Neostellar Capital Corp. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This annual report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this annual report on Form 10-K involve risks and uncertainties, including, without limitation, statements as to: ● our future operating results; ● our dependence upon our management team and key investment professionals; ● our business prospects and the prospects of our portfolio companies; ● our ability to manage our business and future growth; ● the impact of investments that we expect to make; ● risks related to investments in growth-stage companies, other venture capital-backed companies, and generally U.S. companies; ● our contractual arrangements and relationships with third parties; ● our ability to make distributions; ● the dependence of our future success on the general economy and its impact on the industries in which we invest; ● risks related to the uncertainty of the value of our portfolio investments; ● the ability of our portfolio companies to achieve their objectives; ● change in political, economic or industry conditions; ● our expected financings and investments; ● the impact of changes in laws or regulations (including the interpretation thereof), including tax laws, on our operations and/or the operation of our portfolio companies; ● the adequacy of our cash resources and working capital; ● risks related to market volatility, including general price and volume fluctuations in stock markets; and ● the timing of cash flows, if any, from the operations of our portfolio companies. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including, without limitation: ● an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies; 53 TABLE OF CONTENTS ● an economic downturn could disproportionately impact the market sectors in which a significant portion of our portfolio is concentrated, causing us to suffer losses in our portfolio; ● a contraction of available credit and/or an inability to access the equity markets could impair our investment activities; ● increases in inflation or an inflationary economic environment could adversely affect our portfolio companies’ operating results, causing us to suffer losses in our portfolio; ● interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; and ● the risks, uncertainties and other factors we identify in the sections entitled “Risk Factors” in our quarterly reports on Form 10-Q, our annual report on Form 10-K, and in our other filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report on Form 10-K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in our quarterly reports on Form 10-Q and our annual report on Form 10-K, in the “Risk Factors” sections. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report on Form 10-K. The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this annual report on Form 10-K. Overview We are an internally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act, and has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. Our investment objective is to maximize our portfolio’s total return, principally by seeking capital gains on our equity and equity-related investments, and to a lesser extent, income from debt investments. We invest principally in the equity securities of what we believe to be rapidly growing venture capital-backed emerging companies. We acquire our investments through direct investments in prospective portfolio companies, secondary marketplaces for private companies and negotiations with selling stockholders. In addition, we may invest in private credit and in the founders equity, founders warrants, forward purchase agreements, and PIPE transactions of SPACs. We may also invest on an opportunistic basis in select publicly traded equity securities or certain non-U.S. companies that otherwise meet our investment criteria, subject to applicable requirements of the 1940 Act. To the extent we make investments in private equity funds and hedge funds that are excluded from the definition of “investment company” under the 1940 Act by Section 3(c)(1) or 3(c)(7) of the 1940 Act, we will limit such investments to no more than 15% of our net assets. In regard to the regulatory requirements for BDCs under the 1940 Act, some of these investments may not qualify as investments in “eligible portfolio companies,” and thus may not be considered “qualifying assets.” “Eligible portfolio companies” generally include U.S. companies that are not investment companies and that do not have securities listed on a national exchange. If at any time less than 70% of our gross assets are comprised of qualifying assets, including as a result of an increase in the value of any non-qualifying assets or decrease in the value of any qualifying assets, we would generally not be permitted to acquire any additional non-qualifying assets until such time as 70% of our then-current gross assets were comprised of qualifying assets. We would not be required, however, to dispose of any non-qualifying assets in such circumstances. Our investment philosophy is based on a disciplined approach of identifying promising investments in high-growth, venture-backed companies across several key industry themes which may include, among others, social/mobile, cloud computing and big data, internet commerce, financial technology, mobility, and enterprise software. Our investment decisions are based on a disciplined analysis of available information regarding each potential portfolio company’s business operations, focusing on the portfolio company’s growth potential, the quality of recurring revenues, and path to profitability, as well as an understanding of key market fundamentals. Venture capital funds or other institutional investors have invested in the vast majority of companies that we evaluate. 54 TABLE OF CONTENTS We seek to deploy capital primarily in the form of non-controlling equity and equity-related investments, including common stock, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity, and convertible debt securities with a significant equity component. Typically, our preferred stock investments are non-income producing, have different voting rights than our common stock investments and are generally convertible into common stock at our discretion. As our investment strategy is primarily focused on equity positions, our investments generally do not produce current income and therefore we may be dependent on future capital raising to meet our operating needs if no other source of liquidity is available. We seek to create a low-turnover portfolio that includes investments in companies representing a broad range of investment themes. Our History We formed in 2010 as a Maryland corporation and operate as an internally managed, non-diversified closed-end management investment company. Our investment activities are supervised by our Board of Directors and managed by our executive officers and investments professionals, all of which are our employees. Our date of inception was January 6, 2011, which is the date we commenced development stage activities. We commenced operations as a BDC upon completion of our IPO in May 2011 and began our investment operations during the second quarter of 2011. On and effective June 22, 2020, we changed our name to “SuRo Capital Corp.” from “Sutter Rock Capital Corp.” On and effective March 12, 2019, our Board of Directors approved our Internalization, and we began operating as an internally managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Our Board of Directors approved the Internalization in order to better align the interests of our stockholders with its management. As an internally managed BDC, we are managed by our employees, rather than the employees of an external investment adviser, thereby allowing for greater transparency to stockholders through robust disclosure regarding our compensation structure. As a result of the Internalization, we no longer pay any fees or expenses under an investment advisory agreement or administration agreement, and instead pay the operating costs associated with employing investment management professionals including, without limitation, compensation expenses related to salaries, discretionary bonuses and restricted stock grants. Except as otherwise disclosed herein, this Form 10-K discusses our business and operations as an internally managed BDC during the period covered by this Form 10-K. 55 TABLE OF CONTENTS Portfolio and Investment Activity Year Ended December 31, 2023 The value of our investment portfolio will change over time due to changes in the fair value of our underlying investments, as well as changes in the composition of our portfolio resulting from purchases of new and follow-on investments and the sales of existing investments. The fair value, as of December 31, 2023, of all of our portfolio investments, excluding short-term U.S. Treasury bills, was $184,081,249. During the year ended December 31, 2023, we funded investments in an aggregate amount of $25,766,162 (not including capitalized transaction costs or investments in short-term U.S. Treasury bills) as shown in the following table: Portfolio Company Investment Transaction Date Gross Payments Orchard Technologies, Inc. (1) Preferred shares, Series 1 1/13/2023 $ 2,000,000 True Global Ventures 4 Plus Pte Ltd (2) Limited Partner Fund Investment 3/31/2023 1,330,000 PayJoy, Inc. Simple Agreement for Future Equity (SAFE) 5/25/2023 500,000 ServiceTitan, Inc. Common shares 6/30/2023 9,999,990 FourKites, Inc. Common shares Various 8,511,174 Shogun Enterprises, Inc. (d/b/a Hearth) (3) Preferred shares, Series B-4 7/12/2023 499,998 Stake Trade, Inc. (d/b/a Prophet Exchange) Simple Agreement for Future Equity (SAFE) 7/26/2023 1,000,000 Xgroup Holdings Limited (d/b/a Xpoint) Convertible Note 6%, Due 8/17/2024 10/26/2023 325,000 Colombier Sponsor II LLC Class B Units and Class W Units 11/20/2023 1,600,000 Total $ 25,766,162 (1) On January 13, 2023, we invested $2.0 million in Orchard Technologies, Inc.’s Series 1 Senior Preferred financing round. As part of the transaction, we exchanged a portion of our existing Series D Preferred shares investment for Series 1 Senior Preferred shares, Series 2 Senior Preferred shares, and Common shares. Additionally, our previous investment in the Simple Agreement for Future Equity of Orchard Technologies, Inc. was converted into additional Series 1 Senior Preferred shares. (2) On March 31, 2023, the previously unfunded capital commitment of $1.3 million was deemed fully contributed in lieu of cash distributions. On March 31, 2023, the full $2.0 million capital commitment to True Global Ventures 4 Plus Fund LP had been called and funded. (3) On July 12, 2023, we invested $0.5 million in Shogun Enterprises, Inc. (d/b/a Hearth)’s Series B-4 Preferred financing round. As part of the transaction, our previous investment in the Convertible Note of Shogun Enterprises, Inc. (d/b/a Hearth) was converted into Series B-3 Preferred shares. Additionally, we received Common Warrants as part of the transaction. During the year ended December 31, 2023, we capitalized fees of $49,269. During the year ended December 31, 2023, we exited or received proceeds from investments in the amount of $17,338,100, net of transaction costs, and realized a net loss on investments of $11,947,504 (including adjustments to amounts held in escrow receivable) as shown in following table: Portfolio Company Transaction Date Quantity Average Net Share Price (1) Net Proceeds Realized Gain/(Loss) (2) Kahoot! ASA (3) Various 38,305 $ 1.97 $ 75,601 $ (100,466 ) NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) (4) Various 229,758 16.44 3,776,638 (903,070 ) Nextdoor Holdings, Inc. (5) Various 1,689,996 2.97 5,011,707 (4,364,489 ) Rent the Runway, Inc. (6) 1/4/2023 79,191 3.05 241,456 (961,837 ) Residential Homes for Rent, LLC (d/b/a Second Avenue) (7) Various N/A N/A 1,000,000 — True Global Ventures 4 Plus Pte Ltd (8) Various N/A N/A 1,699,222 1,330,000 Ozy Media, Inc. (9) 5/4/2023 3,492,465 N/A — (10,945,024 ) PSQ Holdings, Inc. (d/b/a PublicSquare) - Warrants (10) Various 303,963 1.05 318,369 187,873 Forge Global, Inc. (11) Various 1,465,994 3.56 5,215,107 3,865,611 Churchill Sponsor VI LLC 12/4/2023 N/A N/A — (200,000 ) Total $ 17,338,100 $ (12,091,402 ) (1) The average net share price is the net share price realized after deducting all commissions and fees on the sale(s), if applicable. (2) Realized gain/(loss) does not include adjustments to amounts held in escrow receivable. (3) As of March 8, 2023, we had sold our remaining Kahoot! ASA public common shares. (4) As of December 15, 2023, we had sold our remaining NewLake Capital Partners, Inc. public common shares. (5) As of December 31, 2023, we held 112,420 remaining Nextdoor Holdings, Inc. public common shares. (6) As of January 4, 2023, we had sold our remaining Rent the Runway, Inc. public common shares. 56 TABLE OF CONTENTS (7) On December 26, 2023, a final payment was received from Residential Homes For Rent, LLC (d/b/a Second Avenue) related to the 15% term loan due December 23, 2023. During the year ended December 31, 2023, approximately $1.1 million was 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 the remaining was attributed to interest. (8) On March 31, 2023, the previously unfunded capital commitment of $1.3 million to True Global Ventures 4 Plus Pte Ltd was deemed fully contributed in lieu of cash distributions. (9) On May 4, 2023, we abandoned our investment in Ozy Media, Inc. (10) As of December 31, 2023, we held 2,396,037 remaining PSQ Holdings, Inc. (d/b/a PublicSquare) warrants. (11) As of December 31, 2023, we held 1,145,875 remaining Forge Global, Inc. public common shares. During the year ended December 31, 2023, our OneValley, Inc. (f/k/a NestGSV, Inc.) Series B preferred warrants with a strike price of $2.31 expired on December 31, 2023. Year Ended December 31, 2022 The value of our investment portfolio will change over time due to changes in the fair value of our underlying investments, as well as changes in the composition of our portfolio resulting from purchases of new and follow-on investments and the sales of existing investments. The fair value, as of December 31, 2022, of all of our portfolio investments, excluding U.S. Treasury bills, was $157,188,578. During the year ended December 31, 2022, we funded investments in an aggregate amount of $23,665,080 (not including capitalized transaction costs or investments in short-term U.S. Treasury investments) as shown in the following table: Portfolio Company Investment Transaction Date Gross Payments Shogun Enterprises, Inc. (d/b/a Hearth) Convertible Note 0.5%, Due 4/18/2024 5/2/2022 $ 500,000 EDGE Markets, Inc. Preferred shares, Series Seed 5/18/2022 500,000 Whoop, Inc. Preferred shares, Series C 6/30/2022 10,000,000 Xgroup Holdings Limited (d/b/a Xpoint) Convertible Note 6%, Due 8/17/2023 8/17/2022 1,000,000 Orchard Technologies, Inc. Simple Agreement for Future Equity (SAFE) 9/2/2022 500,000 Forge Global, Inc. (1) Common shares 9/30/2022 915,076 YouBet Technology, Inc. (d/b/a FanPower) Preferred shares, Series Seed-2 11/17/2022 249,999 Locus Robotics Corp. Preferred shares, Series F 11/30/2022 10,000,005 Total $ 23,665,080 (1) On and effective August 5, 2022, we notified Forge Global, Inc. of our intent to net exercise via cashless settlement our 230,144 common warrants in Forge Global, Inc. into 53,283 shares of Forge Global Inc.’s public common stock, pursuant to the net exercise formula in the warrant agreement. The exercise was effectuated on September 30, 2022. During the year ended December 31, 2022, we capitalized fees of $33,384. During the year ended December 31, 2022, we exited or received proceeds from investments in the amount of $9,063,919, net of transaction costs, and realized a net loss on investments of $5,905,453 (including adjustments to amounts held in escrow receivable) as shown in following table: Portfolio Company Transaction Date Shares Average Net Share Price (1) Net Proceeds Realized Gain/(Loss) (2) NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) (3) Various 48,713 $ 23.50 $ 1,144,774 $ 170,103 Rover Group, Inc. (4) Various 838,381 4.93 4,131,112 1,624,993 Rent the Runway, Inc. (5) Various 260,000 3.56 925,289 (3,025,364 ) Residential Homes for Rent, LLC (d/b/a Second Avenue) (6) Various N/A N/A 1,000,000 — True Global Ventures 4 Plus Pte Ltd (7) 5/31/2022 N/A N/A 874,470 160,965 Palantir Lending Trust SPV I (8) 7/14/2022 N/A N/A 611,930 610,790 Enjoy Technology, Inc. (9) Various 947,297 0.26 246,134 (5,280,642 ) Kahoot! ASA (10) 10/19/2022 61,367 2.12 130,210 (151,861 ) Total $ 9,063,919 $ (5,891,016 ) (1) The average net share price is the net share price realized after deducting all commissions and fees on the sale(s), if applicable. (2) Realized gain/(loss) does not include adjustments to amounts held in escrow receivable. (3) As of December 31, 2022, we held 229,758 remaining NewLake Capital Partners, Inc. public common shares. (4) As of October 11, 2022, we had sold all our public common shares of Rover Group, Inc. (5) As of December 31, 2022, we held 79,191 remaining Rent the Runway, Inc. public common shares. (6) During the year ended December 31, 2022, approximately $1.2 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 the remaining was attributed to interest. (7) On May 31, 2022, we received an $874,470 cash distribution from True Global Ventures 4 Plus Pte Ltd. (8) On July 14, 2022, a final payment was received for the remaining 512,290 Class A common shares of Palantir Technologies, Inc. that comprised the beneficial equity interest in underlying shares. The realized gain from our investment in Palantir Lending Trust SPV I is generated by the proceeds from the sale of shares collateralizing the repaid promissory note to Palantir Lending Trust SPV I and attributable to the Equity Participation in Underlying Collateral. 57 TABLE OF CONTENTS (9) As of August 12, 2022, we had sold all its public common shares of Enjoy Technology, Inc. (10) As of December 31, 2022, we held 38,305 remaining Kahoot! ASA public common shares. During the year ended December 31, 2022, we did not write-off any investments and our OneValley, Inc. (f/k/a NestGSV, Inc.) Series B preferred warrants with a strike price of $2.31 expired on May 29, 2022. Results of Operations Comparison of the Year Ended December 31, 2023, 2022, and 2021 Operating results for the years ended December 31, 2023, 2022, and 2021 are as follows: Year Ended December 31, 2023 2022 2021 Total Investment Income $ 6,596,780 $ 3,456,193 $ 1,470,842 Interest income 5,885,470 2,914,954 897,772 Dividend income 711,310 541,239 573,070 Total Operating Expenses $ 20,036,389 $ 18,164,201 $ 11,401,661 Compensation expense 9,482,867 7,566,452 6,162,716 Directors’ fees 645,548 675,716 752,442 Professional fees 2,602,894 3,395,260 2,665,689 Interest expense 4,858,049 4,845,549 693,526 Income tax expense 624,049 82,238 9,347 Other expenses 1,822,982 1,598,986 1,117,941 Net Investment Loss $ (13,439,609 ) $ (14,708,008 ) $ (9,930,819 ) Net realized gain/(loss) on investments (11,947,504 ) (5,905,453 ) 218,735,504 Net change in unrealized appreciation/(depreciation) of investments 30,453,935 (111,563,592 ) (61,732,964 ) Net Change in Net Assets Resulting from Operations $ 5,066,822 $ (132,177,053 ) $ 147,071,721 58 TABLE OF CONTENTS Investment Income For the year ended December 31, 2023 as compared to the year ended December 31, 2022 Investment income increased to $6,596,780 for the year ended December 31, 2023 from $3,456,193 for the year ended December 31, 2022. The net increase between periods was due to increases in interest income from U.S. Treasury Bills and interest on idle cash, plus an increase in dividend income from SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.). The increase was offset by a decrease in interest income from Architect Capital PayJoy SPV, LLC, Residential Homes for Rent, LLC (d/b/a Second Avenue), and a decrease in dividend income from NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) during the year ended December 31, 2023, relative to the year ended December 31, 2022. For the year ended December 31, 2022 as compared to the year ended December 31, 2021 Investment income increased to $3,456,193 for the year ended December 31, 2022 from $1,470,842 for the year ended December 31, 2021. The net increase between periods was due to increases in interest income from U.S. Treasury Bills, Xgroup Holdings Limited (d/b/a Xpoint), Architect Capital PayJoy SPV, LLC, and Shogun Enterprises, Inc. (d/b/a Hearth) plus an increase in dividend income from NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) and interest on idle cash. The increase was offset by a decrease in interest income from Residential Homes for Rent, LLC (d/b/a Second Avenue) and Neutron Holdings, Inc. (d/b/a/ Lime), plus a cessation in dividend income from Treehouse Real Estate Investment Trust, Inc. during the year ended December 31, 2022, relative to the year ended December 31, 2021. Operating Expenses For the year ended December 31, 2023 as compared to the year ended December 31, 2022 Total operating expenses increased to $20,036,389 for the year ended December 31, 2023 from $18,164,201 for the year ended December 31, 2022. The increase in operating expense was primarily due to an increase in compensation expense associated with an increased headcount and stock-based compensation expense, and income tax expense related to blocker corporations, offset by a decrease in professional fees during the year ended December 31, 2023, relative to the year ended December 31, 2022. For the year ended December 31, 2022 as compared to the year ended December 31, 2021 Total operating expenses increased to $18,164,201 for the year ended December 31, 2022 from $11,401,661 for the year ended December 31, 2021. The increase in operating expense was primarily due to an increase in interest expense, compensation expense, and professional fees during the year ended December 31, 2022, relative to the year ended December 31, 2021. Net Investment Loss For the year ended December 31, 2023 as compared to the year ended December 31, 2022 For the year ended December 31, 2023, we recognized a net investment loss of $13,439,609, compared to a net investment loss of $14,708,008 for the year ended December 31, 2022. The change between periods resulted from an increase in total investment income, offset by an increase in operating expenses during the year ended December 31, 2023, relative to the year ended December 31, 2022. For the year ended December 31, 2022 as compared to the year ended December 31, 2021 For the year ended December 31, 2022, we recognized a net investment loss of $14,708,008, compared to a net investment loss of $9,930,819 for the year ended December 31, 2021. The change between periods resulted from the increase in operating expenses offset by an increase in total investment income between periods during the year ended December 31, 2022, relative to the year ended December 31, 2021. Net Realized Loss on Investments For the year ended December 31, 2023 as compared to the year ended December 31, 2022 For the year ended December 31, 2023, we recognized a net realized loss on our investments of $11,947,504, compared to a net realized loss of $5,905,453 for the year ended December 31, 2022. The components of our net realized losses on portfolio investments for the year ended December 31, 2023 and 2022, excluding short-term U.S. Treasury bills and fluctuations in escrow receivables estimates, are reflected in the tables above, under “—Portfolio and Investment Activity.” For the year ended December 31, 2022 as compared to the year ended December 31, 2021 For the year ended December 31, 2022, we recognized a net realized loss on our investments of $5,905,453, compared to a net realized gain of $218,735,504 for the year ended December 31, 2021. The components of our net realized gains and losses on portfolio investments for the year ended December 31, 2022 and 2021, excluding U.S. Treasury investments and fluctuations in escrow receivables estimates, are reflected in the tables above, under “—Portfolio and Investment Activity.” 59 TABLE OF CONTENTS Net Change in Unrealized Appreciation/(Depreciation) of Investments For the year ended December 31, 2023, we had a net change in unrealized appreciation/(depreciation) of $30,453,935. For the year ended December 31, 2022, we had a net change in unrealized appreciation/(depreciation) of $(111,563,592). For the year ended December 31, 2021, we had a net change in unrealized appreciation/depreciation of $(61,732,964). The following tables summarize, by portfolio company, the significant changes in unrealized appreciation/(depreciation) of our investment portfolio for the year ended December 31, 2023, 2022, and 2021. Portfolio Company Net Change in Unrealized Appreciation /(Depreciation) For the Year Ended December 31, 2023 Ozy Media, Inc. (1) $ 10,945,024 PSQ Holdings, Inc. (d/b/a PublicSquare) (1) 7,925,790 Nextdoor Holdings, Inc. (1) 5,875,694 Learneo, Inc. (f/k/a Course Hero, Inc.) 5,441,177 Neutron Holdings, Inc. (d/b/a/ Lime) 3,991,353 Whoop, Inc. 3,528,846 Shogun Enterprises, Inc. (d/b/a Hearth) 3,240,026 StormWind, LLC 2,585,041 ServiceTitan, Inc. 1,952,742 Varo Money, Inc. 1,029,807 FourKites, Inc. (1,604,213 ) Trax, Ltd. (2,927,814 ) Aspiration Partners, Inc. (6,541,511 ) Orchard Technologies, Inc. (7,649,609 ) Other (2) 2,661,582 Total $ 30,453,935 (1) The change in unrealized appreciation/(depreciation) reflected for these investments resulted from the full or partial exit of the investment, which resulted in the reversal of previously accrued unrealized appreciation/(depreciation), as applicable. (2) “Other” represents investments for which individual changes in unrealized appreciation/(depreciation) was less than $1.0 million for the year ended December 31, 2023. 60 TABLE OF CONTENTS Portfolio Company Net Change in Unrealized Appreciation/ (Depreciation) For the Year Ended December 31, 2022 Portfolio Company Net Change in Unrealized Appreciation/ (Depreciation) For the Year Ended December 31, 2021 True Global Ventures 4 Plus Pte Ltd (1) $ 3,106,863 Course Hero, Inc. $ 42,752,699 Rent the Runway (1) 1,773,329 Forge Global, Inc. 10,976,202 StormWind, LLC (1,879,887 ) Aspiration Partners, Inc. 7,597,596 NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) (1) (3,331,136 ) Rover Group, Inc. 6,290,626 Blink Health, Inc. (3,365,627 ) StormWind, LLC 3,872,381 Whoop, Inc. (3,927,419 ) CUX, Inc. (d/b/a CorpU) (1) 3,654,203 Neutron Holdings, Inc. (d/b/a/ Lime) (3,991,353 ) NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) (1) 1,905,116 Shogun Enterprises, Inc. (d/b/a Hearth) (4,225,397 ) Varo Money, Inc. (1,463,873 ) Aspiration Partners, Inc. (4,514,232 ) Palantir Lending Trust SPV I (1,620,240 ) Rover Group, Inc. (1) (5,259,385 ) Enjoy Technology, Inc. (2,514,243 ) Varo Money, Inc. (7,254,893 ) Rent the Runway, Inc. (2,581,146 ) Trax Ltd. (7,442,485 ) Ozy Media, Inc. (10,098,381 ) Skillsoft Corp. (7,707,467 ) Coursera, Inc. (1) (35,822,601 ) Nextdoor Holdings, Inc. (8,726,545 ) Palantir Technologies, Inc. (1) (81,760,272 ) Forge Global, Inc. (17,594,073 ) Other (2) (2,921,031 ) Learneo, Inc. (f/k/a Course Hero, Inc.) (37,290,369 ) Other (2) 66,484 Total $ (111,563,592 ) Total $ (61,732,964 ) (1) The change in unrealized appreciation/(depreciation) reflected for these investments resulted from the full or partial exit of the investment, which resulted in the reversal of previously accrued unrealized appreciation/(depreciation), as applicable. (2) “Other” represents investments (including U.S. Treasury bills) for which individual change in unrealized appreciation/(depreciation) was less than $1.0 million for the year ended December 31, 2022 and 2021. Recent Developments Portfolio Activity Please refer to “Note 12—Subsequent Events” to our Consolidated Financial Statements as of December 31, 2023 for details regarding activity in our investment portfolio from January 1, 2024 through March 13, 2024. We are frequently in negotiations with various private companies with respect to investments in such companies. Investments in private companies are generally subject to satisfaction of applicable closing conditions. In the case of secondary market transactions, such closing conditions may include approval of the issuer, waiver or failure to exercise rights of first refusal by the issuer and/or its stockholders and termination rights by the seller or us. Equity investments made through the secondary market may involve making deposits in escrow accounts until the applicable closing conditions are satisfied, at which time the escrow accounts will close and such equity investments will be effectuated. Modified Dutch Auction Tender Offer On February 14, 2024, our Board of Directors authorized a modified Dutch Auction tender offer (the “Tender Offer”) to purchase up to 2,000,000 shares of our common stock at a price per share of not less than $4.00 and not greater than $5.00 in $0.10 increments, using available cash. The Tender Offer commenced on February 20, 2024 and will expire at 5:00 P.M. Eastern Time on April 1, 2024, unless extended. If the Tender Offer is fully subscribed, we will purchase 2,000,000 shares, or approximately 7.9%, of our outstanding shares of its common stock. Any shares tendered may be withdrawn prior to expiration of the Tender Offer. Based on the number of shares tendered and the prices specified by the tendering stockholders, we will determine the lowest per-share price that will enable us to acquire up to 2,000,000 shares of our common stock. All shares accepted in the Tender Offer will be purchase at the same price even if tendered at a lower price. Liquidity and Capital Resources Our liquidity and capital resources are generated primarily from the sales of our investments and the net proceeds from public offerings of our equity and debt securities, including pursuant to our continuous at-the-market offering of shares of our common stock as discussed below under “Equity Issuances and Debt Capital Activities — At-the-Market Offering”. In addition, on December 17, 2021, we issued $75.0 million aggregate principal amount of 6.00% Notes due 2026, all of which remain outstanding. For additional information, see below and “Note 10—Debt Capital Activities” to our Consolidated Financial Statements as of December 31, 2023. Our primary uses of cash are to make investments, pay our operating expenses, and make distributions to our stockholders. For the year ended December 31, 2023 our operating expenses were $20,036,389. For the years ended December 31, 2022 and 2021, our operating expenses were $18,164,201 and $11,401,661, respectively. 61 TABLE OF CONTENTS Cash Reserves and Liquid Securities December 31, 2023 December 31, 2022 December 31, 2021 Cash $ 28,178,352 $ 40,117,598 $ 198,437,078 Cash Equivalents: U.S. Treasury bills (1) 63,810,855 85,056,817 — Securities of publicly traded portfolio companies: Unrestricted securities (2) 6,970,612 13,298,992 16,970,411 Subject to other sales restrictions (3) 8,542,386 24,493 27,602,814 Securities of publicly traded portfolio companies 15,512,998 13,323,485 44,573,225 Total Cash Reserves and Liquid Securities $ 107,502,205 $ 138,497,900 $ 243,010,303 (1) Consists of short-term U.S. Treasury bills. (2) “Unrestricted securities” represents common stock and warrants of our publicly traded portfolio companies that are not subject to any restrictions upon sale. We may incur losses. (3) Securities of publicly traded portfolio companies “subject to other sales restrictions” represents common stock of our publicly traded portfolio companies that are subject to certain lock-up restrictions. During the year ended December 31, 2023, cash decreased to $28,178,352 from $40,117,598 at the beginning of the year. The decrease was primarily driven by the purchase of new and follow-on investments, our operating expenses, interest payments on the 6.00% Notes due 2026, and the repurchase of our common stock pursuant to a modified “Dutch Auction” tender offer (the “Modified Dutch Auction Tender Offer”) and Share Repurchase Program. The decrease was offset by portfolio investment exits and investment income received. Currently, we believe we have ample liquidity to support our near-term capital requirements. Consistent with past and current practices, we will continue to evaluate our overall liquidity position and take proactive steps to maintain the appropriate liquidity position based upon the current circumstances. Contractual Obligations A summary of our significant contractual payment obligations as of December 31, 2023 is as follows: Payments Due By Period (in millions) Total Less than 1 year 1–3 years 3–5 years More than 5 years 6.00% Notes due 2026 (1) $ 75.0 $ — $ 75.0 $ — Operating lease liability 0.1 0.1 — — — Total $ 75.1 $ 0.1 $ 75.0 $ — $ — (1) Reflects the principal balance payable to investors for the 6.00% Notes due 2026 as of December 31, 2023. Refer to “Note 10—Debt Capital Activities” in our Consolidated Financial Statements as of December 31, 2023 for more information. Share Repurchase Program During the year ended December 31, 2023, we repurchased 186,493 shares of our common stock under the Share Repurchase Program. During the year ended December 31, 2022, we repurchased 1,008,676 shares of our common stock under the Share Repurchase Program. As of December 31, 2023, the dollar value of shares that remained available to be purchased under the Share Repurchase Program was approximately $20.7 million. On August 7, 2023, our Board of Directors authorized an extension of, and an 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, 2024 or (ii) the repurchase of $60.0 million in aggregate amount of our 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 Exchange Act and the rules promulgated thereunder. For more information on the Share Repurchase Program, see “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuances of Equity Securities -- Issuer Purchases of Equity Securities” and “Note 5—Common Stock” to our Consolidated Financial Statements as of December 31, 2023. 62 TABLE OF CONTENTS Modified Dutch Auction Tender Offer On March 17, 2023, we commenced a Modified Dutch Auction Tender Offer to purchase up to 3,000,000 shares of our common stock from our stockholders, which expired on April 17, 2023. In accordance with the terms of the Modified Dutch Auction Tender Offer, we selected the lowest price per share of not less than $3.00 per share and not greater than $4.50 per share. Pursuant to the Modified Dutch Auction Tender Offer, we repurchased 3,000,000 shares, representing 10.6% of our outstanding shares, on or about April 21, 2023 at a price of $4.50 per share. We used available cash to fund the purchase of our shares of common stock in the Modified Dutch Auction Tender Offer and to pay for all related fees and expenses. Off-Balance Sheet Arrangements As of December 31, 2023, we had no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices. However, we may employ hedging and other risk management techniques in the future. Equity Issuances and Debt Capital Activities At-the-Market Offering On July 29, 2020, we entered into an At-the-Market Sales Agreement, dated July 29, 2020 (as amended, the “Sales Agreement”), with BTIG, LLC, JMP Securities LLC, and Ladenburg Thalmann & Co., Inc. (collectively, the “Agents”). Under the Initial Sales Agreement, we may, but have no obligation to, issue and sell up to $150.0 million in aggregate amount of shares of our common stock (the “Shares”) from time to time through the Agents or to them as principal for their own account (the “ATM Program”). We intend to use the net proceeds from the ATM Program to make investments in portfolio companies in accordance with our investment objective and strategy and for general corporate purposes. During the year ended December 31, 2023, we did not issue or sell Shares under the ATM program. As of December 31, 2023, up to approximately $98.8 million in aggregate amount of the Shares remain available for sale under the ATM Program. During the year ended December 31, 2022, we issued and sold 17,807 Shares under the ATM Program at a weighted-average price of $13.01 per Share, for gross proceeds of $231,677 and net proceeds of $229,896, after deducting commissions to the Agents on Shares sold. As of December 31, 2022, up to approximately $98.8 million in aggregate amount of the Shares remain available for sale under the ATM Program. Refer to “Note 5—Common Stock” to our Consolidated Financial Statements as of December 31, 2023 for more information regarding the ATM Program. 6.00% Notes due 2026 On December 17, 2021, we issued $70.0 million aggregate principal amount of 6.00% Notes due 2026, which bear interest at a fixed rate of 6.00% per year, payable quarterly in arrears on March 31, June 30, September 30, and December 30 of each year, commencing on March 30, 2022. On December 21, 2021, we issued an additional $5.0 million aggregate principal amount of 6.00% Notes due 2026. We received approximately $73.0 million in proceeds from the offering, net of underwriting discounts and commissions and other offering expenses. The 6.00% Notes due 2026 have a maturity date of December 30, 2026, unless previously repurchased or redeemed in accordance with their terms. We have the right to redeem the 6.00% Notes due 2026, in whole or in part, at any time or from time to time, on or after December 30, 2024 at a redemption price of 100% of the aggregate principal amount thereof plus accrued and unpaid interest. Refer to “Note 10—Debt Capital Activities” to our Consolidated Financial Statements as of December 31, 2023 for more information regarding the 6.00% Notes due 2026. 63 TABLE OF CONTENTS Distributions The timing and amount of our distributions, if any, will be determined by our Board of Directors and will be declared out of assets legally available for distribution. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Part II, Item 5 of this Form 10-K for a list of our past distributions, including dividends and returns of capital, if any, per share that we have declared since our formation through December 31, 2023. Critical Accounting Estimates and Policies Critical accounting policies and practices are the policies that are both most important to the portrayal of our financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. These include estimates of the fair value of our Level 3 investments and other estimates that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reporting period. It is likely that changes in these estimates will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ materially from such estimates. See “Note 2—Significant Accounting Policies” to our Consolidated Financial Statements as of December 31, 2023 for further detail regarding our critical accounting policies and recently issued or adopted accounting pronouncements. Investment Portfolio Valuation The most significant determination inherent in the preparation of our Consolidated Financial Statements is the valuation of our investment portfolio. We consider this determination to be a critical accounting estimate, given the significant judgments and subjective measurements required. As of December 31, 2023 and 2022, our investment portfolio valued at fair value represented 90.52% and 74.84% of our net assets, respectively. We are required to report our investments at fair value. We follow the provisions of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See “Note 2 – Significant Accounting Policies – Investments at Fair Value” for more information. Due to the inherent uncertainty in the valuation process, the determination of fair value for our investment portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation. In 2022, the SEC adopted Rule 2a-5 under the 1940 Act (“Rule 2a-5”), which establishes a framework for determining fair value in good faith for purposes of the 1940 Act. As adopted, Rule 2a-5 permits boards of directors to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. The SEC also adopted Rule 31a-4 under the 1940 Act (“Rule 31a-4”), which provides the recordkeeping requirements associated with fair value determinations. While our Board of Directors has not elected to designate a valuation designee, we adopted certain revisions to our valuation policies and procedures to comply with the applicable requirements of Rule 2a-5 and Rule 31a-4. 64 TABLE OF CONTENTS While the Board of Directors is ultimately and solely responsible for determining the fair value of our investments, we have engaged independent valuation firms to provide us with valuation assistance with respect to our investments. Our Board of Directors consulted with an independent third-party valuation firm in arriving at its determination of fair value for 100% of our portfolio investments as of December 31, 2023 and 2022, exclusive of new portfolio company investments made during the three months ended December 31, 2023 and 2022, respectively. Revenue Recognition We recognize gains or losses on the sale of investments using the specific identification method. We recognize interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. We recognize dividend income on the ex-dividend date. Investment Transaction Costs and Escrow Deposit 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. We make 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, 2023 and December 31, 2022, we had no escrow deposits. Related-Party Transactions See “Note 3—Related-Party Arrangements” to our Consolidated Financial Statements as of December 31, 2023 for more information.