REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of SuRo Capital Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities of SuRo Capital Corp. and subsidiaries (the “Company”) including the consolidated schedule of investments as of December 31, 2021 and 2020, the related consolidated statements of operations, cash flows, and changes in net assets for each of the three years in the period ended December 31, 2021, the financial highlights (presented in Note 8) for each of the three years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2021 and the financial highlights for each of the three years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of investments owned as of December 31, 2021 and 2020, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Valuation of Investments – Level 3 Investments in Preferred Stock and Common Stock
As described in Note 4 to the consolidated financial statements, approximately 79% of the Company’s $260 million total investments in securities as of December 31, 2021 represents investments in level 3 common stock and preferred stock issued by private companies whose fair value, as disclosed by management, is determined in good faith by the Board of Directors. Management applied significant judgment in determining the fair value of these level 3 investments, which involved the use of significant unobservable inputs with respect to the revenue and/or other multiples utilized, discounts rates and precedent transactions.
The principal considerations for our determination that performing procedures relating to the valuation of level 3 investments in preferred stock and common stock is a critical audit matter are the significant judgment involved by management in determining the fair value of these level 3 investments, including the use of various valuation techniques and significant unobservable inputs, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating the audit evidence obtained relating to the valuation techniques and significant unobservable inputs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements and financial highlights. Our principle audit procedures included, among others:
(i) testing the completeness and accuracy of management’s valuations, including evaluating the appropriateness of management’s methodologies, evaluating the reasonableness of assumptions and significant unobservable inputs, including revenue and/or other multiples utilized, discounts rates and precedent transactions; and
(ii) the involvement of professionals with specialized skills and knowledge to assist in the assessment of the fair values for a sample of investments, including reviewing the valuation methodologies, assessing the assumptions utilized in developing the estimates, and evaluating the reasonableness of management’s conclusions in deriving the valuations.
/s/ Marcum LLP
San Francisco, CA
March 11, 2022
We have served as the Company’s auditor since 2019.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
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| December 31, 2021 | | December 31, 2020 |
ASSETS | | | |
Investments at fair value: | | | |
Non-controlled/non-affiliate investments (cost of $146,360,300 and $105,339,169, respectively) | $ | 231,768,290 | | | $ | 249,804,803 | |
Non-controlled/affiliate investments (cost of $41,211,183 and $53,865,346, respectively) | 14,609,089 | | | 30,165,773 | |
Controlled investments (cost of $19,883,894 and $7,161,412, respectively) | 13,758,874 | | | 809,198 | |
Total Portfolio Investments | 260,136,253 | | | 280,779,774 | |
Investments in U.S. Treasury bills (cost of $0 and $150,000,000, respectively) | — | | | 150,000,000 | |
Total Investments (cost of $207,455,377 and $316,365,927, respectively) | 260,136,253 | | | 430,779,774 | |
Cash | 198,437,078 | | | 45,793,724 | |
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Proceeds receivable | 52,493 | | | — | |
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Escrow proceeds receivable | 2,046,645 | | | 852,462 | |
Interest and dividends receivable | 83,655 | | | 166,998 | |
Deferred financing costs | 621,719 | | | 297,196 | |
Prepaid expenses and other assets(1) | 937,984 | | | 985,550 | |
Total Assets | 462,315,827 | | | 478,875,704 | |
LIABILITIES | | | |
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Accounts payable and accrued expenses(1) | 875,047 | | | 762,312 | |
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Accrued interest payable | 175,000 | | | 453,803 | |
Dividends payable | 23,390,048 | | | 4,395,229 | |
Payable for securities purchased | — | | | 134,250,000 | |
Income tax payable | — | | | 35,850 | |
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4.75% Convertible Senior Notes due March 28, 2023(2) | — | | | 37,395,437 | |
6.00% Notes due December 30, 2026(3) | 73,029,108 | | | — | |
Total Liabilities | 97,469,203 | | | 177,292,631 | |
Commitments and contingencies (Notes 7 and 10) | | | |
Net Assets | $ | 364,846,624 | | | $ | 301,583,073 | |
NET ASSETS | | | |
Common stock, par value $0.01 per share (100,000,000 authorized; 31,118,556 and 19,914,023 issued and outstanding, respectively) | $ | 311,185 | | | $ | 199,140 | |
Paid-in capital in excess of par | 350,079,409 | | | 221,802,592 | |
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Accumulated net investment loss | (50,124,597) | | | (40,193,778) | |
Accumulated net realized gain on investments, net of distributions | 11,899,742 | | | 5,361,270 | |
Accumulated net unrealized appreciation of investments | 52,680,885 | | | 114,413,849 | |
Net Assets | $ | 364,846,624 | | | $ | 301,583,073 | |
Net Asset Value Per Share | $ | 11.72 | | | $ | 15.14 | |
See accompanying notes to consolidated financial statements.
__________________________________________________
(1) This balance includes a right of use asset and corresponding operating lease liability, respectively. Refer to "Note 7—Commitments and Contingencies—Operating Leases and Related Deposits" for more detail.
(2) As of December 31, 2021, the 4.75% Convertible Senior Notes due March 28, 2023 had been fully converted into the Company's common stock or redeemed in cash by the Company. As of December 31, 2020, the 4.75% Convertible Senior Notes due March 28, 2023 (effective interest rate of 5.57%) had a face value $38,215,000. Refer to “Note 10—Debt Capital Activities” for a reconciliation of the carrying value to the face value.
(3) As of December 31, 2021, the 6.00% Notes due December 30, 2026 (effective interest rate of 6.13%) had a face value $75,000,000. Refer to “Note 10—Debt Capital Activities” for a reconciliation of the carrying value to the face value.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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| | Year Ended December 31, | | | |
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| | 2021 | | 2020 | | 2019 | | | | | | | |
INVESTMENT INCOME | | | | | | | | | | | | | |
Non-controlled/non-affiliate investments: | | | | | | | | | | | | | |
Interest income | | $ | 507,772 | | | $ | 1,035,694 | | | $ | 828,392 | | | | | | | | |
Dividend income | | 470,438 | | | 50,000 | | | 100,000 | | | | | | | | |
Non-controlled/affiliate investments: | | | | | | | | | | | | | |
Interest income/(reversal of accrued interest) | | — | | | (29,184) | | | 108,395 | | | | | | | | |
Dividend income | | 102,632 | | | 317,617 | | | — | | | | | | | | |
Controlled investments: | | | | | | | | | | | | | |
Interest income | | 390,000 | | | — | | | 58,937 | | | | | | | | |
Dividend income | | — | | | 450,000 | | | 400,000 | | | | | | | | |
Total Investment Income | | 1,470,842 | | | 1,824,127 | | | 1,495,724 | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | | |
Management fees(1) | | — | | | — | | | 848,723 | | | | | | | | |
Incentive fees/(reversal of incentive fee accrual)(1) | | — | | | — | | | (4,660,472) | | | | | | | | |
Costs incurred under Administration Agreement(1) | | — | | | — | | | 306,084 | | | | | | | | |
Compensation expense(2) | | 6,162,716 | | | 8,801,841 | | | 4,286,972 | | | | | | | | |
Directors’ fees(3) | | 752,442 | | | 445,000 | | | 383,370 | | | | | | | | |
Professional fees | | 2,665,689 | | | 2,962,781 | | | 5,290,329 | | | | | | | | |
Interest expense | | 693,526 | | | 2,247,817 | | | 2,372,570 | | | | | | | | |
Income tax expense | | 9,347 | | | 43,574 | | | 33,825 | | | | | | | | |
Other expenses | | 1,117,941 | | | 1,837,530 | | | 2,085,391 | | | | | | | | |
Total Operating Expenses | | 11,401,661 | | | 16,338,543 | | | 10,946,792 | | | | | | | | |
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Net Investment Loss | | (9,930,819) | | | (14,514,416) | | | (9,451,068) | | | | | | | | |
Realized Gain/(Loss) on Investments: | | | | | | | | | | | | | |
Non-controlled/non-affiliated investments | | 216,870,940 | | | 16,441,223 | | | 32,625,663 | | | | | | | | |
Non-controlled/affiliate investments | | 1,864,564 | | | — | | | (13,446,323) | | | | | | | | |
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Net Realized Gain on Investments | | 218,735,504 | | | 16,441,223 | | | 19,179,340 | | | | | | | | |
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Change in Unrealized Appreciation/(Depreciation) of Investments: | | | | | | | | | | | | | |
Non-controlled/non-affiliated investments | | (59,057,641) | | | 82,163,227 | | | (1,907,148) | | | | | | | | |
Non-controlled/affiliate investments | | (2,902,517) | | | (8,786,596) | | | 21,489,014 | | | | | | | | |
Controlled investments | | 227,194 | | | 34,000 | | | (6,242,007) | | | | | | | | |
Net Change in Unrealized Appreciation/(Depreciation) of Investments | | (61,732,964) | | | 73,410,631 | | | 13,339,859 | | | | | | | | |
Benefit from taxes on unrealized depreciation of investments | | — | | | — | | | 885,566 | | | | | | | | |
Net Change in Net Assets Resulting from Operations | | $ | 147,071,721 | | | $ | 75,337,438 | | | $ | 23,953,697 | | | | | | | | |
Net Change in Net Assets Resulting from Operations per Common Share: | | | | | | | | | | | | | |
Basic | | $ | 5.69 | | | $ | 4.21 | | | $ | 1.24 | | | | | | | | |
Diluted(4) | | $ | 5.52 | | | $ | 3.56 | | | $ | 1.14 | | | | | | | | |
Weighted-Average Common Shares Outstanding | | | | | | | | | | | | | |
Basic | | 25,861,642 | | | 17,910,353 | | | 19,328,414 | | | | | | | | |
Diluted(4) | | 26,758,367 | | | 21,790,898 | | | 23,069,622 | | | | | | | | |
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See accompanying notes to consolidated financial statements.
____________________________________________________________________________________________________________________________
(1) This balance references a related-party transaction. Refer to "Note 3—Related-Party Arrangements" for more detail.
(2) For the year ended December 31, 2020, this balance includes $1,962,431 of accelerated recognition of compensation cost related to the cancellation of unvested options on April 28, 2020.
(3) For the year ended December 31, 2021, this balance includes $209,360 of stock-based compensation expense related to the 2020 annual non-employee director grants. Refer to "Note 11— Stock-Based Compensation" for more detail.
(4) As of December 31, 2021, there were no potentially dilutive securities outstanding.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
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| Year Ended December 31, | |
| 2021 | | 2020 | | 2019 | | | |
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Change in Net Assets Resulting from Operations | | | | | | | | |
Net investment loss | $ | (9,930,819) | | | $ | (14,514,416) | | | $ | (9,451,068) | | | | |
Net realized gains on investments | 218,735,504 | | | 16,441,223 | | | 19,179,340 | | | | |
Net change in unrealized appreciation/(depreciation) of investments | (61,732,964) | | | 73,410,631 | | | 13,339,859 | | | | |
Benefit from taxes on unrealized depreciation of investments | — | | | — | | | 885,566 | | | | |
Net Change in Net Assets Resulting from Operations | 147,071,721 | | | 75,337,438 | | | 23,953,697 | | | | |
Distributions | | | | | | | | |
Dividends declared | (212,197,025) | | | (16,947,366) | | | (5,620,558) | | | | |
Total Distributions | (212,197,025) | | | (16,947,366) | | | (5,620,558) | | | | |
Change in Net Assets Resulting from Capital Transactions | | | | | | | | |
Issuance of common stock from public offering | 78,608 | | | 49,882,319 | | | — | | | | |
Stock-based compensation(1) | 1,306,615 | | | 1,962,431 | | | 998,355 | | | | |
Issuance of common stock from conversion of 4.75% Convertible Notes due 2023 | 37,259,819 | | | 1,810,956 | | | — | | | | |
Issuance of common stock from stock dividend | 89,743,813 | | | — | | | — | | | | |
Repurchases of common stock | — | | | (10,379,994) | | | (14,792,364) | | | | |
Net Change in Net Assets Resulting from Capital Transactions | 128,388,855 | | | 43,275,712 | | | (13,794,009) | | | | |
Total Change in Net Assets | 63,263,551 | | | 101,665,784 | | | 4,539,130 | | | | |
Net Assets at Beginning of Year | 301,583,073 | | | 199,917,289 | | | 195,378,159 | | | | |
Net Assets at End of Year | $ | 364,846,624 | | | $ | 301,583,073 | | | $ | 199,917,289 | | | | |
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Capital Share Activity | | | | | | | | |
Shares outstanding at beginning of year | 19,914,023 | | | 17,564,244 | | | 19,762,647 | | | | |
Issuance of common stock from public offering | 5,900 | | | 3,808,979 | | | — | | | | |
Issuance of common stock under restricted stock plan | 369,298 | | | 21,760 | | | — | | | | |
Issuance of common stock from conversion of 4.75% Convertible Notes due 2023 | 4,097,808 | | | 174,888 | | | — | | | | |
Issuance of common stock from stock dividend | 6,731,527 | | | — | | | — | | | | |
Shares repurchased | — | | | (1,655,848) | | | (2,198,403) | | | | |
Shares Outstanding at End of Year | 31,118,556 | | | 19,914,023 | | | 17,564,244 | | | | |
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See accompanying notes to consolidated financial statements.
__________________________________________________________________________________________________________________________
(1) For the year ended December 31, 2020, this balance includes $1,962,431 of accelerated recognition of compensation cost related to the cancellation of unvested options on April 28, 2020. Refer to "Note 11— Stock-Based Compensation" for more detail.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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| Year Ended December 31, | |
| 2021 | | 2020 | | 2019 | | | |
Cash Flows from Operating Activities | | | | | | | | |
Net change in net assets resulting from operations | $ | 147,071,721 | | | $ | 75,337,438 | | | $ | 23,953,697 | | | | |
Adjustments to reconcile net change in net assets resulting from operations to net cash provided by/(used in) operating activities: | | | | | | | | |
Net realized gain on investments | (218,735,504) | | | (16,441,223) | | | (19,179,340) | | | | |
Net change in unrealized (appreciation)/depreciation of investments | 61,732,964 | | | (73,410,631) | | | (13,339,859) | | | | |
Change in deferred tax liability | — | | | — | | | (885,566) | | | | |
Amortization of discount on 4.75% Convertible Senior Notes due 2023 | 76,927 | | | 376,802 | | | 369,124 | | | | |
Amortization of discount on 6.00% Notes due 2026 | 16,310 | | | — | | | — | | | | |
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Amortization of fixed income security premiums and discounts | — | | | — | | | (5,066) | | | | |
Write-off of deferred offering costs | — | | | — | | | 267,541 | | | | |
Stock-based compensation(1) | 1,306,615 | | | 1,962,431 | | | 998,355 | | | | |
Paid-in-kind interest | — | | | — | | | (383,980) | | | | |
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Adjustments to escrow proceeds receivable | 1,934,622 | | | 844,825 | | | 29,178 | | | | |
Forfeited interest on 4.75% Convertible Senior Notes due 2023 | 102,917 | | | 25,996 | | | — | | | | |
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Purchases of investments in: | | | | | | | | |
Portfolio investments | (81,716,039) | | | (31,433,027) | | | (25,569,685) | | | | |
U.S. Treasury bills | — | | | (450,000,084) | | | (299,930,250) | | | | |
Proceeds from sales or maturity of investments in: | | | | | | | | |
Portfolio investments | 257,427,478 | | | 31,245,944 | | | 65,603,252 | | | | |
U.S. Treasury bills | 150,000,000 | | | 350,000,000 | | | 350,000,000 | | | | |
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Change in operating assets and liabilities: | | | | | | | | |
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Prepaid expenses and other assets | 47,566 | | | 770,383 | | | (1,548,164) | | | | |
Interest and dividends receivable | 83,343 | | | (82,368) | | | 171,040 | | | | |
Deferred credit facility costs | — | | | — | | | (11,382) | | | | |
Proceeds receivable | (52,493) | | | — | | | — | | | | |
Escrow proceeds receivable | (1,194,183) | | | (587,154) | | | 2,229,279 | | | | |
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Payable for securities purchased | (134,250,000) | | | 89,503,340 | | | (44,733,443) | | | | |
Accounts payable and accrued expenses | 112,735 | | | (381,611) | | | 653,236 | | | | |
Payable to executive officers | — | | | (1,369,873) | | | 1,369,873 | | | | |
Income tax payable | (35,850) | | | 35,850 | | | — | | | | |
Accrued incentive fees(2) | — | | | — | | | (4,660,472) | | | | |
Accrued management fees(2) | — | | | — | | | (415,056) | | | | |
Accrued interest payable | (278,803) | | | (21,197) | | | — | | | | |
Net Cash Provided by/(Used in) Operating Activities | 183,650,326 | | | (23,624,159) | | | 34,982,312 | | | | |
Cash Flows from Financing Activities | | | | | | | | |
Proceeds from the issuance of common stock, net | 78,608 | | | 49,882,319 | | | — | | | | |
Proceeds from the issuance of 6.00% Notes due 2026 | 75,000,000 | | | — | | | — | | | | |
Redemption of 4.75% Convertible Senior Notes due 2023 | (290,000) | | | — | | | — | | | | |
Deferred debt issuance costs | (1,970,892) | | | — | | | — | | | | |
Repurchases of common stock | — | | | (10,379,995) | | | (14,792,364) | | | | |
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Cash dividends paid | (103,458,098) | | | (14,659,850) | | | (3,512,849) | | | | |
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Cash paid for fractional shares | (399) | | | (40) | | | — | | | | |
Deferred financing costs | (366,191) | | | (285,814) | | | — | | | | |
Net Cash Provided by/(Used in) Financing Activities | (31,006,972) | | | 24,556,620 | | | (18,305,213) | | | | |
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Total Increase in Cash Balance | 152,643,354 | | | 932,461 | | | 16,677,099 | | | | |
Cash Balance at Beginning of Year | 45,793,724 | | | 44,861,263 | | | 28,184,163 | | | | |
Cash Balance at End of Year | 198,437,078 | | | 45,793,724 | | | 44,861,262 | | | | |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
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| Year Ended December 31, | |
| 2021 | | 2020 | | 2019 | | | |
Supplemental Information: | | | | | | | | |
Interest paid | 794,206 | | | 1,874,294 | | | 2,018,336 | | | | |
Taxes paid | 43,499 | | | 5,859 | | | 33,825 | | | | |
Conversion of 4.75% Convertible Senior Notes due 2023 | 37,925,000 | | | 1,785,000 | | | — | | | | |
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See accompanying notes to consolidated financial statements.
__________________________________________________________________________________________________________________________
(1) For the year ended December 31, 2020, this balance includes $1,962,431 of accelerated recognition of compensation cost related to the cancellation of unvested options on April 28, 2020. Refer to "Note 11— Stock-Based Compensation" for more detail.
(2) This balance references a related-party transaction. Refer to "Note 3—Related-Party Arrangements" for more detail.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2021
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Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets |
NON-CONTROLLED/NON-AFFILIATE | | | | | | | | | | | | |
Course Hero, Inc. | | Redwood City, CA | | | | | | | | | | |
Preferred shares, Series A 8% | | Online Education | | 9/18/2014 | | 2,145,509 | | | $ | 5,000,001 | | | $ | 77,831,772 | | | 21.33 | % |
Preferred shares, Series C 8% | | | | 11/5/2021 | | 275,659 | | | 9,999,971 | | | 9,999,971 | | | 2.74 | % |
Total | | | | | | | | 14,999,972 | | | 87,831,743 | | | 24.07 | % |
Forge Global, Inc. | | San Francisco, CA | | | | | | | | | | |
Common shares, Class AA | | Online Marketplace Finance | | 7/20/2011 | | 625,520 | | | 266,507 | | | 16,430,555 | | | 4.50 | % |
Junior Preferred shares | | | | 7/19/2011 | | 160,534 | | | 2,259,716 | | | 4,216,752 | | | 1.16 | % |
Junior Preferred warrants, Strike Price $12.42, Expiration Date 11/9/2025 | | | | 7/19/2011 | | 73,695 | | | — | | | 368,474 | | | 0.10 | % |
Total | | | | | | | | 2,526,223 | | | 21,015,781 | | | 5.76 | % |
Blink Health, Inc. | | New York, NY | | | | | | | | | | |
Preferred shares, Series A | | Pharmaceutical Technology | | 10/27/2020 | | 238,095 | | | 5,000,423 | | | 4,315,552 | | | 1.18 | % |
Preferred shares, Series C | | | | 10/27/2020 | | 261,944 | | | 10,003,917 | | | 9,999,974 | | | 2.74 | % |
Total | | | | | | | | 15,004,340 | | | 14,315,526 | | | 3.92 | % |
Nextdoor Holdings, Inc.** | | San Francisco, CA | | | | | | | | | | |
Common shares(3) | | Social Networking | | 9/27/2018 | | 1,801,850 | | | 10,002,666 | | | 12,439,522 | | | 3.41 | % |
Aspiration Partners, Inc. | | Marina Del Rey, CA | | | | | | | | | | |
Preferred shares, Series A | | Financial Services | | 8/11/2015 | | 540,270 | | | 1,001,815 | | | 10,556,306 | | | 2.89 | % |
Preferred shares, Series C-3 | | | | 8/12/2019 | | 24,912 | | | 281,190 | | | 499,437 | | | 0.14 | % |
Total | | | | | | | | 1,283,005 | | | 11,055,743 | | | 3.03 | % |
Trax Ltd.** | | Singapore, Singapore | | | | | | | | | | |
Common shares | | Retail Technology | | 6/9/2021 | | 55,591 | | | 2,781,148 | | | 2,882,476 | | | 0.79 | % |
Preferred shares, Investec series | | | | 6/9/2021 | | 144,409 | | | 7,224,600 | | | 7,487,823 | | | 2.05 | % |
Total | | | | | | | | 10,005,748 | | | 10,370,299 | | | 2.84 | % |
Orchard Technologies, Inc. | | New York, NY | | | | | | | | | | |
Preferred shares, Series D | | Real Estate Platform | | 8/9/2021 | | 1,488,139 | | | 10,004,034 | | | 9,999,996 | | | 2.74 | % |
Skillsoft Corp.**(18) | | Nashua, NH | | | | | | | | | | |
Common shares(3) | | Online Education | | 6/8/2021 | | 981,843 | | | 9,818,430 | | | 8,983,863 | | | 2.46 | % |
Varo Money, Inc. | | San Francisco, CA | | | | | | | | | | |
Common shares | | Financial Services | | 8/11/2021 | | 1,079,266 | | | 10,005,548 | | | 8,541,676 | | | 2.34 | % |
NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.)** | | New York, NY | | | | | | | | | | |
Common shares***(3)(16) | | Cannabis REIT | | 8/12/2019 | | 278,471 | | | 5,653,375 | | | 7,986,548 | | | 2.19 | % |
Rover Group, Inc.**(13) | | Seattle, WA | | | | | | | | | | |
Common shares(3) | | Peer-to-Peer Pet Services | | 11/3/2014 | | 838,381 | | | 2,506,119 | | | 7,765,504 | | | 2.13 | % |
Shogun Enterprises, Inc. | | Austin, TX | | | | | | | | | | |
Preferred shares, Series B-1 | | Home Improvement Finance | | 2/26/2021 | | 436,844 | | | 3,501,657 | | | 3,531,447 | | | 0.97 | % |
Preferred shares, Series B-2 | | | | 2/26/2021 | | 301,750 | | | 3,501,661 | | | 3,499,998 | | | 0.96 | % |
Total | | | | | | | | 7,003,318 | | | 7,031,445 | | | 1.93 | % |
Enjoy Technology, Inc.** | | Menlo Park, CA | | | | | | | | | | |
Common shares(3) | | On-Demand Commerce | | 10/16/2014 | | 1,070,919 | | | 5,526,777 | | | 4,576,572 | | | 1.25 | % |
Neutron Holdings, Inc. (d/b/a/ Lime) | | San Francisco, CA | | | | | | | | | | |
Junior Preferred shares, Series 1-D | | Micromobility | | 1/25/2019 | | 41,237,113 | | | 10,007,322 | | | 3,485,014 | | | 0.96 | % |
Junior Preferred Convertible Note 4% Due 5/11/2027*** | | | | 5/11/2020 | | $ | 506,339 | | | 506,339 | | | 506,339 | | | 0.14 | % |
Common Warrants, Strike Price $0.01, Expiration Date 5/11/2027 | | | | 5/11/2020 | | 2,032,967 | | | — | | | — | | | — | % |
Total | | | | | | | | 10,513,661 | | | 3,991,353 | | | 1.10 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets |
Residential Homes for Rent, LLC (d/b/a Second Avenue) | | Chicago, IL | | | | | | | | | | |
Preferred shares, Series A(6) | | Real Estate Platform | | 12/23/2020 | | 150,000 | | | $ | 1,500,000 | | | $ | 1,500,000 | | | 0.41 | % |
Term loan 15%, Due 12/23/2023***(14) | | | | 12/23/2020 | | $ | 2,000,000 | | | 2,000,000 | | | 2,000,000 | | | 0.55 | % |
Total | | | | | | | | 3,500,000 | | | 3,500,000 | | | 0.96 | % |
PayJoy, Inc. | | San Francisco, CA | | | | | | | | | | |
Preferred shares | | Mobile Access Technology | | 7/23/2021 | | 244,117 | | | 2,501,570 | | | 2,500,002 | | | 0.69 | % |
Rent the Runway, Inc.** | | New York, NY | | | | | | | | | | |
Common shares(3) | | Subscription Fashion Rental | | 6/17/2020 | | 339,191 | | | 5,153,945 | | | 2,418,856 | | | 0.66 | % |
Aventine Property Group, Inc.(12) | | Chicago, IL | | | | | | | | | | |
Common shares*** | | Cannabis REIT | | 9/11/2019 | | 312,500 | | | 2,580,750 | | | 2,190,978 | | | 0.60 | % |
Commercial Streaming Solutions Inc. (d/b/a BettorView)(7) | | Las Vegas, NV | | | | | | | | | | |
Simple Agreement for Future Equity | | Interactive Media & Services | | 3/26/2021 | | 1 | | | 1,002,720 | | | 1,000,000 | | | 0.27 | % |
Rebric, Inc. (d/b/a Compliable)(7) | | Denver, CO | | | | | | | | | | |
Preferred shares, Series Seed-4 | | Gaming Licensing | | 10/12/2021 | | 2,064,409 | | | 1,002,755 | | | 1,000,000 | | | 0.27 | % |
Palantir Lending Trust SPV I **(11) | | Palo Alto, CA | | | | | | | | | | |
Equity Participation in Underlying Collateral(3) | | Data Analysis | | 6/19/2020 | | — | | | — | | | 930,524 | | | 0.26 | % |
True Global Ventures 4 Plus Pte Ltd**(8) | | Singapore, Singapore | | | | | | | | | | |
Limited Partner Fund Investment | | Venture Investment Fund | | 8/27/2021 | | 1 | | | 713,505 | | | 670,000 | | | 0.18 | % |
YouBet Technology, Inc. (d/b/a PickUp)(7) | | New York, NY | | | | | | | | | | |
Preferred shares, Series Seed-2 | | Digital Media Technology | | 8/26/2021 | | 385,353 | | | 502,232 | | | 499,999 | | | 0.14 | % |
Kahoot! ASA**(19) | | Oslo, Norway | | | | | | | | | | |
Common shares(3) | | Education Software | | 12/5/2014 | | 86,800 | | | 458,138 | | | 402,360 | | | 0.11 | % |
Churchill Sponsor VII LLC**(17) | | New York, NY | | | | | | | | | | |
Common share units | | Special Purpose Acquisition Company | | 2/25/2021 | | 292,100 | | | 205,820 | | | 205,820 | | | 0.06 | % |
Warrant units | | | | 2/25/2021 | | 277,000 | | | 94,180 | | | 94,180 | | | 0.03 | % |
Total | | | | | | | | 300,000 | | | 300,000 | | | 0.09 | % |
AltC Sponsor LLC**(17) | | New York, NY | | | | | | | | | | |
Share units | | Special Purpose Acquisition Company | | 7/21/2021 | | 239,300 | | | 250,855 | | | 250,000 | | | 0.07 | % |
Churchill Sponsor VI LLC**(17) | | New York, NY | | | | | | | | | | |
Common share units | | Special Purpose Acquisition Company | | 2/25/2021 | | 195,000 | | | 134,297 | | | 134,297 | | | 0.04 | % |
Warrant units | | | | 2/25/2021 | | 199,100 | | | 65,703 | | | 65,703 | | | 0.02 | % |
Total | | | | | | | | 200,000 | | | 200,000 | | | 0.06 | % |
Fullbridge, Inc. | | Cambridge, MA | | | | | | | | | | |
Common shares | | Business Education | | 5/13/2012 | | 517,917 | | | 6,150,506 | | | — | | | — | % |
Promissory Note 1.47%, Due 11/9/2021(4)(20) | | | | 3/3/2016 | | $ | 2,270,458 | | | 2,270,858 | | | — | | | — | % |
Total | | | | | | | | 8,421,364 | | | — | | | — | % |
Treehouse Real Estate Investment Trust, Inc.(12) | | Chicago, IL | | | | | | | | | | |
Common shares*** | | Cannabis REIT | | 9/11/2019 | | 312,500 | | | 4,919,250 | | | — | | | — | % |
Kinetiq Holdings, LLC | | Philadelphia, PA | | | | | | | | | | |
Common shares, Class A | | Social Data Platform | | 3/30/2012 | | 112,374 | | | — | | | — | | | — | % |
| | | | | | | | | | | | |
Total Non-controlled/Non-affiliate | | | | | | | | $ | 146,360,300 | | | $ | 231,768,290 | | | 63.53 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets |
NON-CONTROLLED/AFFILIATE(1) | | | | | | | | | | | | |
StormWind, LLC(5) | | Scottsdale, AZ | | | | | | | | | | |
Preferred shares, Series D 8% | | Interactive Learning | | 11/26/2019 | | 329,337 | | | $ | 257,267 | | | $ | 621,093 | | | 0.17 | % |
Preferred shares, Series C 8% | | | | 1/7/2014 | | 2,779,134 | | | 4,000,787 | | | 6,496,729 | | | 1.78 | % |
Preferred shares, Series B 8% | | | | 12/16/2011 | | 3,279,629 | | | 2,019,687 | | | 4,423,607 | | | 1.21 | % |
Preferred shares, Series A 8% | | | | 2/25/2014 | | 366,666 | | | 110,000 | | | 289,293 | | | 0.08 | % |
Total | | | | | | | | 6,387,741 | | | 11,830,722 | | | 3.24 | % |
OneValley, Inc. (f/k/a NestGSV, Inc.) | | San Mateo, CA | | | | | | | | | | |
Derivative Security, Expiration Date 8/23/2024(10) | | Global Innovation Platform | | 8/23/2019 | | 1 | | | 8,555,124 | | | 2,268,268 | | | 0.62 | % |
Convertible Promissory Note 8% Due 8/23/2024(4)(10) | | | | 2/17/2016 | | $ | 1,010,198 | | | 1,030,176 | | | 505,099 | | | 0.14 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/2022 | | | | 5/29/2017 | | 125,000 | | | 70,379 | | | — | | | — | % |
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/2023 | | | | 12/31/2018 | | 250,000 | | | 5,080 | | | 5,000 | | | 0.01 | % |
Total | | | | | | | | 9,660,759 | | | 2,778,367 | | | 0.77 | % |
Ozy Media, Inc. | | Mountain View, CA | | | | | | | | | | |
Preferred shares, Series C-2 6% | | Digital Media Platform | | 8/31/2016 | | 683,482 | | | 2,414,178 | | | — | | | — | % |
Common Warrants, Strike Price $0.01, Expiration Date 4/9/2028 | | | | 4/9/2018 | | 295,565 | | | 30,647 | | | — | | | — | % |
Preferred shares, Series B 6% | | | | 10/3/2014 | | 922,509 | | | 4,999,999 | | | — | | | — | % |
Preferred shares, Series A 6% | | | | 12/11/2013 | | 1,090,909 | | | 3,000,200 | | | — | | | — | % |
Preferred shares, Series Seed 6% | | | | 11/2/2012 | | 500,000 | | | 500,000 | | | — | | | — | % |
Total | | | | | | | | 10,945,024 | | | — | | | — | % |
Maven Research, Inc. | | San Francisco, CA | | | | | | | | | | |
Preferred shares, Series C 8% | | Knowledge Networks | | 7/2/2012 | | 318,979 | | | 2,000,447 | | | — | | | — | % |
Preferred shares, Series B 5% | | | | 2/28/2012 | | 49,505 | | | 217,206 | | | — | | | — | % |
Total | | | | | | | | 2,217,653 | | | — | | | — | % |
Curious.com, Inc. | | Menlo Park, CA | | | | | | | | | | |
Common shares | | Online Education | | 11/22/2013 | | 1,135,944 | | | 12,000,006 | | | — | | | — | % |
| | | | | | | | | | | | |
Total Non-controlled/Affiliate | | | | | | | | $ | 41,211,183 | | | $ | 14,609,089 | | | 4.01 | % |
| | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets | | | | | | | | | | | | |
CONTROLLED(2) | | | | | | | | | | | | | | | | | | | | | | | | |
Architect Capital PayJoy SPV, LLC** | | San Francisco, CA | | | | | | | | | | | | | | | | | | | | | | |
Membership Interest in Lending SPV***(15) | | Mobile Finance Technology | | 3/24/2021 | | $ | 10,000,000 | | | $ | 10,006,745 | | | $ | 10,000,000 | | | 2.74 | % | | | | | | | | | | | | |
Colombier Sponsor LLC**(17) | | New York, NY | | | | | | | | | | | | | | | | | | | | | | |
Class B Units | | Special Purpose Acquisition Company | | 4/1/2021 | | 1,976,033 | | | 1,556,587 | | | 1,554,354 | | | 0.43 | % | | | | | | | | | | | | |
Class W Units | | | | 4/1/2021 | | 2,700,000 | | | 1,159,150 | | | 1,157,487 | | | 0.32 | % | | | | | | | | | | | | |
Total | | | | | | | | 2,715,737 | | | 2,711,841 | | | 0.75 | % | | | | | | | | | | | | |
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) | | Cupertino, CA | | | | | | | | | | | | | | | | | | | | | | |
Preferred shares, Class A(9) | | Clean Technology | | 4/15/2014 | | 14,300,000 | | | 7,151,412 | | | 1,047,033 | | | 0.29 | % | | | | | | | | | | | | |
Common shares | | | | 4/15/2014 | | 100,000 | | | 10,000 | | | — | | | — | % | | | | | | | | | | | | |
Total | | | | | | | | 7,161,412 | | | 1,047,033 | | | 0.29 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Controlled | | | | | | | | $ | 19,883,894 | | | $ | 13,758,874 | | | 3.78 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Portfolio Investments | | | | | | | | $ | 207,455,377 | | | $ | 260,136,253 | | | 71.32 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
__________________________________________
* All portfolio investments are non-control/non-affiliated and non-income-producing, unless otherwise identified. Equity investments are subject to lock-up restrictions upon their initial public offering (“IPO”). Preferred dividends are generally only payable when declared and paid by the portfolio company's board of directors. The Company’s directors, officers, employees and staff, as applicable, may serve on the board of directors of the Company’s portfolio investments. (Refer to “Note 3—Related-Party Arrangements”). All portfolio investments are considered Level 3 and valued using significant unobservable inputs, unless otherwise noted. (Refer to “Note 4—Investments at Fair Value”). All of the Company's portfolio investments are restricted as to resale, unless otherwise noted, and were valued at fair value as determined in good faith by the Company’s Board of Directors. (Refer to "Note 2—Significant Accounting Policies—Investments at Fair Value").
** Indicates assets that SuRo Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Of the Company’s total investments as of December 31, 2021, 26.91% of its total investments are non-qualifying assets.
*** Investment is income-producing.
(1)“Affiliate Investments” are investments in those companies that are “Affiliated Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, a company is deemed to be an “Affiliate” of SuRo Capital Corp. if SuRo Capital Corp. owns 5% or more of the voting securities (i.e., securities with the right to elect directors) of such company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.
(2)“Control Investments” are investments in those companies that are “Controlled Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, under the 1940 Act, the Company would “Control” a portfolio company if the Company owned more than 25% of its outstanding voting securities (i.e., securities with the right to elect directors) and/or had the power to exercise control over the management or policies of such portfolio company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.
(3)Denotes an investment considered Level 1 or Level 2 and valued using observable inputs. Refer to “Note 4—Investments at Fair Value”.
(4)As of December 31, 2021, the investments noted had been placed on non-accrual status.
(5)SuRo Capital Corp.’s investments in StormWind, LLC are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SW Holdings, Inc.
(6)SuRo Capital Corp.’s investments in preferred shares in Residential Homes for Rent, LLC (d/b/a Second Avenue) are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC AV Holdings, Inc.
(7)SuRo Capital Corp.’s investments in Commercial Streaming Solutions Inc. (d/b/a BettorView), YouBet Technology, Inc. (d/b/a PickUp), and Rebric Inc. (d/b/a Compliable) are held through SuRo Capital Corp.'s wholly owned subsidiary, SuRo Capital Sports, LLC ("SuRo Sports").
(8)SuRo Capital Corp.’s investments in True Global Ventures 4 Plus Pte Ltd are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SVDS Holdings, Inc. As of December 31, 2021, $0.7 million of a $2.0 million capital commitment to True Global Ventures 4 Plus Fund LP had been called and funded.
(9)The SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) preferred shares held by SuRo Capital Corp. do not entitle SuRo Capital Corp. to a preferred dividend. SuRo Capital Corp. does not anticipate that SPBRX, INC. will pay distributions on a quarterly or regular basis or become a predictable distributor of distributions.
(10)On August 23, 2019, SuRo Capital Corp. amended the structure of its investment in OneValley, Inc. (f/k/a NestGSV, Inc.). As part of the agreement, SuRo Capital Corp.’s equity holdings (warrants notwithstanding) were restructured into a derivative security. OneValley, Inc. (f/k/a NestGSV, Inc.) has the right to call the position at any time over a five year period, while SuRo Capital Corp. can put the shares to OneValley, Inc. (f/k/a NestGSV, Inc.) at the end of the five year period.
(11)As of December 31, 2021, 512,290 Class A common shares remain in Palantir Lending Trust SPV I, none of which are subject to lock-up restrictions.
(12)On January 1, 2021, Treehouse Real Estate Investment Trust, Inc. completed its spin off of 34.4% of its assets into Aventine Property Group, Inc. During the year ended December 31, 2021, Aventine Property Group, Inc. declared an aggregate of $0.1 million in dividend distributions. During the year ended December 31, 2021, Treehouse Real Estate Investment Trust, Inc. declared an aggregate of $0.2 million in dividend distributions.
(13)On July 30, 2021, A Place for Rover, Inc. executed a business combination, through Nebula Caravel Acquisition Corp., a special purpose acquisition company. Following the merger, A Place for Rover, Inc. changed its name to Rover Group, Inc. and SuRo Capital Corp. received 130,390 additional common shares as a result of the exchange ratio prescribed in the transaction. As of December 31, 2021, SuRo Capital Corp.'s common shares in Rover Group, Inc. were subject to certain lock-up restrictions.
(14)During the year ended December 31, 2021, approximately $1.4 million has been received from Residential Homes for Rent, LLC (d/b/a Second Avenue) related to the 15% term loan due December 23, 2023. Of the proceeds received, approximately $1.0 million repaid a portion of the outstanding principal and approximately $0.4 million was attributed to interest.
(15)As of December 31, 2021, the total $10.0 million capital commitment representing SuRo Capital Corp.'s Membership Interest in Architect Capital PayJoy SPV, LLC had been called and funded.
(16)During the year ended December 31, 2021, NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) declared an aggregate of approximately $0.3 million in dividend distributions. SuRo Capital Corp. does not anticipate that NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) will pay distributions on a recurring or regular basis or become a predictable distributor of distributions. On August 20, 2021, NewLake Capital Partners, Inc.(f/k/a GreenAcreage Real Estate Corp.) went public via an initial public offering on the OTCQX. As of December 31, 2021, none of SuRo Capital Corp.'s common shares in NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) were subject to lock-up restrictions.
(17)Denotes an investment that is the sponsor of 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.
(18)On June 11, 2021, Churchill Capital Corp. II, a special purpose acquisition company, executed a private investment in public equity transaction in order to acquire shares of Software Luxembourg Holding S.A. alongside the merger of Software Luxembourg Holding S.A. and Churchill Capital Corp. II. Following the merger, Software Luxembourg Holding S.A. changed its name to Skillsoft Corp. As of December 31, 2021, none of SuRo Capital Corp.'s common shares in Skillsoft Corp. were subject to lock-up restrictions.
(19)On September 3, 2021, Clever, Inc. completed its sale to Kahoot! ASA. In connection with this transaction, SuRo Capital Corp. received 86,800 common shares in Kahoot! ASA in addition to cash proceeds and amounts currently held in escrow. SuRo Capital Corp. is also eligible to receive cash and Kahoot! ASA common shares subject to certain earn-out provisions and contingencies. As of December 31, 2021, SuRo Capital Corp.'s common shares in Kahoot! ASA were subject to certain lock-up restrictions.
(20)During the year ended December 31, 2021, Fullbridge, Inc.'s obligations under its financing arrangements with the Company became past due.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets |
NON-CONTROLLED/NON-AFFILIATE | | | | | | | | | | | | |
Palantir Technologies, Inc.** | | Palo Alto, CA | | | | | | | | | | |
Common shares, Class A(3)(13) | | Data Analysis | | 5/7/2012 | | 4,618,952 | | | $ | 12,875,126 | | | $ | 94,635,398 | | | 31.38 | % |
Coursera, Inc. | | Mountain View, CA | | | | | | | | | | |
Preferred shares, Series F 8% | | Online Education | | 7/15/2020 | | 166,962 | | | 2,840,017 | | | 2,838,354 | | | 0.94 | % |
Preferred shares, Series B 8% | | | | 6/9/2013 | | 2,961,399 | | | 14,519,519 | | | 50,343,783 | | | 16.69 | % |
Total | | | | | | | | 17,359,536 | | | 53,182,137 | | | 17.63 | % |
Course Hero, Inc. | | Redwood City, CA | | | | | | | | | | |
Preferred shares, Series A 8% | | Online Education | | 9/18/2014 | | 2,145,509 | | | 5,000,001 | | | 35,079,072 | | | 11.63 | % |
Nextdoor.com, Inc. | | San Francisco, CA | | | | | | | | | | |
Common shares | | Social Networking | | 9/27/2018 | | 580,360 | | | 10,002,666 | | | 12,832,208 | | | 4.25 | % |
Blink Health, Inc. | | New York, NY | | | | | | | | | | |
Preferred shares, Series A | | Pharmaceutical Technology | | 10/27/2020 | | 238,095 | | | 5,000,423 | | | 4,999,995 | | | 1.66 | % |
Preferred shares, Series C | | | | 10/27/2020 | | 130,972 | | | 5,002,932 | | | 4,999,987 | | | 1.66 | % |
Total | | | | | | | | 10,003,355 | | | 9,999,982 | | | 3.32 | % |
Forge Global, Inc.(15) | | San Francisco, CA | | | | | | | | | | |
Common shares, Class AA | | Online Marketplace Finance | | 7/20/2011 | | 614,042 | | | 123,987 | | | 7,624,437 | | | 2.53 | % |
Junior Preferred shares | | | | 7/19/2011 | | 160,534 | | | 2,259,716 | | | 1,993,319 | | | 0.66 | % |
Junior Preferred warrants, Strike Price $12.42, Expiration Date 11/9/2025 | | | | 7/19/2011 | | 73,695 | | | — | | | 279,303 | | | 0.09 | % |
Total | | | | | | | | 2,383,703 | | | 9,897,059 | | | 3.28 | % |
Enjoy Technology, Inc. | | Menlo Park, CA | | | | | | | | | | |
Preferred shares, Series B 6% | | On-Demand Commerce | | 7/29/2015 | | 1,681,520 | | | 4,000,280 | | | 5,032,724 | | | 1.67 | % |
Preferred shares, Series A 6% | | | | 10/16/2014 | | 879,198 | | | 1,002,440 | | | 1,536,980 | | | 0.51 | % |
Convertible Promissory Note 14% Due 1/30/2024*** | | | | 11/30/2020 | | $ | 521,112 | | | 524,057 | | | 521,112 | | | 0.17 | % |
Total | | | | | | | | 5,526,777 | | | 7,090,816 | | | 2.35 | % |
Rent the Runway, Inc. | | New York, NY | | | | | | | | | | |
Preferred shares, Series G | | Subscription Fashion Rental | | 6/17/2020 | | 339,191 | | | 5,153,945 | | | 5,000,001 | | | 1.66 | % |
Residential Homes for Rent, LLC (d/b/a Second Avenue)(16) | | Chicago, IL | | | | | | | | | | |
Preferred shares, Series A | | Real Estate Platform | | 12/23/2020 | | 150,000 | | | 1,500,000 | | | 1,500,000 | | | 0.50 | % |
Term loan 15%, Due 12/23/2023*** | | | | 12/23/2020 | | $ | 3,000,000 | | | 3,000,000 | | | 3,000,000 | | | 0.99 | % |
Total | | | | | | | | 4,500,000 | | | 4,500,000 | | | 1.49 | % |
Neutron Holdings, Inc. (d/b/a/ Lime) | | San Francisco, CA | | | | | | | | | | |
Junior Preferred shares, Series 1-D(11) | | Micromobility | | 1/25/2019 | | 41,237,113 | | | 10,007,322 | | | 3,485,014 | | | 1.16 | % |
Junior Preferred Convertible Note 4% Due 5/11/2027*** | | | | 5/11/2020 | | $ | 506,339 | | | 506,339 | | | 506,339 | | | 0.17 | % |
Common Warrants, Strike Price $0.01, Expiration Date 5/11/2027(11) | | | | 5/11/2020 | | 2,032,967 | | | — | | | — | | | — | % |
Total | | | | | | | | 10,513,661 | | | 3,991,353 | | | 1.33 | % |
Aspiration Partners, Inc. | | Marina Del Rey, CA | | | | | | | | | | |
Preferred shares, Series A | | Financial Services | | 8/11/2015 | | 540,270 | | | 1,001,815 | | | 3,288,548 | | | 1.09 | % |
Preferred shares, Series C-3 (12) | | | | 8/12/2019 | | 24,912 | | | 281,190 | | | 169,599 | | | 0.06 | % |
Total | | | | | | | | 1,283,005 | | | 3,458,147 | | | 1.15 | % |
Treehouse Real Estate Investment Trust, Inc. | | Chicago, IL | | | | | | | | | | |
Common shares***(8) | | Cannabis REIT | | 9/11/2019 | | 312,500 | | | 7,500,000 | | | 3,321,626 | | | 1.10 | % |
Palantir Lending Trust SPV I **(10) | | Palo Alto, CA | | | | | | | | | | |
Equity Participation in Underlying Collateral | | Data Analysis | | 6/19/2020 | | — | | | — | | | 2,550,764 | | | 0.85 | % |
See accompanying notes to consolidated financial statements.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets |
Clever, Inc. | | San Francisco, CA | | | | | | | | | | |
Preferred shares, Series B 8% | | Education Software | | 12/5/2014 | | 1,799,047 | | | $ | 2,000,601 | | | $ | 2,000,001 | | | 0.66 | % |
A Place for Rover Inc. (f/k/a DogVacay, Inc.) | | Seattle, WA | | | | | | | | | | |
Common shares | | Peer-to-Peer Pet Services | | 11/3/2014 | | 707,991 | | | 2,506,119 | | | 1,474,878 | | | 0.49 | % |
Tynker (f/k/a Neuron Fuel, Inc.) | | Mountain View, CA | | | | | | | | | | |
Preferred shares, Series A 8% | | Computer Software | | 8/8/2012 | | 534,162 | | | 309,310 | | | 791,361 | | | 0.26 | % |
Fullbridge, Inc. | | Cambridge, MA | | | | | | | | | | |
Common shares | | Business Education | | 5/13/2012 | | 517,917 | | | 6,150,506 | | | — | | | — | % |
Promissory Note 1.47%, Due 11/9/2021(4) | | | | 3/3/2016 | | $ | 2,270,458 | | | 2,270,858 | | | — | | | — | % |
Total | | | | | | | | 8,421,364 | | | — | | | — | % |
SP Holdings Group, Inc.(15) | | San Francisco, CA | | | | | | | | | | |
Preferred shares, Series B 6% | | Online Marketplace Finance | | 7/19/2011 | | 1,771,653 | | | — | | | — | | | — | % |
Common shares | | | | 7/20/2011 | | 770,934 | | | — | | | — | | | — | % |
Total | | | | | | | | — | | | — | | | — | % |
Kinetiq Holdings, LLC(14) | | Philadelphia, PA | | | | | | | | | | |
Common shares, Class A | | Social Data Platform | | 3/30/2012 | | 112,374 | | | — | | | — | | | — | % |
Total Non-controlled/Non-affiliate | | | | | | | | $ | 105,339,169 | | | $ | 249,804,803 | | | 82.83 | % |
| | | | | | | | | | | | |
NON-CONTROLLED/AFFILIATE(1) | | | | | | | | | | | | |
Ozy Media, Inc. | | Mountain View, CA | | | | | | | | | | |
Preferred shares, Series C-2 6% | | Digital Media Platform | | 9/11/2019 | | 683,482 | | | $ | 2,414,178 | | | $ | 1,865,547 | | | 0.62 | % |
Common Warrants, Strike Price $0.01, Expiration Date 4/9/2028 | | | | 4/9/2018 | | 295,565 | | | 30,647 | | | 762,558 | | | 0.25 | % |
Preferred shares, Series B 6% | | | | 10/3/2014 | | 922,509 | | | 4,999,999 | | | 3,350,952 | | | 1.11 | % |
Preferred shares, Series A 6% | | | | 12/11/2013 | | 1,090,909 | | | 3,000,200 | | | 2,824,679 | | | 0.94 | % |
Preferred shares, Series Seed 6% | | | | 11/2/2012 | | 500,000 | | | 500,000 | | | 1,294,645 | | | 0.43 | % |
Total | | | | | | | | 10,945,024 | | | 10,098,381 | | | 3.35 | % |
GreenAcreage Real Estate Corp. | | New York, NY | | | | | | | | | | |
Common shares***(9) | | Cannabis REIT | | 8/12/2019 | | 422,586 | | | 8,509,633 | | | 8,937,690 | | | 2.96 | % |
StormWind, LLC(5) | | Scottsdale, AZ | | | | | | | | | | |
Preferred shares, Series D 8% | | Interactive Learning | | 11/26/2019 | | 329,337 | | | 257,267 | | | 440,515 | | | 0.15 | % |
Preferred shares, Series C 8% | | | | 1/7/2014 | | 2,779,134 | | | 4,000,787 | | | 4,804,218 | | | 1.59 | % |
Preferred shares, Series B 8% | | | | 12/16/2011 | | 3,279,629 | | | 2,019,687 | | | 2,625,365 | | | 0.87 | % |
Preferred shares, Series A 8% | | | | 2/25/2014 | | 366,666 | | | 110,000 | | | 88,248 | | | 0.03 | % |
Total | | | | | | | | 6,387,741 | | | 7,958,346 | | | 2.64 | % |
NestGSV, Inc. (d/b/a OneValley, Inc.) | | San Mateo, CA | | | | | | | | | | |
Derivative Security, Expiration Date 8/23/2024(7) | | Global Innovation Platform | | 8/23/2019 | | 1 | | | 8,555,124 | | | 2,173,148 | | | 0.72 | % |
Convertible Promissory Note 8% Due 8/23/2024(4)(7) | | | | 2/17/2016 | | $ | 1,010,198 | | | 1,030,176 | | | 505,099 | | | 0.17 | % |
Preferred Warrants Series A-3, Strike Price $1.33, Expiration Date 4/4/2021 | | | | 4/4/2014 | | 187,500 | | | — | | | 4,687 | | | — | % |
Preferred Warrants Series A-4, Strike Price $1.33, Expiration Date 10/6/2021 | | | | 10/6/2014 | | 500,000 | | | — | | | 65,000 | | | 0.02 | % |
Preferred Warrants Series A-4, Strike Price $1.33, Expiration Date 7/18/2021 | | | | 7/8/2016 | | 250,000 | | | 74,380 | | | 27,500 | | | 0.01 | % |
Preferred Warrants Series B, Strike Price $2.31, Expiration Date 11/29/2021 | | | | 11/29/2016 | | 100,000 | | | 29,275 | | | — | | | — | % |
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/2022 | | | | 5/29/2017 | | 125,000 | | | 70,379 | | | — | | | — | % |
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/2023 | | | | 12/31/2018 | | 250,000 | | | 5,080 | | | 9,250 | | | 0.00 | % |
Total | | | | | | | | 9,764,414 | | | 2,784,684 | | | 0.92 | % |
See accompanying notes to consolidated financial statements.
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2020
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Portfolio Investments* | | Headquarters/ Industry | | Date of Initial Investment | | Shares/ Principal | | Cost | | Fair Value | | % of Net Assets |
CUX, Inc. (d/b/a CorpU) | | Philadelphia, PA | | | | | | | | | | |
Senior Subordinated Convertible Promissory Note 4% Due 2/14/2023(4) | | Corporate Education | | 11/26/2014 | | $ | 1,251,158 | | | $ | 1,256,191 | | | $ | 312,790 | | | 0.10 | % |
Convertible preferred shares, Series D 6% | | | | 5/31/2013 | | 169,033 | | | 778,607 | | | 73,882 | | | 0.02 | % |
Convertible preferred shares, Series C 8% | | | | 3/29/2012 | | 615,763 | | | 2,006,077 | | | — | | | — | % |
Total | | | | | | | | 4,040,875 | | | 386,672 | | | 0.12 | % |
Maven Research, Inc. | | San Francisco, CA | | | | | | | | | | |
Preferred shares, Series C 8% | | Knowledge Networks | | 7/2/2012 | | 318,979 | | | 2,000,447 | | | — | | | — | % |
Preferred shares, Series B 5% | | | | 2/28/2012 | | 49,505 | | | 217,206 | | | — | | | — | % |
Total | | | | | | | | 2,217,653 | | | — | | | — | % |
Curious.com, Inc. | | Menlo Park, CA | | | | | | | | | | |
Common shares | | Online Education | | 11/22/2013 | | 1,135,944 | | | 12,000,006 | | | — | | | — | % |
| | | | | | | | | | | | |
Total Non-controlled/Affiliate | | | | | | | | $ | 53,865,346 | | | $ | 30,165,773 | | | 10.00 | % |
| | | | | | | | | | | | |
CONTROLLED(2) | | | | | | | | | | | | |
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) | | Cupertino, CA | | | | | | | | | | |
Preferred shares, Class A***(6) | | Clean Technology | | 4/15/2014 | | 14,300,000 | | | $ | 7,151,412 | | | $ | 809,198 | | | 0.27 | % |
Common shares | | | | 4/15/2014 | | 100,000 | | | 10,000 | | | — | | | — | % |
Total | | | | | | | | 7,161,412 | | | 809,198 | | | 0.27 | % |
| | | | | | | | | | | | |
Total Controlled | | | | | | | | $ | 7,161,412 | | | $ | 809,198 | | | 0.27 | % |
| | | | | | | | | | | | |
Total Portfolio Investments | | | | | | | | $ | 166,365,927 | | | $ | 280,779,774 | | | 93.10 | % |
| | | | | | | | | | | | |
U.S. Treasury | | | | | | | | | | | | |
U.S. Treasury bill, 0%, due 1/2/2021***(3) | | | | 12/30/2020 | | $ | 150,000,000 | | | 150,000,000 | | | 150,000,000 | | | 49.74 | % |
| | | | | | | | | | | | |
TOTAL INVESTMENTS | | | | | | | | $ | 316,365,927 | | | $ | 430,779,774 | | | 142.83 | % |
See accompanying notes to consolidated financial statements.
__________________________________________
* All portfolio investments are non-control/non-affiliated and non-income-producing, unless otherwise identified. Equity investments are subject to lock-up restrictions upon their initial public offering (“IPO”). Preferred dividends are generally only payable when declared and paid by the portfolio company's board of directors. The Company’s directors, officers, employees and staff, as applicable, may serve on the board of directors of the Company’s portfolio investments. (Refer to “Note 3—Related-Party Arrangements”). All portfolio investments are considered Level 3 and valued using significant unobservable inputs, unless otherwise noted. (Refer to “Note 4—Investments at Fair Value”). All of the Company's portfolio investments are restricted as to resale, unless otherwise noted, and were valued at fair value as determined in good faith by the Company’s Board of Directors. (Refer to "Note 2—Significant Accounting Policies—Investments at Fair Value").
** Indicates assets that SuRo Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Of the Company’s total investments as of December 31, 2020, 22.56% of its total investments are non-qualifying assets.
*** Investment is income-producing.
(1)“Affiliate Investments” are investments in those companies that are “Affiliated Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, a company is deemed to be an “Affiliate” of SuRo Capital Corp. if SuRo Capital Corp. owns 5% or more of the voting securities (i.e., securities with the right to elect directors) of such company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.
(2)“Control Investments” are investments in those companies that are “Controlled Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, under the 1940 Act, the Company would “Control” a portfolio company if the Company owned more than 25% of its outstanding voting securities (i.e., securities with the right to elect directors) and/or had the power to exercise control over the management or policies of such portfolio company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.
(3)Denotes an investment considered Level 1 or Level 2 and valued using observable inputs. As of December 31, 2020, 1 portfolio investment held by SuRo Capital Corp. was considered Level 1 or Level 2. Refer to “Note 4—Investments at Fair Value”.
(4)As of December 31, 2020, the investments noted had been placed on non-accrual status.
(5)SuRo Capital Corp.’s investments in StormWind, LLC are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SW Holdings, Inc.
(6)The SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) preferred shares held by SuRo Capital Corp. do not entitle SuRo Capital Corp. to a preferred dividend rate. During the year ended December 31, 2020, SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) declared, and SuRo Capital Corp. received, an aggregate of $450,000 in dividend distributions. SuRo Capital Corp. does not anticipate that SPBRX, INC. will pay distributions on a quarterly or regular basis or become a predictable distributor of distributions.
(7)On August 23, 2019, SuRo Capital Corp. amended the structure of its investment in NestGSV, Inc. (d/b/a OneValley, Inc.). As part of the agreement, SuRo Capital Corp.’s equity holdings (warrants notwithstanding) were restructured into a derivative security. NestGSV, Inc. (d/b/a OneValley,Inc.) has the right to call the position at any time over a five year period, while SuRo Capital Corp. can put the shares to NestGSV, Inc. (d/b/a OneValley, Inc.) at the end of the five year period.
(8)During the year ended December 31, 2020, Treehouse Real Estate Investment Trust Inc. declared, and SuRo Capital Corp. received, an aggregate of $50,000 in dividend distributions. SuRo Capital Corp. does not anticipate that Treehouse Real Estate Investment Trust Inc. will pay distributions on a recurring or regular basis or become a predictable distributor of distributions.
(9)During the year ended December 31, 2020, GreenAcreage Real Estate Corp. declared an aggregate of $317,617 in dividend distributions. SuRo Capital Corp. does not anticipate that GreenAcreage Real Estate Corp. will pay distributions on a recurring or regular basis or become a predictable distributor of distributions.
(10)On June 19, 2020, SuRo Capital Corp. extended a $6,900,000, non-recourse, collateralized loan to Palantir Lending Trust SPV I. The collateralized loan to Palantir Lending Trust SPV I matures on June 19, 2022 and includes a 15% interest rate. Through the collateralized loan, SuRo Capital Corp. participates in additional upside in a future Palantir Technologies, Inc. liquidity event by receiving a percentage of the share price appreciation as captured in the Equity Participation in Underlying Collateral security. As of December 31, 2020, $8,671,618 has been received from Palantir Lending Trust SPV I. Of the proceeds received, $6,900,000 fully repaid the outstanding principal, $782,125 was attributed to the accrued guaranteed interest, and $989,494 was generated by the Equity Participation in Underlying Collateral. As of December 31, 2020, the balance of the loan and all guaranteed interest has been fully repaid, and SuRo Capital Corp. retains the right to upside on 1,312,290 shares as captured in the Equity Participation in Underlying Collateral security.
(11)On May 11, 2020, SuRo Capital Corp. made a follow-on investment in a junior preferred convertible note to Neutron Holdings, Inc. (d/b/a Lime) as part of a recapitalization of Neutron Holdings, Inc. (d/b/a Lime), led by Uber Technologies, Inc. On May 11, 2020, SuRo Capital Corp.'s existing Series D Preferred shares were converted to Series 1-D Junior Preferred shares. As part of the transaction, SuRo Capital Corp. was issued, and received on August 24, 2020, 2,032,967 common warrants with a strike price of $0.01 and an expiration date of May 11, 2027.
(12)On June 6, 2020, the convertible note SuRo Capital Corp. had extended to Aspiration Partners, Inc. converted into Series C-3 Preferred shares at a 15% discount to Aspiration Partners, Inc.'s most recent financing round. SuRo Capital Corp. received 24,912 Series C-3 Preferred shares as a result of the conversion.
(13)On September 30, 2020, Palantir Technologies, Inc. went public via a modified direct listing on the New York Stock Exchange. Under the terms of the modified direct listing, as disclosed in Palantir Technologies, Inc.'s Amendment No. 1 to Form S-1 Registration Statement, 20% of SuRo Capital Corp.'s Class A common shares in Palantir Technologies, Inc. held at the time of the direct public listing were considered unrestricted, while the remaining 80% were subject to sales restrictions and are not eligible for sale until the third business day following the filing of Palantir Technologies, Inc.'s fiscal year 2020 Form 10-K filing in 2021. As of December 31, 2020, SuRo Capital Corp. holds 4,618,952 public shares of Palantir Technologies, Inc. common stock, all of which are subject to certain lock-up restrictions.
(14)On July 29, 2020 SuRo Capital Corp. exited its investment in 4C Insights (f/k/a The Echo Systems Corp.). In connection with this exit, SuRo Capital Corp. received 112,374 Class A common shares in Kinetiq Holdings, LLC in addition to cash proceeds and amounts currently held in escrow.
(15)On November 9, 2020, SharesPost, Inc. completed its merger with Forge Global, Inc. As part of the merger, SuRo Capital Corp. received Class AA Common Shares, Junior Preferred Stock and Junior Warrants of Forge. In addition, as part of the merger, certain assets held by SharesPost, Inc. that were not acquired by Forge were spun-out into a new entity called SP Holdings Group, Inc. In addition to the shares received from Forge, SuRo Capital Corp. also received Series B Preferred Stock and Common Shares in SP Holdings Group, Inc.
(16)SuRo Capital Corp.’s investments in Residential Homes for Rent, LLC (d/b/a Second Avenue) are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC AV Holdings, Inc.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 1—NATURE OF OPERATIONS
SuRo Capital Corp. ("we", "us", "our", “Company” or “SuRo Capital”), formerly known as Sutter Rock Capital Corp. and as GSV Capital Corp. and formed in September 2010 as a Maryland corporation, is an internally-managed, non-diversified closed-end management investment company. The Company 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”).
On and effective March 12, 2019, our Board of Directors approved internalizing our operating structure ("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. Prior to March 12, 2019, 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”). Refer to "Note 3 — Related-Party Arrangements" for further detail.
The Company’s date of inception was January 6, 2011, which is the date it commenced its development stage activities. The Company’s common stock is currently listed on the Nasdaq Global Select Market under the symbol “SSSS” (formerly "GSVC"). Prior to November 24, 2021, our common stock traded on the Nasdaq Capital Market under the same symbol ("SSSS"). The Company began its investment operations during the second quarter of 2011.
The table below displays the Company’s subsidiaries as of December 31, 2021, which, other than GSV Capital Lending, LLC (“GCL”) and SuRo Capital Sports, LLC, are collectively referred to as the “Taxable Subsidiaries.” The Taxable Subsidiaries were formed to hold portfolio investments. The Taxable Subsidiaries, including their associated portfolio investments, are consolidated with the Company for accounting purposes, but have elected to be treated as separate entities for U.S. federal income tax purposes. GCL was formed to originate portfolio loan investments within the state of California and is consolidated with the Company for accounting purposes. Refer to “Note 2—Significant Accounting Policies—Basis of Consolidation” below for further detail.
| | | | | | | | | | | | | | | | | | | | |
Subsidiary | | Jurisdiction of Incorporation | | Formation Date | | Percentage Owned |
GCL | | Delaware | | April 13, 2012 | | 100% |
SuRo Capital Sports, LLC ("SuRo Sports") | | Delaware | | March 19, 2021 | | 100% |
Subsidiaries below are referred to collectively, as the “Taxable Subsidiaries” | | | | | | |
GSVC AE Holdings, Inc. (“GAE”) | | Delaware | | November 28, 2012 | | 100% |
GSVC AV Holdings, Inc. (“GAV”) | | Delaware | | November 28, 2012 | | 100% |
| | | | | | |
GSVC SW Holdings, Inc. (“GSW”) | | Delaware | | November 28, 2012 | | 100% |
| | | | | | |
GSVC SVDS Holdings, Inc. (“SVDS”) | | Delaware | | August 13, 2013 | | 100% |
| | | | | | |
The Company’s investment objective is to maximize its portfolio’s total return, principally by seeking capital gains on its equity and equity-related investments, and to a lesser extent, income from debt investments. The Company invests principally in the equity securities of what it believes to be rapidly growing venture-capital-backed emerging companies. The Company may acquire its investments in these portfolio companies through offerings of the prospective portfolio companies, transactions on secondary marketplaces for private companies, or negotiations with selling stockholders. In addition, the Company may invest in private credit and in founders equity, founders warrants, forward purchase agreements, and private investment in public equity transactions of special purpose acquisition companies. The Company may also invest on an opportunistic basis in select publicly traded equity securities or certain non-U.S. companies that otherwise meet its investment criteria, subject to any applicable limitations under the 1940 Act.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company are prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10-K and Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is an investment company following the specialized accounting and reporting guidance specified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies. In the opinion of management, all adjustments, all of which were of a normal recurring nature, were considered necessary for the fair presentation of consolidated financial statements for the period have been included.
Basis of Consolidation
Under Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’ (“AICPA”) Audit and Accounting Guide for Investment Companies, the Company is precluded from consolidating any entity other than another investment company, a controlled operating company that provides substantially all of its services and benefits to the Company, and certain entities established for tax purposes where the Company holds a 100% interest. Accordingly, the Company’s consolidated financial statements include its accounts and the accounts of the Taxable Subsidiaries and GCL, its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires the Company’s management to make a number of significant estimates. These include estimates of the fair value of certain assets and liabilities and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the 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. The Company’s estimates are inherently subjective in nature and actual results could differ materially from such estimates.
Uncertainties and Risk Factors
The Company is subject to a number of risks and uncertainties in the nature of its operations, as well as vulnerability due to certain concentrations. Refer to "Risk Factors” in Part I, Item 1A of this Form 10-K for a detailed discussion of the risks and uncertainties inherent in the nature of the Company’s operations. Refer to “Note 4—Investments at Fair Value” for an overview of the Company’s industry and geographic concentrations.
Investments at Fair Value
The Company applies fair value accounting in accordance with GAAP and the AICPA’s Audit and Accounting Guide for Investment Companies. The Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date.
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December 31, 2021
Level 2—Valuations based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
Level 3—Valuations based on unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. The majority of the Company’s investments are Level 3 investments and are subject to a high degree of judgment and uncertainty in determining fair value.
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within the Level 3 table set forth in “Note 4—Investments at Fair Value” may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the measurement period in which the reclassifications occur. Refer to “Levelling Policy” below for a detailed discussion of the levelling of the Company’s financial assets or liabilities and events that may cause a reclassification within the fair value hierarchy.
Securities for which market quotations are readily available on an exchange are valued at the most recently available closing price of such security as of the valuation date, unless there are legal or contractual restrictions on the sale or use of such security that under ASC 820-10-35 should be incorporated into the security’s fair value measurement as a characteristic of the security that would transfer to market participants who would buy the security. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined to be adequate, the Company uses the quote obtained.
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of management, our Board of Directors or the valuation committee of the Company’s Board of Directors (the “Valuation Committee”), does not reliably represent fair value, shall each be valued as follows:
1. The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;
2. Preliminary valuation conclusions are then documented and discussed with senior management;
3. An independent third-party valuation firm is engaged by the Valuation Committee to conduct independent appraisals and review management’s preliminary valuations and make its own independent assessment, for all investments for which there are no readily available market quotations;
4. The Valuation Committee discusses the valuations and recommends to the Company’s Board of Directors a fair value for each investment in the portfolio based on the input of management and the independent third-party valuation firm; and
5. The Company’s Board of Directors then discusses the valuations recommended by the Valuation Committee and determines in good faith the fair value of each investment in the portfolio.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
In making a good faith determination of the fair value of investments, the Company considers valuation methodologies consistent with industry practice. Valuation methods utilized include, but are not limited to the following: comparisons to prices from secondary market transactions; venture capital financings; public offerings; purchase or sales transactions; as well as analysis of financial ratios and valuation metrics of the portfolio companies that issued such private equity securities to peer companies that are public, analysis of the portfolio companies’ most recent financial statements and forecasts, and the markets in which the portfolio company does business, and other relevant factors. The Company assigns a weighting based upon the relevance of each method to determine the fair value of each investment.
For investments that are not publicly traded or that do not have readily available market quotations, the Valuation Committee generally engages an independent valuation firm to provide an independent valuation, which the Company’s Board of Directors considers, among other factors, in making its fair value determinations for these investments. For the current and prior fiscal year, the Valuation Committee engaged an independent valuation firm to perform valuations of 100% of the Company’s investments for which there were no readily available market quotations.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements.
Equity Investments
Equity investments for which market quotations are readily available in an active market are generally valued at the most recently available closing market prices and are classified as Level 1 assets. Equity investments with readily available market quotations that are subject to sales restrictions due to an initial public offering (“IPO”) by the portfolio company will be classified as Level 1. Any other equity investments with readily available market quotations that are subject to sales restrictions that would transfer to market participants who would buy the security may be valued at a discount for a lack of marketability (“DLOM”), to the most recently available closing market prices depending upon the nature of the sales restriction. These investments are generally classified as Level 2 assets. The DLOM used is generally based upon the market value of publicly traded put options with similar terms.
The fair values of the Company’s equity investments for which market quotations are not readily available are determined based on various factors and are classified as Level 3 assets. To determine the fair value of a portfolio company for which market quotations are not readily available, the Company may analyze the relevant portfolio company’s most recently available historical and projected financial results, public market comparables, and other factors. The Company may also consider other events, including the transaction in which the Company acquired its securities, subsequent equity sales by the portfolio company, and mergers or acquisitions affecting the portfolio company. In addition, the Company may consider the trends of the portfolio company’s basic financial metrics from the time of its original investment until the measurement date, with material improvement of these metrics indicating a possible increase in fair value, while material deterioration of these metrics may indicate a possible reduction in fair value.
In determining the value of equity or equity-linked securities (including warrants to purchase common or preferred stock) in a portfolio company, the Company considers the rights, preferences and limitations of such securities. In cases where a portfolio company’s capital structure includes multiple classes of preferred and common stock and equity-linked securities with different rights and preferences, the Company may use an option pricing model to allocate value to each equity-linked security, unless it believes a liquidity event such as an acquisition or a dissolution is imminent, or the portfolio company is unlikely to continue as a going concern. When equity-linked securities expire worthless, any cost associated with these positions is recognized as a realized loss on investments in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. In the event these securities are exercised into common or preferred stock, the cost associated with these securities is
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
reassigned to the cost basis of the new common or preferred stock. These conversions are noted as non-cash operating items on the Consolidated Statements of Cash Flows.
Debt Investments
Given the nature of the Company’s current debt investments (excluding U.S. Treasuries), principally convertible and promissory notes issued by venture-capital-backed portfolio companies, these investments are classified as Level 3 assets because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. The Company’s debt investments are valued at estimated fair value as determined by the Company’s Board of Directors.
Options
The Company’s Board of Directors will ascribe value to options based on fair value analyses that can include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate. These investments are classified as Level 3 assets because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. The Company’s options are valued at estimated fair value as determined by the Company’s Board of Directors.
Special Purpose Acquisition Companies
The Company's Board of Directors measures its Special Purpose Acquisition Company ("SPAC") investments at fair value, which is equivalent to cost until a SPAC transaction is announced. After a SPAC transaction is announced, the Company's Board of Directors will ascribe value to SPAC investments based on fair value analyses that can include option pricing models, probability-weighted expected return method analyses and other techniques as deemed appropriate. Upon completion of the SPAC transaction, the Company utilizes the public share price of the entity, less a discount for lack of marketability if there are restrictions on selling. The Company's SPAC investments are valued at estimated fair value as determined by the Company's Board of Directors.
Portfolio Company Investment Classification
The Company is a non-diversified company within the meaning of the 1940 Act. The Company classifies its investments by level of control. As defined in the 1940 Act, control investments are those where there is the power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual directly or indirectly owns beneficially more than 25% of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist when a company or individual directly or indirectly owns, controls or holds the power to vote 5% or more of the outstanding voting securities of a portfolio company. Refer to the Consolidated Schedules of Investments as of December 31, 2021 and December 31, 2020, for details regarding the nature and composition of the Company’s investment portfolio.
Levelling Policy
The portfolio companies in which the Company invests may offer their shares in IPOs. The Company’s shares in such portfolio companies are typically subject to lock-up agreements for 180 days following the IPO. Upon the IPO date, the Company transfers its investment from Level 3 to Level 1 due to the presence of an active market, or Level 2 if limited by the lock-up agreement. The Company prices the investment at the closing price on a public exchange as of the measurement date. In situations where there are lock-up restrictions, as well as legal or contractual restrictions on the sale or use of such security that under ASC 820-10-35 should be incorporated into the security’s fair value measurement as a characteristic of the security that would transfer to market participants who would buy the security, the Company will classify the investment as Level 2 subject to an appropriate DLOM to reflect the restrictions upon sale. The Company transfers investments between levels based on the fair value at the beginning of the measurement period in accordance with FASB ASC 820. For investments transferred out of Level 3 due to an IPO, the Company transfers these investments based on their fair value at the IPO date.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Securities Transactions
Securities transactions are accounted for on the date the transaction for the purchase or sale of the securities is entered into by the Company (i.e., trade date). Securities transactions outside conventional channels, such as private transactions, are recorded as of the date the Company obtains the right to demand the securities purchased or to collect the proceeds from a sale and incurs an obligation to pay for securities purchased or to deliver securities sold, respectively.
Valuation of Other Financial Instruments
The carrying amounts of the Company’s other, non-investment financial instruments, consisting of cash, receivables, accounts payable, and accrued expenses, approximate fair value due to their short-term nature.
Cash
The Company places its cash with U.S. Bank, N.A., Bridge Bank (a subsidiary of Western Alliance Bank), and Silicon Valley Bank, and at times, cash held in these accounts may exceed the Federal Deposit Insurance Corporation insured limit. The Company believes that U.S. Bank, N.A., Bridge Bank (a subsidiary of Western Alliance Bank), and Silicon Valley Bank are high-quality financial institutions and that the risk of loss associated with any uninsured balance is remote.
Escrow Proceeds Receivable
A portion of the proceeds from the sale of portfolio investments are held in escrow as a recourse for indemnity claims that may arise under the sale agreement or other related transaction contingencies. Amounts held in escrow are held at estimated realizable value and included in net realized gains (losses) on investments in the Consolidated Statements of Operations for the period in which they occurred and are adjusted as needed. Any remaining escrow proceeds balances from these transactions reasonably expected to be received are reflected on the Consolidated Statement of Assets and Liabilities as escrow proceeds receivable. Escrow proceeds receivable resulting from contingent consideration is to be recognized when the amount of the contingent consideration becomes realized or realizable. As of December 31, 2021 and December 31, 2020, the Company had $2,046,645 and $852,462, respectively, in escrow proceeds receivable.
Deferred Financing Costs
The Company records origination costs related to lines of credit as deferred financing costs. These costs are deferred and amortized as part of interest expense using the straight-line method over the respective life of the line of credit. For modifications to a line of credit, any unamortized origination costs are expensed. Included within deferred financing costs are offering costs incurred relating to the Company’s shelf registration statement on Form N-2. The Company defers these offering costs until capital is raised pursuant to the shelf registration statement or until the shelf registration statement expires. For equity capital raised, the offering costs reduce paid-in capital resulting from the offering. For debt capital raised, the associated offering costs are amortized over the life of the debt instrument. As of December 31, 2021 and December 31, 2020, the Company had deferred financing costs of $621,719 and $297,196, respectively, on the Consolidated Statement of Assets and Liabilities.
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
Deferred debt issuance costs | $ | 1,970,892 | | | $ | — | |
Deferred offering costs | 621,719 | | | 297,196 | |
| | | |
Deferred Financing Costs | $ | 2,592,611 | | | $ | 297,196 | |
Operating Leases & Related Deposits
The Company accounts for its operating leases as prescribed by ASC 842, Leases, which requires lessees to recognize a right of use asset on the balance sheet, representing its right to use the underlying asset for the lease term, and a corresponding lease liability for all leases with terms greater than 12 months. The lease expense is presented as a single lease cost that is
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
amortized on a straight-line basis over the life of the lease. Non-lease components (maintenance, property tax, insurance and parking) are not included in the lease cost. On June 3, 2019, the Company entered a 5-year operating lease for primary office space for which the Company has recorded a right-of-use asset and a corresponding lease liability for the operating lease obligation. These amounts have been discounted using the rate implicit in the lease. Refer to “Note 7—Commitments and Contingencies—Operating Leases and Related Deposits” for further detail.
Stock-based Compensation
Using the fair value recognition provisions as prescribed by ASC 718, Stock Compensation, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the appropriate service period. Determining the fair value of stock-based awards requires considerable judgment, including estimating the expected term of stock options and the expected volatility of our stock price. Differences between actual results and these estimates could have a material effect on our financial results. Forfeitures are accounted for as they occur. Refer to “Note 11—Stock-Based Compensation” for further detail.
Revenue Recognition
The Company recognizes gains or losses on the sale of investments using the specific identification method. The Company recognizes interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. The Company recognizes dividend income on the ex-dividend date.
Investment Transaction Costs and Escrow Deposits
Commissions and other costs associated with an investment transaction, including legal expenses not reimbursed by the portfolio company, are included in the cost basis of purchases and deducted from the proceeds of sales. The Company makes certain acquisitions on secondary markets, which may involve making deposits to escrow accounts until certain conditions are met, including the underlying private company’s right of first refusal. If the underlying private company does not exercise or assign its right of first refusal and all other conditions are met, then the funds in the escrow account are delivered to the seller and the account is closed. Such transactions would be reflected on the Consolidated Statement of Assets and Liabilities as escrow deposits. As of December 31, 2021 and December 31, 2020, the Company had no material escrow deposits.
Unrealized Appreciation or Depreciation of Investments
Unrealized appreciation or depreciation is calculated as the difference between the fair value of the investment and the cost basis of such investment.
U.S. Federal and State Income Taxes
The Company elected to be treated as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with its taxable year ended December 31, 2014, has qualified to be treated as a RIC for subsequent taxable years and intends to continue to operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least the sum of 90% of our investment company taxable income (“ICTI”), including payment-in-kind interest income, as defined by the Code, and 90% of our net tax-exempt interest income (which is the excess of its gross tax-exempt interest income over certain disallowed deductions) for each taxable year (the "Annual Distribution Requirement"). Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward into the next tax year ICTI in excess of current year dividend distributions. Any such carryforward ICTI must be distributed on or before December 31 of the subsequent tax year to which it was carried forward.
If the Company meets the Annual Distribution Requirement, but does not distribute (or is not deemed to have distributed) each calendar year a sum of (1) 98% of its net ordinary income for each calendar year, (2) 98.2% of its capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the “Excise Tax Avoidance Requirement”), it generally will be required to pay an excise tax equal to 4% of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
the amount by which the Excise Tax Avoidance Requirement exceeds the distributions for the year. To the extent that the Company determines that its estimated current year annual taxable income will exceed estimated current year dividend distributions from such taxable income, the Company will accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.
So long as the Company qualifies and maintains its tax treatment as a RIC, it generally will not be subject to U.S. federal and state income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the RIC will represent obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company. Included in the Company’s consolidated financial statements, the Taxable Subsidiaries are taxable subsidiaries, regardless of whether the Company is 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 the Company’s consolidated financial statements.
If it is not treated as a RIC, the Company will be taxed as a regular corporation (a “C corporation”) under Subchapter C of the Code for such taxable year. If the Company has previously qualified as a RIC but is subsequently unable to qualify for treatment as a RIC, and certain amelioration provisions are not applicable, the Company would be subject to tax on all of its taxable income (including its net capital gains) at regular corporate rates. The Company would not be able to deduct distributions to stockholders, nor would it be required to make distributions. Distributions, including distributions of net long-term capital gain, would generally be taxable to its stockholders as ordinary dividend income to the extent of the Company’s current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate stockholders would be eligible to claim a dividend received deduction with respect to such dividend; non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of the Company’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s adjusted tax basis, and any remaining distributions would be treated as a capital gain. In order to requalify as a RIC, in addition to the other requirements discussed above, the Company would be required to distribute all of its previously undistributed earnings attributable to the period it failed to qualify as a RIC by the end of the first year that it intends to requalify for tax treatment as a RIC. If the Company fails to requalify for tax treatment as a RIC for a period greater than two taxable years, it may be subject to regular corporate tax on any net built-in gains with respect to certain of its assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if the Company had been liquidated) that it elects to recognize on requalification or when recognized over the next five years. The Company was taxed as a C Corporation for its 2012 and 2013 taxable years. Refer to “Note 9—Income Taxes” for further details.
The Company elected to be treated as a RIC for the taxable year ended December 31, 2014 in connection with the filing of its 2014 tax return. As a result, the Company was required to pay a corporate-level U.S. federal income tax on the amount of the net built-in gains in its assets (the amount by which the net fair market value of the Company’s assets exceeds the net adjusted basis in its assets) either (1) as of the date it converted to a RIC (i.e., the beginning of the first taxable year that the Company qualifies as a RIC, which would be January 1, 2014), or (2) to the extent that the Company recognized such net built-in gains during the five-year recognition period beginning on the date of conversion. As of January 1, 2014, the Company had net unrealized built-in gains, but did not incur a built-in-gains tax for the 2014 tax year due to the fact that there were sufficient net capital loss carryforwards to completely offset recognized built-in gains as well as available net operating losses. The five-year recognition period ended on December 31, 2018.
Per Share Information
Net change in net assets resulting from operations per basic common share is computed using the weighted-average number of shares outstanding for the period presented. Diluted net change in net assets resulting from operations per common share is computed by dividing net increase/(decrease) in net assets resulting from operations for the period adjusted to include the pre-tax effects of interest incurred on potentially dilutive securities, by the weighted-average number of common shares outstanding plus any potentially dilutive shares outstanding during the period. The Company used the if-converted method in accordance with FASB ASC 260, Earnings Per Share (“ASC 260”) to determine the number of potentially dilutive shares
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
outstanding. Refer to “Note 6—Net Increase in Net Assets Resulting from Operations per Common Share—Basic and Diluted” for further detail.
Recently Issued or Adopted Accounting Standards
In April 2020, as part of the Securities Offering Reform for Closed-End Investment Companies final rule, the SEC adopted certain structured data reporting requirements for BDCs to submit financial statement information using Inline eXtensible Business Reporting Language (XBRL) format to the extent required of operating companies. BDCs that are eligible to file a short-form registration statement will be subject to the above structuring requirements with respect to Forms filed on or after August 1, 2022. Other BDCs will be subject in to the requirements with respect to Forms filed on or after February 1, 2023. The Company is currently assessing the impact of this standard on our financial condition and results of operations.
In May 2020, the SEC adopted rule amendments that impacted the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules amended the definition of “significant subsidiary” in a manner that was intended to more accurately capture those portfolio companies that were more likely to materially impact the financial condition of an investment company.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which made various technical changes and corrections intended to provide clarifications to existing guidance, as well as simplifications to wording or structure of existing guidance. The Company adopted the modified disclosure requirements during the period ended March 31, 2021.
In December 2020, the SEC adopted rule 2a-5, which established requirements for satisfying a fund board's obligation to determine fair value in good faith for purposes of the Investment Company Act of 1940. The rule permits boards to assign the determination to a “valuation designee,” who may be the fund’s investment adviser or, if the fund is internally managed, an officer of the fund. The rule also defines a market quotation as “readily available” only when that quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date. In connection with the adoption of new rule 2a-5, the Commission also adopted new rule 31a-4, which requires funds to maintain documentation to support fair value determinations and documentation related to the designation of the valuation designee. The Company is evaluating the impact of adopting these new rules and intends to comply with their requirements on or before the compliance date in September 2022.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 3—RELATED-PARTY ARRANGEMENTS
Internalization of Company’s Operating Structure
On and effective March 12, 2019 (the "Effective Date"), our Board of Directors approved internalizing our operating structure 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. Prior to the Effective Date, we were externally managed by our former investment adviser, GSV Asset Management, pursuant to the Investment Advisory Agreement, and our former administrator, GSV Capital Service Company, provided the administrative services necessary for our operations pursuant to the Administration Agreement.
Termination of Investment Advisory Agreement
On and effective March 12, 2019, the Investment Advisory Agreement was terminated by mutual agreement of GSV Asset Management and us in connection with our Internalization.
Prior to our Internalization, GSV Asset Management served as our external investment adviser pursuant to the Investment Advisory Agreement. Pursuant to the terms of the Investment Advisory Agreement, we paid GSV Asset Management a fee for its services consisting of two components - a base management fee and an incentive fee. The base management fee was calculated at an annual rate of 2.00% of our gross assets (our total assets as reflected on our balance sheet with no deduction for liabilities). The incentive fee was determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equaled the lesser of (i) 20% of our realized capital gains during such calendar year, if any, calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle” of 8.00% per year, and a “catch-up” feature, and (ii) 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees. See “—Investment Advisory Agreement” below.
As the Investment Advisory Agreement has been terminated, there will be no base management fees or incentives fees payable to GSV Asset Management going forward.
Termination of Administration Agreement
On and effective March 12, 2019, the Administration Agreement was terminated by mutual agreement of GSV Capital Service Company and us in connection with our Internalization.
Prior to our Internalization, GSV Capital Service Company served as our external administrator and provided administrative services necessary for our operations, including but not limited to, furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with certain other administrative services, including, but not limited to, assisting us with determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders.
Under the Administration Agreement, we did not pay any fees to GSV Capital Service Company but reimbursed GSV Capital Service Company for our allocable portion of overhead and other expenses incurred by GSV Capital Service Company in performing its services under the Administration Agreement, including, but not limited to, fees and expenses associated with performing compliance functions and our allocable portion of rent and compensation of our President, Chief Financial Officer, Chief Compliance Officer and other staff providing administrative services. See “—Administration Agreement” below.
As the Administration Agreement has been terminated, there will be no costs incurred by GSV Capital Service Company going forward.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Consulting Agreement
On and effective March 12, 2019, we entered into a Consulting Agreement (the “Consulting Agreement”) with Michael T. Moe, the former Chairman of our Board of Directors and the Chief Executive Officer and Chief Investment Officer of GSV Asset Management, for the purpose of assisting us with certain transition services following the termination of the Investment Advisory Agreement and our Internalization. Pursuant to the Consulting Agreement, Mr. Moe provided certain transition services to us related to our existing portfolio investments for which Mr. Moe previously had oversight in his role as the Chief Executive Officer and Chief Investment Officer of GSV Asset Management. Such transition services included providing information to us regarding such portfolio companies, including as a member of a portfolio company’s board of directors, assisting with the transition of portfolio company board seats as requested by us, making appropriate introductions to representatives of portfolio companies, and providing other similar types of services that we may reasonably request.
The term of the Consulting Agreement commenced on March 12, 2019 and continued for eighteen months in accordance with its terms. Pursuant to the Consulting Agreement, we paid Mr. Moe a total amount equal to $1,250,000. On September 12, 2020, the Consulting Agreement expired in accordance with its terms and was not renewed or extended.
For the years ended December 31, 2021, 2020, and 2019, the Company incurred $0, $582,438 and $667,563, respectively, of consulting expense, as included in "professional fees" on the Consolidated Statements of Operations, related to the Consulting Agreement.
Amended and Restated Trademark License Agreement
On and effective March 12, 2019, we entered into an Amended and Restated Trademark License Agreement (the “Amended and Restated License Agreement”) with GSV Asset Management in connection with termination of the Investment Advisory Agreement. See “—Termination of Investment Advisory Agreement.”
GSV Asset Management is the owner of the trade name “GSV”, and other state or unregistered “GSV” marks, including the trading symbol “GSVC” (collectively, the “Licensed Marks”). Pursuant to the Amended and Restated License Agreement, GSV Asset Management granted us a non-transferable, non-sublicensable, and non-exclusive right and license to use the Licensed Marks, solely in connection with the operation of our existing business.
The term of the Amended and Restated License Agreement commenced on March 12, 2019 and continued for eighteen months in accordance with its terms. Pursuant to the Amended and Restated License Agreement, we paid GSV Asset Management a total amount equal to $1,250,000. On September 12, 2020, the Amended and Restated License Agreement expired in accordance with its terms and was not renewed or extended.
For the years ended December 31, 2021, 2020, and 2019, the Company incurred $0, $582,438 and $667,563, respectively, of licensing expense, as included in "other expenses" on the Consolidated Statements of Operations, related to the Amended and Restated License Agreement.
Investment Advisory Agreement
On March 12, 2019, in connection with the Company's Internalization, the Investment Advisory Agreement was terminated in accordance with its terms.
Prior to our Internalization on March 12, 2019, the Company had entered into the Investment Advisory Agreement with GSV Asset Management. Under the terms of the Investment Advisory Agreement, GSV Asset Management was paid a quarterly management fee and an annual incentive fee. GSV Asset Management is controlled by Michael T. Moe, the former Chairman of the Company’s Board of Directors. Mr. Moe, through his ownership interest in GSV Asset Management, was entitled to a portion of any profits earned by GSV Asset Management in performing its services under the Investment Advisory Agreement. Mr. Moe serves as the principal of GSV Asset Management and manages the business and internal affairs of GSV Asset Management. Mark Klein, the Company’s Chief Executive Officer, President, and a member of the Company’s Board of Directors, or entities with which he is affiliated, received consulting fees from GSV Asset Management equal to a percentage of
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
each of the base management fee and the incentive fee paid by the Company to GSV Asset Management pursuant to a consulting agreement with GSV Asset Management. As the Investment Advisory Agreement has been terminated, Mr. Klein no longer has a consulting agreement or any other affiliation with GSV Asset Management.
Under the Investment Advisory Agreement, there were no restrictions on the right of any manager, partner, officer or employee of GSV Asset Management to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to, one or more of the Company’s portfolio companies). GSV Asset Management had, however, adopted an internal policy whereby any fees or compensation received by a manager, partner, officer or employee of GSV Asset Management in exchange for serving as a director of, or providing consulting services to, any of the Company’s portfolio companies would be transferred to the Company, net of any personal taxes incurred, upon such receipt for the benefit of the Company and its stockholders.
Management Fees
Under the terms of the Investment Advisory Agreement, GSV Asset Management was paid a base management fee of 2.00% of gross assets, which is the Company’s total assets reflected on its Consolidated Statement of Assets and Liabilities (with no deduction for liabilities) reduced by any non-portfolio investments. During the month of January 2018, pursuant to a voluntary waiver by GSV Asset Management, the Company paid GSV Asset Management a base management fee of 1.75%, a 0.25% reduction from the 2.00% base management fee payable under the Investment Advisory Agreement. On February 2, 2018 GSV Asset Management voluntarily agreed to reduce fees payable under the Investment Advisory Agreement (the “Waiver Agreement”). Pursuant to the Waiver Agreement, effective February 1, 2018, the base management fee is reduced to 1.75% of the Company’s gross assets, as further described below. The waiver of a portion of the base management fee is not subject to recourse against or reimbursement by the Company.
For the years ended December 31, 2021 and 2020, the Company did not accrue or waive any management fees due to the termination of the Investment Advisory Agreement, effective March 12, 2019. GSV Asset Management earned $848,723 in management fees for the year ended December 31, 2019, and waived $0 in management fees for the year ended December 31, 2019.
As the Investment Advisory Agreement has been terminated, there will be no base management fee payable to GSV Asset Management going forward.
Incentive Fees
Under the terms of the Investment Advisory Agreement, GSV Asset Management was paid an annual incentive fee equal to the lesser of (i) 20% of the Company’s realized capital gains during each calendar year, if any, calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle,” and a “catch-up” feature, and (ii) 20% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees. Effective February 1, 2018, the incentive fee paid by the Company to GSV Asset Management under the Investment Advisory Agreement was modified pursuant to the terms of the Waiver Agreement, as further described below.
The Company was required to accrue incentive fees for all periods as if the Company had fully liquidated its entire investment portfolio at the fair value stated on the Consolidated Statements of Assets and Liabilities as of December 31, 2018 or prior to the termination of the Investment Advisory Agreement. The accrual considered both the hypothetical liquidation of the Company’s portfolio described previously, as well as the Company’s actual cumulative realized gains and losses since inception, as well any previously paid incentive fees.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
For the years ended December 31, 2021 and 2020, the Company did not accrue any incentive fees due to the termination of the Investment Advisory Agreement, effective March 12, 2019. For the year ended December 31, 2019, the Company reversed previously accrued incentive fees of $4,660,472, due to the termination of the Investment Advisory Agreement. As the Investment Advisory Agreement has been terminated, there will be no incentive fee payable to GSV Asset Management going forward.
Management and Incentive Fee Waiver Agreement
On February 2, 2018, GSV Asset Management voluntarily agreed to reduce the fees payable under the Investment Advisory Agreement pursuant to the Waiver Agreement. The Waiver Agreement was effective beginning February 1, 2018 and changed the fee structure set forth in the Investment Advisory Agreement by: (i) reducing the Company’s base management fee from 2.00% to 1.75%; and (ii) creating certain high-water marks that must be reached before any incentive fee is paid to GSV Asset Management.
Pursuant to the Waiver Agreement, in addition to the “hurdle” feature in the incentive fee, GSV Asset Management had agreed to additional conditions on its ability to receive an incentive fee. Specifically, the Waiver Agreement provided that an incentive fee earned by GSV Asset Management under the Investment Advisory Agreement would be payable to GSV Asset Management only if, at the time that such incentive fee becomes payable under the Investment Advisory Agreement, both the Company’s stock price and its last reported net asset value per share were equal to, or greater than, $12.55 (the “High-Water Mark”). The High-Water Mark was based upon the volume weighted average price (VWAP) of all the Company’s equity offerings since its initial public offering, less the dollar amount of all dividends paid by the Company since inception. Upon such time that the High-Water Mark was achieved, and GSV Asset Management was paid an incentive fee, a new High-Water Mark would have been established. Each new High-Water Mark would have been equal to the most recent High-Water Mark, plus 10%. Any High-Water Mark then in effect would have been adjusted to reflect any dividends paid by the Company or any stock split effected by the Company.
For the avoidance of doubt, after the effective date of the Waiver Agreement, under no circumstances would the aggregate fees earned by GSV Asset Management in any quarterly period have been higher than those aggregate fees that would have been earned prior to the effectiveness of the Waiver Agreement.
As of each of December 31, 2021, 2020, and 2019, there were no receivables owed to the Company by GSV Asset Management. As the Investment Advisory Agreement has been terminated, there will be no receivables owed to the Company by GSV Asset Management going forward.
Administration Agreement
On March 12, 2019, in connection with the Company's Internalization, the Administration Agreement was terminated in accordance with its terms.
Prior to the Internalization, the Company had entered into the Administration Agreement with GSV Capital Service Company to provide administrative services, including furnishing the Company with office facilities, equipment, clerical, bookkeeping, record keeping services, and other administrative services. The Company reimbursed GSV Capital Service Company an allocable portion of overhead and other expenses in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of the Company’s President, Chief Financial Officer, Chief Compliance Officer and other staff providing administrative services. While there was no limit on the total amount of expenses the Company may have been required to reimburse to GSV Capital Service Company, GSV Capital Service Company would only charge the Company for the actual expenses GSV Capital Service Company incurred on the Company’s behalf, or the Company’s allocable portion thereof, without any profit to GSV Capital Service Company.
For the years ended December 31, 2021 and 2020, the Company did not incur any costs under the Administration Agreement due to the termination of the Investment Advisory Agreement, effective March 12, 2019. For the year ended
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
December 31, 2019, the Company incurred $306,084 in such costs incurred under the Administration Agreement. As the Administration Agreement has been terminated, there will be no costs incurred by GSV Capital Service Company on behalf of the Company going forward.
License Agreement
On March 12, 2019, in connection with the Company's Internalization, as of the Effective Date, the Company entered into the Amended and Restated Trademark License Agreement to use the trade name “GSV”, and other state or unregistered “GSV” marks, including the trading symbol “GSVC.” for a period of up to eighteen months and a predetermined fee of $1,250,000. Other than with respect to this limited license, the Company has no legal right to the “GSV” name. On September 12, 2020, the Amended and Restated License Agreement expired in accordance with its terms and was not renewed or extended.
Prior to the Internalization on March 12, 2019, the Company entered into a license agreement with GSV Asset Management pursuant to which GSV Asset Management had agreed to grant the Company a non-exclusive, royalty-free license to use the name “GSV.” Under this agreement, the Company had the right to use the GSV name for so long as the Investment Advisory Agreement with GSV Asset Management is in effect.
Other Arrangements
The Company’s executive officers and directors serve or may serve as officers, directors, or managers of entities that operate in a line of business similar to the Company’s, including new entities that may be formed in the future. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of the Company or the Company’s stockholders.
The 1940 Act prohibits the Company from participating in certain negotiated co-investments with certain affiliates unless it receives an order from the SEC permitting it to do so. As a BDC, the Company is prohibited under the 1940 Act from participating in certain transactions with certain of its affiliates without the prior approval of the Board of Directors, including its independent directors, and, in some cases, the SEC. The affiliates with which the Company may be prohibited from transacting include its officers, directors, and employees and any person controlling or under common control with the Company, subject to certain exceptions.
In the ordinary course of business, the Company may enter into transactions with portfolio companies that may be considered related-party transactions. To ensure that the Company does not engage in any prohibited transactions with any persons affiliated with the Company, the Company has implemented certain written policies and procedures whereby the Company’s executive officers screen each of the Company’s transactions for any possible affiliations between the proposed portfolio investment, the Company, companies controlled by the Company, and the Company’s executive officers and directors.
The Company’s investment in Churchill Sponsor VI LLC, the sponsor of Churchill Capital Corp VI, a special purpose acquisition company, constituted a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Mark D. Klein, our Chairman, Chief Executive Officer and President, has a non-controlling interest in the entity that controls Churchill Sponsor VI LLC, and is a non-controlling member of the board of directors of Churchill Capital Corp VI. The Company’s investment in Churchill Sponsor VII LLC, the sponsor of Churchill Capital Corp VII, a special purpose acquisition company, also constituted a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Mr. Klein has a non-controlling interest in the entity that controls Churchill Sponsor VII LLC, and is a non-controlling member of the board of directors of Churchill Capital Corp VII. In addition, Mr. Klein's brother, Michael Klein, is a control person of such Churchill entities. As of December 31, 2021, the fair values of the Company’s investments in Churchill Sponsor VI LLC and Churchill Sponsor VII LLC were $200,000 and $300,000, respectively.
The Company's investment in Skillsoft Corp. (f/k/a Software Luxembourg Holding S.A.) (“Skillsoft”) constituted a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Mr. Klein has a non-controlling interest in the entity that controls Churchill Sponsor II LLC, the sponsor of Churchill Capital Corp II, a special purpose acquisition company, and is a non-controlling member of the board of directors of Churchill Capital Corp II, through which the Company executed a
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
private investment in public equity transaction in order to acquire common shares of Skillsoft alongside the merger of Skillsoft and Churchill Capital Corp II. In addition, Mr. Klein's brother, Michael Klein, is a control person of such Churchill entities. As of December 31, 2021, the fair value of the Company’s investment in Skillsoft Corp. was $8,983,863.
Keri Findley, a senior managing director of the Company, is a non-controlling member of the board of directors of Shogun Enterprises, Inc., one of the Company’s portfolio companies, and holds a minority equity interest in such portfolio company. Ms. Findley also is a non-controlling member of the board of directors of the investment manager to Architect Capital PayJoy SPV, LLC, one of the Company’s portfolio companies, and holds a minority equity interest in such investment manager. As of December 31, 2021, the fair values of the Company’s investments in Shogun Enterprises, Inc. and Architect Capital PayJoy SPV, LLC were $7,031,445 and $10,000,000, respectively.
In addition, Keri Findley and Claire Councill, an investment professional of the Company, are non-controlling members of the board of directors of Colombier Acquisition Corp., a special purpose acquisition company, which is sponsored by Colombier Sponsor LLC, one of the Company's portfolio companies. The Company's investment in AltC Sponsor LLC, the sponsor of AltC Acquisition Corp, a special purpose acquisition company, constituted a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Mark D. Klein, the Company's Chairman, Chief Executive Officer and President, has a non-controlling interest in one of the entities that controls AltC Sponsor LLC, and Allison Green, the Company's Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary, is a non-controlling member of the board of directors of AltC Acquisition Corp. As of December 31, 2021, the fair values of the Company’s investments in Colombier Sponsor LLC and AltC Sponsor LLC were $2,711,841 and $250,000, respectively.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 4—INVESTMENTS AT FAIR VALUE
Investment Portfolio Composition
The Company’s investments in portfolio companies consist primarily of equity securities (such as common stock, preferred stock and options to purchase common and preferred stock) and to a lesser extent, debt securities, issued by private and publicly traded companies. The Company may also, from time to time, invest in U.S. Treasury securities. Non-portfolio investments represent investments in U.S. Treasury securities. As of December 31, 2021, the Company had 64 positions in 38 portfolio companies. As of December 31, 2020, the Company had 57 positions in 27 portfolio companies.
The following tables summarize the composition of the Company’s investment portfolio by security type at cost and fair value as of December 31, 2021 and December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Cost | | Fair Value | | Percentage of Net Assets | | Cost | | Fair Value | | Percentage of Net Assets |
Private Portfolio Companies | | | | | | | | | | | |
Preferred Stock | $ | 99,964,047 | | | $ | 163,801,798 | | | 44.9 | % | | $ | 89,335,378 | | | $ | 141,235,987 | | | 46.9 | % |
Common Stock | 51,581,524 | | | 42,860,156 | | | 11.7 | % | | 46,802,917 | | | 34,190,839 | | | 11.3 | % |
Debt Investments | 5,807,373 | | | 3,011,438 | | | 0.8 | % | | 8,587,621 | | | 4,845,340 | | | 1.6 | % |
Options | 10,982,983 | | | 4,959,112 | | | 1.4 | % | | 8,764,885 | | | 5,872,210 | | | 1.9 | % |
Total Private Portfolio Companies | 168,335,927 | | | 214,632,504 | | | 58.8 | % | | 153,490,801 | | | 186,144,376 | | | 61.7 | % |
Publicly Traded Portfolio Companies | | | | | | | | | | | |
Common Stock | 39,119,450 | | | 44,573,225 | | | 12.2 | % | | 12,875,126 | | | 94,635,398 | | | 31.4 | % |
Options | — | | | 930,524 | | | 0.3 | % | | — | | | — | | | — | % |
Total Publicly Traded Portfolio Companies | 39,119,450 | | | 45,503,749 | | | 12.5 | % | | 12,875,126 | | | 94,635,398 | | | 31.4 | % |
Total Portfolio Investments | 207,455,377 | | | 260,136,253 | | | 71.3 | % | | 166,365,927 | | | 280,779,774 | | | 93.1 | % |
Non-Portfolio Investments | | | | | | | | | | | |
U.S. Treasury Bills | — | | | — | | | — | % | | 150,000,000 | | | 150,000,000 | | | 49.7 | % |
Total Investments | $ | 207,455,377 | | | $ | 260,136,253 | | | 71.3 | % | | $ | 316,365,927 | | | $ | 430,779,774 | | | 142.8 | % |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The geographic and industrial compositions of the Company’s portfolio at fair value as of December 31, 2021 and December 31, 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 | | As of December 31, 2020 |
| Fair Value | | Percentage of Portfolio | | Percentage of Net Assets | | Fair Value | | Percentage of Portfolio | | Percentage of Net Assets |
Geographic Region | | | | | | | | | | | |
West | $ | 188,304,542 | | | 72.4 | % | | 51.6 | % | | $ | 248,633,803 | | | 88.5 | % | | 82.4 | % |
Northeast | 47,666,629 | | | 18.3 | % | | 13.1 | % | | 24,324,345 | | | 8.7 | % | | 8.1 | % |
Mid-west | 12,722,423 | | | 4.9 | % | | 3.5 | % | | 7,821,626 | | | 2.8 | % | | 2.6 | % |
International | 11,442,659 | | | 4.4 | % | | 3.1 | % | | — | | | — | % | | — | % |
Total | $ | 260,136,253 | | | 100.0 | % | | 71.3 | % | | $ | 280,779,774 | | | 100.0 | % | | 93.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 | | As of December 31, 2020 |
| Fair Value | | Percentage of Portfolio | | Percentage of Net Assets | | Fair Value | | Percentage of Portfolio | | Percentage of Net Assets |
Industry | | | | | | | | | | | |
Education Technology | $ | 109,048,688 | | | 41.9 | % | | 29.9 | % | | $ | 99,397,589 | | | 35.4 | % | | 33.0 | % |
Financial Technology | 71,954,012 | | | 27.7 | % | | 19.7 | % | | 25,614,522 | | | 9.1 | % | | 8.5 | % |
Marketplaces | 49,346,174 | | | 19.0 | % | | 13.5 | % | | 34,841,714 | | | 12.4 | % | | 11.6 | % |
Social/Mobile | 16,439,523 | | | 6.3 | % | | 4.5 | % | | 22,930,589 | | | 8.2 | % | | 7.6 | % |
Big Data/Cloud | 12,300,823 | | | 4.7 | % | | 3.4 | % | | 97,186,162 | | | 34.6 | % | | 32.1 | % |
Sustainability | 1,047,033 | | | 0.4 | % | | 0.3 | % | | 809,198 | | | 0.3 | % | | 0.3 | % |
Total | $ | 260,136,253 | | | 100.0 | % | | 71.3 | % | | $ | 280,779,774 | | | 100.0 | % | | 93.1 | % |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The table below details the composition of the Company’s industrial themes presented in the preceding tables:
| | | | | | | | |
Industry Theme | | Industry |
Education Technology | | Business Education |
| | Computer Software |
| | Corporate Education |
| | |
| | Education Software |
| | Interactive Learning |
| | Online Education |
Big Data/Cloud | | Data Analysis |
| | Gaming Licensing |
| | Retail Technology |
| | |
Marketplaces | | Global Innovation Platform |
| | Knowledge Networks |
| | Micromobility |
| | On-Demand Commerce |
| | Peer-to-Peer Pet Services |
| | Pharmaceutical Technology |
| | Real Estate Platform |
| | Subscription Fashion Rental |
Financial Technology | | Cannabis REIT |
| | Financial Services |
| | Home Improvement Finance |
| | Mobile Finance Technology |
| | Online Marketplace Finance |
| | Retail Technology |
| | Special Purpose Acquisition Company |
| | Venture Investment Fund |
Social/Mobile | | Digital Media Platform |
| | Digital Media Technology |
| | Interactive Media & Services |
| | Mobile Access Technology |
| | Social Data Platform |
| | |
| | Social Networking |
Sustainability | | Clean Technology |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Investment Valuation Inputs
The fair values of the Company’s investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of December 31, 2021 and December 31, 2020 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 |
| Quoted Prices in Active Markets for Identical Securities (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
Investments at Fair Value | | | | | | | |
Private Portfolio Companies | | | | | | | |
Preferred Stock | $ | — | | | $ | — | | | $ | 163,801,798 | | | $ | 163,801,798 | |
Common Stock | — | | | — | | | 42,860,156 | | | 42,860,156 | |
Debt Investments | — | | | — | | | 3,011,438 | | | 3,011,438 | |
Options | — | | | — | | | 4,959,112 | | | 4,959,112 | |
Private Portfolio Companies | — | | | — | | | 214,632,504 | | | 214,632,504 | |
Publicly Traded Portfolio Companies | | | | | | | |
Common Stock | 16,970,411 | | | 27,602,814 | | | — | | | 44,573,225 | |
Options | — | | | 930,524 | | | — | | | 930,524 | |
Publicly Traded Portfolio Companies | 16,970,411 | | | 28,533,338 | | | — | | | 45,503,749 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total Investments at Fair Value | $ | 16,970,411 | | | $ | 28,533,338 | | | $ | 214,632,504 | | | $ | 260,136,253 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 |
| Quoted Prices in Active Markets for Identical Securities (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
Investments at Fair Value | | | | | | | |
Private Portfolio Companies | | | | | | | |
Preferred Stock | $ | — | | | $ | — | | | $ | 141,235,987 | | | $ | 141,235,987 | |
Common Stock | — | | | — | | | 34,190,839 | | | 34,190,839 | |
Debt Investments | — | | | — | | | 4,845,340 | | | 4,845,340 | |
Options | — | | | — | | | 5,872,210 | | | 5,872,210 | |
Private Portfolio Companies | — | | | — | | | 186,144,376 | | | 186,144,376 | |
Publicly Traded Portfolio Companies | | | | | | | |
Common Stock | — | | | 94,635,398 | | | — | | | 94,635,398 | |
Total Portfolio Investments | — | | | 94,635,398 | | | 186,144,376 | | | 280,779,774 | |
Non-Portfolio Investments | | | | | | | |
U.S. Treasury bills | 150,000,000 | | | — | | | — | | | 150,000,000 | |
Total Investments at Fair Value | $ | 150,000,000 | | | $ | 94,635,398 | | | $ | 186,144,376 | | | $ | 430,779,774 | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Significant Unobservable Inputs for Level 3 Assets and Liabilities
In accordance with FASB ASC 820, Fair Value Measurement, the tables below provide quantitative information about the Company’s fair value measurements of its Level 3 assets as of December 31, 2021 and December 31, 2020. In addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The tables below are not intended to be all-inclusive, but rather provide information on the significant Level 3 inputs as they relate to the Company’s fair value measurements. To the extent an unobservable input is not reflected in the tables below, such input is deemed insignificant with respect to the Company’s Level 3 fair value measurements as of December 31, 2021 and December 31, 2020. Significant changes in the inputs in isolation would result in a significant change in the fair value measurement, depending on the input and the materiality of the investment. Refer to “Note 2—Significant Accounting Policies—Investments at Fair Value” for more detail.
As of December 31, 2021
| | | | | | | | | | | | | | |
Asset | Fair Value | Valuation Approach/ Technique(1) | Unobservable Inputs(2) | Range (Weighted Average)(3) |
Common stock in private companies | $42,860,156 | Market approach | Revenue multiples | 1.80x - 9.62x (6.00x) |
Discounted cash flow | Discount rate | 15.0% (15.0%) |
PWERM(5) | DLOM(6) | 10.0% (10.0%) |
AFFO(4) multiple | 23.03 - 36.28x (23.03x) |
Financing Risk | 10.0% (10.0%) |
Preferred stock in private companies | $163,801,798 | Market approach | Revenue multiples | 0.53x - 9.62x (6.63x) |
Discounted cash flow | Discount rate | 15.0% (15.0%) |
| |
PWERM(5) | Revenue multiples | 1.05x - 9.62x (3.04x) |
DLOM(6) | 10.0% (10.0%) |
Financing Risk | 10.0% (10.0%) |
Debt investments | $3,011,438 | Market approach | Revenue multiples | 1.74x - 2.91x (1.95x) |
| | |
Options | $4,959,112 | Option pricing model | Term to expiration (Years) | 0.17 - 6.61 (3.08) |
Volatility | 37.7% - 56.5% (37.7%) |
Discounted cash flow | Discount Rate | 15.0% (15.0%) |
________________________
(1) As of December 31, 2021, the Company used a hybrid market and income approach to value certain common and preferred stock investments as the Company felt this approach better reflected the fair value of these investments. In considering multiple valuation approaches (and consequently, multiple valuation techniques), the valuation approaches and techniques are not likely to change from one period of measurement to the next; however, the weighting of each in determining the final fair value of a Level 3 investment may change based on recent events or transactions. The hybrid approach may also consider certain risk weightings to account for the uncertainty of future events. Refer to “Note 2—Significant Accounting Policies—Investments at Fair Value” for more detail.
(2) The Company considers all relevant information that can reasonably be obtained when determining the fair value of Level 3 investments. Due to any given portfolio company’s information rights, changes in capital structure, recent events, transactions, or liquidity events, the type and availability of unobservable inputs may change. Increases/(decreases) in revenue multiples, earnings
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
before interest and taxes (“EBIT”) multiples, time to expiration, and stock price/strike price would result in higher (lower) fair values all else equal. Decreases (increases) in discount rates, volatility, and annual risk rates, would result in higher (lower) fair values all else equal. The market approach utilizes market value (revenue and EBIT) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. In general, precedent transactions include recent rounds of financing, recent purchases made by the Company, and tender offers. Refer to “Note 2—Significant Accounting Policies—Investments at Fair Value” for more detail.
(3) The weighted averages are calculated based on the fair market value of each investment.
(4) Adjusted Funds From Operations, or "AFFO"
(5) Probability-Weighted Expected Return Method, or "PWERM"
(6) Discount for Lack of Marketability, or "DLOM"
As of December 31, 2020
| | | | | | | | | | | | | | |
Asset | Fair Value | Valuation Approach/ Technique(1) | Unobservable Inputs(2) | Range (Weighted Average)(3) |
Common stock in private companies | $34,190,839 | Market approach | AFFO(4) multiple | 27.53x (27.53x) |
Revenue multiples | 2.12x -6.95x (6.39x) |
Liquidation value | N/A |
Discounted cash flow | Discount rate | 12.0% (12.0%) |
| |
Preferred stock in private companies | $141,235,987 | Market approach | Revenue multiples | 1.03x - 4.35x (2.66x) |
Precedent transactions | N/A |
Discounted cash flow | Discount rate | 12.0% (12.0%) |
| |
PWERM(5) | Revenue multiples | 1.28x - 2.27x (2.06x) |
Precedent transactions | N/A |
Debt investments | $4,845,340 | Market approach | Revenue multiples | 2.12x - 4.35x (2.32x) |
PWERM(5) | Revenue multiples | N/A |
Liquidation value | N/A |
Options | $5,872,210 | Option pricing model | Term to expiration (Years) | 0.26 - 7.36 (4.51) |
Volatility | 34.9% - 56.3% (36.8%) |
Discounted cash flow | Discount Rate | 12.0% (12.0%) |
________________________
(1) As of December 31, 2020, the Company used a hybrid market and income approach to value certain common and preferred stock investments as the Company felt this approach better reflected the fair value of these investments. By considering multiple valuation approaches (and consequently, multiple valuation techniques), the valuation approaches and techniques are not likely to change from one period of measurement to the next; however, the weighting of each in determining the final fair value of a Level 3 investment may change based on recent events or transactions. The hybrid approach may also consider certain risk weightings to account for the uncertainty of future events. Refer to “Note 2—Significant Accounting Policies—Investments at Fair Value” for more detail.
(2) The Company considers all relevant information that can reasonably be obtained when determining the fair value of Level 3 investments. Due to any given portfolio company’s information rights, changes in capital structure, recent events, transactions, or liquidity events, the type and availability of unobservable inputs may change. Increases/(decreases) in revenue multiples, earnings before interest and taxes (“EBIT”) multiples, time to expiration, and stock price/strike price would result in higher (lower) fair values all else equal. Decreases (increases) in discount rates, volatility, and annual risk rates, would result in higher (lower) fair
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
values all else equal. The market approach utilizes market value (revenue and EBIT) multiples of publicly traded comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. In general, precedent transactions include recent rounds of financing, recent purchases made by the Company, and tender offers. Refer to “Note 2—Significant Accounting Policies—Investments at Fair Value” for more detail.
(3) The weighted averages are calculated based on the fair market value of each investment.
(4) Adjusted Funds From Operations, or "AFFO"
(5) Probability-Weighted Expected Return Method, or "PWERM"
The aggregate values of Level 3 assets and liabilities changed during the year ended December 31, 2021 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| Common Stock | | Preferred Stock | | Debt Investments | | Options | | Total |
Assets: | | | | | | | | | |
Fair Value as of December 31, 2020 | $ | 34,190,839 | | | $ | 141,235,987 | | | $ | 4,845,340 | | | $ | 5,872,210 | | | $ | 186,144,376 | |
Transfers out of Level 3(1) | (31,652,675) | | | (155,414,652) | | | (5,211,120) | | | (1,619,463) | | | (193,897,910) | |
Purchases, capitalized fees and interest | 36,154,823 | | | 43,239,463 | | | — | | | 2,321,752 | | | 81,716,038 | |
Sales/Maturity of investments | (61,675) | | | (10,646,457) | | | (2,344,979) | | | — | | | (13,053,111) | |
| | | | | | | | | |
| | | | | | | | | |
Realized gains/(losses) | 204,195 | | | 5,551,864 | | | 88,788 | | | (103,655) | | | 5,741,192 | |
Net change in unrealized appreciation/(depreciation) included in earnings | 4,024,649 | | | 139,835,593 | | | 5,633,409 | | | (1,511,732) | | | 147,981,919 | |
Fair Value as of December 31, 2021 | $ | 42,860,156 | | | $ | 163,801,798 | | | $ | 3,011,438 | | | $ | 4,959,112 | | | $ | 214,632,504 | |
Net change in unrealized appreciation/ (depreciation) of Level 3 investments still held as of December 31, 2021 | $ | 6,117,069 | | | $ | 46,943,434 | | | $ | — | | | $ | (586,899) | | | $ | 52,473,604 | |
________________________
(1) During the year ended December 31, 2021, the Company’s portfolio investments had the following corporate actions which are reflected above:
| | | | | | | | | | | | | | |
Portfolio Company | | Conversion from | | Conversion to |
| | | | |
Coursera, Inc. | | Preferred shares, Series F 8% Preferred shares, Series B 8% | | Public Common shares (Level 2) |
Churchill Capital Corp. II | | Common shares, Class A | | Skillsoft Corp. Public Common shares (Level 2) |
NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) | | Common shares | | Public Common shares (Level 2) |
A Place for Rover, Inc. (f/k/a DogVacay, Inc.) | | Common shares | | Rover Group, Inc. Public Common shares (Level 2) |
Enjoy Technology, Inc. | | Preferred shares, Series B 6% Preferred shares, Series A 6% Convertible Promissory Note 14% Due 1/30/2024 | | Public Common shares (Level 2) |
Nextdoor Holdings, Inc. | | Common shares | | Public Common shares (Level 2) |
Rent the Runway, Inc. | | Preferred shares, Series G | | Public Common shares (Level 2) |
| | | | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The aggregate values of Level 3 assets and liabilities changed during the year ended December 31, 2020 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| Common Stock | | Preferred Stock | | Debt Investments | | Options | | Total |
Assets: | | | | | | | | | |
Fair Value as of December 31, 2019 | $ | 59,209,559 | | | $ | 125,448,358 | | | $ | 1,644,155 | | | $ | 5,283,506 | | | $ | 191,585,578 | |
Transfers out of Level 3(1) | (57,736,900) | | | — | | | — | | — | | (57,736,900) | |
Purchases, capitalized fees, and interest | 1,004,190 | | | 19,497,839 | | | 10,930,996 | | | — | | | 31,433,025 | |
Sales/Maturity of investments | (807,953) | | | (10,876,624) | | | (6,899,999) | | | (989,494) | | | (19,574,070) | |
Exercises and conversions(1) | — | | | 281,190 | | | (281,190) | | | — | | | — | |
| | | | | | | | | |
Realized gains/(losses) | (628,452) | | | 6,875,639 | | | (602) | | | 989,494 | | | 7,236,079 | |
Net change in unrealized appreciation/(depreciation) included in earnings | 33,150,395 | | | 9,585 | | | (548,020) | | | 588,704 | | | 33,200,664 | |
Fair Value as of December 31, 2020 | $ | 34,190,839 | | | $ | 141,235,987 | | | $ | 4,845,340 | | | $ | 5,872,210 | | | $ | 186,144,376 | |
Net change in unrealized appreciation/ (depreciation) of Level 3 investments still held as of December 31, 2020 | $ | 6,347,026 | | | $ | 10,825,549 | | | $ | (508,045) | | | $ | 588,704 | | | $ | 17,253,234 | |
________________________
(1) During the year ended December 31, 2020, the Company’s portfolio investments had the following corporate actions which are reflected above:
| | | | | | | | | | | | | | |
Portfolio Company | | Conversion from | | Conversion to |
| | | | |
Neutron Holdings, Inc. (d/b/a/ Lime) | | Preferred shares, Series D | | Junior Preferred shares, Series 1-D Common warrants, Strike price $0.01, Expiration Date 5/11/2027 |
Aspiration Partners, Inc. | | Convertible Promissory Note | | Preferred shares, Series C-3 |
Palantir Technologies, Inc. | | Common shares, Class A | | Public Common shares (Level 2) |
SharesPost, Inc. | | Preferred shares, Series B | | Forge Global Inc. Junior Preferred shares SP Holdings Group, Inc. Preferred shares Series B |
SharesPost, Inc. | | Common shares | | Forge Global Inc. Common shares, Class AA Forge Junior Warrants, Strike price $12.42, Expiration Date 11/9/2025 SP Holdings Group, Inc. Common Shares |
| | | | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Schedule of Investments In, and Advances to, Affiliates
Transactions during the year ended December 31, 2021 involving the Company’s controlled investments and non-controlled/affiliate investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2020 | | Transfer In/ (Out) | | | Purchases, Capitalized Fees, Interest and Amortization | | Sales | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2021 | | Percentage of Net Assets | |
CONTROLLED INVESTMENTS*(2) | | | | | | | | | | | | | | | | | | | | | | |
Options | | | | | | | | | | | | | | | | | | | | | | |
Special Purpose Acquisition Company | | | | | | | | | | | | | | | | | | | | | | |
Colombier Sponsor LLC**–Class W Units(9) | | 2,700,000 | | | $ | — | | | $ | — | | | $ | — | | | | $ | 1,159,150 | | | $ | — | | | $ | — | | | $ | (1,663) | | | $ | 1,157,487 | | | 0.32 | % | |
Total Options | | | | — | | | — | | | — | | | | 1,159,150 | | | — | | | — | | | (1,663) | | | 1,157,487 | | | 0.32 | % | |
Preferred Stock | | | | | | | | | | | | | | | | | | | | | | |
Clean Technology | | | | | | | | | | | | | | | | | | | | | | |
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Preferred shares, Class A(4) | | 14,300,000 | | | — | | | 809,198 | | | — | | | | — | | | — | | | — | | | 237,835 | | | 1,047,033 | | | 0.29 | % | |
Total Preferred Stock | | | | — | | | 809,198 | | | — | | | | — | | | — | | | — | | | 237,835 | | | 1,047,033 | | | 0.29 | % | |
Common Stock | | | | | | | | | | | | | | | | | | | | | | |
Clean Technology | | | | | | | | | | | | | | | | | | | | | | |
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Common shares | | 100,000 | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | % | |
Mobile Finance Technology | | | | | | | | | | | | | | | | | | | | | | |
Architect Capital PayJoy SPV, LLC**–Membership Interest in Lending SPV***(7) | | $ | 10,000,000 | | | 390,000 | | | — | | | — | | | | 10,006,745 | | | — | | | — | | | (6,745) | | | 10,000,000 | | | 2.74 | % | |
Special Purpose Acquisition Company | | | | | | | | | | | | | | | | | | | | | | |
Colombier Sponsor LLC**–Class B Units(9) | | 1,976,033 | | | — | | | — | | | — | | | | 1,556,587 | | | — | | | — | | | (2,233) | | | 1,554,354 | | | 0.43 | % | |
Total Common Stock | | | | 390,000 | | | — | | | — | | | | 11,563,332 | | | — | | | — | | | (8,978) | | | 11,554,354 | | | 3.17 | % | |
TOTAL CONTROLLED INVESTMENTS*(2) | | | | $ | 390,000 | | | $ | 809,198 | | | $ | — | | | | $ | 12,722,482 | | | $ | — | | | $ | — | | | $ | 227,194 | | | $ | 13,758,874 | | | 3.78 | % | |
NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | | | | | | | | | | | | | | | | | | | | | | |
Debt Investments | | | | | | | | | | | | | | | | | | | | | | |
Corporate Education | | | | | | | | | | | | | | | | | | | | | | |
CUX, Inc. (d/b/a CorpU)–Senior Subordinated Convertible Promissory Note 4% Due 2/14/2023 | | $ | — | | | $ | — | | | $ | 312,790 | | | $ | — | | | | $ | — | | | $ | (1,344,981) | | | $ | 88,789 | | | $ | 943,402 | | | $ | — | | | — | % | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2020 | | Transfer In/ (Out) | | | Purchases, Capitalized Fees, Interest and Amortization | | Sales | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2021 | | Percentage of Net Assets | |
Global Innovation Platform | | | | | | | | | | | | | | | | | | | | | | |
OneValley, Inc. (f/k/a NestGSV, Inc.) –Convertible Promissory Note 8% Due 8/23/2024(3)(6) | | $ | 1,010,198 | | | $ | — | | | $ | 505,099 | | | $ | — | | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 505,099 | | | 0.14 | % | |
Total Debt Investments | | | | — | | | 817,889 | | | — | | | | — | | | (1,344,981) | | | 88,789 | | | 943,402 | | | 505,099 | | | 0.14 | % | |
Preferred Stock | | | | | | | | | | | | | | | | | | | | | | |
Corporate Education | | | | | | | | | | | | | | | | | | | | | | |
CUX, Inc. (d/b/a CorpU)–Convertible preferred shares, Series D 6% | | — | | | — | | | 73,882 | | | — | | | | — | | | (1,159,243) | | | 380,636 | | | 704,725 | | | — | | | — | % | |
CUX, Inc. (d/b/a CorpU) -Convertible preferred shares, Series C 8% | | — | | | — | | | — | | | — | | | | — | | | (3,504,871) | | | 1,498,794 | | | 2,006,077 | | | — | | | — | % | |
Total Corporate Education | | | | — | | | 73,882 | | | — | | | | — | | | (4,664,114) | | | 1,879,430 | | | 2,710,802 | | | — | | | — | % | |
Knowledge Networks | | | | | | | | | | | | | | | | | | | | | | |
Maven Research, Inc.–Preferred shares, Series C | | 318,979 | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | % | |
Maven Research, Inc.–Preferred shares, Series B | | 49,505 | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | % | |
Total Knowledge Networks | | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | % | |
Digital Media Platform | | | | | | | | | | | | | | | | | | | | | | |
OzyMedia, Inc.–Preferred shares, Series C-2 6% | | 683,482 | | | — | | | 1,865,547 | | | — | | | | — | | | | | — | | | (1,865,547) | | | — | | | — | % | |
OzyMedia, Inc.–Preferred shares, Series B 6% | | 922,509 | | | — | | | 3,350,952 | | | — | | | | — | | | — | | | — | | | (3,350,952) | | | — | | | — | % | |
OzyMedia, Inc.–Preferred shares, Series A 6% | | 1,090,909 | | | — | | | 2,824,679 | | | — | | | | — | | | — | | | — | | | (2,824,679) | | | — | | | — | % | |
OzyMedia, Inc.–Preferred shares, Series Seed 6% | | 500,000 | | | — | | | 1,294,645 | | | — | | | | — | | | — | | | — | | | (1,294,645) | | | — | | | — | % | |
Total Digital Media Platform | | | | — | | | 9,335,823 | | | — | | | | — | | | — | | | — | | | (9,335,823) | | | — | | | — | % | |
Interactive Learning | | | | | | | | | | | | | | | | | | | | | | |
StormWind, LLC–Preferred shares, Series D 8%(5) | | 329,337 | | | — | | | 440,515 | | | — | | | | — | | | | | — | | | 180,578 | | | 621,093 | | | 0.17 | % | |
StormWind, LLC–Preferred shares, Series C 8%(5) | | 2,779,134 | | | — | | | 4,804,218 | | | — | | | | — | | | — | | | — | | | 1,692,511 | | | 6,496,729 | | | 1.78 | % | |
StormWind, LLC–Preferred shares, Series B 8%(5) | | 3,279,629 | | | — | | | 2,625,365 | | | — | | | | — | | | — | | | — | | | 1,798,242 | | | 4,423,607 | | | 1.21 | % | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2020 | | Transfer In/ (Out) | | | Purchases, Capitalized Fees, Interest and Amortization | | Sales | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2021 | | Percentage of Net Assets | |
StormWind, LLC–Preferred shares, Series A 8%(5) | | 366,666 | | | $ | — | | | $ | 88,248 | | | $ | — | | | | $ | — | | | $ | — | | | $ | — | | | $ | 201,045 | | | $ | 289,293 | | | 0.08 | % | |
Total Interactive Learning | | | | — | | | 7,958,346 | | | — | | | | — | | | — | | | — | | | 3,872,376 | | | 11,830,722 | | | 3.24 | % | |
Total Preferred Stock | | | | — | | | 17,368,051 | | | — | | | | — | | | (4,664,114) | | | 1,879,430 | | | (2,752,645) | | | 11,830,722 | | | 3.24 | % | |
Options | | | | | | | | | | | | | | | | | | | | | | |
Digital Media Platform | | | | | | | | | | | | | | | | | | | | | | |
Ozy Media, Inc.–Common Warrants, Strike Price $0.01, Expiration Date 4/9/2028 | | 295,565 | | | — | | | 762,558 | | | — | | | | — | | | — | | | — | | | (762,558) | | | — | | | — | % | |
Global Innovation Platform | | | | | | | | | | | | | | | | | | | | | | |
OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred Warrant Series A-3 - Strike Price $1.33, Expiration Date 4/4/2021 | | — | | | — | | | 4,687 | | | — | | | | — | | | — | | | — | | | (4,687) | | | — | | | — | % | |
OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred Warrant Series A-4, Strike Price $1.33, Expiration Date 7/18/2021 | | — | | | — | | | 27,500 | | | — | | | | — | | | — | | | (74,380) | | | 46,880 | | | — | | | — | % | |
OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred Warrant Series A-4, Strike Price $1.33, Expiration Date 10/6/2021 | | — | | | — | | | 65,000 | | | — | | | | — | | | — | | | — | | | (65,000) | | | — | | | — | % | |
OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred Warrant Series B, Strike Price $2.31, Expiration Date 11/29/2021 | | — | | | — | | | — | | | — | | | | — | | | — | | | (29,275) | | | 29,275 | | | — | | | — | % | |
OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/2022 | | 125,000 | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | % | |
OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/2023 | | 250,000 | | | — | | | 9,250 | | | — | | | | — | | | — | | | — | | | (4,250) | | | 5,000 | | | 0.01 | % | |
Derivative Security, Expiration Date 8/23/2024(6) | | 1 | | | — | | | 2,173,148 | | | — | | | | — | | | — | | | — | | | 95,120 | | | 2,268,268 | | | 0.62 | % | |
Total Global Innovation Platform | | | | — | | | 2,279,585 | | | — | | | | — | | | | | (103,655) | | | 97,338 | | | 2,273,268 | | | 0.63 | % | |
Total Options | | | | — | | | 3,042,143 | | | — | | | | — | | | — | | | (103,655) | | | (665,220) | | | 2,273,268 | | | 0.63 | % | |
Common Stock | | | | | | | | | | | | | | | | | | | | | | |
Online Education | | | | | | | | | | | | | | | | | | | | | | |
Curious.com, Inc.–Common shares | | 1,135,944 | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | % | |
| | | | | | | | | | | | | | | | | | | | | | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2020 | | Transfer In/ (Out) | | | Purchases, Capitalized Fees, Interest and Amortization | | Sales | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2021 | | Percentage of Net Assets | |
Cannabis REIT | | | | | | | | | | | | | | | | | | | | | | |
NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.)**–Common shares***(8) | | — | | | $ | 102,632 | | | $ | 8,937,690 | | | $ | (9,009,952) | | | | $ | 500,319 | | | $ | — | | | $ | — | | | $ | (428,057) | | | $ | — | | | — | % | |
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Total Common Stock | | | | 102,632 | | | 8,937,690 | | | (9,009,952) | | | | 500,319 | | | — | | | — | | | (428,057) | | | — | | | — | % | |
TOTAL NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | | | | $ | 102,632 | | | $ | 30,165,773 | | | $ | (9,009,952) | | | | $ | 500,319 | | | $ | (6,009,095) | | | $ | 1,864,564 | | | $ | (2,902,520) | | | $ | 14,609,089 | | | 4.01 | % | |
____________________
* All portfolio investments are non-income-producing, unless otherwise identified. Equity investments are subject to lock-up restrictions upon their IPO. Preferred dividends are generally only payable when declared and paid by the portfolio company's board of directors. The Company’s directors, officers, employees and staff, as applicable, may serve on the board of directors of the Company’s portfolio investments. (Refer to “Note 3—Related-Party Arrangements”). All portfolio investments are considered Level 3 and valued using significant unobservable inputs, unless otherwise noted. (Refer to “Note 4—Investments at Fair Value”). All portfolio investments are considered Level 3 and valued using unobservable inputs, unless otherwise noted. All of the Company's portfolio investments are restricted as to resale, unless otherwise noted, and were valued at fair value as determined in good faith by the Company’s Board of Directors. (Refer to "Note 2—Significant Accounting Policies—Investments at Fair Value").
** Indicates assets that SuRo Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Of the Company’s total investments as of December 31, 2021, 26.91% of its total investments are non-qualifying assets.
*** Investment is income-producing.
(1) “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, a company is deemed to be an “Affiliate” of SuRo Capital Corp. if SuRo Capital Corp. owns 5% or more of the voting securities (i.e., securities with the right to elect directors) of such company.
(2) “Control Investments” are investments in those companies that are “Controlled Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, under the 1940 Act, the Company would “Control” a portfolio company if the Company owned more than 25% of its outstanding voting securities (i.e., securities with the right to elect directors) and/or had the power to exercise control over the management or policies of such portfolio company.
(3) As of December 31, 2021, the investments noted had been placed on non-accrual status.
(4) The SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) preferred shares held by SuRo Capital Corp. do not entitle SuRo Capital Corp. to a preferred dividend rate. SuRo Capital Corp. does not anticipate that SPBRX, INC. will pay distributions on a quarterly or regular basis or become a predictable distributor of distributions.
(5) SuRo Capital Corp.’s investments in StormWind, LLC are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SW Holdings, Inc.
(6) On August 23, 2019, SuRo Capital Corp. amended the structure of its investment in OneValley, Inc. (f/k/a NestGSV, Inc.). As part of the agreement, SuRo Capital Corp.’s equity holdings (warrants notwithstanding) were restructured into a derivative security. OneValley, Inc. (f/k/a NestGSV, Inc.) has the right to call the position at any time over a five year period, while SuRo Capital Corp. can put the shares to OneValley, Inc. (f/k/a NestGSV, Inc.) at the end of the five year period.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(7) As of December 31, 2021, the total $10.0 million capital commitment representing SuRo Capital Corp.'s Membership Interest in Architect Capital PayJoy SPV, LLC had been called and funded.
(8) During the year ended December 31, 2021, NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) declared an aggregate of approximately $0.3 million in dividend distributions, of which approximately $0.1 million reflects the dividend income earned while NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) was a non-controlled/affiliate investment. SuRo Capital Corp. does not anticipate that NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) will pay distributions on a recurring or regular basis or become a predictable distributor of distributions. On August 20, 2021, NewLake Capital Partners, Inc.(f/k/a GreenAcreage Real Estate Corp.) went public via an initial public offering on the OTCQX. As of December 31, 2021, none of SuRo Capital Corp.'s common shares in NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) were subject to lock-up restrictions.
(9) Colombier Sponsor LLC is the sponsor of Colombier Acquisition Corp., 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.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Schedule of Investments In, and Advances to, Affiliates
Transactions during the year ended December 31, 2020 involving the Company’s controlled investments and non-controlled/affiliate investments were as follows:
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Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2019 | | | | | Purchases, Capitalized Fees, Interest and Amortization | | | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2020 | | Percentage of Net Assets |
CONTROLLED INVESTMENTS*(2) | | | | | | | | | | | | | | | | | | | | | |
Preferred Stock | | | | | | | | | | | | | | | | | | | | | |
Clean Technology | | | | | | | | | | | | | | | | | | | | | |
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Preferred shares, Class A***(4) | | 14,300,000 | | | $ | 450,000 | | | $ | 775,198 | | | | | | $ | — | | | | | $ | — | | | $ | 34,000 | | | $ | 809,198 | | | 0.27 | % |
Total Preferred Stock | | | | 450,000 | | | 775,198 | | | | | | — | | | | | — | | | 34,000 | | | 809,198 | | | 0.27 | % |
Common Stock | | | | | | | | | | | | | | | | | | | | | |
Clean Technology | | | | | | | | | | | | | | | | | | | | | |
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Common shares | | 100,000 | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
Total Common Stock | | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
TOTAL CONTROLLED INVESTMENTS*(2) | | | | $ | 450,000 | | | $ | 775,198 | | | | | | $ | — | | | | | $ | — | | | $ | 34,000 | | | $ | 809,198 | | | 0.27 | % |
NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | | | | | | | | | | | | | | | | | | | | | |
Debt Investments | | | | | | | | | | | | | | | | | | | | | |
Corporate Education | | | | | | | | | | | | | | | | | | | | | |
CUX, Inc. (d/b/a CorpU)–Senior Subordinated Convertible Promissory Note 4% Due 2/14/2023(3) | | $ | 1,251,158 | | | $ | — | | | $ | 312,789 | | | | | | $ | — | | | | | $ | — | | | $ | 1 | | | $ | 312,790 | | | 0.10 | % |
Global Innovation Platform | | | | | | | | | | | | | | | | | | | | | |
NestGSV, Inc. (d/b/a OneValley, Inc.) –Convertible Promissory Note 8% Due 8/23/2024(3)(6) | | $ | 1,010,198 | | | (29,184) | | | 1,010,198 | | | | | | — | | | | | — | | | (505,099) | | | 505,099 | | | 0.17 | % |
Total Debt Investments | | | | (29,184) | | | 1,322,987 | | | | | | — | | | | | — | | | (505,098) | | | 817,889 | | | 0.27 | % |
Preferred Stock | | | | | | | | | | | | | | | | | | | | | |
Corporate Education | | | | | | | | | | | | | | | | | | | | | |
CUX, Inc. (d/b/a CorpU)–Convertible preferred shares, Series D 6% | | 169,033 | | | — | | | 34,980 | | | | | | — | | | | | — | | | 38,902 | | | 73,882 | | | 0.02 | % |
CUX, Inc. (d/b/a CorpU) -Convertible preferred shares, Series C 8% | | 615,763 | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
Total Corporate Education | | | | — | | | 34,980 | | | | | | — | | | | | — | | | 38,902 | | | 73,882 | | | 0.02 | % |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2019 | | | | | Purchases, Capitalized Fees, Interest and Amortization | | | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2020 | | Percentage of Net Assets |
Knowledge Networks | | | | | | | | | | | | | | | | | | | | | |
Maven Research, Inc.–Preferred shares, Series C | | 318,979 | | | $ | — | | | $ | — | | | | | | $ | — | | | | | $ | — | | | $ | — | | | $ | — | | | — | % |
Maven Research, Inc.–Preferred shares, Series B | | 49,505 | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
Total Knowledge Networks | | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
Digital Media Platform | | | | | | | | | | | | | | | | | | | | | |
OzyMedia, Inc.–Preferred shares, Series C-2 6% | | 683,482 | | | — | | | 2,970,252 | | | | | | — | | | | | — | | | (1,104,705) | | | 1,865,547 | | | 0.62 | % |
OzyMedia, Inc.–Preferred shares, Series B 6% | | 922,509 | | | — | | | 5,001,420 | | | | | | — | | | | | — | | | (1,650,468) | | | 3,350,952 | | | 1.11 | % |
OzyMedia, Inc.–Preferred shares, Series A 6% | | 1,090,909 | | | — | | | 4,528,107 | | | | | | — | | | | | — | | | (1,703,428) | | | 2,824,679 | | | 0.94 | % |
OzyMedia, Inc.–Preferred shares, Series Seed 6% | | 500,000 | | | — | | | 2,002,143 | | | | | | — | | | | | — | | | (707,498) | | | 1,294,645 | | | 0.43 | % |
Total Digital Media Platform | | | | — | | | 14,501,922 | | | | | | — | | | | | — | | | (5,166,099) | | | 9,335,823 | | | 3.10 | % |
Interactive Learning | | | | | | | | | | | | | | | | | | | | | |
StormWind, LLC–Preferred shares, Series D 8%(5) | | 329,337 | | | — | | | 503,120 | | | | | | — | | | | | — | | | (62,605) | | | 440,515 | | | 0.15 | % |
StormWind, LLC–Preferred shares, Series C 8%(5) | | 2,779,134 | | | — | | | 5,391,000 | | | | | | — | | | | | — | | | (586,782) | | | 4,804,218 | | | 1.59 | % |
StormWind, LLC–Preferred shares, Series B 8%(5) | | 3,279,629 | | | — | | | 3,248,804 | | | | | | — | | | | | — | | | (623,439) | | | 2,625,365 | | | 0.87 | % |
StormWind, LLC–Preferred shares, Series A 8%(5) | | 366,666 | | | — | | | 157,949 | | | | | | — | | | | | — | | | (69,701) | | | 88,248 | | | 0.03 | % |
Total Interactive Learning | | | | — | | | 9,300,873 | | | | | | — | | | | | — | | | (1,342,527) | | | 7,958,346 | | | 2.64 | % |
Total Preferred Stock | | | | — | | | 23,837,775 | | | | | | — | | | | | — | | | (6,469,724) | | | 17,368,051 | | | 5.76 | % |
Options | | | | | | | | | | | | | | | | | | | | | |
Digital Media Platform | | | | | | | | | | | | | | | | | | | | | |
OzyMedia, Inc.–Common Warrants, Strike Price $0.01, Expiration Date 4/9/2028 | | 295,565 | | | — | | | 1,182,260 | | | | | | — | | | | | — | | | (419,702) | | | 762,558 | | | 0.25 | % |
Global Innovation Platform | | | | | | | | | | | | | | | | | | | | | |
NestGSV, Inc. (d/b/a OneValley, Inc.)–Preferred Warrant Series A-3, Strike Price $1.33, Expiration Date 4/4/2021 | | 187,500 | | | — | | | 20,625 | | | | | | — | | | | | — | | | (15,938) | | | 4,687 | | | — | % |
NestGSV, Inc. (d/b/a OneValley, Inc.)–Preferred Warrant Series A-4, Strike Price $1.33, Expiration Date 10/6/2021 | | 500,000 | | | — | | | 135,000 | | | | | | — | | | | | — | | | (70,000) | | | 65,000 | | | 0.02 | % |
NestGSV, Inc. (d/b/a OneValley, Inc.)–Preferred Warrant Series A-4, Strike Price $1.33, Expiration Date 7/18/2021 | | 250,000 | | | — | | | 62,500 | | | | | | — | | | | | — | | | (35,000) | | | 27,500 | | | 0.01 | % |
NestGSV, Inc. (d/b/a OneValley, Inc.)–Preferred Warrant Series B, Strike Price $2.31, Expiration Date 11/29/2021 | | 100,000 | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
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Type/Industry/Portfolio Company/Investment | | Principal/ Quantity | | Interest, Fees, or Dividends Credited in Income | | Fair Value at December 31, 2019 | | | | | Purchases, Capitalized Fees, Interest and Amortization | | | | Realized Gains/(Losses) | | Unrealized Gains/(Losses) | | Fair Value at December 31, 2020 | | Percentage of Net Assets |
NestGSV, Inc. (d/b/a OneValley, Inc.)–Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/2022 | | 125,000 | | | $ | — | | | $ | — | | | | | | $ | — | | | | | $ | — | | | $ | — | | | $ | — | | | — | % |
NestGSV, Inc. (d/b/a OneValley, Inc.)–Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/2023 | | 250,000 | | | — | | | 2,500 | | | | | | — | | | | | — | | | 6,750 | | | 9,250 | | | — | % |
Derivative Security, Expiration Date 8/23/2024(6) | | 1 | | | — | | | 3,880,621 | | | | | | — | | | | | — | | | (1,707,473) | | | 2,173,148 | | | 0.72 | % |
Total Global Innovation Platform | | | | — | | | 4,101,246 | | | | | | — | | | | | — | | | (1,821,661) | | | 2,279,585 | | | 0.75 | % |
Total Options | | | | — | | | 5,283,506 | | | | | | — | | | | | — | | | (2,241,363) | | | 3,042,143 | | | 1.00 | % |
Common Stock | | | | | | | | | | | | | | | | | | | | | |
Online Education | | | | | | | | | | | | | | | | | | | | | |
Curious.com, Inc.–Common shares | | 1,135,944 | | | — | | | — | | | | | | — | | | | | — | | | — | | | — | | | — | % |
Cannabis REIT | | | | | | | | | | | | | | | | | | | | | |
GreenAcreage Real Estate Corp. -Common shares***(7) | | 422,586 | | | 317,617 | | | 7,500,000 | | | | | | 1,008,103 | | | | | — | | | 429,587 | | | 8,937,690 | | | 2.96 | % |
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Total Common Stock | | | | 317,617 | | | 7,500,000 | | | | | | 1,008,103 | | | | | — | | | 429,587 | | | 8,937,690 | | | 2.96 | % |
TOTAL NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | | | | $ | 288,433 | | | $ | 37,944,268 | | | | | | $ | 1,008,103 | | | | | $ | — | | | $ | (8,786,598) | | | $ | 30,165,773 | | | 10.00 | % |
____________________
* All portfolio investments are non-income-producing, unless otherwise identified. Equity investments are subject to lock-up restrictions upon their IPO. Preferred dividends are generally only payable when declared and paid by the portfolio company's board of directors. The Company’s directors, officers, employees and staff, as applicable, may serve on the board of directors of the Company’s portfolio investments. (Refer to “Note 3—Related-Party Arrangements”). All portfolio investments are considered Level 3 and valued using significant unobservable inputs, unless otherwise noted. (Refer to “Note 4—Investments at Fair Value”). All portfolio investments are considered Level 3 and valued using unobservable inputs, unless otherwise noted. All of the Company's portfolio investments are restricted as to resale, unless otherwise noted, and were valued at fair value as determined in good faith by the Company’s Board of Directors. (Refer to "Note 2—Significant Accounting Policies—Investments at Fair Value").
** Indicates assets that SuRo Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Of the Company’s total investments as of December 31, 2020, 22.56% of its total investments are non-qualifying assets.
*** Investment is income-producing.
(1) “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, a company is deemed to be an “Affiliate” of SuRo Capital Corp. if SuRo Capital Corp. owns 5% or more of the voting securities (i.e., securities with the right to elect directors) of such company.
(2) “Control Investments” are investments in those companies that are “Controlled Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, under the 1940 Act, the Company would “Control” a portfolio company if the Company owned more than 25% of its outstanding voting securities (i.e., securities with the right to elect directors) and/or had the power to exercise control over the management or policies of such portfolio company.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(3) As of December 31, 2020, the investments noted had been placed on non-accrual status.
(4) The SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) preferred shares held by SuRo Capital Corp. do not entitle SuRo Capital Corp. to a preferred dividend rate. During the year ended December 31, 2020, SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) declared, and SuRo Capital Corp. received, an aggregate of $450,000 in dividend distributions. SuRo Capital Corp. does not anticipate that SPBRX, INC. will pay distributions on a quarterly or regular basis or become a predictable distributor of distributions.
(5) SuRo Capital Corp.’s investments in StormWind, LLC are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SW Holdings, Inc.
(6) On August 23, 2019, SuRo Capital Corp. amended the structure of its investment in NestGSV, Inc. (d/b/a OneValley, Inc.). As part of the agreement, SuRo Capital Corp.’s equity holdings (warrants notwithstanding) were restructured into a derivative security. NestGSV, Inc. (d/b/a OneValley,Inc.) has the right to call the position at any time over a five year period, while SuRo Capital Corp. can put the shares to NestGSV, Inc. (d/b/a OneValley, Inc.) at the end of the five year period.
(7) During the year ended December 31, 2020, GreenAcreage Real Estate Corp. declared an aggregate of $317,617 in dividend distributions. SuRo Capital Corp. does not anticipate that Green Acreage Real Estate Corp. will pay distributions on a recurring or regular basis or become a predictable distributor of distributions.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 5—COMMON STOCK
Share Repurchase Program
On August 8, 2017, the Company announced a $5.0 million discretionary open-market share repurchase program of shares of the Company’s common stock, $0.01 par value per share, of up to $5.0 million until the earlier of (i) August 6, 2018 or (ii) the repurchase of $5.0 million in aggregate amount of the Company’s common stock (the “Share Repurchase Program”). On November 7, 2017, the Company’s Board of Directors authorized an extension of, and an increase in the amount of shares of the Company’s common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) November 6, 2018 or (ii) the repurchase of $10.0 million in aggregate amount of the Company’s common stock. On May 3, 2018, the Company’s Board of Directors authorized a $5.0 million increase in the amount of shares of the Company’s common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) November 6, 2018 or (ii) the repurchase of $15.0 million in aggregate amount of the Company’s common stock. On November 1, 2018, our Board of Directors authorized a $5.0 million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) October 31, 2019 or (ii) the repurchase of $20.0 million in aggregate amount of our common stock. On August 5, 2019, our Board of Directors authorized a $5.0 million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) August 4, 2020 or (ii) the repurchase of $25.0 million in aggregate amount of our common stock. On March 9, 2020, our Board of Directors authorized a $5.0 million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) March 8, 2021 or (ii) the repurchase of $30.0 million in aggregate amount of our common stock. On October 28, 2020, our Board of Directors authorized a $10.0 million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) October 31, 2021 or (ii) the repurchase of $40.0 million in aggregate amount of our common stock. On October 27, 2021, our Board of Directors approved an extension of the Share Repurchase Program until the earlier of (i) October 31, 2022 or (ii) the repurchase of $40.0 million in aggregate amount of our common stock.
The timing and number of shares to be repurchased will depend on a number of factors, including market conditions and alternative investment opportunities. The Share Repurchase Program may be suspended, terminated or modified at any time for any reason and does not obligate the Company to acquire any specific number of shares of its common stock. 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.
During the year ended December 31, 2021, the Company did not repurchase shares of common stock under the Share Repurchase Program. During the year ended December 31, 2020, the Company repurchased 1,655,848 shares of the Company's common stock. As of December 31, 2021, the dollar value of shares that remained available to be purchased by the Company under the Share Repurchase Program was approximately $9.6 million.
Amended and Restated 2019 Equity Incentive Plan
Refer to “Note 11—Stock-Based Compensation” for a description of the Company’s restricted shares of common stock granted under the Amended & Restated 2019 Equity Incentive Plan (as defined herein).
Dividends Paid in Common Stock
On May 4, 2021, the Company's Board of Directors declared a dividend of $2.50 per share that was paid on June 30, 2021 to stockholders of record as of the close of business on May 18, 2021. The ex-dividend date was May 17, 2021. The dividend was paid in cash and shares of the Company's common stock at the election of the stockholders, although the total amount of cash to be distributed to all stockholders was limited to no more than 50% of the total dividend paid to all stockholders. The total dividend amount paid to all stockholders consisted of approximately $30.0 million in cash and 2,335,527 in shares of common stock issued.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
On August 3, 2021, the Company's Board of Directors declared a dividend of $2.25 per share that was paid on September 30, 2021 to stockholders of record as of the close of business on August 18, 2021. The ex-dividend date was August 17, 2021. The dividend was paid in cash and shares of the Company's common stock at the election of the stockholders, although the total amount of cash to be distributed to all stockholders was limited to no more than 50% of the total dividend paid to all stockholders. The total dividend amount paid to all stockholders consisted of approximately $29.6 million in cash and 2,225,193 in shares of common stock issued.
On November 2, 2021, the Company's Board of Directors declared a dividend of $2.00 per share that was paid on December 30, 2021 to stockholders of record as of the close of business on November 17, 2021. The ex-dividend date was November 16, 2021. The dividend was paid in cash and shares of the Company's common stock at the election of the stockholders, although the total amount of cash to be distributed to all stockholders was limited to no more than 50% of the total dividend paid to all stockholders. The total dividend amount paid to all stockholders consisted of approximately $28.5 million in cash and 2,170,807 in shares of common stock issued.
Conversion of 4.75% Convertible Senior Notes due 2023
During the year ended December 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 on March 29, 2021. During the year ended December 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” for more detail regarding conversion terms.
At-the-Market Offering
On July 29, 2020, the Company entered into an At-the-Market Sales Agreement, dated July 29, 2020 (the “Initial Sales Agreement”), with BTIG, LLC, JMP Securities LLC and Ladenburg 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"). On September 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 Amendment No. 1 to the At-the-Market Sales Agreement, dated September 23, 2020, with the Agents (the “Amendment No. 1 to the Sales Agreement,” and together with the Initial Sales Agreement, the “Sales Agreement”). 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.
Sales of the Shares, if any, will be made by any method that is deemed to be an “at-the-market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Select Market or sales made to or through a market maker other than on an exchange, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at other negotiated prices. Actual sales in the ATM Program will depend on a variety of factors to be determined by the Company from time to time.
The Agents will receive a commission from the Company equal to up to 2.0% of the gross sales price of any Shares sold through the Agents under the Sales Agreement and reimbursement of certain expenses. The Sales Agreement contains customary representations, warranties and agreements of the Company, conditions to closing, indemnification rights and obligations of the parties and termination provisions.
During the year ended December 31, 2021, the Company issued and sold 5,900 Shares under the ATM Program at a weighted-average price of $13.42 per share, for gross proceeds of $79,198 and net proceeds of $78,608, after deducting commissions to the Agents on Shares sold. As of December 31, 2021, up to approximately $99.0 million in aggregate amount of the Shares remain available for sale under the ATM Program.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Modified Dutch Auction Tender Offer
On October 21, 2019, the Company commenced a modified “Dutch Auction” tender offer (the “Modified Dutch Auction Tender Offer”) to purchase for cash up to $10.0 million in shares of its common stock from its stockholders at a price per share of not less than $6.00 and not greater than $8.00 in $0.10 increments, using available cash. Upon expiration of the Modified Dutch Auction Tender Offer on November 20, 2019, the Company repurchased 1,449,275 shares, representing 7.6% of its outstanding shares, at a price of $6.90 per share on a pro rata basis, excluding fees and expenses relating to the self-tender offer. The Company has determined that the proration factor for the tender offer was 78.1%.
NOTE 6—NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE—BASIC AND DILUTED
The following information sets forth the computation of basic and diluted net increase in net assets resulting from operations per common share, pursuant to ASC 260, for the years ended December 31, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | |
| | | | | 2021 | | 2020 | | 2019 | | | | |
Earnings per common share–basic: | | | | | | | | | | | | | |
Net change in net assets resulting from operations | | | | | $ | 147,071,721 | | | $ | 75,337,438 | | | $ | 23,953,697 | | | | | |
Weighted-average common shares–basic | | | | | 25,861,642 | | | 17,910,353 | | | 19,328,414 | | | | | |
Earnings per common share–basic | | | | | $ | 5.69 | | | $ | 4.21 | | | $ | 1.24 | | | | | |
Earnings per common share–diluted: | | | | | | | | | | | | | |
Net change in net assets resulting from operations | | | | | $ | 147,071,721 | | | $ | 75,337,438 | | | $ | 23,953,697 | | | | | |
| | | | | | | | | | | | | |
Adjustment for interest and amortization on 4.75% Convertible Senior Notes due 2023(1) | | | | | 501,065 | | | 2,239,210 | | | 2,269,124 | | | | | |
Net change in net assets resulting from operations, as adjusted | | | | | $ | 147,572,786 | | | $ | 77,576,648 | | | $ | 26,222,821 | | | | | |
| | | | | | | | | | | | | |
Adjustment for dilutive effect of 4.75% Convertible Senior Notes due 2023(1) | | | | | 896,725 | | | 3,880,545 | | | 3,741,208 | | | | | |
Weighted-average common shares outstanding–diluted | | | | | 26,758,367 | | | 21,790,898 | | | 23,069,622 | | | | | |
Earnings per common share–diluted | | | | | $ | 5.52 | | | $ | 3.56 | | | $ | 1.14 | | | | | |
______________________
(1) As of December 31, 2021, there were no potentially dilutive securities outstanding.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 7—COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in a portfolio company at some future date or over a specified period of time. As of December 31, 2021 and December 31, 2020, the Company had $1,330,000 and $10,000,000, respectively, in non-binding investment agreements that required it to make a future investment in a portfolio company.
From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of its rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its business, financial condition or results of operations. The Company is not currently a party to any material legal proceedings.
Operating Leases & Related Deposits
The Company currently has one operating lease for office space for which the Company has recorded a right-of-use asset and lease liability for the operating lease obligation. The lease commenced June 3, 2019 and expires July 31, 2024. The lease expense is presented as a single lease cost that is amortized on a straight-line basis over the life of the lease.
As of December 31, 2021 and December 31, 2020, the Company booked a right of use asset and operating lease liability of $470,508 and $633,736, respectively, on the Consolidated Statement of Assets and Liabilities. As of December 31, 2021 and December 31, 2020, the Company recorded a security deposit of $16,574 and $16,574, respectively, on the Consolidated Statement of Assets and Liabilities. For the years ended December 31, 2021 and 2020, the Company incurred $186,738 and $180,254, respectively, of operating lease expense. The amounts reflected on the Consolidated Statement of Assets and Liabilities have been discounted using the rate implicit in the lease. As of December 31, 2021, the remaining lease term was 2.6 years and the discount rate was 3.00%.
The following table shows future minimum payments under the Company's operating lease as of December 31, 2021:
| | | | | |
For the Years Ended December 31, | Amount |
| |
| |
2022 | 185,194 | |
2023 | 190,750 | |
2024 | 113,603 | |
2025 | — | |
2026 | — | |
| $ | 489,547 | |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 8—FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended December 31, | | | | | | |
| | | | | | | | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | | | | | |
Per Basic Share Data | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value at beginning of the year | | | | | | | | | $ | 15.14 | | | $ | 11.38 | | | $ | 9.89 | | | $ | 9.64 | | | $ | 8.66 | | | | | | | |
Net investment loss(1) | | | | | | | | | (0.38) | | | (0.81) | | | (0.49) | | | (0.37) | | | (0.95) | | | | | | | |
Net realized gain/(loss) on investments(1) | | | | | | | | | 8.46 | | | 0.92 | | | 0.99 | | | (0.36) | | | 0.04 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Realized loss on partial repurchase of 5.25% Convertible Senior Notes due 2018(1) | | | | | | | | | — | | | — | | | — | | | (0.02) | | | — | | | | | | | |
Net change in unrealized appreciation/(depreciation) of investments(1) | | | | | | | | | (2.39) | | | 3.78 | | | 0.69 | | | 0.47 | | | 1.59 | | | | | | | |
Benefit from taxes on unrealized depreciation of investments(1) | | | | | | | | | — | | | — | | | 0.05 | | | 0.33 | | | 0.13 | | | | | | | |
Dividends declared | | | | | | | | | (8.00) | | | (0.87) | | | (0.32) | | | — | | | — | | | | | | | |
Issuance of common stock from stock dividend(1) | | | | | | | | | 0.74 | | | — | | | — | | | — | | | — | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Issuance of common stock from public offering | | | | | | | | | 0.01 | | | 0.30 | | | — | | | — | | | — | | | | | | | |
Issuance of common stock from conversion of 4.75% Convertible Notes due 2023(1) | | | | | | | | | (1.91) | | | (0.11) | | | — | | | — | | | — | | | | | | | |
Repurchase of common stock(1) | | | | | | | | | — | | | 0.43 | | | 0.52 | | | 0.20 | | | 0.18 | | | | | | | |
Stock-based compensation(1) | | | | | | | | | 0.05 | | | 0.12 | | | 0.05 | | | — | | | — | | | | | | | |
Net asset value at end of year | | | | | | | | | $ | 11.72 | | | $ | 15.14 | | | $ | 11.38 | | | $ | 9.89 | | | $ | 9.64 | | | | | | | |
Per share market value at end of year | | | | | | | | | $ | 12.95 | | | $ | 13.09 | | | $ | 6.55 | | | $ | 5.22 | | | $ | 5.45 | | | | | | | |
Total return based on market value(2) | | | | | | | | | 60.05 | % | | 99.85 | % | | 31.61 | % | | (4.22) | % | | 8.35 | % | | | | | | |
Total return based on net asset value(2) | | | | | | | | | 30.25 | % | | 33.04 | % | | 15.08 | % | | 2.59 | % | | 11.32 | % | | | | | | |
Shares outstanding at end of year | | | | | | | | | 31,118,556 | | 19,914,023 | | 17,564,244 | | 19,762,647 | | 21,246,345 | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | |
Net assets at end of year | | | | | | | | | $364,846,624 | | $301,583,073 | | $199,917,289 | | $195,378,159 | | $204,762,866 | | | | | | |
Average net assets | | | | | | | | | $396,209,139 | | $205,430,809 | | $209,261,190 | | $208,678,731 | | $199,457,678 | | | | | | |
Ratio of gross operating expenses to average net assets(3) | | | | | | | | | 2.88 | % | | 7.95 | % | | 6.08 | % | | 7.09 | % | | 11.25 | % | | | | | | |
Ratio of incentive fee waiver to average net assets | | | | | | | | | — | % | | — | % | | — | % | | (2.40) | % | | — | % | | | | | | |
Ratio of management fee waiver to average net assets | | | | | | | | | — | % | | — | % | | — | % | | (0.43) | % | | (0.36) | % | | | | | | |
Ratio of income tax provision to average net assets | | | | | | | | | — | % | | — | % | | (0.42) | % | | (3.22) | % | | (1.38) | % | | | | | | |
Ratio of net operating expenses to average net assets(3) | | | | | | | | | 2.88 | % | | 7.95 | % | | 5.66 | % | | 1.04 | % | | 9.51 | % | | | | | | |
Ratio of net investment loss to average net assets(3) | | | | | | | | | (2.51) | % | | (7.07) | % | | (4.52) | % | | (3.66) | % | | (10.47) | % | | | | | | |
Portfolio Turnover Ratio | | | | | | | | | 28.34 | % | | 14.87 | % | | 12.95 | % | | 5.01 | % | | 0.07 | % | | | | | | |
__________________
(1)Based on weighted-average number of shares outstanding for the relevant period.
(2)Total return based on market value is based upon the change in market price per share between the opening and ending market values per share in the period, adjusted for dividends and equity issuances. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period, adjusted for dividends and equity issuances.
(3)For the year ended December 31, 2021, the Company excluded $100,274 of non-recurring expenses. For the year ended December 31, 2020, the Company excluded $1,962,431 of non-recurring expenses. For the year ended December 31, 2019, the Company excluded $1,769,820 of non-recurring expenses. For the year ended December 31, 2018, the Company excluded $352,667 of non-recurring expenses. Because the ratios are calculated for the Company’s common stock taken as a whole, an individual investor’s ratios may vary from these ratios.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 9—INCOME TAXES
The Company elected to be treated as a RIC under Subchapter M of the Code beginning with its taxable year ended December 31, 2014, has qualified to be treated as a RIC for subsequent taxable years. The Company intends to continue to operate so as to qualify to be subject to tax treatment as a RIC under Subchapter M of the Code and, as such, will not be subject to U.S. federal income tax on the portion of taxable income (including gains) distributed as dividends for U.S. federal income tax purposes to stockholders. Taxable income includes the Company’s taxable interest, dividend and fee income, reduced by certain deductions, as well as taxable net realized investment gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as such gains or losses are not included in taxable income until they are realized.
To qualify and be subject to tax as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing dividends of an amount generally at least equal to 90% of its investment company taxable income, as defined by the Code and determined without regard to any deduction for distributions paid, to its stockholders. The amount to be paid out as a distribution is determined by the Board of Directors each quarter and is based upon the annual earnings estimated by the management of the Company. To the extent that the Company’s earnings fall below the amount of dividend distributions declared, however, a portion of the total amount of the Company’s distributions for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.
During the year ended December 31, 2021, the Company declared distributions of $8.00 per share. The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s taxable year generally based upon its taxable income for the full taxable year and distributions paid for the full taxable year. As a result, a determination made on a by-dividend basis may not be representative of the actual tax attributes of the Company’s distributions for a full taxable year. If the Company had determined the tax attributes of our distributions taxable year-to-date as of December 31, 2021, 100% would be from net realized investment gains. However, there can be no certainty to stockholders that this determination is representative of what the actual tax attributes of the Company’s fiscal year of 2021 distributions to stockholders will be.
As a RIC, the Company will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless the Company makes distributions treated as dividends for U.S. federal income tax purposes in a timely manner to its stockholders in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our ordinary income (taking into account certain deferrals and elections) for each calendar year, (2) 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the 1-year period ending October 31 of each such calendar year and (3) any ordinary income and net capital gains for preceding years, but not distributed during such years and on which the Company paid no U.S. federal income tax. The Company will not be subject to this excise tax on any amount on which the Company incurred U.S. federal corporate income tax (such as the tax imposed on a RIC’s retained net capital gains).
Depending on the level of taxable income earned in a taxable year, the Company may choose to carry over taxable income in excess of current taxable year distributions from such taxable income into the next taxable year and incur a 4% excise tax on such taxable income, as required. The maximum amount of excess taxable income that may be carried over for distribution in the next taxable year under the Code is the total amount of distributions paid in the following taxable year, subject to certain declaration and payment guidelines. To the extent the Company chooses to carry over taxable income into the next taxable year, distributions declared and paid by the Company in a taxable year may differ from the Company’s taxable income for that taxable year as such distributions may include the distribution of current taxable year taxable income, the distribution of prior taxable year taxable income carried over into and distributed in the current taxable year, or returns of capital.
The Company has taxable subsidiaries which hold certain portfolio investments in an effort to limit potential legal liability and/or comply with source-income type requirements contained in the RIC tax provisions of the Code. These taxable subsidiaries are consolidated for U.S. GAAP and the portfolio investments held by the taxable subsidiaries are included in the Company’s consolidated financial statements and are recorded at fair value. These taxable subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities as a
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
result of their ownership of certain portfolio investments. Any income generated by these taxable subsidiaries generally would be subject to tax at normal corporate tax rates based on its taxable income.
The Company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year, except that it may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.
As of December 31, 2021 and December 31, 2020, the Company recorded a deferred tax liability of $0. The Company is required to include net deferred tax provision/benefit in calculating its total expenses even though these net deferred taxes are not currently payable/receivable. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as such gains or losses are not included in taxable income until they are realized.
For U.S. federal and state income tax purposes, a portion of the Taxable Subsidiaries’ net operating loss carryforwards and basis differences may be subject to limitations on annual utilization in case of a change in ownership, as defined by federal and state law. The amount of such limitations, if any, has not been determined. Accordingly, the amount of such tax attributes available to offset future profits may be significantly less than the actual amounts of the tax attributes.
The Company and the Taxable Subsidiaries identified their major tax jurisdictions as U.S. federal and California and may be subject to the taxing authorities’ examination for the tax years 2018–2021 and 2017–2021, respectively. Further, the Company and the Taxable Subsidiaries accrue all interest and penalties related to uncertain tax positions as incurred. As of December 31, 2021, there were no material interest or penalties incurred related to uncertain tax positions.
Permanent differences between ICTI and net investment income for financial reporting purposes are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. During the years ended December 31, 2021 and 2020, the Company reclassified for book purposes amounts arising from permanent book/tax differences related as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 |
Capital in excess of par value | $ | (9,931,831) | | | $ | (14,516,336) | |
Accumulated undistributed net investment loss | 8,007,039 | | | 13,524,191 | |
Accumulated net realized gains from investments | (1,924,792) | | | (992,145) | |
For income tax purposes, distributions paid to stockholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The tax character of distributions declared in the years ended December 31, 2021, 2020, and 2019 was as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
Ordinary income | $ | — | | | $ | — | | | $ | — | |
Long-term capital gain | 212,197,026 | | | 16,947,370 | | | 5,620,558 | |
Return of capital | — | | | — | | | — | |
Distributions on a tax basis | — | | | — | | | — | |
For federal income tax purposes, the tax cost of investments owned at December 31, 2021 and 2020, was $201,067,636 and $309,978,186, respectively. The gross unrealized appreciation and gross unrealized depreciation on investments owned at December 31, 2021 was $123,319,904 and $65,056,699, respectively, and on investments owned at December 31, 2020 was $175,168,002 and $54,366,414, respectively. The net unrealized appreciation/(depreciation) on investments owned at December 31, 2021 and 2020, was $58,263,205 and $120,801,588, respectively.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
At December 31, 2021 and 2020, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Company’s Consolidated Statements of Assets and Liabilities by temporary and other book/tax differences, primarily relating to the tax treatment of certain investments in partnerships and wholly-owned subsidiary corporations, and organizational expenses, as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 |
Undistributed ordinary income | $ | (35,883,906) | | | $ | — | |
Accumulated net realized gains/(losses) on investments | 3,489,058 | | | (2,116,773) | |
Unrealized appreciation | 58,263,205 | | | 120,801,588 | |
Components of distributable earnings at year end | $ | 25,868,357 | | | $ | 118,684,815 | |
NOTE 10—DEBT CAPITAL ACTIVITIES
6.00% Notes due 2026
On December 17, 2021, the Company issued $70.0 million aggregate principal amount of its 6.00% Notes due 2026 (the "6.00% Notes due 2026"), pursuant to an Indenture, dated as of March 28, 2018 (the "Base Indenture"), between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee (the "Trustee"), as supplemented by a second supplemental indenture, dated as of December 17, 2021 (together with the Base Indenture, the "Indenture"), between the Company and the Trustee. On December 21, 2021, the Company issued an additional $5.0 million aggregate principal amount of 6.00% Notes due 2026 pursuant to an overallotment option. The 6.00% Notes due 2026 bear interest at a fixed rate of 6.00% per year, payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year, commencing on March 30, 2022. The 6.00% Notes due 2026 have a maturity date of December 30, 2026, unless previously repurchased in accordance with their terms. The Company has 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 after December 30, 2024 at a redemption price of 100% of the outstanding principal amount of the 6.00% Notes due 2026 plus accrued and unpaid interest.
The 6.00% Notes due 2026 are direct unsecured obligations of the Company and rank pari passu, or equal in right of payment, with all outstanding and future unsecured, unsubordinated indebtedness of the Company; senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 6.00% Notes due 2026; effectively subordinated to any of the Company’s future secured indebtedness (including indebtedness that is initially unsecured in respect of which the Company subsequently grants a security interest), to the extent of the value of the assets securing such indebtedness (provided, however, that the Company has agreed under the Indenture to not incur any secured or unsecured indebtedness that would be senior to the 6.00% Notes due 2026 while the 6.00% Notes due 2026 are outstanding, subject to certain exceptions); and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.
The 6.00% Notes due 2026 are listed for trading on the Nasdaq Global Select Market under the symbol “SSSSL”. The reported closing market price of SSSSL on December 31, 2021 was $25.68 per note. As of December 31, 2021, the fair value of the 6.00% Notes due 2026 was $77.0 million. They are classified as Level 1 of the fair value hierarchy (Refer to “Note 2-Significant Accounting Policies”). As of December 31, 2021, the Company was in compliance with the terms of the Indenture.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
4.75% Convertible Senior Notes due 2023
On March 28, 2018, the Company issued $40.0 million aggregate principal amount of convertible senior notes, which bore interest at a fixed rate of 4.75% per year, payable semi-annually in arrears on March 31 and September 30 of each year, commencing on September 30, 2018. The 4.75% Convertible Senior Notes due 2023 had a maturity date of March 28, 2023 (the "4.75% Convertible Senior Notes due 2023"), unless previously repurchased or converted in accordance with their terms. The Company did not have the right to redeem the 4.75% Convertible Senior Notes due 2023 prior to March 27, 2021. On or after March 27, 2021, the Company could redeem the 4.75% Convertible Senior Notes due 2023 for cash, in whole or from time to time in part, at the Company’s option if (i) the closing sale price of the Company’s common stock for at least 15 trading days (whether or not consecutive) during the period of any 20 consecutive trading days was greater than or equal to 150% of the conversion price on each applicable trading day, (ii) no public announcement of a pending, proposed or intended fundamental change had occurred which had not been abandoned, terminated or consummated, and (iii) no event of default under the indenture governing the 4.75% Convertible Senior Notes due 2023, and no event that with the passage of time or giving of notice would constitute an event of default under such indenture, had occurred or existed.
All of these conditions were met and on February 19, 2021, the Company caused notices to be issued to the holders of the 4.75% Convertible Senior Notes due 2023 regarding the Company’s exercise of its option to redeem, in whole, the issued and outstanding 4.75% Convertible Senior Notes due 2023, pursuant to the governing indenture. The Company established March 29, 2021 as the date on which all of the 4.75% Convertible Senior Notes due 2023 would be redeemed (the “Redemption Date”), at 100% of their principal amount ($1,000 per convertible note), plus the accrued and unpaid interest thereon from September 30, 2020, through, but excluding, the Redemption Date. Holders of the 4.75% Convertible Senior Notes due 2023 had the option to surrender their 4.75% Convertible Senior Notes due 2023 for conversion into shares of the Company’s common stock at the then existing conversion rate, in lieu of receiving cash, at any time prior to the close of business on the business day immediately preceding the Redemption Date.
On the Redemption Date, 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. Due to the election of certain holders to surrender their 4.75% Convertible Senior Notes due 2023 for conversion into shares of the Company’s common stock prior to the Redemption Date, the Company issued a total of 4,272,696 shares since the 4.75% Convertible Senior Notes due 2023 were initially issued. As result of such redemption and conversions, the 4.75% Convertible Senior Notes due 2023 were no longer outstanding as of the Redemption Date.
The initial conversion rate for the 4.75% Convertible Senior Notes due 2023 was 93.2836 shares of the Company’s common stock for each $1,000 principal amount of the 4.75% Convertible Senior Notes due 2023, which represented an initial conversion price of approximately $10.72 per share. As a result of the Company’s Modified Dutch Auction Tender Offer and cash dividends, the conversion rate for the 4.75% Convertible Senior Notes due 2023 had changed to 108.0505 shares of the Company’s common stock for each $1,000 principal amount of the 4.75% Convertible Senior Notes due 2023, which represented a conversion price of approximately $9.25 per share.
The indenture governing the 4.75% Convertible Senior Notes due 2023 contained customary financial reporting requirements and contained certain restrictions on mergers, consolidations, and asset sales. The indenture also contained certain events of default, the occurrence of which could have caused the 4.75% Convertible Senior Notes due 2023 to become due and payable before their maturity or immediately.
For the year ended December 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 on March 29, 2021. During the year ended December 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.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The table below shows a reconciliation from the aggregate principal amount of 4.75% Convertible Senior Notes due 2023 to the balance shown on the Consolidated Statement of Assets and Liabilities.
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
Initial aggregate principal amount of 4.75% Convertible Senior Notes due 2023 | $ | 38,215,000 | | | $ | 40,000,000 | |
Conversion of 4.75% Convertible Senior Notes due 2023 | (37,925,000) | | | (1,785,000) | |
Redemption of 4.75% Convertible Senior Notes due 2023 | (290,000) | | | — | |
Direct deduction of deferred debt issuance costs | — | | | (819,563) | |
4.75% Convertible Senior Notes due 2023 Payable | $ | — | | | $ | 37,395,437 | |
The 4.75% Convertible Senior Notes due 2023 were the Company’s general, unsecured, senior obligations and ranked senior in right of payment to any future indebtedness that was expressly subordinated in right of payment to the 4.75% Convertible Senior Notes due 2023, equal in right of payment to any existing and future unsecured indebtedness that was not so subordinated to the 4.75% Convertible Senior Notes due 2023, effectively junior to any future secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all future indebtedness (including trade payables) incurred by the Company’s subsidiaries.
In connection with the issuance of the 4.75% Convertible Senior Notes due 2023, the Company was required under the terms of the Credit Facility (defined below) to deposit any proceeds from the 4.75% Convertible Senior Notes due 2023 offering into an account at Western Alliance Bank and was required to maintain at least $65.0 million (or such lesser amount to the extent such funds are used to repay or repurchase a portion of the outstanding 5.25% Convertible Senior Notes due 2018 prior to their maturity and repayment in full) in an account at Western Alliance Bank until such time as the 5.25% Convertible Senior Notes due 2018 were repaid in full. The 5.25% Convertible Senior Notes due 2018 matured on September 15, 2018, at which time the Company repaid the remaining outstanding aggregate principal amount of the 5.25% Convertible Senior Notes due 2018, including accrued but unpaid interest. In addition, the Credit Facility matured on May 31, 2019. As a result, the company is no longer subject to such requirements.
Western Alliance Bank Credit Facility
The Credit Facility (defined below) matured on May 31, 2019 and was no longer outstanding as of such date. There were no borrowings by the Company from the Credit Facility during the year ended December 31, 2021 and the year ended December 31, 2020.
The Company entered into a Loan and Security Agreement, effective May 31, 2017 and amended on March 22, 2018 (the “Loan Agreement”), with Western Alliance Bank, pursuant to which Western Alliance Bank agreed to provide the Company with a $12.0 million senior secured revolving credit facility (the “Credit Facility”).
The Credit Facility matured on May 31, 2019 and bore interest at a per annum rate equal to the prime rate plus 3.50%. In addition, a facility fee of $60,000 was charged upon closing of the Credit Facility, and the Loan Agreement required payment of a fee for unused amounts during the revolving period in an amount equal to 0.50% per annum of the average unused portion of the Credit Facility payable quarterly in arrears.
Under the Loan Agreement, the Company made certain customary representations and warranties and was required to comply with various affirmative and negative covenants, reporting requirements, and other customary requirements for similar credit facilities, including, without limitation, restrictions on incurring additional indebtedness (with unsecured longer-term indebtedness limited to $70.0 million in the aggregate), compliance with the asset coverage requirements under the 1940 Act, a minimum net asset value requirement of at least the greater of $60.0 million or five times the amount of the Credit Facility, a limitation on the Company’s net asset value being reduced by more than 15% of its net asset value at December 31, 2016, and maintenance of RIC and BDC status. The Loan Agreement included usual and customary events of default for credit facilities of this nature, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to certain other indebtedness, bankruptcy, the cessation of the Investment Advisory Agreement, and the occurrence of a material adverse effect.
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The Credit Facility was secured by substantially all of the Company’s property and assets. As of December 31, 2021 and December 31, 2020, the Company had no borrowings outstanding under the Credit Facility, as the Credit Facility matured on May 31, 2019.