Form N-CSR PERRITT FUNDS INC For: Oct 31

January 3, 2022 3:57 PM EST

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES




Investment Company Act file number  811-21556



Perritt Funds, Inc.
(Exact name of registrant as specified in charter)



300 South Wacker Drive, Suite 600, Chicago, IL 60606
(Address of principal executive offices) (Zip code)



Michael J. Corbett, 300 South Wacker Drive, Suite 600, Chicago, IL 60606
(Name and address of agent for service)



1-312-669-1650
Registrant's telephone number, including area code



Date of fiscal year end: October 31, 2021



Date of reporting period:  October 31, 2021




Item 1. Reports to Stockholders.

(a)








MicroCap Opportunities Fund

Ultra MicroCap Fund



Annual Report
October 31, 2021











The PERRITT MICROCAP OPPORTUNITIES FUND will, under normal circumstances, invest at least 80% of its net assets in a diversified portfolio of common stocks of United States companies that at the time of initial purchase have a market capitalization (equity market value) that is below $500 million (referred to as “micro-cap” companies).  The Fund seeks to invest in micro-cap companies that have demonstrated above-average growth in revenues and/or earnings, possess relatively low levels of long-term debt, have a high percentage of their shares owned by company management, and possess modest price-to-sales ratios and price-to-earnings ratios that are below their long-term annual growth rate. At times, the Fund may also invest in “special situations” such as companies that possess valuable patents, companies undergoing restructuring, and companies involved in large share repurchase programs.  Investors should expect the Fund to contain a mix of both value-priced and growth stocks.

The PERRITT ULTRA MICROCAP FUND will, under normal circumstances, invest at least 80% of its net assets in a diversified portfolio of common stocks of United States companies that at the time of initial purchase have a market capitalization (equity market value) that is below $300 million (referred to as “micro-cap” companies). The Fund seeks to invest in micro-cap companies that have a high percentage of their shares owned by company management, possess relatively low levels of long-term debt, have a potential for above average growth in revenues and/or earnings, and possess reasonable valuations based on the ratios of price-to-sales, price-to-earnings, and price-to-book values. The micro-cap companies in which the Fund may invest include “early stage” companies, which are companies that are in a relatively early stage of development with market capitalizations that are below $50 million. At times, the Fund may also invest in unseasoned companies, companies that are undergoing corporate restructuring, initial public offerings, and companies believed to possess undervalued assets.




Table of Contents

Annual Report
October 31, 2021

Perritt MicroCap Opportunities Fund
 
From the Portfolio Managers
2
Performance
6
Ten Largest Common Stock Holdings
8
Allocation of Portfolio Investments
9
   
Perritt Ultra MicroCap Fund
 
From the Portfolio Managers
10
Performance
14
Ten Largest Common Stock Holdings
16
Allocation of Portfolio Investments
17
   
Perritt Funds
 
Schedules of Investments
18
Statements of Assets and Liabilities
25
Statements of Operations
26
Statements of Changes in Net Assets
27
Financial Highlights
29
Notes to Financial Statements
31
Report of the Independent Registered Public Accounting Firm
39
Expense Example
40
Directors and Officers
42
Information
45




1

Perritt MicroCap Opportunities Fund

Portfolio Manager’s Message

Michael Corbett,
Portfolio Manager

For the fiscal year ended October 31, 2021, the Perritt MicroCap Opportunities Fund posted a 64.12% gain which compares to the gain of 62.55% for the Russell Microcap Index and the 50.80% gain for the Russell 2000 Index.  The Fund and benchmark performance details can be found later in this report.
 
All industries had positive contributions to the Fund’s performance, except for consumer staples.  The strongest group of stocks for the Fund was from communication services and energy, each with gains well more than 100%.  On an attribution basis relative to the Fund’s benchmark, the Fund outperformed the most within healthcare and financial services.  We are currently underweight to the Index for both healthcare and financial services industries.  Individual stock selection also had a strong positive attribution for the Fund.  Some of the largest gains came from Tecnoglass (TGLS) which rose by 546% in the past 12 months and U.S. Global (GROW) rose by 141% in the past year.
 
The past year started off strong for both the stock market and economic growth.  Most of the Fund’s gains occurred in the first six months of the fiscal year and the U.S. economy also experienced strong growth in that period.  It seems clear to us that growth and projections for further growth moderated as optimism waned due to more coronavirus uncertainty throughout the world.  While the economies are reopening, the pace seems to be less than previously expected.  The markets and the worldwide economy are slowly but surely adjusting to a world with the virus still among us.  As we have noted in the past, the U.S. Federal Government has provided more than $5 trillion in fiscal stimulus in the past couple years, and the Federal Reserve has injected another $4 trillion into the economy by purchasing a variety of bonds.  While recent growth has been choppy, these efforts should result in one of the strongest economic recoveries from a recession in decades.  Therefore, we continue to believe it is prudent to make investments in economically sensitive companies.
 
We remain severely underweight in healthcare stocks relative to the Index since valuations remain very rich, and most healthcare companies are not profitable.  Profitability or near-term profitability remains a requirement for us to make an investment.  We also have a big overweight in industrial and information technology.  As was said earlier, we believe reopening of the economy will eventually occur and our investments in economically sensitive industries will pay big dividends.  We are currently overweight, or as some call it an active weight, in economic industries, such as industrial, information technology, and materials by more than 35%.
 
During the past year, we sold 20 companies from the portfolio.  Three companies were sold after receiving acquisition offers: Biospecifics Technologies, DSP Group and GP Strategies.  Eight companies were sold after reaching their long-term price targets.  There were also eight companies sold due to a downgrade in their long-term outlook for their businesses.  Lastly, we sold one company, Federal Signal (FSS), since it exceeded our definition of micro-cap.  We purchased 18 new companies for the
 
2

Perritt MicroCap Opportunities Fund


portfolio, all from different industries, but the bulk of them were from industrial and material industries.
 
As of October 31, 2021, the Fund’s portfolio contained the common stocks of 90 companies.  The Fund’s 10 largest holdings and detailed descriptions can be found in the following pages of this report.  Based on our earnings estimates, the Fund’s portfolio is trading at approximately 14.2 times our 2022 earnings estimate.  We are forecasting the average company in the portfolio will grow earnings at nearly 30% in 2022.  Stocks in the portfolio are priced at slightly more than 1.5 times average revenue and the median market capitalization is approximately $233 million.  Finally, the average stock in the Fund is trading at 1.9 times book value and less than 10.2 times Enterprise Value to EBITDA (earnings before interest, taxes, depreciation, and amortization).  The valuation characteristics for the MicroCap Opportunities Fund are more attractive than the Fund’s benchmark Russell Microcap Index.  The Russell Microcap Index is priced at nearly 3.0 times revenue, 15 times earnings and more than 2.0 times book value.  Lastly, it is important to note than more than 50% of the companies within the Russell Microcap Index are not profitable, which compares to only 10% for the Perritt MicroCap Opportunities Fund.
 
I want to thank my fellow shareholders for their continued support and confidence in the Perritt Capital Management team.  I have been a shareholder of the Fund for more than 30 years and have nearly half of my liquid investments in the Perritt Funds.  The Perritt team remains dedicated to investing in high quality micro-cap companies at attractive valuations.  If you have any questions or comments about this report or your investment in the Perritt MicroCap Opportunities Fund, please call us toll-free at (800) 331-8936 or visit our web site at www.perrittcap.com.  Please refer to the prospectus for information about the Fund’s investment objectives and strategies.
 
 
Michael Corbett
President
 



3

Perritt MicroCap Opportunities Fund


Mutual fund investing involves risk. Principal loss is possible. The Funds invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility. The Funds invest in micro-cap companies which tend to perform poorly during times of economic stress.
 
Past performance does not guarantee future results.
 
Earnings Growth is not a measure of the Fund’s future performance.
 
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice. Please refer to the Schedule of Investments in the report for more complete information regarding Fund holdings. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
 
Russell Microcap Index is a capitalization weighted index of 2,000 small cap and micro-cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks.
 
One cannot invest directly in an index. The index is used herein for comparative purposes in accordance with SEC regulations.
 
Book Value is the net asset value of a company calculated as total assets minus intangible asset (patents, goodwill) and liabilities.
 
Enterprise Value is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company’s balance sheet.
 
Enterprise value to EBITDA Equals market capitalization + preferred shares + minority interest + debt - total cash divided by EBITDA.
 
The semi-annual report must be preceded or accompanied by a prospectus.
 
The Perritt Funds are distributed by Quasar Distributors, LLC.
 


4





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5

Perritt MicroCap Opportunities Fund

Performance (Unaudited)
October 31, 2021  

Perritt MicroCap Opportunities Fund versus
Russell Microcap® Index and Russell 2000® Index



 
There are several ways to evaluate a fund’s historical performance.  You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment.  Each performance figure includes changes in a fund’s share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value).
 
Cumulative total returns reflect the Fund’s actual performance over a set period.  For example, if you invested $1,000 in a fund that had a 5% return over one year, you would end up with $1,050.  You can compare the Fund’s returns to the Russell 2000® Index, which reflects a popular measure of the stock performance of small companies, and the Russell Microcap® Index, which measures the performance of the micro-cap segment of the U.S. equity market.
 
Average annual total returns take the Fund’s actual (or cumulative) return and show you what would have happened if the Fund had performed at a constant rate each year.
 
*
The graph illustrates the performance of a hypothetical $10,000 investment made in the period presented.  Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees or the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of the Fund shares.  The graph does not imply any future performance.  It is not possible to invest directly in an index.

6

Perritt MicroCap Opportunities Fund

Performance (Unaudited) (Continued)
October 31, 2021  

Average Annual Total Returns*
Year ended October 31, 2021 (Unaudited)
 
Past
Past
Past
Past
Past
 
1 Year
5 Years
10 Years
15 Years
25 Years
           
Perritt MicroCap Opportunities Fund
64.12%
  9.37%
10.73%
6.58%
9.61%
 
         
Russell Microcap® Index
62.55%
16.33%
14.23%
8.14%
n/a
  (reflects no deduction
         
  for fees and expenses)
         
 
         
Russell 2000® Index
50.80%
15.52%
13.50%
9.05%
9.37%
  (reflects no deduction
         
  for fees and expenses)
         

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end is available by calling 800-331-8936.
 
*
The performance data quoted does not reflect the deduction of taxes that a shareholder would pay on the Fund’s distributions or the 2% redemption or exchange fee for shares held 90 days or less. If reflected, total return would be reduced.

The Fund’s gross expense ratio is 1.64% and is as of the most recent prospectus dated February 28, 2021. Please see the Fund’s Financial Highlights in this report for the most recent expense ratio.
 
7

Perritt MicroCap Opportunities Fund

Ten Largest Common Stock Holdings (Unaudited)

DLH Holdings Corp. (DLHC) provides healthcare and social services in the United States. It offers defense and veterans’ health solutions, including case management, physical and behavioral health examinations, and medical administration and logistics services.
 
Silvercrest Asset Management Group Inc. (SAMG) is a wealth management firm that provides financial advisory and related family office services in the United States. The company serves ultra-high net worth individuals and families, as well as their trusts; endowments; foundations; and other institutional investors. It also manages funds of funds and other investment funds.
 
Northern Technologies International, Corp. (NTIC) develops and markets rust and corrosion inhibiting products and services to automotive, electronics, electrical mechanical, military, retail consumer, and oil and gas markets.
 
Radiant Logistics, Inc. (RLGT) operates as a third-party logistics and multi-modal transportation services company primarily in the United States and Canada. The company offers domestic and international air and ocean freight forwarding services; and freight brokerage services, including truckload, less than truckload, and intermodal services.
 
U.S. Global Investors, Inc. (GROW) is a publicly owned investment manager. The firm primarily provides its services to investment companies. It also provides its services to pooled investment vehicles. The firm manages equity and fixed income mutual funds, hedge funds and exchange traded funds. It also invests in the public equity and fixed income markets across the globe.
 
Shyft Group, Inc. (SHYF) through its subsidiary Spartan Motors USA, Inc., manufactures and assembles specialty vehicles for the commercial vehicle and recreational vehicle industries in the United States and internationally. It operates through two segments, Fleet Vehicles and Services (FVS), and Specialty Chassis and Vehicles (SCV).
 
Legacy Housing Corp. (LEGH) builds, sells, and finances manufactured homes and tiny houses primarily in the southern United States. The company manufactures and provides for the transport of mobile homes; and offers wholesale financing to dealers and mobile home parks, as well as a range of homes.
 
Miller Industries, Inc. (MLR) engages in the manufacture and sale of towing and recovery equipment.  It offers wreckers, such as conventional tow trucks and recovery vehicles.  The company also provides transport trailers for moving multiple vehicles, auto auctions, car dealerships, leasing companies, and other similar applications.
 
A-Mark Precious Metals, Inc. (AMRK) together with its subsidiaries, operates as a precious metals trading company. It operates in three segments: Wholesale Sales & Ancillary Services, Secured Lending, and Direct-to-Consumer.
 
IES Holdings, Inc. (IESC) engages in communications, commercial and industrial, infrastructure solutions, and residential businesses in the United States.
 

Fund holdings and/or sector allocations are subject to change at any time and
are not recommendations to buy or sell any security.
Please refer to the Schedule of Investments in this report for a complete list of Fund holdings.

8

Perritt MicroCap Opportunities Fund

Allocation of Portfolio Investments (Unaudited)
October 31, 2021  






The sector classifications represented in the graph above and industry classifications represented in
the Schedule of Investments are in accordance with Global Industry Classification Standard
(GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard &
Poor Financial Services LLC.  Percentages are based on total investments, at value.
 
Note:
For presentation purposes, the Fund has grouped some of the industry categories.  For purposes of categorizing securities for compliance with section 8(b)(1) of the Investment Company Act of 1940, the Fund uses more specific industry classifications.
 
9

Perritt Ultra MicroCap Fund

Portfolio Managers’ Message

Michael Corbett,
Matthew Brackmann,
Portfolio Manager
Portfolio Manager

The Perritt Ultra MicroCap Fund outperformed the Russell Microcap Index for fiscal year 2021 returning 91.16% versus 62.55% for the Russell Microcap Index.  The shift in strength to the small market names within the Index that we have noted in previous letters continued during the second half of the year which benefited the Ultra MicroCap’s holdings relative to the Index.  Additionally, our stock picks have continued to be strong which led to substantial outperformance for several sectors.  Due to these factors, we were able to outperform the Russell Microcap Index for the period of fiscal 2021.
 
During the COVID shutdowns we had several companies engage in both cost saving initiatives, as well as strategic investments in their businesses.  We detailed some of the cost savings initiatives, as well as their impact on our investments in previous writeups and now that we are far enough past the emergence of COVID-19 and its impact on the global economy, the impact of the strategic investments firms made during that time are beginning to show results.  One example is Quest Resources, QRHC, a provider of waste management solutions to clients, including grocery and big box retail chains, restaurants, and the auto maintenance industry.  At the start of COVID, Quest experienced a disruption to their business as restaurants struggled to adjust to the new environment.  Amidst this uncertainty, Quest was put in the position of needing to grow their business while simultaneously adjusting to the shutdown of one of their core verticals.  While reducing certain expenses and adjusting to new staffing needs, the company continued to execute on their expansion strategies of acquiring new businesses and expanding within current markets.  These investments have paid off during the subsequent recovery with Quest recently reporting revenue growth of 57% for the most recent quarter on a year over year basis, partly attributable to their investments in the business, as well as contributions from general economic recovery.
 
For the fiscal year 2021, the Ultra MicroCap Fund outperformed the Russell Microcap Index by 28.61%, returning 91.16% to shareholders on a net of fee basis compared to the 62.55% return in for the Russell Microcap Index.  The Fund’s longer-term performance, as well as that of its Index, can be found later in this report.  The top contributor to the Fund’s out performance came from holdings in the industrial sector.  The Fund’s industrial investments returned 126.78% for the first half of the year which compared favorably to the 65.50% return for the sector within the Index.  In an echo to the previous letter from the semi-annual report, the second-best performing sector was the Fund’s healthcare investments, which earned returns of 66.76% for the Funds versus 29.54% for the Index.  This is an example of what we in the industry call serial correlation, where positive returns in an asset class in one period may imply the likelihood of positive returns in the next.
 
Since our last update, we have exited four positions and added ten.  Two were sold due to declining fundamentals while two, DSP Group (DSPG) and Support.com (SPRT) were sold due to receiving valid
 
10

Perritt Ultra MicroCap Fund


buyout offers.  The names we added were drawn from a number of industries and include a mix of names we have previously owned and new ideas we found during our various research activities.  One new name, The Dixie Group (DXYN) which is a manufacturer of flooring and carpeting that has made substantial changes to their business model, selling off non-core assets and focusing on their core markets.  This company had struggled for years prior to their current management team’s strategic plans being put in place and has recently posted the best operating results they have had in years.  This name was first followed by Perritt back in the 1980s and was featured in a newsletter written by our CEO earlier in his career.  This serves as an illustration of the depth of knowledge and experience that the Perritt Research team brings to their stock picking process.
 
As of October 31, 2021, the Fund holds the common stock of 81 companies which is higher than the last report.  We are currently re-evaluating several investments as we head into 2022 to bring that number closer to the 75 names held in the last report.  We intend on adding new investments as others are sold off on a rotational basis to keep a meaningful position in the firms we invest in.
 
Regarding current portfolio valuations, based on our earnings estimates, the Fund’s portfolio is trading at 18.5x forward price to earnings.  The median price to sales ratio is 1.76x, the median price to book is 2.2x and a trailing twelve-month price to earnings of 26.37x.  The median market cap for the Fund is at $104 million.  By comparison the Russell Microcap Index has a price to sales ratio of 2.6, a price to book ratio of 2.3x and a trailing twelve-month p/e of 14.5.  The median market cap for the Index is $264 million.  We like to point out the difference in market cap exposure between the two names, as this illustrates the different focus of the two products as the Ultra MicroCap remains committed to investing in the smallest segment of the microcap space.
 
We want to genuinely thank our fellow shareholders for their continued support and confidence in the Perritt Capital Management team.  Each member of our investment committee, as well as many other employees have made continued investments in this Fund over the years and remain shareholders alongside all of you.  We also wish you and your loved ones well and continued good health as we emerge from the trials of the past year.  If you have any questions or comments about this report or your investment in the Perritt Ultra MicroCap Fund, please call us toll- free at (800) 331-8936 or visit our website at www.perrittcap.com.  Please refer to the prospectus for information about the Fund’s investment objectives and strategies.
 

Matt Brackmann
Portfolio Manager
 

11

Perritt Ultra MicroCap Fund


Past performance does not guarantee future results.
 
Earnings Growth is not a measure of the Fund’s future performance.
 
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.
 
Please refer to the Schedule of Investments in the report for more complete information regarding Fund holdings. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
 
Any tax or legal information provided is merely a summary of our understanding and interpretation of some of the current income tax regulations and not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their situation.  Neither the fund nor any of its representatives may give legal or tax advice.
 
Mutual fund investing involves risk.  Principal loss is possible.  The Funds invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility.  The Funds invest in microcap companies which tend to perform poorly during times of economic stress.  The Ultra MicroCap Fund may invest in early-stage companies which tend to be more volatile and somewhat more speculative than investments in more established companies.
 
Russell Microcap Index is a capitalization weighted index of 2,000 small cap and micro-cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks.
 
One cannot invest directly in an index.
 
Price-to-Book (P/B) is a ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.
 
Price-to-Sales (P/S) is a valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenues.
 
Trailing Price-to Earnings (P/E) is calculated by taking the current stock price and dividing it by the trailing earnings per share (EPS) for the past 12 months.
 
Forward price-to-earnings (forward P/E) is a version of the ratio of price-to-earnings (P/E) that uses forecasted earnings for the P/E calculation. The forecasted earnings used in the formula typically uses either projected earnings for the following 12 months or for the next full-year fiscal (FY) period.
 
The annual report must be preceded or accompanied by a prospectus.
 
The Perritt Funds are distributed by Quasar Distributors, LLC.
 
12






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13

Perritt Ultra MicroCap Fund

Performance* (Unaudited)
October 31, 2021  

Perritt Ultra MicroCap Fund versus
Russell Microcap® Index and Russell 2000® Index


 
 
There are several ways to evaluate a fund’s historical performance.  You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment.  Each performance figure includes changes in a fund’s share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value).
 
Cumulative total returns reflect the Fund’s actual performance over a set period.  For example, if you invested $1,000 in a fund that had a 5% return over one year, you would end up with $1,050.  You can compare the Fund’s returns to the Russell 2000® Index, which reflects a popular measure of the stock performance of small companies, and the Russell Microcap® Index, which measures the performance of the micro-cap segment of the U.S. equity market.
 
Average annual total returns take the Fund’s actual (or cumulative) return and show you what would have happened if the Fund had performed at a constant rate each year.
 
*
The graph illustrates the performance of a hypothetical $10,000 investment made in the period presented.  Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees or the deduction of taxes that a shareholder would pay on the Fund’s distributions or the redemption of Fund shares.  The graph does not imply any future performance.  It is not possible to invest directly in an index.


14

Perritt Ultra MicroCap Fund

Performance (Unaudited) (Continued)
October 31, 2021  

Average Annual Total Returns*
Year ended October 31, 2021 (Unaudited)
 
Past
Past
Past
Past
 
1 Year
5 Years
10 Years
15 Years
         
Perritt Ultra MicroCap Fund
91.16%
12.50%
11.88%
7.01%
         
Russell Microcap® Index
62.55%
16.33%
14.23%
8.14%
  (reflects no deduction for fees and expenses)
       
         
Russell 2000® Index
50.80%
15.52%
13.50%
9.05%
  (reflects no deduction for fees and expenses)
       

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end is available by calling 800-331-8936.
 
*
The performance data quoted does not reflect the deduction of taxes that a shareholder would pay on the Fund’s distributions or the 2% redemption or exchange fee for shares held 90 days or less. If reflected, total return would be reduced.

The Fund’s gross expense ratio is 2.68% and is as of the most recent prospectus dated February 28, 2021. Please see the Fund’s Financial Highlights in this report for the most recent expense ratio.
 


15

Perritt Ultra MicroCap Fund

Ten Largest Common Stock Holdings (Unaudited)


DLH Holdings Corp. (DLHC) provides healthcare, logistics, and technical services and solutions to Federal Government agencies including the Department of Veteran Affairs, the Department of Defense, and other government clients.
 
A-Mark Precious Metals, Inc. (AMRK) together with its subsidiaries, operates as a precious metals trading company. It operates in three segments: Wholesale Sales & Ancillary Services, Secured Lending, and Direct-to-Consumer.
 
Transcat, Inc. (TRNS) provides calibration and laboratory instrument services in North America and internationally. It operates in two segments, Service and Distribution.
 
Perion Network, Ltd. (PERI) delivers advertising solutions to brands, agencies, and publishers in North America, Europe, and internationally.
 
Technoglass, Inc. (TGLS) through its subsidiaries, manufactures, supplies, and installs architectural glass, windows, and associated aluminum products for the commercial and residential construction industries in North, Central, and South America.
 
Quest Resource Holding Corp. (QRHC) through its subsidiaries, provides solutions for the reuse, recycling, and disposal of various waste streams and recyclables in the United States.
 
Northern Technologies International, Corp. (NTIC) develops and markets rust and corrosion inhibiting products and services to automotive, electronics, electrical mechanical, military, retail consumer, and oil and gas markets.
 
Napco Security Technologies, Inc. (NSSC) develops, manufactures, and sells electronic security products in the United States and internationally. The company offers access control systems, door-locking products, intrusion and fire alarm systems, and video surveillance systems.
 
Century Casinos, Inc. (CNTY) operates as a casino entertainment company worldwide. The company develops and operates gaming establishments, as well as related lodging, restaurant, horse racing, and entertainment facilities.
 
Immucell Corp. (ICCC) an animal health company, acquires, develops, manufactures, and sells products that enhance the health and productivity of dairy and beef cattle in the United States and international.
 

Fund holdings and/or sector allocations are subject to change at any time and
are not recommendations to buy or sell any security.
Please refer to the Schedule of Investments in this report for a complete list of Fund holdings.


16

Perritt Ultra MicroCap Fund

Allocation of Portfolio Investments (Unaudited)
October 31, 2021  






The sector classifications represented in the graph above and industry classifications represented in
the Schedule of Investments are in accordance with Global Industry Classification Standard
(GICS®), which was developed by and/or is the exclusive property of MSCI, Inc. and Standard &
Poor Financial Services LLC.  Percentages are based on total investments, at value.
 
Note:
For presentation purposes, the Fund has grouped some of the industry categories.  For purposes of categorizing securities for compliance with section 8(b)(1) of the Investment Company Act of 1940, the Fund uses more specific industry classifications.
 

17

Perritt MicroCap Opportunities Fund

Schedule of Investments
October 31, 2021  

Shares
 
COMMON STOCKS – 98.68%
 
Value
 
Administrative and
     
  Support Services – 1.69%
     
 
36,500
 
BGSF, Inc.
 
$
439,095
 
 
46,746
 
Hudson Global, Inc.(a)
   
780,658
 
           
1,219,753
 
Auto Parts & Equipment – 3.22%
       
 
43,800
 
Miller Industries, Inc.
   
1,582,932
 
 
40,000
 
Motorcar Parts
       
     
  of America, Inc.(a)
   
756,800
 
           
2,339,732
 
Biotechnology – 0.73%
       
 
22,500
 
Opiant Pharmaceuticals,
       
     
   Inc.(a)
   
530,325
 
           
530,325
 
Building Materials – 2.92%
       
 
10,000
 
BlueLinx
       
     
  Holdings, Inc.(a)
   
476,300
 
 
30,000
 
PGT Innovations, Inc.(a)
   
640,500
 
 
35,000
 
Tecnoglass,
       
     
  Inc. – ADR(c)
   
1,010,800
 
           
2,127,600
 
Business Services – 8.22%
       
 
253,041
 
DLH Holdings Corp.(a)
   
3,851,284
 
 
140,000
 
Information Services
       
     
  Group, Inc.
   
1,141,000
 
 
83,000
 
Intrusion, Inc.(a)
   
327,020
 
 
50,000
 
PFSweb, Inc.(a)
   
650,000
 
           
5,969,304
 
Chemical & Related Products – 4.66%
       
 
221,625
 
Northern Technologies
       
     
  International Corp.
   
3,379,781
 
           
3,379,781
 
Chemical Manufacturing – 1.41%
       
 
218,750
 
Assertio
       
     
  Holdings, Inc.(a)
   
225,313
 
 
135,000
 
ProPhase Labs, Inc.
   
795,150
 
           
1,020,463
 
Commercial Services – 1.66%
       
 
40,000
 
TriState Capital
       
     
  Holdings, Inc.(a)
   
1,202,000
 
           
1,202,000
 
Computer & Electronic Product
       
  Manufacturing – 4.06%
       
 
93,000
 
Coda Octopus
       
     
  Group, Inc.(a)
   
784,920
 
 
54,000
 
Gilat Satellite Networks
       
     
  Ltd. – ADR(c)
   
442,260
 
 
50,000
 
Powerfleet, Inc.(a)
   
346,000
 
 
94,000
 
Senstar Technologies
       
     
  Ltd. – ADR(c)
   
382,580
 
 
1,050,000
 
Singing Machine
       
     
  Co., Inc.(a)(e)
   
325,500
 
 
46,500
 
TransAct
       
     
  Technologies, Inc.(a)
   
656,580
 
           
2,937,840
 
Construction & Engineering – 2.84%
       
 
57,655
 
Gencor
       
     
  Industries, Inc.(a)
   
643,430
 
 
28,400
 
IES Holdings, Inc.(a)
   
1,415,740
 
           
2,059,170
 
Consumer Goods – 1.59%
       
 
40,000
 
Turtle Beach Corp.(a)
   
1,150,400
 
           
1,150,400
 
Consumer Products –
       
  Manufacturing – 1.72%
       
 
14,000
 
Delta Apparel, Inc.(a)
   
375,900
 
 
22,000
 
Superior Group
       
     
  of Cos., Inc.
   
571,780
 
 
26,000
 
VOXX
       
     
  International Corp.(a)
   
294,060
 
           
1,241,740
 
Consumer Services – 0.67%
       
 
103,800
 
DHI Group, Inc.(a)
   
487,860
 
           
487,860
 
Data Processing, Hosting and
       
  Related Services – 0.80%
       
 
25,000
 
Ooma, Inc.(a)
   
577,500
 
           
577,500
 
Educational Services – 1.87%
       
 
90,000
 
Lincoln Educational
       
     
  Services Corp.(a)
   
648,000
 
 
100,000
 
Universal Technical
       
     
  Institute, Inc.(a)
   
704,000
 
           
1,352,000
 

The accompanying notes to financial statements are an integral part of this schedule.
18

Perritt MicroCap Opportunities Fund

Schedule of Investments (Continued)
October 31, 2021  

Shares
     
Value
 
Electronic Equipment &
     
  Instruments – 1.37%
     
 
26,000
 
Bel Fuse, Inc. – Class B
 
$
361,920
 
 
33,000
 
Identiv, Inc.(a)
   
632,280
 
           
994,200
 
Engineering & Construction – 0.93%
       
 
61,150
 
Infrastructure & Energy
       
     
  Alternatives, Inc.(a)
   
676,931
 
           
676,931
 
Environmental Services – 1.20%
       
 
150,000
 
Quest Resource
       
     
  Holdings Corp.(a)
   
873,000
 
           
873,000
 
Financial Services – 10.29%
       
 
32,000
 
First Internet Bancorp
   
1,089,280
 
 
20,000
 
Hennessy Advisors, Inc.
   
230,800
 
 
227,643
 
Silvercrest Asset
       
     
  Management Group,
       
     
  Inc. – Class A
   
3,642,288
 
 
406,600
 
U.S. Global Investors,
       
     
  Inc. – Class A
   
2,492,458
 
           
7,454,826
 
Food – 0.47%
       
 
35,000
 
Landec Corp.(a)
   
340,200
 
           
340,200
 
Gold – 2.12%
       
 
125,000
 
Fortuna Silver
       
     
  Mines, Inc. – ADR(a)(c)
   
607,500
 
 
337,500
 
Gold Resource Corp.
   
621,000
 
 
280,000
 
McEwen Mining, Inc.(a)
   
308,000
 
           
1,536,500
 
Healthcare Services – 0.81%
       
 
35,000
 
InfuSystem
       
     
  Holdings, Inc.(a)
   
582,050
 
           
582,050
 
Home Builder – 1.08%
       
 
30,100
 
Green Brick
       
     
  Partners, Inc.(a)
   
784,105
 
           
784,105
 
Housing – 2.40%
       
 
98,000
 
Legacy Housing Corp.(a)
   
1,739,500
 
           
1,739,500
 
Leisure – 2.38%
       
 
84,000
 
Century Casinos, Inc.(a)
   
1,243,200
 
 
90,000
 
Galaxy Gaming, Inc.(a)
   
389,700
 
 
30,000
 
Super League
       
     
  Gaming, Inc.(a)
   
94,200
 
           
1,727,100
 
Machinery Manufacturing – 1.07%
       
 
16,000
 
Mayville Engineering
       
     
  Co, Inc.(a)
   
284,160
 
 
245,400
 
TechPrecision Corp.(a)
   
489,573
 
           
773,733
 
Medical Supplies & Services – 1.39%
       
 
3,000
 
Addus HomeCare
       
     
  Corp.(a)
   
280,500
 
 
18,041
 
IntriCon Corp.(a)
   
306,697
 
 
20,000
 
Lakeland
       
     
  Industries, Inc.(a)
   
418,200
 
           
1,005,397
 
Merchant Wholesalers,
       
  Durable Goods – 2.07%
       
 
20,000
 
A-Mark Precious
       
     
  Metals, Inc.
   
1,499,800
 
           
1,499,800
 
Merchant Wholesalers, Nondurable
       
  Goods – 0.46%
       
 
225,000
 
NewAge, Inc.(a)
   
333,000
 
           
333,000
 
Mining (except Oil and Gas) – 0.41%
       
 
43,610
 
Fortitude Gold Corp.
   
296,112
 
           
296,112
 
Miscellaneous Manufacturing – 0.58%
       
 
40,000
 
iCAD, Inc.(a)
   
422,000
 
           
422,000
 
Motion Pictures and Sound
       
  Recording Industries – 1.75%
       
 
402,605
 
WildBrain Ltd.(a)(c)
   
1,272,232
 
           
1,272,232
 
Oil & Gas – 1.21%
       
 
147,367
 
Evolution
       
     
  Petroleum Corp.
   
875,360
 
           
875,360
 
Oil & Gas Services – 0.61%
       
 
371,895
 
Profire Energy, Inc.(a)
   
442,555
 
           
442,555
 

The accompanying notes to financial statements are an integral part of this schedule.
19

Perritt MicroCap Opportunities Fund

Schedule of Investments (Continued)
October 31, 2021  

Shares
     
Value
 
Primary Metal Manufacturing – 0.99%
     
 
127,404
 
Ampco-Pittsburgh
     
     
  Corp.(a)
 
$
716,011
 
           
716,011
 
Professional, Scientific, and
       
  Technical Services – 3.86%
       
 
38,703
 
Bowman Consulting
       
     
  Group Ltd.(a)
   
596,026
 
 
8,500
 
CRA International, Inc.
   
933,470
 
 
230,880
 
Heritage Global, Inc.(a)
   
438,672
 
 
328,400
 
Research
       
     
  Solutions, Inc.(a)
   
824,284
 
           
2,792,452
 
Publishing Industries
       
  (except Internet) – 0.57%
       
 
40,000
 
eGain Corp.(a)
   
412,800
 
           
412,800
 
Securities, Commodity Contracts, and
       
  Other Financial Investments and
       
  Related Activities – 0.56%
       
 
10,000
 
Sprott, Inc.(c)
   
406,100
 
           
406,100
 
Semiconductor Related Products – 1.61%
       
 
80,000
 
AXT, Inc.(a)
   
653,600
 
 
40,000
 
Photronics, Inc.(a)
   
519,600
 
           
1,173,200
 
Software – 4.80%
       
 
21,720
 
American Software, Inc. –
       
     
  Class A
   
628,359
 
 
100,000
 
Asure Software, Inc.(a)
   
966,000
 
 
130,000
 
Immersion Corp.(a)
   
1,038,700
 
 
100,000
 
Zix Corp.(a)
   
847,000
 
           
3,480,059
 
Specialty Manufacturing – 1.67%
       
 
20,000
 
LB Foster Co. –
       
     
  Class A(a)
   
318,600
 
 
40,400
 
LSI Industries, Inc.
   
300,576
 
 
25,223
 
Northwest Pipe Co.(a)
   
599,298
 
           
1,218,474
 
Support Activities for Mining – 0.23%
       
 
100,000
 
Alexco Resource
       
     
  Corp.(a)(c)
   
167,000
 
           
167,000
 
Telecommunications – 2.87%
       
 
150,000
 
Ceragon Networks,
       
     
  Ltd. – ADR(a)(c)
   
526,500
 
 
34,000
 
Digi
       
     
  International, Inc.(a)
   
732,700
 
 
142,000
 
PC-Tel, Inc.
   
817,920
 
           
2,077,120
 
Transportation – 3.46%
       
 
373,000
 
Radiant
       
     
  Logistics, Inc.(a)
   
2,510,290
 
           
2,510,290
 
Transportation Equipment
       
  Manufacturing – 3.94%
       
 
60,000
 
The Shyft
       
     
  Group, Inc.
   
2,472,600
 
 
11,000
 
Strattec Security
       
     
  Corp.(a)
   
381,370
 
           
2,853,970
 
Utilities – 1.08%
           
 
50,000
 
Pure Cycle Corp.(a)
   
784,500
 
           
784,500
 
Waste Management & Remediation
       
  Services – 1.56%
       
 
100,000
 
Perma-Fix Environmental
       
     
  Services, Inc.(a)
   
720,000
 
 
50,000
 
Sharps Compliance
       
     
  Corp.(a)
   
412,500
 
           
1,132,500
 
Water Transportation – 0.82%
       
 
19,000
 
Euroseas Ltd.(a)(c)
   
592,990
 
           
592,990
 
     
TOTAL COMMON
       
     
  STOCKS
       
     
  (Cost $41,942,713)
 
$
71,541,535
 

The accompanying notes to financial statements are an integral part of this schedule.
20

Perritt MicroCap Opportunities Fund

Schedule of Investments (Continued)
October 31, 2021  

Contracts
 
WARRANTS – 0.01%
 
Value
 
Engineering & Construction – 0.01%
     
 
5,000
 
Infrastructure & Energy
     
     
  Alternatives, Inc.
     
     
  Expiration : 03/26/2023,
     
     
  Exercise Price
  $11.50(a)
     
       
$
6,000
 
         
Computer & Electronic Product
       
  Manufacturing – 0.00%
       
 
1,000,000
 
Singing Machine Co., Inc.
       
     
  Expiration : 08/06/2026,
       
     
  Exercise Price
  $0.35(a)(d)
       
         
0
 
     
TOTAL WARRANTS
       
     
  (Cost $8,100)
 
$
6,000
 
               
  Shares
 
SHORT-TERM
       
     
  INVESTMENTS – 1.53%
       
Money Market Funds – 1.53%
       
 
1,108,605
 
First American Government
       
     
  Obligations Fund, Class X,
  0.03%(b)
       
       
$
1,108,605
 
     
TOTAL SHORT-TERM
       
     
  INVESTMENTS
       
     
  (Cost $1,108,605)
 
$
1,108,605
 
     
Total Investments
       
     
  (Cost $43,059,418) –
  100.22%
       
       
$
72,656,140
 
     
Liabilities in Excess
       
     
  of Other Assets –
  (0.22)%
       
         
(160,280
)
     
TOTAL NET ASSETS –
       
     
   100.00%
 
$
72,495,860
 

Percentages are stated as a percent of net assets.
 
ADR
American Depository Receipt
(a)
Non-income producing security.
(b)
The rate shown is the seven-day yield as of October 31, 2021.
(c)
Foreign issued security.
(d)
This security is deemed to be illiquid. This security represents $0 of value or 0.00% of net assets.
(e)
Security was purchased in a transaction exempt from registration in the U.S. under the Securities Act of 1933 (the “Act”) and, unless registered under the Act, may only be sold pursuant to exemption from registration and, in the case of a Rule 144A offering under the Act, may only be sold to “qualified institutional buyers.” The value of this security is $325,500 or 0.45% of the Fund’s net assets. This security is deemed to be liquid.

 
The accompanying notes to financial statements are an integral part of this schedule.
21

Perritt Ultra MicroCap Fund

Schedule of Investments
October 31, 2021  

Shares
 
COMMON STOCKS – 93.40%
 
Value
 
Administrative and Support
     
  Services – 1.50%
     
 
10,000
 
BGSF, Inc.
 
$
120,300
 
 
12,548
 
Hudson Global, Inc.(a)
   
209,552
 
           
329,852
 
Auto Parts & Equipment – 1.37%
       
 
30,000
 
Commercial Vehicle
       
     
  Group, Inc.(a)
   
301,200
 
           
301,200
 
Biotechnology – 1.01%
       
 
9,500
 
Opiant Pharmaceuticals,
       
     
   Inc.(a)
   
223,915
 
           
223,915
 
Building Materials – 2.50%
       
 
19,093
 
Tecnoglass, Inc.(d)
   
551,406
 
           
551,406
 
Business Services – 12.75%
       
 
90,000
 
CynergisTek, Inc.(a)
   
158,400
 
 
60,000
 
DLH Holdings Corp.(a)
   
913,200
 
 
50,000
 
Information Services
       
     
  Group, Inc.
   
407,500
 
 
10,000
 
Intrusion, Inc.(a)
   
39,400
 
 
13,486
 
Issuer Direct Corp.(a)
   
343,488
 
 
97,958
 
Medicine Man
       
     
  Technologies, Inc.(a)
   
200,814
 
 
10,000
 
Transcat, Inc.(a)
   
748,800
 
           
2,811,602
 
Chemical & Related Products – 2.86%
       
 
37,000
 
Flexible Solutions
       
     
  International, Inc. –
       
     
  ADR(a)(d)
   
135,420
 
 
32,560
 
Northern Technologies
       
     
  International Corp.
   
496,540
 
           
631,960
 
Chemical Manufacturing – 2.40%
       
 
60,000
 
AgroFresh
       
     
  Solutions, Inc.(a)
   
121,800
 
 
20,000
 
Alimera Sciences, Inc.(a)
   
88,400
 
 
24,000
 
Aridis Pharmaceuticals,
       
     
   Inc.(a)
   
84,000
 
 
40,000
 
ProPhase Labs, Inc.
   
235,600
 
           
529,800
 
Computer & Electronic Product
       
  Manufacturing – 10.03%
       
 
20,000
 
Airgain, Inc.(a)
   
224,600
 
 
65,000
 
BK Technologies Corp.
   
191,750
 
 
175,000
 
Dynatronics Corp.(a)
   
250,250
 
 
30,000
 
Luna
       
     
  Innovations, Inc.(a)
   
292,200
 
 
55,000
 
One Stop
       
     
  Systems, Inc.(a)
   
275,550
 
 
65,000
 
Orbital Energy
       
     
  Group, Inc.(a)
   
173,550
 
 
50,000
 
PC-Tel, Inc.
   
288,000
 
 
700,000
 
Singing Machine
       
     
  Co., Inc.(a)(b)
   
217,000
 
 
21,000
 
TransAct
       
     
  Technologies, Inc.(a)
   
296,520
 
           
2,209,420
 
Computers & Electronics – 2.17%
       
 
10,000
 
Napco Security
       
     
 Technologies, Inc.(a)
   
479,600
 
           
479,600
 
Construction & Engineering – 0.76%
       
 
15,000
 
Gencor Industries,
       
     
   Inc.(a)
   
167,400
 
           
167,400
 
Consumer Goods – 2.73%
       
 
25,000
 
Jerash Holdings
       
     
  US, Inc.
   
163,750
 
 
12,000
 
Natural Alternatives
       
     
  International, Inc.(a)
   
151,200
 
 
10,000
 
Turtle Beach Corp.(a)
   
287,600
 
           
602,550
 
Consumer Services – 1.28%
       
 
60,000
 
DHI Group, Inc.(a)
   
282,000
 
           
282,000
 
Diversified Financials – 0.76%
       
 
20,000
 
Safeguard
       
     
  Scientifics, Inc.(a)
   
167,800
 
           
167,800
 
Educational Services – 1.61%
       
 
45,000
 
VirTra, Inc.(a)
   
354,600
 
           
354,600
 

The accompanying notes to financial statements are an integral part of this schedule.
22

Perritt Ultra MicroCap Fund

Schedule of Investments (Continued)
October 31, 2021  

Shares
     
Value
 
Electronic Equipment &
     
  Instruments – 2.47%
     
 
20,000
 
Identiv, Inc.(a)
 
$
383,200
 
 
30,000
 
Iteris, Inc.(a)
   
160,800
 
           
544,000
 
Environmental Services – 2.38%
       
 
90,000
 
Quest Resource Holding
       
     
  Corp.(a)
   
523,800
 
           
523,800
 
Fabricated Metal Product
       
  Manufacturing – 1.03%
       
 
9,500
 
The Eastern Company
   
228,285
 
           
228,285
 
Financial Services – 2.18%
       
 
17,500
 
Hennessy Advisors, Inc.
   
201,950
 
 
17,500
 
Silvercrest Asset
       
     
  Management
       
     
  Group, Inc. – Class A
   
280,000
 
           
481,950
 
Leisure – 3.98%
       
 
30,000
 
Century Casinos, Inc.(a)
   
444,000
 
 
100,000
 
Galaxy Gaming, Inc.(a)
   
433,000
 
           
877,000
 
Machinery Manufacturing – 2.25%
       
 
25,000
 
Cantaloupe, Inc.(a)
   
312,500
 
 
5,000
 
Graham Corporation
   
63,550
 
 
60,000
 
TechPrecision Corp.(a)
   
119,700
 
           
495,750
 
Medical Supplies & Services – 2.90%
       
 
30,000
 
Biomerica, Inc.(a)
   
137,700
 
 
58,424
 
Check Cap,
       
     
  Ltd. – ADR(a)(d)
   
52,283
 
 
7,500
 
Lakeland
       
     
  Industries, Inc.(a)
   
156,825
 
 
25,000
 
Sensus
       
     
 Healthcare, Inc.(a)
   
100,000
 
 
16,211
 
Taylor Devices, Inc.(a)
   
193,721
 
           
640,529
 
Merchant Wholesalers, Durable
       
  Goods – 3.40%
       
 
10,000
 
A-Mark Precious
       
     
  Metals, Inc.
   
749,900
 
           
749,900
 
Merchant Wholesalers, Nondurable
       
  Goods – 0.76%
       
 
8,198
 
Educational Development
       
     
   Corp.
   
80,095
 
 
60,000
 
NewAge, Inc.(a)
   
88,800
 
           
168,895
 
Miscellaneous Manufacturing – 2.28%
       
 
78,125
 
INVO BioScience,
       
     
   Inc.(a)
   
269,531
 
 
22,965
 
Myomo, Inc.(a)
   
232,636
 
           
502,167
 
Miscellaneous Store Retailers – 0.88%
       
 
50,000
 
Better Choice
       
     
  Co, Inc.(a)
   
194,000
 
           
194,000
 
Oil & Gas Services – 0.76%
       
 
140,010
 
Profire Energy, Inc.(a)
   
166,612
 
           
166,612
 
Pharmaceuticals – 2.00%
       
 
50,000
 
ImmuCell Corp.(a)
   
440,000
 
           
440,000
 
Primary Metal Manufacturing – 0.97%
       
 
38,000
 
Ampco-Pittsburgh
       
     
  Corp.(a)
   
213,560
 
           
213,560
 
Professional, Scientific, and Technical
       
  Services – 4.73%
       
 
21,000
 
Bowman Consulting
       
     
  Group Ltd.(a)
   
323,400
 
 
20,000
 
Perion Network Ltd. –
       
     
  ADR(a)(d)
   
568,400
 
 
60,000
 
Research Solutions,
       
     
   Inc.(a)
   
150,600
 
           
1,042,400
 
Publishing Industries
       
  (except Internet) – 0.82%
       
 
60,000
 
FalconStor Software,
       
     
  Inc.(a)(b)
   
180,000
 
           
180,000
 
Real Estate – 1.72%
       
 
15,000
 
Fathom Holdings,
       
     
   Inc.(a)
   
379,350
 
           
379,350
 

The accompanying notes to financial statements are an integral part of this schedule.
23

Perritt Ultra MicroCap Fund

Schedule of Investments (Continued)
October 31, 2021  

Shares
     
Value
 
Real Estate Investment Trusts – 1.73%
     
 
35,000
 
Sachem Capital Corp.
 
$
202,300
 
 
35,000
 
Global Self
       
     
  Storage, Inc.
   
178,150
 
           
380,450
 
Semiconductor Related Products – 2.18%
       
 
25,000
 
AXT, Inc.(a)
   
204,250
 
 
25,000
 
inTEST Corp.(a)
   
276,750
 
           
481,000
 
Software – 2.13%
       
 
30,000
 
Asure Software, Inc.(a)
   
289,800
 
 
40,000
 
NetSol Technologies,
       
     
   Inc.(a)
   
180,800
 
           
470,600
 
Specialty Manufacturing – 4.05%
       
 
45,000
 
Data I/O Corp.(a)
   
243,900
 
 
17,500
 
GSI Technology, Inc.(a)
   
90,825
 
 
25,000
 
Gulf Island Fabrication,
       
     
   Inc.(a)
   
98,500
 
 
70,000
 
MIND
       
     
  Technology, Inc.(a)
   
119,000
 
 
5,500
 
UFP Technologies,
       
     
   Inc.(a)
   
340,395
 
           
892,620
 
Telecommunications – 1.63%
       
 
25,000
 
Data Storage Corp.(a)
   
104,500
 
 
172,383
 
Mobivity Holdings
       
     
  Corp.(a)
   
256,851
 
           
361,351
 
Textile Product Mills – 0.52%
       
 
25,000
 
Dixie Group, Inc.(a)
   
114,750
 
           
114,750
 
Utilities – 1.72%
       
 
20,000
 
Global Water
       
     
  Resources, Inc.
   
378,400
 
           
378,400
 
Wholesale Electronic Markets and
       
  Agents and Brokers – 0.20%
       
 
20,387
 
DecisionPoint
       
     
  Systems, Inc.(a)
   
44,851
 
           
44,851
 
     
TOTAL COMMON
       
     
  STOCKS
       
     
  (Cost $12,921,954)
 
$
20,595,325
 
             
Contracts
 
WARRANTS – 0.06%
       
Medical Supplies & Services – 0.00%
       
 
250,000
 
Titan Medical, Inc.
       
     
  Expiration: 08/10/2023,
       
     
  Exercise Price
  $3.20(a)(b)
       
       
$
0
 
         
Primary Metal Manufacturing – 0.06%
       
 
15,000
 
Ampco-Pittsburgh Corp.
       
     
  Expiration: 08/01/2025,
       
     
  Exercise Price
  $5.75(a)
       
         
13,500
 
     
TOTAL WARRANTS
       
     
  (Cost $85,000)
 
$
13,500
 
               
Shares
 
SHORT-TERM
       
     
  INVESTMENTS – 7.18%
       
Money Market Funds – 7.18%
       
 
1,582,589
 
First American Government
       
     
  Obligations Fund, Class X,
  0.03%(c)
       
       
$
1,582,589
 
     
TOTAL SHORT-TERM
       
     
  INVESTMENTS
       
     
  (Cost $1,582,589)
 
$
1,582,589
 
     
Total Investments
       
     
  (Cost $14,589,543) –
  100.64%
       
       
$
22,191,414
 
     
Liabilities in Excess
       
     
  of Other Assets –
  (0.64)%
       
         
(142,157
)
     
TOTAL NET ASSETS –
       
     
   100.00%
 
$
22,049,257
 

Percentages are stated as a percent of net assets.
 
ADR
American Depository Receipt
(a)
Non-income producing security.
(b)
These securities are deemed to be illiquid. These securities represent $397,000 of value or 1.80% of net assets.
(c)
The rate shown is the seven-day yield as of October 31, 2021.
(d)
Foreign issued security.

The accompanying notes to financial statements are an integral part of this schedule.
24

Perritt Funds, Inc.

Statements of Assets and Liabilities

October 31, 2021

   
Perritt MicroCap
   
Perritt Ultra
 
   
Opportunities Fund
   
MicroCap Fund
 
Assets:
           
Investments at value
 
$
72,656,140
   
$
22,191,414
 
Receivable for fund shares issued
   
     
12,395
 
Dividends and interest receivable
   
3,391
     
42
 
Prepaid expenses
   
1,965
     
1,879
 
Total Assets
   
72,661,496
     
22,205,730
 
                 
Liabilities:
               
Payable for investments purchased
   
11,602
     
85,508
 
Payable for fund shares purchased
   
6,264
     
1,748
 
Payable to Advisor
   
59,765
     
23,060
 
Payable to Officer & Directors
   
2,800
     
1,100
 
Accrued accounting expense
   
14,135
     
3,305
 
Accrued administration expense
   
17,330
     
7,268
 
Accrued audit expense
   
17,500
     
17,500
 
Accrued printing & mailing expense
   
10,896
     
3,666
 
Accrued transfer agent expense
   
13,962
     
7,972
 
Other accrued expenses & liabilities
   
11,382
     
5,346
 
Total Liabilities
   
165,636
     
156,473
 
Net Assets
 
$
72,495,860
   
$
22,049,257
 
                 
Net Assets Consist of:
               
Capital Stock
 
$
33,266,497
   
$
13,540,672
 
Total Distributable Earnings
   
39,229,363
     
8,508,585
 
Total Net Assets
 
$
72,495,860
   
$
22,049,257
 
Capital Stock, $0.0001 par value
               
Authorized
   
100,000,000
     
100,000,000
 
Outstanding
   
2,263,932
     
999,472
 
Net Assets
 
$
72,495,860
   
$
22,049,257
 
Net asset value and offering price per share
 
$
32.02
   
$
22.06
 
Cost of Investments
 
$
43,059,418
   
$
14,589,543
 
                 
The accompanying notes to financial statements are an integral part of these statements.
25

Perritt Funds, Inc.

Statements of Operations

For the Year Ended October 31, 2021

   
Perritt MicroCap
   
Perritt Ultra
 
   
Opportunities Fund
   
MicroCap Fund
 
Investment Income:
           
Dividend Income (net of $68,024 and $0 foreign
           
  withholding tax and issuance fees)
 
$
713,558
   
$
100,854
 
Interest income
   
238
     
179
 
Total investment income
   
713,796
     
101,033
 
                 
Expenses:
               
Investment advisory fee
   
692,099
     
228,752
 
Shareholder servicing
   
127,110
     
36,340
 
Administration fee
   
65,678
     
34,505
 
Officer & directors’ fees & expenses
   
50,899
     
50,890
 
Fund accounting expenses
   
37,494
     
10,106
 
Federal & state registration fees
   
35,493
     
33,319
 
Professional fees
   
33,353
     
37,596
 
Other expense
   
18,126
     
6,882
 
Printing & mailing fees
   
11,685
     
2,547
 
Custodian fees
   
7,547
     
2,608
 
Total expenses
   
1,079,484
     
443,545
 
Net investment loss
   
(365,688
)
   
(342,512
)
                 
Realized and Unrealized Gain on Investments:
               
Net realized gain on investments
   
11,475,458
     
2,836,726
 
Change in unrealized appreciation on investments
   
20,589,785
     
7,565,696
 
Net realized and unrealized gain on investments
   
32,065,243
     
10,402,422
 
Net increase in net assets resulting from operations
 
$
31,699,555
   
$
10,059,910
 

The accompanying notes to financial statements are an integral part of these statements.
26

Perritt MicroCap Opportunities Fund

Statements of Changes in Net Assets

   
For the
   
For the
 
   
Year Ended
   
Year Ended
 
   
October 31, 2021
   
October 31, 2020
 
Operations:
           
Net investment loss
 
$
(365,688
)
 
$
(510,080
)
Net realized gain on investments
   
11,475,458
     
1,646,827
 
Net change in unrealized appreciation/(depreciation)
               
  on investments
   
20,589,785
     
(15,762,510
)
Net increase/(decrease) in net
               
  assets resulting from operations
   
31,699,555
     
(14,625,763
)
Dividends and Distributions to Shareholders:
               
Distributable Earnings
   
     
(3,593,867
)
Total dividends and distributions
   
     
(3,593,867
)
Capital Share Transactions:
               
Proceeds from shares issued
   
1,840,135
     
3,364,259
 
Reinvestment of distributions
   
     
3,508,721
 
Cost of shares redeemed
   
(13,801,023
)
   
(43,781,601
)
Redemption fees
   
1,544
     
9,268
 
Net decrease in net assets from capital share transactions
   
(11,959,344
)
   
(36,899,353
)
Total Increase/(Decrease) in Net Assets
   
19,740,211
     
(55,118,983
)
Net Assets
               
Beginning of the year
   
52,755,649
     
107,874,632
 
End of the year
 
$
72,495,860
   
$
52,755,649
 
Capital Share Transactions:
               
Shares sold
   
63,095
     
183,094
 
Shares issued on reinvestment of distributions
   
     
163,424
 
Shares redeemed
   
(503,819
)
   
(2,307,998
)
Net decrease from capital share transactions
   
(440,724
)
   
(1,961,480
)

The accompanying notes to financial statements are an integral part of this statement.
27

Perritt Ultra MicroCap Fund

Statements of Changes in Net Assets

   
For the
   
For the
 
   
Year Ended
   
Year Ended
 
   
October 31, 2021
   
October 31, 2020
 
Operations:
           
Net investment loss
 
$
(342,512
)
 
$
(152,246
)
Net realized gain/(loss) on investments
   
2,836,726
     
(1,147,634
)
Net change in unrealized
               
  appreciation/(depreciation) on investments
   
7,565,696
     
(1,333,569
)
Net increase/(decrease) in net
               
  assets resulting from operations
   
10,059,910
     
(2,633,449
)
Dividends and Distributions to Shareholders:
               
Distributable Earnings
   
     
(17,594
)
Return of capital
   
     
(34,626
)
Total dividends and distributions
   
     
(52,220
)
Capital Share Transactions:
               
Proceeds from shares issued
   
5,130,104
     
776,958
 
Reinvestment of distributions
   
     
50,759
 
Cost of shares redeemed
   
(4,741,542
)
   
(20,714,603
)
Redemption fees
   
19,111
     
150
 
Net decrease in net assets from capital share transactions
   
407,673
     
(19,886,736
)
Total Increase/(Decrease) in Net Assets
   
10,467,583
     
(22,572,405
)
Net Assets
               
Beginning of the year
   
11,581,674
     
34,154,079
 
End of the year
 
$
22,049,257
   
$
11,581,674
 
Capital Share Transactions:
               
Shares sold
   
251,322
     
64,582
 
Shares issued on reinvestment of distributions
   
     
4,028
 
Shares redeemed
   
(255,221
)
   
(1,731,047
)
Net decrease from capital share transactions
   
(3,899
)
   
(1,662,437
)

The accompanying notes to financial statements are an integral part of this statement.
28

Perritt MicroCap Opportunities Fund

Financial Highlights

For a Fund share outstanding throughout the year
 
   
For the Years Ended October 31,
 
   
2021
   
2020
   
2019
   
2018
   
2017
 
Net asset value, beginning of year
 
$
19.51
   
$
23.12
   
$
28.17
   
$
38.59
   
$
34.18
 
Income/(loss) from investment operations:
                                       
Net investment income (loss)2
   
(0.15
)
   
(0.15
)
   
(0.11
)
   
(0.20
)
   
(0.15
)
Net realized and unrealized
                                       
  gain (loss) on investments
   
12.66
     
(2.66
)
   
(1.74
)
   
(1.83
)
   
7.94
 
Total from investment operations
   
12.51
     
(2.81
)
   
(1.85
)
   
(2.03
)
   
7.79
 
Less dividends and distributions:
                                       
From net investment income
   
     
     
     
     
(0.09
)
From net realized gains
   
     
(0.80
)
   
(3.20
)
   
(8.39
)
   
(3.29
)
Total dividends and distributions
   
     
(0.80
)
   
(3.20
)
   
(8.39
)
   
(3.38
)
Redemption fees2,3
   
0.00
     
0.00
     
0.00
     
0.00
     
0.00
 
Net asset value, end of year
 
$
32.02
   
$
19.51
   
$
23.12
   
$
28.17
   
$
38.59
 
Total return1
   
64.12
%
   
(12.46
%)
   
(6.80
%)
   
(5.89
%)
   
24.20
%
Supplemental data and ratios:
                                       
Net assets, end of year (in thousands)
 
$
72,496
   
$
52,756
   
$
107,875
   
$
160,698
   
$
225,445
 
Ratio of net expenses to average net assets
   
1.56
%
   
1.64
%
   
1.38
%
   
1.28
%
   
1.23
%
Ratio of net investment loss
                                       
  to average net assets
   
(0.53
%)
   
(0.73
%)
   
(0.48
%)
   
(0.63
%)
   
(0.41
%)
Portfolio turnover rate
   
23.5
%
   
19.1
%
   
22.1
%
   
14.0
%
   
18.0
%

1
Total return reflects reinvested dividends but does not reflect the impact of taxes.
2
Net investment income (loss) and redemption fees per share has been calculated based on average shares outstanding during the year.
3
Amount is less than $0.01 per share.

The accompanying notes to financial statements are an integral part of this schedule.
29

Perritt Ultra MicroCap Fund

Financial Highlights

For a Fund share outstanding throughout the year
 
   
For the Years Ended October 31,
 
   
2021
   
2020
   
2019
   
2018
   
2017
 
Net asset value, beginning of year
 
$
11.54
   
$
12.81
   
$
15.62
   
$
18.49
   
$
15.46
 
Income/(loss) from investment operations:
                                       
Net investment income2
   
(0.36
)
   
(0.11
)
   
(0.12
)
   
(0.17
)
   
(0.18
)
Net realized and unrealized
                                       
  gain (loss) on investments
   
10.86
     
(1.14
)
   
(1.60
)
   
(0.77
)
   
3.94
 
Total from investment operations
   
10.50
     
(1.25
)
   
(1.72
)
   
(0.94
     
3.76
 
Less dividends and distributions:
                                       
From net realized gains
   
     
(0.01
)
   
(1.09
)
   
(1.93
)
   
(0.73
)
From return of capital
   
     
(0.01
)
   
     
     
 
Total dividends and distributions
   
     
(0.02
)
   
(1.09
)
   
(1.93
)
   
(0.73
)
Redemption fees2
   
0.02
     
0.00
3 
   
0.00
3 
   
0.00
3 
   
0.00
3 
Net asset value, end of year
 
$
22.06
   
$
11.54
   
$
12.81
   
$
15.62
   
$
18.49
 
Total return1
   
91.16
%
   
(9.75
)%
   
(11.54
%)
   
(5.73
%)
   
25.27
%
Supplemental data and ratios:
                                       
Net assets, end of year (in thousands)
 
$
22,049
   
$
11,582
   
$
34,154
   
$
61,042
   
$
69,636
 
Ratio of net expenses to average net assets
   
2.42
%
   
2.68
%
   
1.83
%
   
1.71
%
   
1.70
%
Ratio of net investment loss
                                       
  to average net assets
   
(1.85
)%
   
(0.92
%)
   
(0.85
%)
   
(0.99
%)
   
(1.07
%)
Portfolio turnover rate
   
25.7
%
   
14.3
%
   
13.3
%
   
28.4
%
   
43.0
%

1
Total return reflects reinvested dividends but does not reflect the impact of taxes.
2
Net investment income (loss) and redemption fees per share has been calculated based on average shares outstanding during the year.
3
Amount is less than $0.01 per share.

The accompanying notes to financial statements are an integral part of this schedule.
30

Perritt Funds, Inc.

Notes to Financial Statements

October 31, 2021
 
1.
Organization
   
 
Perritt Funds, Inc. (the “Corporation”) was organized on March 19, 2004 as a Maryland corporation and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end investment company, with each series below being a diversified fund. The Corporation currently consists of the following series: Perritt MicroCap Opportunities Fund (“MicroCap Fund”) and Perritt Ultra MicroCap Fund (“Ultra MicroCap Fund”) (each, a “Fund,” and collectively, the “Funds”). Perritt MicroCap Opportunities Fund, Inc., the predecessor to the MicroCap Fund, commenced operations on April 11, 1988. As part of a plan of reorganization, on February 28, 2013, Perritt MicroCap Opportunities Fund, Inc. merged into the MicroCap Fund, a series within the Corporation. The Ultra MicroCap Fund commenced operations on August 30, 2004. The MicroCap Fund’s investment objective is to invest in mainly common stocks of companies with market capitalizations that are below $500 million at the time of the initial purchase. The Ultra MicroCap Fund’s investment objective is to invest in mainly common stocks of companies with market capitalizations that are below $300 million at the time of the initial purchase. The Funds are each an investment company and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services – Investment Companies.”
   
2.
Summary of Significant Accounting Policies
 
 
a.
Exchange-listed securities are generally valued at the last sales price reported by the principal security exchange on which the security is traded, or if no sale is reported, the mean between the latest bid and ask price unless the Funds’ investment advisor believes that the mean does not represent a fair value, in which case the securities are fair valued as set forth below. Securities listed on NASDAQ are valued at the NASDAQ Official Closing Price. Demand notes, commercial paper, U.S. Treasury Bills and warrants are stated at fair value using market prices if available, or a pricing service when such prices are believed to reflect fair value. Money Market Funds are valued at amortized cost. Securities for which market quotations are not readily available are valued at their fair value as determined in good faith by the Funds’ advisor under procedures established by and under the supervision of the Board of Directors of the Funds. The Funds’ fair value procedures allow for the use of certain methods performed by the Funds’ advisor to value those securities for which market quotations are not readily available, at a price that a Fund might reasonably expect to receive upon a sale of such securities. For example, these methods may be based on a multiple of earnings, or a discount from market of a similar freely traded security, or a yield to maturity with respect to debt issues, or a combination of these and other methods.
     
 
b.
Net realized gains and losses on securities are computed using the first-in, first-out method.
     
 
c.
Dividend income is recognized on the ex-dividend date, and interest income is recognized on the accrual basis. Withholding taxes on foreign dividends and capital gains, which are included as a component of net investment income and realized gain

31

Perritt Funds, Inc.

Notes to Financial Statements (Continued)

   
(loss) on investments, respectively, have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates. Discounts and premiums on securities purchased are amortized over the life of the respective securities using the interest method. Distributions received from real estate investment trusts (“REITs”) are classified as investment income or realized gains based on the U.S. income tax characteristics of the distribution. Return of capital distributions received from REIT securities and partnerships are recorded as an adjustment to the cost of the security and thus may impact unrealized or realized gains or losses on the security. Investment and shareholder transactions are recorded on the trade date.
     
 
d.
Each Fund is charged for those expenses that are directly attributable to it. Expenses that are not readily identifiable to a specific Fund are generally allocated among the Funds in proportion to the relative net assets of the Funds.
     
 
e.
Provision has not been made for federal income tax since the Funds have each elected to be taxed as a “regulated investment company” and intend to distribute substantially all income to their shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies.
     
 
f.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
     
   
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
     
 
g.
Dividends from net investment income and net realized capital gains, if any, are declared and paid annually. Distributions to shareholders are recorded on the ex-dividend date. Each Fund may utilize earnings and profit distributed to shareholders on redemption of shares as part of the dividends paid deduction. The Funds may periodically make reclassifications among certain of their capital accounts as a result of the timing and characterization of certain income and realized gain distributions, including reclassifying net operating loss, as determined annually in accordance with federal tax regulations which may differ from GAAP. The MicroCap Fund has reclassified the components of its capital accounts for the year ended October 31, 2021 by increasing paid-in capital by $769,229 and decreasing distributable earnings/(losses) by $769,229. The Ultra Microcap Fund has reclassified the components of its capital accounts for the year ended October 31, 2021 by decreasing paid-in capital by $12,069 and increasing distributable earnings/(losses) by $12,069. These adjustments were primarily due to the utilization of earnings and profits distributed to shareholders on redemptions of shares and the write off of net operating losses.
     
 
h.
As of and during the year ended October 31, 2021, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the Statements of

32

Perritt Funds, Inc.

Notes to Financial Statements (Continued)

   
Operations. During the year ended October 31, 2021, the Funds did not incur any interest or penalties. The Funds are not subject to examination by U.S. federal tax authorities for any tax years before 2018.
 
3.
Security Valuation
   
 
GAAP establishes an authoritative definition of fair value and sets out a hierarchy for measuring fair value. GAAP also requires additional disclosures about the various inputs used to develop the measurements of fair value. These inputs are summarized in the three broad levels listed below:

 
• Level 1 –
Quoted prices in active markets for identical securities that the Funds have the ability to access.
     
 
• Level 2 –
Other significant observable inputs (including quoted prices for similar securities or the identical security on an inactive market, interest rates, prepayment speeds, credit risk, etc.).
     
 
• Level 3 –
Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments).

 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Funds’ net assets as of October 31, 2021:

 
Perritt MicroCap Opportunities Fund
                       
                           
 
Description
 
Level 1
   
Level 2
   
Level 3
   
Total
 
 
Investments in Securities
                       
 
Common Stocks
                       
 
  Communication Services
 
$
2,431,792
   
$
   
$
   
$
2,431,792
 
 
  Consumer Discretionary
   
8,306,615
     
325,500
     
     
8,632,115
 
 
  Consumer Staples
   
673,200
     
     
     
673,200
 
 
  Energy
   
1,317,915
     
     
     
1,317,915
 
 
  Financial
   
11,001,398
     
     
     
11,001,398
 
 
  Health Care
   
3,554,534
     
     
     
3,554,534
 
 
  Industrials
   
22,208,253
     
     
     
22,208,253
 
 
  Information Technology
   
14,842,424
     
     
     
14,842,424
 
 
  Materials
   
6,095,404
     
     
     
6,095,404
 
 
  Utilities
   
784,500
     
     
     
784,500
 
 
Total Common Stocks
   
71,216,035
     
325,500
     
     
71,541,535
 
 
Warrants
                               
 
  Industrials
   
6,000
     
     
     
6,000
 
 
  Consumer Discretionary
   
     
0
     
     
0
 
 
Total Warrants
   
6,000
     
0
     
     
6,000
 
 
Short-Term Investments
   
1,108,605
     
     
     
1,108,605
 
 
Total Investments in Securities
 
$
72,330,640
   
$
325,500
   
$
   
$
72,656,140
 

 
33

Perritt Funds, Inc.

Notes to Financial Statements (Continued)

 
Perritt Ultra MicroCap Fund
                       
                           
 
Description
 
Level 1
   
Level 2
   
Level 3
   
Total
 
 
Investments in Securities
                       
 
Common Stocks
                       
 
  Communication Services
 
$
1,107,251
   
$
   
$
   
$
1,107,251
 
 
  Consumer Discretionary
   
1,392,419
     
217,000
     
     
1,609,419
 
 
  Consumer Staples
   
434,000
     
     
     
434,000
 
 
  Energy
   
384,112
     
     
     
384,112
 
 
  Financial
   
1,601,950
     
     
     
1,601,950
 
 
  Health Care
   
2,473,529
     
     
     
2,473,529
 
 
  Industrials
   
4,992,464
     
     
     
4,992,464
 
 
  Information Technology
   
5,568,985
     
180,000
     
     
5,748,985
 
 
  Materials
   
1,307,715
     
     
     
1,307,715
 
 
  Real Estate Investment Trusts
   
557,500
     
     
     
557,500
 
 
  Utilities
   
378,400
     
     
     
378,400
 
 
Total Common Stocks
   
20,198,325
     
397,000
     
     
20,595,325
 
 
Warrants
                               
 
  Health Care
   
     
0
     
     
0
 
 
  Materials
   
13,500
     
     
     
13,500
 
 
Total Warrants
   
13,500
     
0
     
     
13,500
 
 
Short-Term Investments
   
1,582,589
     
     
     
1,582,589
 
 
Total Investments in Securities
 
$
21,794,414
   
$
397,000
   
$
   
$
22,191,414
 

 
Please refer to the Schedule of Investments for additional information regarding the composition of the amounts listed above.
   
 
During the year ended October 31, 2021, the MicroCap Fund and the Ultra MicroCap Fund did not hold any Level 3 securities.
   
4.
Investment Advisory Agreement
   
 
For each Fund, the Corporation entered into an investment advisory agreement (collectively, the “Agreements”) with Perritt Capital Management, Inc. (the “Advisor”), with whom certain officers and directors of the Corporation are affiliated, to furnish investment advisory services to the Funds. Under the terms of the Agreements, the MicroCap Fund pays the Advisor a monthly fee at the annual rate of 1.00% of the Fund’s daily average net assets, and the Ultra MicroCap Fund pays the Advisor a monthly fee equal to 1.25% of its daily average net assets less than or equal to $100 million; 1.00% with respect to daily average net assets in excess of $100 million and less than or equal to $200 million; and 0.50% with respect to daily average net assets in excess of $200 million. At October 31, 2021, the MicroCap Fund and Ultra MicroCap Fund had fees due to the Advisor of $59,765 and $23,060, respectively. For the year ended October 31, 2021, the MicroCap Fund and Ultra MicroCap Fund had incurred advisory fees of $692,099 and $228,752, respectively.
   
 
The Advisor manages the Funds’ investments subject to the supervision of the Funds’ Board of Directors. The Advisor is responsible for investment decisions and supplies

34

Perritt Funds, Inc.

Notes to Financial Statements (Continued)

 
investment research and portfolio management. Under the Agreements, the Advisor, at its own expense and without reimbursement from the Funds, will furnish office space and all necessary office facilities, equipment and personnel for making the investment decisions necessary for managing the Funds and maintaining their organization, will pay the salaries and fees of all officers and directors of the Funds (except the Chief Compliance Officer’s salary and the fees paid to disinterested directors) and will bear all sales and promotional expenses of the Funds.
   
 
The officers of the Funds are affiliated with the Advisor. Such officers, with the exception of the Chief Compliance Officer, receive no compensation from the Funds or the Advisor for serving their respective roles. The Funds pay the salary associated with the office of the Chief Compliance Officer. Such fees are included on the Statements of Operations within officer & directors’ fees & expenses.
   
 
The Funds reimbursed the Advisor for fees paid to financial intermediaries such as banks, broker-dealers, financial advisors or other financial institutions for sub-transfer agency, sub-administration and other services that the financial intermediaries provided to their clients, who are beneficial owners of shares of the Funds. The financial intermediaries are the record owners of the Funds on the Funds’ records through omnibus accounts, other group accounts, retirement plans or accounts traded through registered securities clearing agents. These fees are fees that the Funds are obligated to pay to such intermediaries, and the fees may vary based on, for example, the nature of services provided. The fees paid to such intermediaries by the Funds are only a portion of the full fee that is paid to the intermediaries, and the Advisor is obligated to pay the remaining amount. In determining the portion of the fees paid to the intermediaries that the Funds are obligated to pay, the Funds have used the “avoided cost” method, which is one of several permissible methods to determine the fees are reasonable. Based on this method, the Funds’ Board of Directors determines a fee per sub-account that it believes approximates the transfer agency fee that would otherwise have been payable by the Funds if such intermediaries did not maintain the sub-account. These amounts are included within shareholder servicing fees on the Statements of Operations.
   
5.
Investment Transactions
   
 
Purchases and sales of securities, excluding short-term investments, for the year ended October 31, 2021, were as follows:

     
Purchases
   
Sales
 
     
U.S.
         
U.S.
       
     
Governments
   
Other
   
Governments
   
Other
 
 
MicroCap Fund
 
$
   
$
15,833,771
   
$
   
$
29,077,887
 
 
Ultra MicroCap Fund
 
$
   
$
4,505,291
   
$
   
$
5,580,156
 

35

Perritt Funds, Inc.

Notes to Financial Statements (Continued)

6.
Federal Income Tax Matters
   
 
As of October 31, 2021, the components of distributable earnings on a tax basis were as follows:

     
MicroCap