Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report (the “evaluation date”), we
carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer (the “CEO”)
and Chief Financial Officer (the “CFO”), of
the effectiveness of the design and operation of our disclosure controls and procedures,
as defined in Rule 13a-15(e) under the
Exchange Act. Based on this evaluation, the CEO and CFO concluded our disclosure
controls and procedures, as designed and
implemented, were effective as of the evaluation date (1) in ensuring that information regarding the
Company is accumulated and
communicated to our management, including our CEO and CFO, by our employees,
as appropriate to allow timely decisions regarding
required disclosure and (2) in providing reasonable assurance that information
we must disclose in our periodic reports under the
Exchange Act is recorded, processed, summarized and reported within
the time periods prescribed by the SEC’s rules and forms.
Changes in Internal Controls over Financial Reporting
There were no significant changes in the Company’s internal control over financial
reporting that occurred during the Company’s
most recent fiscal quarter that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over
financial reporting.
Management’s Report of Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rules 13a-15(f) under
the Exchange Act as a process designed by, or under the
supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board
of directors,
management and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and
procedures that:
●
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and
dispositions of the assets of the Company;
●
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are
being made only in accordance with authorizations of management and directors
of the Company; and
●
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements.
As a result,
even systems determined to be effective can provide only reasonable assurance regarding
the preparation and presentation of
financial statements.
Moreover, projections of any evaluation of effectiveness to future periods are subject to the risks that controls
may become inadequate because of changes in conditions or that the degree
of compliance with the policies or procedures may
deteriorate.
106
The Company’s management assessed the effectiveness of the Company’s internal control over financial
reporting as of
December 31, 2021.
In making this assessment, the Company’s management used criteria
set forth in
Internal Control—Integrated
Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on management’s assessment, the Company’s management believes that, as of December 31, 2021, the
Company’s
internal control over financial reporting was effective based on those criteria. The Company’s independent registered
public accounting
firm, BDO USA, LLP,
has issued an attestation report on the Company’s internal control over
financial reporting, which is included
herein.
107
Report of Independent Registered Public
Accounting Firm
Stockholders and Board of Directors
Orchid Island Capital, Inc.
Vero Beach, Florida
Opinion on Internal Control over Financial
Reporting
We
have
audited Orchid
Island
Capital, Inc.’s
(the “Company’s”)
internal control
over
financial
reporting
as
of
December 31, 2021, based on criteria established in
Internal Control – Integrated Framework (2013)
issued by the
Committee
of
Sponsoring Organizations
of
the
Treadway
Commission (the
“COSO
criteria”).
In
our opinion,
the
Company maintained, in
all material respects,
effective internal control over
financial reporting as
of December
31, 2021 based on the COSO criteria
.
We also have audited,
in accordance
with the standards
of the Public
Company Accounting
Oversight Board (United
States) (“PCAOB”), the balance sheets of the Company
as of December 31, 2021 and 2020, the related statements
of operations, stockholders’ equity,
and cash flows for each of the three years
in the period ended December 31,
2021, and the related notes and our report
dated February 25, 2022, expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s
management is responsible for maintaining effective
internal control over financial reporting and
for its assessment
of the effectiveness
of internal control over
financial reporting, included in
the accompanying
“Item 9A, Management’s
Report on
Internal Control over Financial
Reporting”. Our responsibility
is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with
the PCAOB
and are
required to be
independent with respect
to the
Company in
accordance
with U.S.
federal
securities laws
and the
applicable
rules and
regulations
of the
Securities
and Exchange
Commission
and the PCAOB.
We conducted our
audit of
internal control
over financial
reporting in
accordance with
the standards
of the PCAOB.
Those standards
require that
we plan
and perform
the audit
to obtain
reasonable assurance
about whether
effective
internal control over financial
reporting was maintained in
all material respects. Our
audit included obtaining an
understanding of internal control over financial
reporting, assessing the risk that
a material weakness exists, and
testing and evaluating
the design and
operating effectiveness of
internal control based
on the assessed
risk. Our
audit also included
performing such
other procedures
as we considered
necessary in the
circumstances. We believe
that our audit provides a reasonable basis
for our opinion.
Definition and Limitations of Internal
Control over Financial Reporting
A
company’s
internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding the reliability of financial
reporting and the preparation of financial
statements for external purposes in
accordance with
generally accepted accounting
principles. A
company’s
internal control over
financial reporting
includes those policies
and procedures that
(1) pertain to
the maintenance of
records that, in
reasonable detail,
accurately and fairly reflect
the transactions and
dispositions of the assets
of the company; (2)
provide reasonable
assurance that transactions are
recorded as necessary
to permit preparation of
financial statements in accordance
with generally accepted
accounting principles, and
that receipts and expenditures
of the company are
being made
only in accordance with authorizations of
management and directors of the company;
and (3) provide reasonable
assurance
regarding
prevention
or
timely
detection
of
unauthorized
acquisition,
use,
or
disposition
of
the
company’s assets that could have a material effect on the financial
statements.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements. Also, projections of
any evaluation of
effectiveness to future periods
are subject to
the risk that
controls
may
become
inadequate because
of
changes
in
conditions, or
that
the
degree
of
compliance with
the
policies or procedures may deteriorate.
108
/s/ BDO USA, LLP
Certified Public Accountants
West Palm Beach, Florida
February 25, 2022
109
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURE
REGARDING
FOREIGN
JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
110
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 and not otherwise set forth below is incorporated herein by reference to the
Company's definitive Proxy Statement relating to the Company’s 2022 Annual Meeting of Stockholders (the “Proxy
Statement”), which the Company expects to file with the SEC, pursuant to Regulation 14A, not later than 120 days after
December 31, 2021.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by reference to the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 is incorporated herein by reference to the Proxy Statement and to Part II, Item
5 of this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 is incorporated herein by reference to the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT
FEES AND SERVICES
The information required by this Item 14 is incorporated herein by reference to the Proxy Statement.
111
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
a.
Financial Statements. The financial statements of the Company, together with the report of Independent Registered Public
Accounting Firm thereon, are set forth in Part II-Item 8 of this Form 10-K
and are incorporated herein by reference.
The following
information
is filed
as part of
this Form
10-K:
Page
Report of
Independent
Registered
Public Accounting
Firm
80
Balance Sheets
82
Statements
of Operations
83
Statements
of Stockholders’
Equity
84
Statements
of Cash Flows
85
Notes to
Financial
Statements
86
b.
Financial Statement Schedules.
Not applicable.
c.
Exhibits.
Exhibit No.
Description
3.1
Articles of Amendment and Restatement of Orchid Island Capital, Inc. (filed as Exhibit 3.1
to the Company’s Registration Statement on Amendment No. 1 to Form S-11 (File No.333-
184538) filed on November 28, 2012 and incorporated herein by reference)
3.2
Certificate of Correction of Orchid Island Capital, Inc. (filed as Exhibit 3.2 to the Company’s
Annual Report on Form 10-K filed on February 22, 2019 and incorporated herein by
reference)
3.3
Amended and Restated Bylaws of Orchid Island Capital, Inc. (filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed on March 19, 2019)
4.1
Specimen Certificate of common stock of Orchid Island Capital, Inc. (filed as Exhibit 4.1 to
the Company’s Registration Statement on Amendment No. 1 to Form S-11 (File No.333-
184538) filed on November 28, 2012 and incorporated herein by reference)
4.2
Description of Securities (filed as Exhibit 4.2 to the Company’s Annual Report on Form 10-
K filed on February 21, 2020 and incorporated herein by reference)
10.1
Management Agreement between Orchid Island Capital, Inc. and Bimini Advisors, LLC,
dated as of February 20, 2013 (filed as Exhibit 10.2 to the Company's Current Report on
Form 8 K filed on April 3, 2014 and incorporated herein by reference)†
112
10.2
First Amendment to Management Agreement, effective as of April 1, 2014 (filed as Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on April 3, 2014 and incorporated
herein by reference)†
10.3
Second Amendment to Management Agreement, effective as of June 30, 2014 (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 3, 2014 and
incorporated herein by reference)
10.4
Third Amendment to Management Agreement, effective as of November 17, 2021 (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 17, 2021
and incorporated herein by reference)†
10.5
Form of Investment Allocation Agreement by and among Orchid Island Capital, Inc., Bimini
Advisors, LLC and Bimini Capital Management, Inc. (filed as Exhibit 10.2 to the Company’s
Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on
November 28, 2012 and incorporated herein by reference)†
10.6
2012 Equity Incentive Plan (filed as Exhibit 10.3 to the Company’s Registration Statement
on Amendment No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and
incorporated herein by reference)†
10.7
2021 Equity Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on June 15, 2021 and incorporated herein by reference)†
10.8
Form of Indemnification Agreement by and between Orchid Island Capital, Inc. and
Indemnitee (filed as Exhibit 10.4 to the Company’s Registration Statement on Amendment
No. 1 to Form S-11 (File No.333-184538) filed on November 28, 2012 and incorporated
herein by reference)†
10.9
Form of Master Repurchase Agreement (filed as Exhibit 10.5 to the Company’s
Registration Statement on Amendment No. 1 to Form S-11 (File No.333-184538) filed on
November 28, 2012 and incorporated herein by reference)
10.10
Performance Unit Award Agreement by Orchid Island Capital, Inc. to Robert E. Cauley
dated January 21, 2015 (filed as Exhibit 99.2 to Form 8-K filed on January 23, 2015 and
incorporated herein by reference)†
10.11
Performance Unit Award Agreement by Orchid Island Capital, Inc. to George H. Haas, IV
dated January 21, 2015 (filed as Exhibit 99.4 to Form 8-K filed on January 23, 2015 and
incorporated herein by reference)†
10.12
2015 Long Term Incentive Compensation Plan (filed as Exhibit 99.1 to Form 8-K filed on
March 25, 2015 and incorporated herein by reference)†
10.13
2016 Long Term Incentive Compensation Plan (filed as Exhibit 10.1 to Form 10-Q filed on
April 28, 2016 and incorporated herein by reference)†
10.14
2017 Long Term Incentive Compensation Plan (filed as Exhibit 10.2 to Form 10-Q filed on
April 28, 2017 and incorporated herein by reference)†
10.15
2018 Long Term Incentive Compensation Plan (filed as Exhibit 10.5 to Form 10-Q filed on
April 27, 2018 and incorporated herein by reference)†
10.16
2019 Long Term Incentive Compensation Plan (filed as Exhibit 10.1 to Form 10-Q filed on
April 26, 2019 and incorporated herein by reference)†
10.17
2020 Long Term Incentive Compensation Plan (filed as Exhibit 10.1 to Form 10-Q filed on
May 1, 2020 and incorporated herein by reference)†
10.18
2021 Long Term Incentive Compensation Plan (filed as Exhibit 10.1 to Form 10-Q filed on
April 30, 2021 and incorporated herein by reference)†
10.19
Form of Deferred Stock Unit Grant Notice and Agreement under the 2021 Equity Incentive
Plan † *
10.20
Form of Director Cash Compensation Deferral Election Form † *
113
21.1
Subsidiaries of the Company (filed as Exhibit 21.1 to the Company’s Annual Report on
Form 10-K filed on February 26, 2021 and incorporated herein by reference)
23.1
Consent of BDO USA, LLP*
31.1
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of George H. Haas, IV, Chief Financial Officer of the Registrant, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Robert E. Cauley, Chief Executive Officer and President of the Registrant,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.**
32.2
Certification of George H. Haas, IV, Chief Financial Officer of the Registrant, pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.**
Exhibit 101.INS XBRL
Instance Document ***
Exhibit 101.SCH
XBRL
Taxonomy Extension Schema Document ***
Exhibit 101.CAL XBRL
Taxonomy Extension Calculation Linkbase Document***
Exhibit 101.DEF XBRL
Additional Taxonomy Extension Definition Linkbase Document Created***
Exhibit 101.LAB XBRL
Taxonomy Extension Label Linkbase Document ***
Exhibit 101.PRE XBRL
Taxonomy Extension Presentation Linkbase Document ***
Exhibit 104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Filed herewith.
**
Furnished herewith.
***
Submitted electronically herewith.
†
Management contract or compensatory plan.
ITEM 16. FORM 10-K SUMMARY
The Company has elected not to provide summary information.
114
Signatures
Pursuant to the requirements
of Section 13 or 15(d)
of the Securities Exchange
Act of 1934, as amended,
the registrant has duly
caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Orchid Island Capital, Inc
.
Registrant
Date:
February 25, 2022
By:
/s/ Robert E. Cauley
Robert E. Cauley
Chief Executive Officer, President and Chairman of the Board
Date:
February 25, 2022
By:
/s/ George H. Haas, IV
George H. Haas,
IV
Secretary, Chief Financial Officer, Chief Investment Officer and
Director (Principal Financial and Accounting Officer)
Pursuant to
the requirements
of the
Securities Exchange Act
of 1934,
this report
has been
signed below
by the
following persons
on
behalf of the Company and in the capacities and on the dates indicated.
/s/ Robert E. Cauley
Chairman of the Board, Director, Chief
February 25, 2022
Robert E. Cauley
Executive Officer, and President
(Principal Executive Officer)
/s/ George H. Haas, IV
Chief Financial Officer, Chief
February 25, 2022
George H. Haas, IV
Investment Officer, and Director
(Principal Financial and Accounting Officer)
/s/ W Coleman Bitting
Independent Director
February 25, 2022
W Coleman Bitting
/s/ Frank P.
Filipps
Independent Director
February 25, 2022
Frank P.
Filipps
/s/ Paula Morabito
Independent Director
February 25, 2022
Paula Morabito
/s/ Ava L. Parker
Independent Director
February 25, 2022
Ava L. Parker