SURO CAPITAL CORP. Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements that
involve substantial risks and uncertainties. These forward-looking statements
are not historical facts, but rather are based on current expectations,
estimates and projections about us, our current and prospective portfolio
investments, our industry, our beliefs, and our assumptions. Words such as
"anticipates," "expects," "intends," "plans," "will," "may," "continue,"
"believes," "seeks," "estimates," "would," "could," "should," "targets,"
"projects," and variations of these words and similar expressions are intended
to identify forward-looking statements.
The forward-looking statements contained in this quarterly report on Form 10-Q
involve risks and uncertainties, including, without limitation, statements as
to:
•the effect and consequences of the novel coronavirus ("COVID-19") public health
crisis on matters including global, U.S. and local economies, our business
operations and continuity, potential disruption to our portfolio companies,
tightened availability to capital and financing, the health and productivity of
our employees, the ability of third-party providers to continue uninterrupted
service, and the regulatory environment in which we operate;
• our future operating results;
• our business prospects and the prospects of our portfolio companies;
• the impact of investments that we expect to make;
• our contractual arrangements and relationships with third parties;
• the dependence of our future success on the general economy and its impact on the industries in which we invest;
• the ability of our portfolio companies to achieve their objectives;
• our expected financings and investments;
• the adequacy of our cash resources and working capital; and
• the timing of cash flows, if any, from the operations of our portfolio companies.
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
• an economic downturn could impair our portfolio companies' ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;
• an economic downturn could disproportionately impact the market sectors in which a significant portion of our portfolio is concentrated, causing us to suffer losses in our portfolio;
• a contraction of available credit and/or an inability to access the equity markets could impair our investment activities;
• interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; and
• the risks, uncertainties and other factors we identify in the sections
entitled "Risk Factors" in our quarterly reports on Form 10-Q, our annual report
on Form 10-K, and in our other filings with the
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Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in our quarterly reports on Form 10-Q and our annual report on Form 10-K, in the "Risk Factors" sections. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report on Form 10-Q. The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this quarterly report on Form 10-Q.
Overview
We are an internally-managed, non-diversified closed-end management 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"),
and has elected to be treated, and intends to qualify annually, as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code").
Our investment objective is to maximize our portfolio's total return,
principally by seeking capital gains on our equity and equity-related
investments, and to a lesser extent, income from debt investments. We invest
principally in the equity securities of what we believe to be rapidly growing
venture-capital-backed emerging companies. We acquire our investments through
direct investments in prospective portfolio companies, secondary marketplaces
for private companies and negotiations with selling stockholders. In addition,
we may invest in private credit and in the founders equity, founders warrants,
forward purchase agreements, and private investment in public equity ("PIPE")
transactions of special purpose acquisition companies ("SPACs"). We may also
invest on an opportunistic basis in select publicly traded equity securities or
certain non-U.S. companies that otherwise meet our investment criteria, subject
to applicable requirements of the 1940 Act. To the extent we make investments in
private equity funds and hedge funds that are excluded from the definition of
"investment company" under the 1940 Act by Section 3(c)(1) or 3(c)(7) of the
1940 Act, we will limit such investments to no more than 15% of our net assets.
In regard to the regulatory requirements for BDCs under the 1940 Act, some of
these investments may not qualify as investments in "eligible portfolio
companies," and thus may not be considered "qualifying assets." "Eligible
portfolio companies" generally include U.S. companies that are not investment
companies and that do not have securities listed on a national exchange. If at
any time less than 70% of our gross assets are comprised of qualifying assets,
including as a result of an increase in the value of any non-qualifying assets
or decrease in the value of any qualifying assets, we would generally not be
permitted to acquire any additional non-qualifying assets until such time as 70%
of our then-current gross assets were comprised of qualifying assets. We would
not be required, however, to dispose of any non-qualifying assets in such
circumstances.
Our investment philosophy is based on a disciplined approach of identifying
promising investments in high-growth, venture-backed companies across several
key industry themes which may include, among others, social/mobile, cloud
computing and big data, internet commerce, financial technology, mobility, and
enterprise software. Our investment decisions are based on a disciplined
analysis of available information regarding each potential portfolio company's
business operations, focusing on the portfolio company's growth potential, the
quality of recurring revenues, and path to profitability, as well as an
understanding of key market fundamentals. Venture capital funds or other
institutional investors have invested in the vast majority of companies that we
evaluate.
We seek to deploy capital primarily in the form of non-controlling equity and
equity-related investments, including common stock, warrants, preferred stock
and similar forms of senior equity, which may or may not be convertible into a
portfolio company's common equity, and convertible debt securities with a
significant equity component. Typically, our preferred stock investments are
non-income producing, have different voting rights than our common stock
investments and are generally convertible into common stock at our discretion.
As our investment strategy is primarily focused on equity positions, our
investments generally do not produce current income and therefore we may be
dependent on future capital raising to meet our operating needs if no other
source of liquidity is available.
We seek to create a low-turnover portfolio that includes investments in companies representing a broad range of investment themes.
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Internalization of Operating Structure
On and effectiveMarch 12, 2019 (the "Effective Date"), our Board of Directors approved internalizing our operating structure (the "Internalization") and we began operating as an internally managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Our Board of Directors approved the Internalization in order to better align the interests of the Company's stockholders with its management. As an internally managed BDC, the Company is managed by its employees, rather than the employees of an external investment adviser, thereby allowing for greater transparency to stockholders through robust disclosure regarding the Company's compensation structure. Prior to the Effective Date, we were externally managed by our former investment adviser,GSV Asset Management, LLC ("GSV Asset Management"), pursuant to an investment advisory agreement (the "Investment Advisory Agreement"), and our former administrator,GSV Capital Service Company, LLC ("GSV Capital Service Company "), provided the administrative services necessary for our operations pursuant to an administration agreement (the "Administration Agreement"). In connection with our Internalization, the Investment Advisory Agreement and the Administration Agreement were terminated as of the Effective Date, in accordance with their respective terms. As a result, we no longer pay any fees or expenses under an investment advisory agreement or administration agreement, and instead pay the operating costs associated with employing investment management professionals including, without limitation, compensation expenses related to salaries, discretionary bonuses and restricted stock grants. Except as otherwise disclosed herein, this Form 10-Q discusses our business and operations as an internally-managed BDC during the period covered by this Form 10-Q. Recent COVID-19 Developments InMarch 2020 , the outbreak of the novel coronavirus ("COVID-19") was recognized as a pandemic by theWorld Health Organization . As of the quarter endedMarch 31, 2022 , and subsequent toMarch 31, 2022 , the COVID-19 pandemic has had a significant impact on theU.S. and global economy. We have and continue to assess the impact of the COVID-19 pandemic on our portfolio companies. We cannot predict the full impact of the COVID-19 pandemic, including its duration inthe United States and worldwide, the effectiveness of governmental responses designed to mitigate strain to businesses and the economy, and the magnitude of the economic impact of the outbreak, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. As such, we are unable to predict the duration of any business and supply-chain disruptions, the extent to which the COVID-19 pandemic will negatively affect our portfolio companies' operating results or the impact that such disruptions may have on our results of operations and financial condition. Our portfolio companies and, by extension, our operating results may be adversely impacted by the COVID-19 pandemic and, depending on the duration and extent of the disruption to the operations of our portfolio companies, certain portfolio companies may experience financial distress and may possibly default on their financial obligations to us and their other capital providers. Any of these developments would likely result in a decrease in the value of our investment in any such portfolio company. In addition, to the extent that the impact to our portfolio companies results in reduced interest payments or permanent impairments on our investments, we could see a decrease in our net investment income, which would increase the percentage of our cash flows dedicated to our debt obligations and could impact the amount of any future distributions to our stockholders. In response to the COVID-19 pandemic, we instituted a temporary work-from-home policy inMarch 2020 , pursuant to which our employees primarily worked remotely without disruption to our operations. This policy was amended inFebruary 2022 when it was deemed safe to return to our offices. As ofMay 4, 2022 , there is no indication of a reportable subsequent event impacting the Company's financial statements for the quarter endedMarch 31, 2022 . The Company continues to observe and respond to the evolving COVID-19 environment and its potential impact on areas across its business. 57
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Portfolio and Investment Activity
Three Months Ended
The value of our investment portfolio will change over time due to changes in the fair value of our underlying investments, as well as changes in the composition of our portfolio resulting from purchases of new and follow-on investments and the sales of existing investments. The fair value, as ofMarch 31, 2022 , of all of our portfolio investments was$280,778,078 .
During the three months ended
During the three months ended
During the three months ended
Average Net
Share Price Realized
Portfolio Company Transaction Date Shares (1) Net Proceeds Gain(2)
NewLake Capital Partners, Inc. Various
27,352
1/31/2022 42,744 6.52 278,497 150,725
Residential Homes for Rent, LLC
(d/b/a Second Avenue)(3) Various N/A N/A 250,000 -
Total $ 1,287,722 $ 362,798 _________________________________
(1)The average net share price is the net share price realized after deducting all commissions and fees on the sale(s), if applicable. (2)Realized gain does not include adjustments to amounts held in escrow receivable. (3)During the three months endedMarch 31, 2022 , approximately$0.3 million has been received fromResidential Homes forRent, LLC (d/b/aSecond Avenue ) related to the 15% term loan dueDecember 23, 2023 . Of the proceeds received, approximately$0.2 million repaid a portion of the outstanding principal and the remaining was attributed to interest.
During the three months ended
Three Months Ended
During the three months endedMarch 31, 2021 , we funded investments in an aggregate amount of$9,499,978 (not including capitalized transaction costs) as shown in the following table: Portfolio Company Investment Transaction Date Gross Payments NewLake Capital Partners, Inc. (f/k/aGreenAcreage Real Estate Corp.) Common Shares 2/12/2021$ 499,986 Churchill Sponsor VI LLC(1) Common Share Units & Warrant Units 2/25/2021 200,000 Churchill Sponsor VII LLC(2) Common Share Units & Warrant Units 2/25/2021 300,000 Shogun Enterprises, Inc.(3) Preferred Shares, Series B-1 2/26/2021 3,499,994 Shogun Enterprises, Inc.(3) Preferred Shares, Series B-2 2/26/2021 3,499,998 Architect Capital PayJoy SPV, LLC(4) Membership Interest in Lending SPV 3/24/2021 500,000 Commercial Streaming Solutions Simple Agreement for Future Equity Inc. (d/b/a BettorView) ("SAFE") 3/26/2021 1,000,000 Total$ 9,499,978
_________________________________
(1)Churchill Sponsor VI LLC is the sponsor of Churchill Capital Corp VI, a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Our investment inChurchill Sponsor VI LLC constituted a "remote-affiliate" transaction for purposes of the 1940 Act in light of the fact thatMark Klein , our Chairman, CEO and President, has a non-controlling interest in the entity that controlsChurchill Sponsor VI LLC , and is a non-controlling board member of Churchill Capital Corp VI. (2)Churchill Sponsor VII LLC is the sponsor of Churchill Capital Corp VII, a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Our investment inChurchill Sponsor VII LLC constituted a "remote-affiliate" transaction for purposes of the 1940 Act in light of the fact thatMark Klein , our Chairman, CEO and President, has a non-controlling interest in the entity that controlsChurchill Sponsor VII LLC , and is a non-controlling board member of Churchill Capital Corp VII. (3)Keri Findley , a former senior managing director of the Company until her departure onMarch 9, 2022 , is a non-controlling member of the board of directors ofShogun Enterprises, Inc. and holds a minority equity interest in such company. (4)As ofMarch 31, 2021 ,$0.5 million of the$10.0 million capital commitment representingSuRo Capital Corp.'s Membership Interest inArchitect Capital PayJoy SPV, LLC had been called and funded.Keri Findley , a former senior managing director of the Company until her departure on March 58
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9, 2022, is a non-controlling member of the board of directors of the investment
manager to
During the three months ended
During the three months endedMarch 31, 2021 , we exited investments in an amount of$125,387,267 , net of transaction costs, and realized a net gain on investments of$112,152,518 (includingU.S. Treasury investments and adjustments to amounts held in escrow receivable) as shown in following table: Average Net Share Price Portfolio Company Transaction Date Shares (1) Net Proceeds Realized Gain(2) Palantir Technologies, Inc.(3) Various
4,618,952
Various N/A N/A 1,608,604 1,608,604
Residential Homes for Rent, LLC
(d/b/a Second Avenue)(5) Various N/A N/A 359,479 -
Total $ 125,387,267 $ 112,152,672 _________________________________
(1)The average net share price is the net share price realized after deducting all commissions and fees on the sale(s), if applicable. (2)Realized gain does not include adjustments to amounts held in escrow receivable. (3)As ofMarch 4, 2021 , all remaining shares of Palantir Technologies, Inc. held by us had been sold. (4)The Palantir Lending Trust SPV I promissory note was initially collateralized with 2,260,000 Class A common shares of Palantir Technologies, Inc. to whichSuRo Capital Corp. retains a beneficial equity upside interest. As ofMarch 31, 2022 , 512,290 Class A common shares remain in Palantir Lending Trust SPV I, none of which are subject to lock-up restrictions. The realized gain fromSuRo Capital Corp.'s investment in Palantir Lending Trust SPV I is generated by the proceeds from the sale of a portion of the shares collateralizing the promissory note to Palantir Lending Trust SPV I and attributable to the Equity Participation in Underlying Collateral. (5)As ofMarch 31, 2021 , approximately$0.4 million had been received fromResidential Homes forRent, LLC (d/b/aSecond Avenue ) related to the 15% term loan dueDecember 23, 2023 . Of the proceeds received, approximately$0.3 million repaid a portion of the outstanding principal and approximately$0.1 million was attributed to interest.
During the three months ended
Results of Operations
Comparison of the Three Months Ended
Operating results for the three months ended
Three Months Ended
2022 2021
Total Investment Income $ 583,100 $ 291,352
Interest income 452,455 166,845
Dividend income 130,645 124,507
Total Operating Expenses $ 4,807,805 $ 3,125,670
Compensation expense 1,860,702 1,293,310
Directors' fees 160,565 111,250
Professional fees 1,272,713 973,159
Interest expense 1,200,786 504,793
Tax expense 2,050 2,025
Other expenses 310,989 241,133
Net Investment Loss $ (4,224,705) $ (2,834,318)
Net realized gain on investments 3,096,275 112,152,518
Net change in unrealized appreciation/(depreciation) of investments
21,584,885 (1,315,837)
Net Increase in Net Assets Resulting from Operations $ 20,456,455 $ 108,002,363
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Investment Income
Investment income increased to$583,100 for the three months endedMarch 31, 2022 from$291,352 for the three months endedMarch 31, 2021 . The net increase between periods was due to an increase in interest income fromArchitect Capital PayJoy SPV, LLC . The increase was offset by a decrease in interest income fromResidential Homes forRent, LLC (d/b/aSecond Avenue ) and a decrease in dividend income fromGreenAcreage Real Estate Investment Trust, Inc. during the three months endedMarch 31, 2022 , relative to the three months endedMarch 31, 2021 .
Operating Expenses
Total operating expenses increased to$4,807,805 for the three months endedMarch 31, 2022 from$3,125,670 for the three months endedMarch 31, 2021 . The increase in operating expense was primarily due to an increase in compensation expense, interest expense, professional fees, and other expenses during the three months endedMarch 31, 2022 , relative to the three months endedMarch 31, 2021 . Net Investment Loss For the three months endedMarch 31, 2022 , we recognized a net investment loss of$4,224,705 , compared to a net investment loss of$2,834,318 for the three months endedMarch 31, 2021 . The change between periods resulted from the increase in operating expenses between periods during the three months endedMarch 31, 2022 , relative to the three months endedMarch 31, 2021 .
Net Realized Gain on Investments
For the three months endedMarch 31, 2022 , we recognized a net realized gain on our investments of$3,096,275 , compared to a net realized gain of$112,152,518 for the three months endedMarch 31, 2021 . The components of our net realized gains on portfolio investments for the three months endedMarch 31, 2022 and 2021, excludingU.S. Treasury investments and fluctuations in escrow receivables estimates, are reflected in the tables above, under "-Portfolio and Investment Activity."
Net Change in Unrealized Appreciation/(Depreciation) of Investments
For the three months ended
Net Change in Unrealized Net Change in Unrealized
Appreciation/(Depreciation) For the Appreciation/(Depreciation) For the
Portfolio Company Quarter Ended March 31, 2022 Portfolio Company Quarter Ended March 31, 2021
Forge Global, Inc. $ 41,728,933 Coursera, Inc. $ 73,516,484
True Global Ventures 4 Plus Fund
Pte Ltd 3,267,828 Nextdoor.com, Inc. 5,081,591
NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate A Place for Rover Inc. (f/k/a Corp.)(1) (1,161,292) DogVacay, Inc.) 3,941,249 Trax Ltd. (1,600,177) Ozy Media, Inc. 1,391,903 Nextdoor, Inc. (2,452,786) Aventine Property Group, Inc.(1)
1,293,674
Rover Group, Inc.(1) (3,028,901) Enjoy Technology, Inc. (2,434,915) Skillsoft Corp. (3,053,532) Course Hero, Inc. (2,548,258) Course Hero, Inc. (11,030,543) Palantir Technologies, Inc.(1) (81,760,272) Other(2) (1,084,645) Other(2) 202,707 Total $ 21,584,885 Total $ (1,315,837) _______________________ (1)The change in unrealized appreciation/(depreciation) reflected for these investments resulted in full or in part from the full or partial exit of the investment, which resulted in the reversal of previously accrued unrealized appreciation/(depreciation), as applicable. (2)"Other" represents investments (includingU.S. Treasury bills) for which individual change in unrealized appreciation/(depreciation) was less than$1.0 million for the three months endedMarch 31, 2022 and 2021. 60
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TABLE OF CONTENTS Recent Developments Portfolio Activity
Please refer to "Note 12-Subsequent Events" to our condensed consolidated
financial statements as of
We are frequently in negotiations with various private companies with respect to investments in such companies. Investments in private companies are generally subject to satisfaction of applicable closing conditions. In the case of secondary market transactions, such closing conditions may include approval of the issuer, waiver or failure to exercise rights of first refusal by the issuer and/or its stockholders and termination rights by the seller or us. Equity investments made through the secondary market may involve making deposits in escrow accounts until the applicable closing conditions are satisfied, at which time the escrow accounts will close and such equity investments will be effectuated.
Share Repurchase Program
From
COVID-19 The Company has been closely monitoring the COVID-19 pandemic, its broader impact on the global economy and the more recent impacts on theU.S. economy. Subsequent toMarch 31, 2022 , the global outbreak of the COVID-19 pandemic, and the related effect on theU.S. and global economies, may have adverse consequences for the business operations of some of the Company's portfolio companies and, as a result, may have adverse effects on the Company's operations. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, remain uncertain. The operational and financial performance of the issuers of securities in which the Company invests depends on future developments, including the duration and spread of the crisis, and such uncertainty may in turn adversely affect the value and liquidity of the Company's investments and negatively impact the Company's performance. As ofMay 4, 2022 , there is no indication of a reportable subsequent event impacting the Company's financial statements for the three months endedMarch 31, 2022 . The Company continues to observe and respond to the evolving COVID-19 environment and its potential impact on areas across its business.
Liquidity and Capital Resources
Our liquidity and capital resources are generated primarily from the sales of our investments and the net proceeds from public offerings of our equity and debt securities, including pursuant to our continuous at-the-market offering of shares of our common stock as discussed below under "At-the-Market Offering". In addition, onMarch 28, 2018 , we issued$40.0 million aggregate principal amount of 4.75% Convertible Senior Notes due 2023, the outstanding principal amount of which we redeemed in full onMarch 29, 2021 . OnDecember 17, 2021 , we issued$75.0 million aggregate principal amount of 6.00% Notes due 2026, all of which remain outstanding. For additional information, see below and "Note 10-Debt Capital Activities" to our condensed consolidated financial statements as ofMarch 31, 2022 . Our primary uses of cash are to make investments, pay our operating expenses, and make distributions to our stockholders. For the three months endedMarch 31, 2022 and 2021, our operating expenses were$4,807,805 and$3,125,670 , respectively. Cash Reserves and Liquid Securities March 31, 2022 December 31, 2021 Cash $
172,839,141
Securities of publicly traded portfolio companies: Unrestricted securities(1)
16,799,132 -
Subject to other sales restrictions(2) 78,794,391 94,635,398
Securities of publicly traded portfolio companies 95,593,523 94,635,398
Total Cash Reserves and Liquid Securities $ 268,432,664 $ 293,072,476
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_______________________
(1)"Unrestricted securities" represents common stock of our publicly traded companies that are not subject to any restrictions upon sale. We may incur losses if we liquidate these positions to pay operating expenses or fund new investments. (2)Securities of publicly traded portfolio companies "subject to other sales restrictions" represents common stock of our publicly traded companies that are subject to certain lock-up restrictions. During the three months endedMarch 31, 2022 , cash decreased to$172,839,141 from$198,437,078 at the beginning of the year. The decrease in cash was primarily due to the payment of our dividends, interest on the 6.00% Notes due 2026, and to pay our operating expenses offset by proceeds from the sale of public investments and other investment income received. Currently, we believe we have ample liquidity to support our near-term capital requirements. As the impact of the COVID-19 continues to unfold and consistent with past and current practices, we will continue to evaluate our overall liquidity position and take proactive steps to maintain the appropriate liquidity position based upon the current circumstances.
Contractual Obligations
A summary of our significant contractual payment obligations as ofMarch 31, 2022 is as follows: Payments Due By Period (in millions) Less than More than Total 1 year 1-3 years 3-5 years 5 years Notes(1)$ 75.0 $ - $ -$ 75.0 $ - Payable for securities purchased 0.5 0.5 - - - Operating lease liability 0.5 0.2 0.3 - - Total$ 75.9 $ 0.6 $ 0.3 $ 75.0 $ - _______________________ (1)The balance shown for the "Notes" reflects the principal balance payable to investors for the 6.00% Notes due 2026 as ofMarch 31, 2022 . Refer to "Note 10-Debt Capital Activities" to our condensed consolidated financial statements as ofMarch 31, 2022 for more information.
Share Repurchase Program
During the three months endedMarch 31, 2022 , the Company repurchased 153,517 shares of the Company's common stock under the Share Repurchase Program. During the three months endedMarch 31, 2021 , the Company did not repurchase shares of common stock under the Share Repurchase Program. As ofMarch 31, 2022 , the dollar value of shares that remained available to be purchased by the Company under the Share Repurchase Program was approximately$23.3 million . Under the Share Repurchase Program, we may repurchase our outstanding common stock in the open market provided that we comply with the prohibitions under our insider trading policies and procedures and the applicable provisions of the 1940 Act and the Securities Exchange Act of 1934, as amended. For more information on the Share Repurchase Program, see "Part II, Item 5. Unregistered Sales ofEquity Securities and Use of Proceeds" and "Note 5-Common Stock" to our condensed consolidated financial statements as ofMarch 31, 2022 .
Off-Balance Sheet Arrangements
As ofMarch 31, 2022 , we had no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices. However, we may employ hedging and other risk management techniques in the future.
Equity Issuances & Debt Capital Activities
At-the-Market Offering
OnJuly 29, 2020 , the Company entered into an At-the-Market Sales Agreement, datedJuly 29, 2020 (the "Initial Sales Agreement"), withBTIG, LLC ,JMP Securities LLC , andLadenburg Thalmann & Co., Inc. (collectively, the "Agents"). Under the Initial Sales Agreement, the Company may, but has no obligation to, issue and sell up to$50.0 million in aggregate amount of shares of its common stock (the "Shares") from time to time through the Agents or to them as principal for their own account (the "ATM Program"). OnSeptember 23, 2020 , the Company increased the maximum amount of Shares to be sold through the ATM Program to$150.0 million from$50.0 million . In connection with the upsize of the ATM Program to$150.0 million , the Company entered into the Amendment No. 1 to the At-the-Market Sales Agreement, datedSeptember 23, 2020 , with the Agents. The Company intends to use the net proceeds from the ATM Program to make investments in portfolio companies in accordance with its investment objective and strategy and for general corporate purposes. 62
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During the three months endedMarch 31, 2022 , the Company issued and sold 17,807 Shares under the ATM Program at a weighted-average price of$13.01 per share, for gross proceeds of$231,677 and net proceeds of$229,896 , after deducting commissions to the Agents on Shares sold. As ofMarch 31, 2022 , up to approximately$98.8 million in aggregate amount of the Shares remain available for sale under the ATM Program. Refer to "Note 5-Common Stock" to our consolidated financial statements as ofMarch 31, 2022 for more information regarding the ATM Program.
4.75% Convertible Senior Notes due 2023
OnMarch 28, 2018 , we issued$40.0 million aggregate principal amount of 4.75% Convertible Senior Notes due 2023, which bore interest at a fixed rate of 4.75% per year, payable semi-annually in arrears onMarch 31 andSeptember 30 of each year, commencing onSeptember 30, 2018 . We received approximately$38.2 million in proceeds from the offering, net of underwriting discounts and commissions and other offering expenses. The 4.75% Convertible Senior Notes due 2023 had a maturity date ofMarch 28, 2023 , unless previously repurchased or converted in accordance with their terms. We did not have the right to redeem the 4.75% Convertible Senior Notes due 2023 prior toMarch 27, 2021 . OnMarch 29, 2021 , the Company redeemed$0.3 million in aggregate principal amount of the 4.75% Convertible Senior Notes due 2023 at a redemption price equal to 100% of their principal amount ($1,000 per convertible note), plus accrued and unpaid interest thereon, which amounted to approximately$0.8 million . As a result of this redemption and prior conversions of the 4.75% Convertible Senior Notes due 2023 into shares of our common stock by the holders thereof, the 4.75% Convertible Senior Notes due 2023 were no longer outstanding as ofMarch 29, 2021 . During the three months endedMarch 31, 2021 , the Company issued 4,097,808 shares of its common stock and cash for fractional shares upon the conversion of approximately$37.9 million in aggregate principal amount of the 4.75% Convertible Senior Notes due 2023. The Company also redeemed approximately$0.3 million of aggregate principal amount for cash plus accrued and unpaid interest onMarch 29, 2021 . During the year endedDecember 31, 2020 , the Company issued 174,888 shares of its common stock and cash for fractional shares upon the conversion of$1,785,000 in aggregate principal amount of the 4.75% Convertible Senior Notes due 2023.
Refer to "Note 10-Debt Capital Activities" to our condensed consolidated
financial statements as of
6.00% Notes due 2026
OnDecember 17, 2021 , we issued$70.0 million aggregate principal amount of 6.00% Notes due 2026, which bear interest at a fixed rate of 6.00% per year, payable quarterly in arrears onMarch 31 ,June 30 ,September 30 , andDecember 30 of each year, commencing onMarch 30, 2022 . OnDecember 21, 2021 , we issued an additional$5.0 million aggregate principal amount of 6.00% Notes due 2026. We received approximately$73.0 million in proceeds from the offering, net of underwriting discounts and commissions and other offering expenses. The 6.00% Notes due 2026 have a maturity date ofDecember 30, 2026 , unless previously repurchased or redeemed in accordance with their terms. We have the right to redeem the 6.00% Notes due 2026, in whole or in part, at any time or from time to time, on or afterDecember 30, 2024 at a redemption price of 100% of the aggregate principal amount thereof plus accrued and unpaid interest.
Refer to "Note 10-Debt Capital Activities" to our condensed consolidated
financial statements as of
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Distributions
The timing and amount of our distributions, if any, will be determined by our Board of Directors and will be declared out of assets legally available for distribution. The following table lists the distributions, including dividends and returns of capital, if any, per share that we have declared since our formation throughMarch 31, 2022 . The table is divided by fiscal year according to record date: Date Declared Record Date Payment Date Amount per Share Fiscal 2015: November 4, 2015(1) November 16, 2015 December 31, 2015 $ 2.76 Fiscal 2016: August 3, 2016(2) August 16, 2016 August 24, 2016 0.04 Fiscal 2019: November 5, 2019(3) December 2, 2019 December 12, 2019 0.20 December 20, 2019(4) December 31, 2019 January 15, 2020 0.12 Fiscal 2020: July 29, 2020(5) August 11, 2020 August 25, 2020 0.15 September 28, 2020(6) October 5, 2020 October 20, 2020 0.25 October 28, 2020(7) November 10, 2020 November 30, 2020 0.25 December 16, 2020(8) December 30, 2020 January 15, 2021 0.22 Fiscal 2021: January 26, 2021(9) February 5, 2021 February 19, 2021 0.25 March 8, 2021(10) March 30, 2021 April 15, 2021 0.25 May 4, 2021(11) May 18, 2021 June 30, 2021 2.50 August 3, 2021(12) August 18, 2021 September 30, 2021 2.25 November 2, 2021(13) November 17, 2021 December 30, 2021 2.00 December 20, 2021(14) December 31, 2021 January 14, 2022 0.75 Fiscal 2022: March 8, 2022(15) March 25, 2022 April 15, 2022 0.11 Total $ 12.10 ___________________ (1) The distribution was paid in cash or shares of our common stock at the election of stockholders, although the total amount of cash distributed to all stockholders was limited to approximately 50% of the total distribution to be paid to all stockholders. As a result of stockholder elections, the distribution consisted of 2,860,903 shares of common stock issued in lieu of cash, or approximately 14.8% of our outstanding shares prior to the distribution, as well as cash of$26,358,885 . The number of shares of common stock comprising the stock portion was calculated based on a price of$9.425 per share, which equaled the average of the volume weighted-average trading price per share of our common stock onDecember 28 , 29 and 30, 2015. None of the$2.76 per share distribution represented a return of capital. (2) Of the total distribution of$887,240 onAugust 24, 2016 ,$820,753 represented a distribution from realized gains, and$66,487 represented a return of capital. (3) All of the$3,512,849 distribution paid onDecember 12, 2019 represented a distribution from realized gains. None of the distribution represented a return of capital. (4) All of the$2,107,709 distribution paid onJanuary 15, 2020 represented a distribution from realized gains. None of the distribution represented a return of capital. (5) All of the$2,516,452 distribution paid onAugust 25, 2020 represented a distribution from realized gains. None of the distribution represented a return of capital. (6) All of the$5,071,326 distribution paid onOctober 20, 2020 represented a distribution from realized gains. None of the distribution represented a return of capital. (7) All of the$4,978,504 distribution paid onNovember 30, 2020 represented a distribution from realized gains. None of the distribution represented a return of capital. (8) All of the$4,381,084 distribution paid onJanuary 15, 2021 represented a distribution from realized gains. None of the distribution represented a return of capital. (9) All of the$4,981,131 distribution paid onFebruary 19, 2021 represented a distribution from realized gains. None of the distribution represented a return of capital. (10) All of the$6,051,304 distribution paid onApril 15, 2021 represented a distribution from realized gains. None of the distribution represented a return of capital. 64
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(11) The distribution was paid in cash or shares of our common stock at the election of stockholders, although the total amount of cash distributed to all stockholders was limited to approximately 50% of the total distribution to be paid to all stockholders. As a result of stockholder elections, the distribution consisted of 2,335,527 shares of common stock issued in lieu of cash, or approximately 9.6% of our outstanding shares prior to the distribution, as well as cash of$29,987,589 . The number of shares of common stock comprising the stock portion was calculated based on a price of$13.07 per share, which equaled the average of the volume weighted-average trading price per share of our common stock onMay 12, 13 , and 14, 2021. None of the$2.50 per share distribution represented a return of capital. (12) The distribution was paid in cash or shares of our common stock at the election of stockholders, although the total amount of cash distributed to all stockholders was limited to approximately 50% of the total distribution to be paid to all stockholders. As a result of stockholder elections, the distribution consisted of 2,225,193 shares of common stock issued in lieu of cash, or approximately 8.4% of our outstanding shares prior to the distribution, as well as cash of$29,599,164 . The number of shares of common stock comprising the stock portion was calculated based on a price of$13.55 per share, which equaled the average of the volume weighted-average trading price per share of our common stock onAugust 11, 12 , and 13, 2021. None of the$2.25 per share distribution represented a return of capital. (13) The distribution was paid in cash or shares of our common stock at the election of stockholders, although the total amount of cash distributed to all stockholders was limited to approximately 50% of the total distribution to be paid to all stockholders. As a result of stockholder elections, the distribution consisted of 2,170,807 shares of common stock issued in lieu of cash, or approximately 7.5% of our outstanding shares prior to the distribution, as well as cash of$28,494,812 . The number of shares of common stock comprising the stock portion was calculated based on a price of$13.39 per share, which equaled the average of the volume weighted-average trading price per share of our common stock onNovember 11, 12 , and 13, 2021. None of the$2.00 per share distribution represented a return of capital. (14) All of the$23,338,915 distribution paid onJanuary 14, 2022 represented a distribution from realized gains. None of the distribution represented a return of capital. (15) All of the$3,441,824 distribution paid onApril 15, 2022 represented a distribution from realized gains. None of the distribution represented a return of capital. We intend to focus on making equity-based investments from which we will derive primarily capital gains. As a consequence, we do not anticipate that we will pay distributions on a quarterly basis or become a predictable distributor of distributions, and we expect that our distributions, if any, will be much less consistent than the distributions of other BDCs that primarily make debt investments. If there are earnings or realized capital gains to be distributed, we intend to declare and pay a distribution at least annually. The amount of realized capital gains available for distribution to stockholders will be impacted by our tax status. Our current intention is to make any future distributions out of assets legally available therefrom in the form of additional shares of our common stock under our dividend reinvestment plan, except in the case of stockholderswho elect to receive dividends and/or long-term capital gains distributions in cash. Under the dividend reinvestment plan, if a stockholder owns shares of common stock registered in its own name, the stockholder will have all cash distributions (net of any applicable withholding) automatically reinvested in additional shares of common stock unless the stockholder opts out of our dividend reinvestment plan by delivering a written notice to our dividend paying agent prior to the record date of the next dividend or distribution. Any distributions reinvested under the plan will nevertheless be treated as received by theU.S. stockholder forU.S. federal income tax purposes, although no cash distribution has been made. As a result, if a stockholder does not elect to opt out of the dividend reinvestment plan, it will be required to pay applicable federal, state and local taxes on any reinvested dividends even though such stockholder will not receive a corresponding cash distribution. Stockholders that hold shares in the name of a broker or financial intermediary should contact the broker or financial intermediary regarding any election to receive distributions in cash. So long as we qualify and maintain our tax treatment as a RIC, we generally will not be subject toU.S. federal and state income taxes on any ordinary income or capital gains that we distribute at least annually to our stockholders as dividends. Rather, any tax liability related to income earned by the RIC will represent obligations of our investors and will not be reflected in our consolidated financial statements. See "Note 2-Significant Accounting Policies-U.S. Federal and State Income Taxes" and "Note 9-Income Taxes" to our condensed consolidated financial statements as ofMarch 31, 2022 for more information. The Taxable Subsidiaries included in our consolidated financial statements are taxable subsidiaries, regardless of whether we are taxed as a RIC. These taxable subsidiaries are not consolidated for income tax purposes and may generate income tax expenses as a result of their ownership of the portfolio companies. Such income tax expenses and deferred taxes, if any, will be reflected in our consolidated financial statements.
Critical Accounting Policies
Critical accounting policies and practices are the policies that are both most
important to the portrayal of our financial condition and results, and require
management's most difficult, subjective, or complex judgments, often as a result
of the need to make estimates about the effects of matters that are inherently
uncertain. These include estimates of the fair value of our Level 3 investments
and other estimates that affect the reported amounts of assets and liabilities
as of the date of the
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consolidated financial statements and the reported amounts of certain revenues and expenses during the reporting period. It is likely that changes in these estimates will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ materially from such estimates. See "Note 2-Significant Accounting Policies" to our condensed consolidated financial statements as ofMarch 31, 2022 for further detail regarding our critical accounting policies and recently issued or adopted accounting pronouncements.
Related-Party Transactions
See "Note 3-Related-Party Arrangements" to our condensed consolidated financial
statements as of
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