What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-12 · 155 added, 219 removed, 376 unchanged (50% of the section changed)

37 unchanged sentences

We have elected to be regulated as a BDC under the 1940 Act.

In addition, we have elected to be treated, currently qualify, and intend to continue to qualify as a RIC under Subchapter M of the Code.

In addition, we have elected to be treated, have qualified, and intend to continue to qualify as a RIC under Subchapter M of the Code.

If we fail to qualify as a RIC for any taxable year, we will be subject to corporate-level U.S.

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We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

(together with the rules and regulations promulgated thereunder, the “Exchange Act”), (which would occur if the market value of our common stock held by non-affiliates exceeds $700.0 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

We will remain an emerging growth company until the last day of our fiscal year following the fifth anniversary of an initial public offering (“IPO”), if any, or until the earliest of (i) the last day of the first fiscal year in which we have total annual gross revenue of $1,070,000,000 or more, (ii) December 31 of the fiscal year in which we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”), (which would occur if the market value of our common stock held by non-affiliates exceeds $700.0 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

For so long as we remain an emerging growth company under the JOBS Act, we will be subject to reduced public company reporting requirements.

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The final closing of the Initial Private Offering occurred on December 1, 2017.

As of September 30, 2020, in connection with the Initial Private Offering, we had total capital commitments of $275,000,000 and had issued 18,241,157 shares of our common stock to stockholders for a total purchase price of $275,000,000.

As of September 30, 2020, we had completed multiple closings under the Company’s second private offering (the “Second Private Offering”) and had accepted capital commitments of $174,673,500.

As of September 30, 2020, in connection with the Second Private Offering, we have issued an aggregate of 5,018,918 shares for a total purchase price of $75,283,766.

In March 2020, we issued 2,103 shares as an additional direct investment of $31,542 by Runway Growth Holdings LLC, an affiliate of RGC.

On August 10, 2020, RGC, the Company, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates were granted an order (the “Order”) that permits the Company greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if the Board determines that it would be advantageous for the Company to co-invest with other accounts sponsored or managed by RGC or its affiliates in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.

The Company believes that the ability to co-invest with similar investment structures and accounts sponsored or managed by RGC or its affiliates will provide additional investment opportunities and the ability to achieve greater diversification.

Under the terms of the Order, a majority of the Company’s independent directors are required to make certain determinations in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to the Company and the Company’s shareholders and do not involve overreaching of the Company or the Company’s shareholders on the part of any person concerned and (2) the transaction is consistent with the interests of the Company’s shareholders and is consistent with the Company’s investment strategies and policies.

As of March 31, 2021, in connection with the Initial Private Offering, we had total capital commitments of $275,000,000 and had issued 18,241,157 shares of our common stock to stockholders for a total purchase price of $275,000,000.

As of March 31, 2021, we had completed multiple closings under the Company’s second private offering (the “Second Private Offering”) and had accepted capital commitments of $174,673,500.

As of March 31, 2021, in connection with the Second Private Offering, we have issued an aggregate of 8,352,251 shares for a total purchase price of $125,283,766.

As of March 31, 2021, $49,389,734 of capital commitments remain undrawn.

As of March 31, 2021, we issued 22,564 shares as an additional direct investment of $338,453 by Runway Growth Holdings LLC, an affiliate of RGC.

On August 10, 2020, we, RGC, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates were granted an order (the “Order”) that permits us greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if the Board determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by RGC or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.

We believe that the ability to co-invest with similar investment structures and accounts sponsored or managed by RGC or its affiliates will provide additional investment opportunities and the ability to achieve greater diversification.

Under the terms of the Order, a majority of our independent directors are required to make certain determinations in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment strategies and policies.

Portfolio Composition and Investment Activity

Portfolio Composition

At September 30, 2020, we had investments in 28 portfolio companies, representing 21 companies where we held loan and warrant investments, six companies where we held warrant investments only, one company where we held bonds, and we held one U.S.

At March 31, 2021, we had investments in 33 portfolio companies, representing 19 companies in which we held loan and warrant investments, three companies in which we held loan investments and common or preferred stocks, seven companies in which we held warrant investments only, one company in which we held bonds, three companies in which we held shares of common or preferred stocks, and we held one U.S.

Treasury Bill.

At December 31, 2019, we had investments in 25 portfolio companies, representing 21 companies where we held loan and warrant investments, four companies where we held warrant interest only, and held

Treasury Bills.

The following table shows the fair value of our investments and U.S.

Treasury Bills sold short, by asset class, as of September 30, 2020 and December 31, 2019:

September 30, 2020 (Unaudited)

At December 31, 2020, we had investments in 31 portfolio companies, representing 22 companies in which we held loan and warrant investments, eight companies in which we held warrant interests only, one company

in which we held bonds, and we held one U.S.

Treasury Bill.

The following table shows the fair value of our investments, by asset class, as of March 31, 2021 and December 31, 2020:

March 31, 2021 (Unaudited)

December 31, 2020

Portfolio Investments

Common Stocks

Corporate Bonds

Senior Secured Term Loans

Preferred Stock

Preferred Stocks

Total Portfolio Investments

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Total Investments

Treasury Bill Sold Short

Investment Activity

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 as well as repayments and sales of existing investments.

During the nine months ended September 30, 2020, the Company funded $150.8 million in eight new portfolio companies and $14.9 million in six existing portfolio companies.

The Company also received $76.1 million in loan repayments from eight portfolio companies and $2.9 million in proceeds from the termination of warrants.

During the three months ended March 31, 2021, the Company funded $34.7 million in two new portfolio companies and $19.3 million in five existing portfolio companies.

The Company also received $16.6 million in loan repayments from four portfolio companies.

During the three months ended March 31, 2020, the Company funded $69.7 million in five new portfolio companies and $13.5 million in four existing portfolio companies.

The Company also received $56.6 million in loan repayments from four portfolio companies and $2.7 million in proceeds from the termination of warrants.

Portfolio Reconciliation

The following is a reconciliation of our investment portfolio, including U.S.

Treasury Bills, for the nine months ended September 30, 2020 and 2019:

Nine Months Ended

September 30, 2020

September 30, 2019

Treasury Bills, for the three months ended March 31, 2021 and 2020:

Three Months Ended

March 31, 2021

March 31, 2020

Beginning Investment Portfolio

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Treasury Bills

(194,985,264)

(235,966,606)

Realized Gain (Loss) on Investments

Net Change in Unrealized Appreciation (Depreciation) on Investments

Realized (Loss) on Investments

Net Change in Unrealized (Depreciation) on Investments

Ending Investment Portfolio

(1) Includes payment-in-kind (“PIK”) interest.

(2) Excludes $25,999,624 in U.S.

Treasury Bills sold short.

(1) Includes PIK interest.

Asset Quality

In addition to various risk management and monitoring tools, RGC uses an investment rating system to characterize and monitor the quality of our debt investment portfolio.

Equity securities and Treasury Bills are not rated.

Equity securities and Treasury Bills are not graded.

This debt investment rating system uses a five-level numeric scale.

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May experience partial and/or full loss.

The following table shows the investment rankings of our debt investments at fair value as of September 30, 2020 and December 31, 2019:

As of September 30, 2020 (Unaudited)

The following table shows the investment ratings of our debt investments at fair value as of March 31, 2021 and December 31, 2020:

As of March 31, 2021

As of December 31, 2020

The global COVID-19 pandemic, to date, has had limited impact on the investment ratings of our debt investments, taken as a whole.

However, the ongoing impact of the COVID-19 pandemic is uncertain and we can make no assurances that the pandemic will not have a negative impact on our investment portfolio in the future.

However, the ongoing impact of the global COVID-19 pandemic is uncertain and we can make no assurances that the pandemic will not have a negative impact on our investment portfolio in the future.

Loans and Debt Securities on Non-Accrual Status

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible.

As of September 30, 2020, we had seven loans to Mojix, Inc.

representing an aggregate principal funded of $11,400,000 at a fair market value of $9,158,727, on non-accrual status, which represents 2.29% of our total assets at fair value.

As of December 31, 2019, we had two loans to Aginity, Inc.

representing an aggregate principal funded of $9,000,000 at a fair market value of $4,311,589, on non-accrual status , which represents 1.15% of our total assets at fair value .

As of March 31, 2021, we had seven loans to Mojix, Inc.

representing an aggregate principal funded of $11,500,000 at a fair market value of $10,135,424, on non-accrual status, which represents 2.14% of our net assets.

As of December 31, 2020, we had six loans to Mojix, Inc.

representing an aggregate principal funded of $11,000,000 at a fair market value of $8,961,080, on non-accrual status, which represents 1.92% of our net assets .

Results of Operations

An important measure of our financial performance is net increase/(decrease) in net assets resulting from operations, which includes net investment income, net realized gain/(loss) and net unrealized appreciation/(depreciation).

Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating expenses, including interest on borrowed funds.

An important measure of our financial performance is net increase/(decrease) in net assets resulting from operations, which includes net investment income/(loss), net realized gain/(loss) and net unrealized appreciation/(depreciation).

Net investment income/(loss) is the difference between our income from interest, dividends, fees and other investment income and our operating

expenses, including interest on borrowed funds.

Net realized gain/(loss) on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost.

Net unrealized appreciation/(depreciation) on investments is the net change in the fair value of our investment portfolio.

Comparison of the Three Months Ended September 30, 2020 and 2019

Comparison of the Three Months Ended March 31, 2021 and 2020

Three Months Ended

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Investment income

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Administration fees

Facility fees

Credit facility fees

Directors’ fees

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Net investment income

Realized gain (loss) on investments

Net change in unrealized appreciation (depreciation) on investments

Realized (loss) on investments

Net change in unrealized (depreciation) on investments

Net increase in net assets resulting from operations

(1) The basic per share figures noted above are based on weighted averages of 27,271,559 and 19,990,416 shares outstanding for the three months ended September 30, 2020 and 2019, respectively.

(1) The basic per share figures noted above are based on weighted averages of 31,505,254 and 25,887,286 shares outstanding for the three months ended March 31, 2021 and 2020, respectively.

Investment Income

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We generate revenue in the form of interest on the debt securities that we hold and distributions and capital gains on other interests that we acquire in our portfolio companies.

We expect that the debt we invest in will generally have

stated terms of 36 to 60 months.

We expect that the debt we invest in will generally have stated terms of 36 to 60 months.

Interest on debt securities is generally payable quarterly or semiannually, primarily based on a floating rate index, and subject to certain floors determined by market rates at the time the investment is made.

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In addition, we may generate revenue in the form of commitment and other fees in connection with transactions.

Original issue discounts and market discounts or premiums will be capitalized, and we will accrete or amortize such amounts as interest income.

Original issue discounts and market discounts or premiums will be capitalized, and we will accrete or amortize such

amounts as interest income.

We record prepayment premiums on loans and debt securities as interest income.

Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.

Investment income for the three months ended September 30, 2020 was $14,215,723 due primarily to interest income earned on our portfolio investments.

Investment income for the three months ended September 30, 2019 was $11,834,485 due primarily to interest income earned on our portfolio investments.

The increase in interest income for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was a result of our deployment of capital and increased investments in our portfolio.

Investment income for the three months ended March 31, 2021 and 2020 was $16,422,773 and $14,820,857 respectivly, due primarily to interest income earned on our portfolio investments.

The increase in interest income for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was driven by our deployment of capital, increased invested balance, prepayments, and end of term payments, partially offset by falling market interest rates.

The United States Federal Reserve Bank has indicated it will maintain an accommodative monetary policy that is expected to maintain short-term interest rates at historically low levels for an extended period of time.

Consequently, yields on our portfolio, as well as other investment strategies, have declined relative to prior periods.

We expect this trend to continue through 2021.

Operating Expenses

Our primary operating expenses include the payment of fees to RGC under the Amended Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement, professional fees, and other operating costs described below.

Our primary operating expenses include the payment of fees to RGC under the Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement, professional fees, and other operating costs described below.

We bear all other out-of-pocket costs and expenses of our operations and transactions, including those relating to:

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● all other expenses incurred by us, our Administrator or RGC in connection with administering our business, including payments under the Administration Agreement based on our allocable portion of our Administrator’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs.

Operating expenses for the three months ended September 30, 2020 and 2019 were $4,698,047 and $4,329,742, respectively.

Operating expenses increased for the three months ended September 30, 2020 from the three months ended September 30, 2019 primarily due to an increase in assets, which resulted in increased management fees paid to RGC and increased fees paid to our fund administrator.

Operating expenses per share for the three months ended September 30, 2020 and 2019 were $0.17 per share and $0.21 per share, respectively.

Operating expenses for the three months ended March 31, 2021 and 2020 were $4,941,040 and $5,177,270, respectively.

Operating expenses decreased for the three months ended March 31, 2021 from the three months ended March 31, 2020 primarily due to a decrease in incentive fees, partially offset by an increase in management fees.

Operating expenses per share for the three months ended March 31, 2021 and 2020 were $0.16 per share and $0.20 per share, respectively.

Incentive Fees

Incentive fees for the three months ended September 30, 2020 and 2019 were $1,650,930 and $1,669,053, respectively, incurred primarily due to net investment income.

Incentive fees decreased for the three months ended September 30, 2020 from the three months ended September 30, 2019 primarily due to a decrease in net investment income.

$1,126,241 of the incentive fees for the three months ended September 30, 2020 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2020.

$524,551 of the incentive fees for the three months ended September 30, 2020 were deferred and accrued, and included in Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2020.

$1,120,903 of the incentive fees for the three months ended September 30, 2019 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2019.

$548,150 of the incentive fees for the three months ended September 30, 2019 were deferred and accrued, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2019.

Incentive fees for the three months ended March 31, 2021 and 2020 were $975,704 and $2,315,118, respectively, incurred primarily due to net investment income.

Incentive fees decreased for the three months ended March 31, 2021 from the three months ended March 31, 2020 primarily due to an increase in the daily average leverage utilized and lower yielding assets increasing the hurdle base.

$739,231 of the incentive fees for the three months ended March 31, 2021 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of March 31, 2021.

$236,473 of the incentive fees for the three months ended March 31, 2021 were deferred and accrued, and included in Accrued incentive fees on the Statement of Assets and Liabilities as of March 31, 2021.

$1,846,533 of the incentive fees for the three months ended March 31, 2020 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of March 31, 2020.

$468,585 of the incentive fees for the three months ended March 31, 2020 were deferred and accrued, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of March 31, 2020.

Incentive fees related to PIK or deferred interest are accrued and payment is deferred until such interest is collected in cash.

Incentive fees per share for the three months ended September 30, 2020 and September 30, 2019 were $0.06 and $0.08 per share, respectively.

Incentive fees per share for the three months ended March 31, 2021 and March 31, 2020 were $0.03 and $0.09 per share, respectively.

Net Investment Income

Net investment income for the three months ended September 30, 2020 and 2019 was $9,522,580 and $7,504,743, respectively.

Net investment income increased for the three months ended September 30, 2020 from the three months ended September 30, 2019 primarily due to an increase in interest income resulting from an increase in the size of the investment portfolio.

Net investment income per share for the three months ended September 30, 2020 and 2019 was $0.35 per share and $0.38 per share, respectively.

Net Realized Gain on Investment

The net realized gain on investments of $1,142,706 for the three months ended September 30, 2020 was primarily due to the gain on our investment in the common stock of Hercules Capital Inc.

There were $966 in net realized gains on investments for the three months ended September 30, 2019, primarily due to the sale of U.S.

Treasury Bills.

Net Change in Unrealized Appreciation (Depreciation) on Investments

Net change in unrealized appreciation on investments of $243,742 for the three months ended September 30, 2020 was primarily due to increases in the fair value of our senior secured loan to Brilliant Earth LLC and our investments in the warrants of MTBC, Inc.

and Aspen Group, Inc.

This was partially offset by decreases in the fair value of our senior

secured loan to Pivot3, Inc.

and our investment in the preferred stock of MTBC, Inc.

The net change in unrealized depreciation on investments of $2,782,423 for the three months ended September 30, 2019 was primarily due to a decrease in the fair value of our senior secured loan to Aginity, Inc.

Net investment income for the three months ended March 31, 2021 and 2020 was $11,481,733 and $9,643,587, respectively.

Net investment income increased for the three months ended March 31, 2021 from the three months ended March 1, 2020 primarily due to an increase in interest income resulting from an increase in the size of the investment portfolio.

Net investment income per share for the three months ended March 31, 2021 and 2020 was $0.36 per share and $0.37 per share, respectively.

Net Realized (Loss) on Investments

The net realized loss on investments of $199,223 for the three months ended March 31, 2021 was primarily due to the loss on our investment in the warrants for preferred stock of Pivot3 Holdings, Inc.

The net realized loss on investments of $6,717,262 for the three months ended March 31, 2020 was primarily due to the loss on our senior secured loan to Aginity, Inc.

Net Change in Unrealized (Depreciation) on Investments

Net change in unrealized depreciation on investments of $1,911,181 for the three months ended March 31, 2021 was primarily due to decreases in the fair value of our investments in the warrants of Aspen Group, Inc.

and CareCloud, Inc.

This was partially offset by increases in the fair value of our senior secured loans to Mojix, Inc.

and our investment in the preferred stock of CareCloud, Inc.

The net change in unrealized depreciation on investments of $1,179,081 for the three months ended March 31, 2020 was primarily due to decreases in the fair value of our senior secured loans to Circadence Corporation, our preferred stock in MTBC, Inc., and our warrants in RealWear, Inc.

The COVID-19 pandemic and its resultant impact on economic activity and capital market volatility has impacted and may continue to have an impact on the fair market values of our investments.

As of September 30, 2020 numerous variables used in the valuation process reflected the impact of the COVID-19 pandemic, such as market comparables, market volatility, discount rates and credit spreads;

however, the dynamic nature of the COVID-19 pandemic and ability of portfolio companies to assess its impact on future performance may not be fully incorporated into our assumptions.

As a result, the fair market values of our portfolio investments may be negatively impacted after September 30, 2020 by circumstances and events that are not yet known, including the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto.

As of March 31, 2021 numerous variables used in the valuation process reflected the impact of the COVID-19 pandemic, such as market comparables, market volatility, discount rates and credit spreads;

however, the dynamic nature of the COVID-19 pandemic and ability of portfolio companies to assess its impact on future

performance may not be fully incorporated into our assumptions.

As a result, the fair market values of our portfolio investments may be negatively impacted after March 31, 2021 by circumstances and events that are not yet known, including the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto.

Our valuation process carefully considers the impact of the COVID-19 pandemic-related uncertainties in the various inputs utilized in the determination of the fair market value of investments.

Net Increase in Net Assets Resulting from Operations

We had a net increase in net assets resulting from operations of $10,909,028 for the three months ended September 30, 2020, as compared to a net increase in net assets resulting from operations of $4,721,354 for the three months ended September 30, 2019.

The net increase in net assets resulting from operations for the three months ended September 30, 2020 was primarily due to interest and other income earned from portfolio investments and a gain on our investment in the common stock of Hercules Capital, Inc.

The net increase in net assets resulting from operations for the three months ended September 30, 2019 was primarily due to interest and other income earned from portfolio investments, partially offset by increased management and incentive fees, professional fees incurred and the net change in unrealized depreciation related to a senior secured loan in our portfolio, Aginity, Inc.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended

September 30, 2020

September 30, 2019

Investment income

Interest and dividend income

Total investment income

Operating expenses

Management fees

Incentive fees

Interest expense

Professional fees

Overhead allocation expense

Administration fees

Credit facility fees

Directors’ fees

Consulting fees

Insurance expense

General and administrative expenses

Other expenses

Total operating expenses

Net investment income

Realized gain (loss) on investments

Net change in unrealized appreciation (depreciation) on investments

Net increase in net assets resulting from operations

(1) The basic per share figures noted above are based on weighted averages of 26,603,966 and 17,520,157 shares outstanding for the nine months ended September 30, 2020 and 2019, respectively.

Investment Income

Investment income for the nine months ended September 30, 2020 was $40,837,641, due primarily to interest income earned on our portfolio investments.

Investment income for the nine months ended September 30, 2019 was $40,380,803, due primarily to interest income earned on our portfolio investments.

The increase in interest income for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was a result of our deployment of capital and increased size of the investment portfolio.

Operating Expenses

Operating expenses for the nine months ended September 30, 2020 and 2019 were $13,797,632 and $13,432,026, respectively.

Operating expenses increased for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 primarily due to an increase in management fees and partially offset by a decrease in incentive fees.

Operating expenses per share for the nine months ended September 30, 2020 and 2019 were $0.52 per share and $0.77 per share, respectively.

Incentive Fees

Incentive fees for the nine months ended September 30, 2020 and 2019 were $4,871,907 and $6,285,048, respectively, incurred primarily due to net investment income.

Incentive fees decreased for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 primarily due to higher net investment income hurdles.

$3,694,845 of the incentive fees for the nine months ended September 30, 2020 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2020.

$1,221,835 of the incentive fees for the nine months ended September 30, 2020 were deferred and accrued, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2020.

$5,126,159 of the incentive fees for the nine months ended September 30, 2019 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2019.

$1,158,889 of the incentive fees for the nine months ended September 30, 2019 were deferred and accrued, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2019.

Incentive fees related to PIK or deferred interest are accrued and payment is deferred until such interest is collected in cash.

Incentive fees per share for the nine months ended September 30, 2020 and September 30, 2019 were $0.18 and $0.36 per share, respectively.

Net Investment Income

Net investment income for the nine months ended September 30, 2020 and 2019 was $27,040,009 and $26,948,778 respectively.

Net investment income increased for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 primarily due to an increase in interest income, partially offset by a decrease in prepayment fees and end of term payments received during the nine months ended September 30, 2020.

The decrease in early terminations, and accompanying decrease in prepayment fees and associated income, may have been negatively impacted by the COVID-19 pandemic and the associated disruption in the capital markets and merger and acquisition markets.

Net investment income per share for the nine months ended September 30, 2020 and 2019 was $1.02 per share and $1.54 per share, respectively.

Net Realized Gain (Loss) on Investment

The net realized loss on investments of $5,370,703 for the nine months ended September 30, 2020 was primarily due to the loss on our senior secured loan to Aginity, Inc.

The net realized gain on investments of $492,342 for the nine months ended September 30, 2019 was due to the gains on our warrants for preferred stock on Drawbridge, Inc.

and Jibe, Inc.

Net Change in Unrealized Appreciation (Depreciation) on Investments

Net change in unrealized appreciation on investments of $4,561,255 for the nine months ended September 30, 2020 was primarily due to increases in the fair value of our investments in the warrants of MTBC, Inc.

This was partially offset by decreases in the fair value of our senior secured loan to Pivot3, Inc.

and our investment in the preferred stock of MTBC, Inc.

The net change in unrealized depreciation on investments of $8,270,054 for the nine months ended September 30, 2019 was primarily due to a decrease in the fair value of a senior secured loan in our portfolio, Aginity, Inc.

Net Increase in Net Assets Resulting from Operations

We had a net increase in net assets resulting from operations of $26,230,561 for the nine months ended September 30, 2020, as compared to a net increase in net assets resulting from operations of $19,171,066 for the nine months ended September 30, 2019.

The net increase in net assets resulting from operations for the nine months ended September 30, 2020 was primarily due to interest and other income earned from portfolio investments, offset by the net realized loss related to a senior secured loan in our portfolio to Aginity, Inc.

The net increase in net assets resulting from operations for the nine months ended September 30, 2019 was primarily due to interest and other income earned from portfolio investments, prepayment fees, and end of term payments, partially offset by increased management and incentive fees, professional fees incurred and the net change in unrealized depreciation related to a senior secured loan in our portfolio, Aginity, Inc.

We had a net increase in net assets resulting from operations of $9,371,328 for the three months ended March 31, 2021, as compared to a net increase in net assets resulting from operations of $1,747,244 for the three months ended March 31, 2020.

The net increase in net assets resulting from operations for the three months ended March 31, 2021 from the three months ended March 31, 2020 was primarily due to interest income earned from portfolio investments and a decrease in realized losses in our portfolio for the three months ended March 31, 2021.

Financial Condition, Liquidity and Capital Resources

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We expect that we may also generate cash from any financing arrangements we may enter into in the future and any future offerings of our equity or debt securities.

We may fund a portion of our investments through borrowings from banks and issuances of senior securities.

We may fund a portion of our investments through borrowings from banks and issuances of senior securities, which may be secured or unsecured, through registered offerings or private placements.

Our primary use of funds is to make investments in eligible portfolio companies, pay our operating expenses and make distributions to holders of our common stock.

During the nine months ended September 30, 2020, cash and cash equivalents decreased to $1,377,916 from $45,799,672 as of December 31, 2019.

During the three months ended March 31, 2021, cash and cash equivalents decreased to $1,780,788 from $14,886,246 as of December 31, 2020.

This decrease was primarily the result of the purchase of investments in portfolio companies for $53,900,000 and U.S.

Treasury Bills for $179,998,299 and repayments under our Credit Agreement for $110,500,000 and was partially offset by the sales of investments in portfolio companies.

Treasury Bills for $24,999,969 and was partially offset by the sales of investments in portfolio companies, the maturity of U.S.

Treasuary Bills, the issuance of common stock, and net borrowings under the Credit Agreement.

Equity Activity

We have the authority to issue 100,000,000 shares of common stock, $0.01 par value per share.

On October 8, 2015, in connection with our initial capitalization, we issued 1,667 shares of our common stock to R.

David Spreng, our President, Chief Executive Officer and Chairman of our Board of Directors, for an aggregate

purchase price of $25,000.

The remaining shares were issued in connection with the Initial Private Offering, the Second Private Offering, or pursuant to our dividend reinvestment plan, as follows, as of September 30, 2020:

On October 8, 2015, we issued 1,667 shares of our common stock to R.

David Spreng, our President, Chief Executive Officer and Chairman of our Board of Directors, for an aggregate purchase price of $25,000.

The remaining shares were issued in connection with the Initial Private Offering, the Second Private Offering, or pursuant to our dividend reinvestment plan, as follows:

Issuance Date

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August 6, 2020 (1)

October 15, 2020

November 12, 2020 (1)

March 19, 2021 (1)

March 24, 2021

Shares were issued as part of the dividend reinvestment plan.

Contractual Obligations

At September 30, 2020, the Company had $26,085,569 in unfunded loan commitments to provide debt financing to eight portfolio companies.

The Company’s management believes that its available cash balances, availability under the Credit Agreement (as defined below) and/or ability to drawdown capital from investors provides sufficient funds to cover its unfunded commitments as of September 30, 2020.

At March 31, 2021, the Company had $58,085,569 in unfunded loan commitments to provide debt financing to eight portfolio companies.

Payments Due By Period

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Treasury Bill on margin.

The reverse repurchase agreement purchased was subsequently repaid in October 2020.

(See “Note 2 – Summary of Significant Accounting Policies, Offsetting of Amounts Related to Certain Contracts ” to our financial statements in Part I of this Form 10-Q for more information related to netting of our reverse repurchase and repurchase agreements.)

(2) See “Note 10 – Credit Facilities” to our financial statements in Part I of this Form 10-Q for more information.

Credit Facilities

On May 31, 2019, we entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, as borrower, KeyBank National Association, as administrative agent, syndication agent, and a lender, CIBC Bank USA (“CIBC”), as documentation agent and a lender, and U.S.

The reverse repurchase agreement purchased was subsequently repaid in April 2021.

(2) See “Note 10 – Credit Facilities” to our financial statements in Part I, Item 1 of this Form 10-Q for more information.

On May 31, 2019, we entered into a Credit Agreement (the “Credit Agreement”) by and among us, as borrower, KeyBank National Association, as administrative agent, syndication agent, and a lender, CIBC Bank USA (“CIBC”), as documentation agent and a lender, and U.S.

Bank National Association, as paying agent.

The Credit Agreement provides for borrowings up to a maximum aggregate principal amount of $100 million, subject to availability under a borrowing base that is determined by the number and value of eligible loan investments in the collateral, applicable advance rates and concentration limits, and certain cash and cash equivalent holdings of the Company.

The Credit Agreement has an accordion feature that allows the Company to increase the aggregate commitments up to $200 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions.

The Credit Agreement has an accordion feature that allows us to increase the aggregate commitments up to $200 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions.

Current capital markets dislocation and economic uncertainty associated with the COVID-19 pandemic may impact our ability to access the accordion features of the Credit Agreement.

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Interest is payable quarterly in arrears.

The Company also pays unused commitment fees of 0.50% per annum on the unused lender commitments under the Credit Agreement, as well as a minimum earnings fee of 3.00% that will be payable annually in arrears, starting on May 31, 2021, on the average unused commitments below 60% of the aggregate commitments during the preceding 12-month period.

We also pay unused commitment fees of 0.50% per annum on the unused lender commitments under the Credit Agreement, as well as a minimum earnings fee of 3.00% that will be payable annually in arrears, starting on May 31, 2021, on the average unused commitments below 60% of the aggregate commitments during the preceding 12-month period.

The availability period under the Credit Agreement expires on May 31, 2022 and is followed by a two-year amortization period.

The stated maturity date under the Credit Agreement is May 31, 2024.

The Credit Agreement is secured by a perfected first priority security interest in substantially all of the Company’s assets and portfolio investments.

The Credit Agreement is secured by a perfected first priority security interest in substantially all of our assets and portfolio investments.

During the fourth quarter of 2020, we amended the Credit Agreement and others to increase its size to $215 million, increase the accordion feature to $300 million, add additional lenders, modify certain pricing elements and other provisions.

See "Note 10 -Credit Facilities"

to our financial statements in Part I of this Form 10 Q for more information on the Credit Agreement and Credit Facilities.

During the three months ended March 31, 2021, we drew down $43,000,000 on the Credit Agreement and repaid $25,000,000, of which $117,000,000 remains outstanding at March 31, 2021.

At March 31, 2021, interest was accruing at a rate of 3.50%.

During the year ended December 31, 2020, we drew down $200,500,000 on the Credit Agreement and repaid $162,500,000 of which $99,000,000 remained outstanding at December 31, 2020.

At December 31, 2020, interest was accruing at a rate of 3.22%.

See “Note 10 – Credit Facilities” to our financial statements in Part I, Item 1 of this Form 10-Q for more information on the Credit Agreement and Credit Facilities.

On June 22, 2018, as amended on September 24, 2018, we entered into a demand loan agreement (the “Uncommitted Facility”) and a revolving loan agreement (the “Committed Facility” and, together with the Uncommitted Facility, the “Credit Facilities”) with CIBC.

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On May 31, 2019, in conjunction with securing and entering into the new Credit Agreement, we terminated the Credit Facilities.

During the nine months ended September 30, 2020, the Company drew down $87,000,000 on the Credit Agreement and repaid $110,500,000, of which $37,500,000 remains outstanding at September 30, 2020.

At September 30, 2020, interest was accruing at a rate of 3.30%.

During the year ended December 31, 2019, the Company drew down $162,250,000 on the Credit Facilities and repaid $160,750,000 of which $61,000,000 remained outstanding at December 31, 2019.

At December 31, 2019, interest was accruing at a rate of 5.10%.

See “Note 10 – Credit Facilities” to our financial statements in Part I, Item 1 of this Form 10-Q for more information on the Credit Facilities.

Off-Balance Sheet Arrangements

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Any distribution to our stockholders will be declared out of assets legally available for distribution.

We anticipate that distributions will be paid from income

primarily generated by interest and dividend income earned on investments made by us.

We anticipate that distributions will be paid from income primarily generated by interest and dividend income earned on investments made by us.

We maintain an “opt out” dividend reinvestment plan for our common stockholders.

As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions.

During the nine months ended September 30, 2020, we declared dividends in the amount of $29,264,163, of which $5,405,487, was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment plan.

During the three months ended March 31, 2021, we declared dividends in the amount of $11,623,199, of which $2,439,978 was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment plan.

During the year ended December 31, 2020, we declared and paid dividends in the amount of $39,709,233, of which $7,265,784 was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment program.

The timing and amount of our distributions, if any, will be determined by our Board of Directors and will be declared out of assets legally available for distribution.

The following table shows the dividends per share declared since our formation through September 30, 2020.

The following table shows the dividends per share declared since our formation through March 31, 2021.

Date Declared

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August 20, 2020

October 1, 2020

November 12, 2020

March 4, 2021

March 5, 2021

March 19, 2021

Critical Accounting Policies

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The COVID-19 pandemic and its resultant impact on economic activity and capital market volatility has impacted and may continue to have impact on the fair market values of our portfolio investments.

As a result, the fair market values of our portfolio investments may be negatively impacted after March 31, 2021 by circumstances and events that are not yet known,

including the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto.

Our valuation process carefully considers the impact of the COVID-19 pandemic related uncertainties in the various inputs utilized in the determination of the fair market value of our portfolio investments.

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Valuation techniques are also utilized to allocate the enterprise fair value of a portfolio company to the specific class of common or preferred stock exercisable in the warrant.

Such techniques take into account the rights and preferences of the portfolio company’s securities, expected exit scenarios, and volatility associated with such outcomes to allocate the fair value to the specific class of stock held in the portfolio.

Such techniques take into account the rights and

preferences of the portfolio company’s securities, expected exit scenarios, and volatility associated with such outcomes to allocate the fair value to the specific class of stock held in the portfolio.

Such techniques include Option Pricing Models, or “OPM,” including back-solve techniques, Probability Weighted Expected Return Models, or “PWERM,” and other techniques as determined to be appropriate.

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Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time.

The determination of fair value may differ materially from the values that would have been used if an active market for these investments

The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed.

In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a fair value may then be determined.

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These assets are recorded at fair value on a recurring basis.

The Company’s assets measured at fair value on a recurring basis subject to the requirements of ASC Topic 820 at September 30, 2020 and December 31, 2019 were as follows:

As of September 30, 2020 (Unaudited)

These valuation methodologies involve a significant degree of judgment.

There is no single standard for determining the fair value of investments that do not have an active public market.

Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time.

The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed.

In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a fair value may then be determined.

The Company’s assets measured at fair value on a recurring basis subject to the requirements of ASC Topic 820 at March 31, 2021 and December 31, 2020 were as follows:

As of March 31, 2021 (Unaudited)

Portfolio Investments

5 unchanged sentences

Total Investments

Treasury Bill Sold Short

As of December 31, 2020

Portfolio Investments

Corporate Bonds

Senior Secured Term Loans

7 unchanged sentences

The amortized cost basis of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums and upfront loan origination fees.

We report changes in fair value of investments that are measured at fair value as a component of net change in unrealized appreciation (depreciation) on investments in the statement of operations.

We report changes in fair value of investments that are measured at fair value as a component of net change in unrealized appreciation (depreciation) on investments on the statement of operations.

Dividends are recorded on the applicable ex-dividend date.

2 unchanged sentences

Loan origination fees received in connection with the closing of investments are reported as unearned income, which is included as amortized cost of the investment;

the unearned income from such fees is accreted

over the contractual life of the loan based on the effective interest method.

the unearned income from such fees is accreted over the contractual life of the loan based on the effective interest method.

Upon prepayment of a loan or debt security, any prepayment penalties, unamortized loan origination fees, end of term payments and unamortized market discounts are recorded as interest income.

2 unchanged sentences

The accrual for incentive fees includes the recognition of incentive fees on unrealized capital gains, even though such incentive fees are neither earned nor payable to RGC until the gains are both realized and in excess of unrealized depreciation on investments.

See “Note 7 – Related Party Agreements and Transactions” to our financial statements in Part I, Item 1 of this Form 10-Q for more information on the Amended Advisory Agreement and the fee structure thereunder.

We have elected to be treated, currently qualify and intend to qualify annually, as a RIC under Subchapter M of the Code.

See “Note 7 – Related Party Agreements and Transactions” to our financial statements in Part I, Item 1 of this Form 10-Q for more information on the Advisory Agreement and the fee structure thereunder.

We have elected to be treated, have qualified and intend to qualify annually, as a RIC under Subchapter M of the Code.

Generally, a RIC is not subject to U.S.

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Recent Developments

We evaluated events subsequent to September 30, 2020 through November 12, 2020.

On October 1, 2020 the Company declared a dividend of $0.38 per share payable on November 12, 2020 to shareholders of record as of October 1, 2020.

The Company set September 30, 2020 as the valuation date for shares issued in connection with the dividend pursuant to the Company’s dividend reinvestment plan.

On October 2, 2020, the Company delivered a capital drawdown notice to investors relating to the sale of 3,333,333 shares of common stock, for an aggregate offering price of $50,000,000.

The sale closed on October 15, 2020.

On October 2, 2020, the Company funded an investment of $2,000,000 to Pivot3, Inc.

On October 19, 2020, the Company funded an investment of $45,000,000 to FiscalNote, Inc.

On November 10, 2020, Company entered into an amendment (the “Credit Facility Amendment”) to the Credit Agreement.

The Credit Facility Amendment amended the Credit Agreement to, among other things:

(i) increase the size of the aggregate commitments under the Credit Facility to $175 million from $100 million;

(ii) add MUFG Union Bank, N.A.

as a new lender and co-documentation agent under the Credit Agreement;

(iii) revise the interest rate margin to be 3.00% for the remaining term of the Credit Facility regardless of the Credit Facility average utilization or the number of unaffiliated obligors on loans in the collateral;

(iv) permit the Company to obtain a future subscription line of credit of up to $50 million;

(v) revise the LIBOR replacement provisions;

(vi) implement a 0.50% LIBOR floor and benchmark replacement rate floor on borrowings under the Credit Agreement;

and (vii) revise certain of the borrowing base concentration limits.

Borrowing under the Credit Facility remains subject to the leverage restrictions contained in the 1940 Act.

On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to the COVID-19 pandemic.

The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets.

The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting

Such actions are creating disruption in global supply chains and adversely impacting a number of industries.

The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic.

Nevertheless, the COVID-19 pandemic presents material uncertainty and risks with respect to the underlying value of our portfolio companies, our business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

The volatility and disruption to the global economy from the COVID-19 pandemic has affected, and is expected to continue to affect, the pace of our investment activity, which may have a material adverse impact on our results of operations.

Such volatility and disruption have also led to the increased credit spreads in the private debt capital markets.

Further, the operational and financial performance of the portfolio companies in which we make investments may continue to be significantly impacted by the COVID-19 pandemic, which may in turn continue to impact the valuation of our investments.

As a result, the long term impacts of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments and the fair value of our portfolio investments may be further negatively impacted after September 30, 2020 by circumstances and events that are not yet known, including the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto.

In addition, write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value (and, as a result, our asset coverage calculation).

Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses after September 30, 2020, which could have a material adverse effect on our business, financial condition and results of operations.

Accordingly, we cannot predict the ultimate extent to which our financial condition and results of operations will be affected at this time.

The continuing impact on our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control.

We evaluated events subsequent to March 31, 2021 through May 6, 2021.

On April 5, 2021, TriplePoint Venture Growth BDC Corp.

redeemed its outstanding corporate bonds from the Company for cash proceeds of $334,900.

On April 7, 2021, the Board approved the second amended and restated investment advisory agreement between RGC and the Company (the “Second A&R Advisory Agreement”).

If the Second A&R Advisory Agreement is approved by the Company’s shareholders at the annual meeting to be held on May 27, 2021, it would become effective on that date.

Further, if approved by the Company’s shareholders, the Second A&R Advisory Agreement would make certain changes to the management and incentive fee calculation mechanisms and clarify language relating to liquidity events.

On April 19, 2021, the Company funded an investment of $800,000 to Pivot3 Holdings, Inc.

On April 23, 2021, the Company funded an investment of $1,000,000 to Aria Systems, Inc.

On April 23, 2021, Longtail Ad Solutions, Inc.

(dba JW Player) prepaid its outstanding principal balance of $30,000,000.

In addition, the Company received cash proceeds of $1,862,708 in conjunction with ETP, prepayment fees, and interest for total proceeds of $31,862,708.

On April 26, 2021, Massdrop, Inc.

prepaid its outstanding principal balance of $20,474,451.

In addition, the Company received cash proceeds of $1,242,684 in conjunction with ETP, prepayment fees, and interest for total proceeds of $21,717,135.

On April 29, 2021, the Company declared a dividend of $0.37 per share payable on May 13, 2021 to shareholders of record as of April 30, 2021.

The Company set March 31, 2021 as the valuation date for shares issued in connection with the dividend pursuant to the Company’s dividend reinvestment plan.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis