What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-12 compared with 2020-03-20 · 133 added, 130 removed, 416 unchanged (39% of the section changed)

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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:

● changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including changes from the impact of the current COVID-19 pandemic;

● our ability to continue to effectively manage our business due to the disruptions caused by the current COVID-19 pandemic;

● 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;

● such an economic downturn could disproportionately impact the companies that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;

a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

● a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities, including as a result of the COVID-19 pandemic;

● interest rate volatility could adversely affect our results, particularly to the extent that we use leverage as part of our investment strategy;

● currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S.

our future operating results;

our business prospects and the prospects of our portfolio companies;

● our future operating results, including our ability to achieve objectives as a result of the COVID-19 pandemic;

● our business prospects and the prospects of our portfolio companies, including the impact of the COVID-19 pandemic thereon;

● our contractual arrangements and relationships with third parties;

the ability of our portfolio companies to achieve their objectives;

● the ability of our portfolio companies to achieve their objectives, including as a result of the COVID-19 pandemic;

● competition with other entities and our affiliates for investment opportunities;

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● the loss of key personnel;

the timing of cash flows, if any, from the operations of our portfolio companies;

the ability of our external investment adviser, RGC, to locate suitable investments for us and to monitor and administer our investments;

● the timing of cash flows, if any, from the operations of our portfolio companies, and the impact of the COVID-19 pandemic thereon;

● the ability of our external investment adviser, RGC, to locate suitable investments for us and to monitor and administer our investments, and the impacts of the COVID-19 pandemic thereon;

● the ability of RGC to attract and retain highly talented professionals;

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

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

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.

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

As of December 31, 2019, 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 December 31, 2019, we had completed multiple closings under its second private offering (the “Second Private Offering”) and had accepted capital commitments of $174,423,500.

In connection with the Initial Private Offering, we issued 18,241,157 shares of our common stock to stockholders for a total purchase price of $275,000,000.

As of December 31, 2020, we had completed multiple closings under our second private offering (the “Second Private Offering”) and had accepted capital commitments of $174,673,500.

As of December 31, 2020, 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 December 31, 2020, we have issued 4,816,873 shares for a total purchase price of $70,757,547 in connection with our dividend reinvestment plan.

On August 10, 2020, we, RGC, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates were granted the Order that permits us greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if our Board of Directors 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 the 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 and is consistent with our investment strategies and policies.

Portfolio Composition and Investment Activity

Portfolio Composition

At December 31, 2019, we had investments in twenty-five portfolio companies, representing twenty-one companies where we held loan and warrant investments, four companies where we held warrant interests only, and held two U.S.

Treasury Bills.

At December 31, 2020, we had investments in 31 portfolio companies, representing 22 companies where we held loan and warrant investments, eight companies where we held warrant interests only, and we held one U.S.

Treasury Bill.

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

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Portfolio Investments

Corporate Bonds

Senior Secured Term Loans

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Total Investments

At December 31, 2018, we had investments in twenty portfolio companies, representing seventeen companies where we held loan and warrant investments, two companies where we held warrant interests only, and one company where we held an unfunded commitment to lend, and 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 interests only, and held two U.S.

Treasury Bills.

The following table shows the fair value of our investments, by asset class, as of December 31, 2019:

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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.

For the year ended December 31, 2019 the Company funded $173,000,000 in nine new portfolio companies and $62,250,000 in eight existing portfolio companies.

The Company also received $82,500,000 in loan repayments from six portfolio companies and $3,241,934 in proceeds from the termination of warrants.

For the year ended December 31, 2020, the Company funded $249.5 million in eleven new portfolio companies and $46.0 million in seven existing portfolio companies.

The Company also received $103.7 in loan repayments from ten portfolio companies and $2.9 million in proceeds from the termination of warrants.

Portfolio Reconciliation

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Treasury Bills, for the years ended December 31, 2020, 2019 and 2018:

December 31, 2020

December 31, 2019

December 31, 2018

Beginning Investment Portfolio

Purchase of Investments (1)

Purchase of U.S.

Purchases of Investments (1)

Purchases of U.S.

Treasury Bills

Amortization of Fixed Income Premiums and Discounts

Portfolio Investments Repaid

(79,062,912 )

(14,500,629 )

Sales and Maturities of Investments

Amortization of Fixed Income Premiums or Accretion of Discounts

Sales or Repayments of Investments

(107,610,861)

Scheduled Principal Payments of Investments

Sales and Maturities of U.S.

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(262,989,682)

Realized gain on Investments

Realized Gain (Loss) on Investments

Net Change in Unrealized Appreciation (Depreciation) on Investments

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May experience partial and/or full loss.

The following tables show the investment rankings of our debt investments at fair value as of December 31, 2019 and 2018.

The following tables show the investment ratings of our debt investments at fair value as of December 31, 2020 and 2019:

As of December 31, 2020

Investment Rating

As of December 31, 2019

Investment Rating

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.

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 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.

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.

As of December 31, 2018, we did not have any loans on non-accrual status.

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 net assets.

Results of Operations

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Investment income

Interest income

Dividend income

Interest and dividend income

Total investment income

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Total operating expenses

Net investment income (loss)

Realized gain on investments

Net investment income

Realized gain (loss) on investments

Net change in unrealized appreciation (depreciation) on investments

Net increase (decrease) in net assets resulting from operations

Net increase in net assets resulting from operations

The basic per share figures noted above are based on weighted averages of 27,617,425, 18,701,021, and 9,300,960 shares outstanding for the years ended December 31, 2020, 2019, and 2018, respectively.

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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.

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Investment income for the years ended December 31, 2020, 2019, and 2018 was $57,626,303, $55,139,136, and $20,756,054, respectively, due primarily to interest income earned on our portfolio investments.

The increase in interest income for the year ended December 31, 2019 from the year ended December 31, 2018, and for the year ended December 31, 2018 from the year ended December 31, 2017 was driven by our deployment of capital and increasing invested balance.

Investment income further increased due to prepayments and end of term payments received during the years ended December 31, 2019 and December 31, 2018.

The increase in interest income for the year ended December 31, 2020 from the year ended December 31, 2019, and for the year ended December 31, 2019 from the year ended December 31, 2018 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 may 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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● direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs;

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.

● 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 years ended December 31, 2020, 2019 and 2018 were $19,556,586, $18,685,305 and $9,049,637, respectively.

Operating expenses increased for the year ended December 31, 2020 from the year ended December 31, 2019 primarily due to increased management fees paid to RGC, professional fees, credit facility fees, and other expenses.

Operating expenses increased for the year ended December 31, 2019 from the year ended December 31, 2018 primarily due to increased management fees and incentive fees paid to RGC, overhead allocation expense, consulting fees, directors’ fees, interest expense, administration fees, and other expenses.

Operating expenses increased for the year ended December 31, 2018 from the year ended December 31, 2017 primarily due to increased management fees and incentive fees paid to RGC, overhead allocation expense, interest expense, administration fees, and tax expense.

Incentive fees for the years ended December 31.

2019 and December 31, 2018 increased primarily due to the increase in investment income.

Refer to the discussion below for further detail.

Incentive fees for the years ended December 31, 2019 and December 31, 2018 increased primarily due to the increase in investment income, as discussed in more detail below.

The increases in management fees were driven by our deployment of capital and increasing invested balance.

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Incentive Fees

Incentive fees for the years ended December 31, 2019 and December 31, 2018 were $8,349,449 and $1,411,324, respectively, due primarily to the increase in investment income.

Incentive fees for the years ended December 31, 2020, 2019, and 2018 were $7,260,656, $8,349,449, and $1,411,324, respectively.

$1,748,171 of the incentive fees for the year ended December 31, 2020 were earned, payable in cash, and included in accrued incentive fees in the statement of assets and liabilities as of December 31, 2020.

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$1,891,676 of the incentive fees for the year ended December 31, 2019 were deferred and accrued, and included in accrued incentive fees in the statement of assets and liabilities as of December 31, 2019.

$711,868 of the incentive fees for the year ended December 31, 2018 were earned, payable in cash, and included in accrued incentive fees in the statement of assets and liabilities as of December 31, 2018.

$359,698 of the incentive fees for the year ended December 31, 2018 were deferred and accrued, and included in accrued incentive fees in the statement of assets and liabilities as of December 31, 2018.

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

Incentive fees per share for the years ended December 31, 2019 and December 31, 2018 were $0.45 per share, and $0.15 per share, respectively.

We had no incentive fees for the year ended December 31, 2017.

Net Investment Income (Loss)

Net investment income (loss) for the years ended December 31, 2019, 2018 and 2017 was $36,453,831, $11,706,417, and $(1,841,546) respectively.

Incentive fees per share for the years ended December 31, 2020, 2019, and 2018 were $0.26 per share, $0.45 per share, and $0.15 per share, respectively.

Net Investment Income

Net investment income for the years ended December 31, 2020, 2019 and 2018 was $38,069,717, $36,453,831, and $11,706,417, respectively.

Net investment income increased for the year ended December 31, 2020 from the year ended December 31, 2019 primarily due to increased interest income earned on our portfolio investments, partially offset by increased management fees and incentive fees and the other operating expenses discussed above.

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 increased for the year ended December 31, 2019 from the year ended December 31, 2018 primarily due to increased interest income earned on our portfolio investments, partially offset by increased management fees and incentive fees and the other operating expenses discussed above.

Net investment income (loss) per share for the years ended December 31, 2019, 2018 and 2017 were $1.95 per share, $1.26 per share and $(0.66) per share, respectively.

Net Realized Gain on Investment

Net investment income per share for the years ended December 31, 2020, 2019 and 2018 were $1.38 per share, $1.95 per share and $1.26 per share, respectively.

Net Realized Gain (Loss) on Investment

The net realized loss on investments of $5,347,409 for the year ended December 31, 2020 was primarily due to the loss on our senior secured loan to Aginity, Inc.

The net realized gain on investments of $609,031 for the year ended December 31, 2019 was primarily due to the gain on the sale of preferred stock warrant in Drawbridge, Inc.

and redemption of warrant for membership interest in Mobius Imagine, LLC, partially offset by a loss our warrants for preferred stock on RedSeal, Inc.

and redemption of warrant for membership interest

in Mobius Imagine, LLC, partially offset by a loss our warrants for preferred stock on RedSeal, Inc.

The net realized gain on investments of $59,792 for the year ended December 31, 2018 was primarily due to the gain on our warrants for preferred stock of Placecast, Inc.

For the year ended December 31, 2017, we had no realized gains or losses on investments.

Net Change in Unrealized Appreciation (Depreciation) on Investments

Net change in unrealized appreciation on investments of $14,257,593 for the year ended December 31, 2020 was primarily due to increases in the fair value of our senior secured loans to Aria Systems, Inc.

and our warrants for preferred stock or common stock of Ouster, Inc., MTBC, Inc., and Aspen Group Inc.

This increase was offset by the decreases in the fair value of senior secured loans to Circadence Corporation and Pivot3, Inc., and our preferred stock in MTBC, Inc.

Net change in unrealized depreciation on investments of $9,416,462 for the year ended December 31, 2019 was primarily due to increases in the fair value of our senior secured loans to eSilicon Corporation and Realwear, Inc., our preferred stock in Aria Systems, Inc.

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and eSilicon Corporation.

This increase was offset by the decreased in the fair fvalue of senior secured loans to Aginity, Inc., CareCloud Corporation, and Mojix Inc., and our warrants for common or preferred stock of All Clear ID, Inc., Mojix Inc.

This increase was offset by the decreased in the fair value of senior secured loans to Aginity, Inc., CareCloud Corporation, and Mojix Inc., and our warrants for common or preferred stock of All Clear ID, Inc., Mojix Inc.

and zSpace, Inc.

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and SendtoNews Video, Inc.

The net change in unrealized appreciation on investments of $405,251 for the year ended December 31, 2017 was primarily due to an increase in the fair value of our warrants for common stock of Aspen Group, Inc.

Net Increase (Decrease) in Net Assets Resulting from Operations

We had a net increase in net assets resulting from operations of $27,646,400 for the year ended December 31, 2019, as compared to a net increase in net assets resulting from operations of $11,757,516 and a net decrease in net assets resulting from operations of $1,436,295 for the years ended December 31, 2018 and December 31, 2017, respectively.

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 December 31, 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 December 31, 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.

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 $46,979,900 for the year ended December 31, 2020, as compared to a net increase in net assets resulting from operations of $27,646,400 and $11,757,516 for the years ended December 31, 2019 and December 31, 2018, respectively.

The net increase in net assets resulting from operations for the year ended December 31, 2020 from the year ended December 31, 2019 is attributable to increases in the fair value of our senior secured loans to Aria Systems, Inc.

and our warrants for preferred stock or common stock of Ouster, Inc., MTBC, Inc., and Aspen Group Inc.

The net increase in net assets resulting from operations for the year ended December 31, 2019 from the year ended December 31, 2018 is attributable to increased interest income earned on our portfolio investments and the gain on our warrants for preferred stock or units on Drawbridge, Inc.

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The net increase in net assets resulting from operations for the year ended December 31, 2018 from the year ended December 31, 2017 is attributable to increased interest income earned on our portfolio investments and the gain on our warrants for preferred stock of Placecast, Inc.

The net decrease in net assets resulting from operations for the year ended December 31, 2017 was primarily due to management fees and professional fees incurred, partially offset by interest and other income earned from our portfolio investments and the net change in unrealized appreciation related to our warrants for common stock of Aspen Group, Inc.

Financial Condition, Liquidity and Capital Resources

We generate cash primarily from the net proceeds of the offering of our securities and cash flows from our operations, including investment sales and repayments as well as income earned on investments and cash equivalents.

We may also fund a portion of our investments through borrowings under the Credit Facilities (discussed below).

We may also fund a portion of our investments through borrowings under the Credit Agreement (discussed below).

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.

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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 year ended December 31, 2019, cash and cash equivalents increased to $45,799,672, from $2,527,474 as of December 31, 2019.

This increase was primarily the result of the purchase of investments in portfolio companies for $252,083,775 and U.S.

During the year ended December 31, 2020, cash and cash equivalents decreased to $14,886,246, from $45,799,672 as of December 31, 2019.

This decrease was primarily the result of the purchase of investments in portfolio companies for $272,532,493 and

Treasury Bills for $276,000,012 and was partially offset by sales of investments in portfolio companies, the maturity of U.S.

Treasury Bills the issuance of common stock, and borrowings under our Credit Facilities.

During the year ended December 31, 2018, cash and cash equivalents decreased to $2,527,474, from $8,141,670 as of December 31, 2018.

This decrease was primarily the result of the purchase of investments in portfolio companies for $168,111,471 and U.S.

During the year ended December 31, 2019, cash and cash equivalents increased to $45,799,672, from $2,527,474 as of December 31, 2018.

This increase was primarily the result of the purchase of investments in portfolio companies for $241,669,802 and U.S.

Treasury Bills for $315,836,640 and was partially offset by sales of investments in portfolio companies, the maturity of U.S.

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Issuance Date

Shares Issued

Price Per Share

Gross Proceeds

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December 23, 2019 (1)

March 20, 2020 (1)

March 31, 2020

May 21, 2020 (1)

August 6, 2020 (1)

October 15, 2020

November 12, 2020 (1)

Shares were issued as part of the dividend reinvestment program.

Contractual Obligations

At December 31, 2019, the Company had $40,000,000 in unfunded loan commitments to provide debt financing to nine portfolio companies.

At December 31, 2020, the Company had $49,085,569 in unfunded loan commitments to provide debt financing to five portfolio companies.

The Company’s management believes that its available cash balances, availability under the Credit Agreement and/or ability to drawdown capital from investors provides sufficient funds to cover its unfunded commitments as of December 31, 2020.

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See “Note 10 — Credit Facilities.” to our financial statements in Part II of this Form 10-K for more information.

Credit Facilities

On May 31, 2019, we entered into the Credit Agreement with KeyBank National Association, as administrative agent, syndication agent, and a lender, CIBC Bank USA, as documentation agent and a lender, and U.S.

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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.

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.

Borrowings under the Credit Agreement bear interest on a per annum basis equal to a three-month adjusted LIBOR rate (with a LIBOR floor of zero), plus an applicable margin rate that varies from 3.00% to 2.50% per annum depending on utilization and other factors.

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

During the fourth quarter of 2020, the Company 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 II, Item 8 of this Form 10 K for more information on the Credit Agreement and Credit Facilities.

On June 22, 2018, as amended on September 24, 2018, we entered into the Uncommitted Facility and the Committed Facility with CIBC.

The maximum principal amount of available borrowings under each of the Uncommitted Facility and the Committed Facility was $30 million (for a combined maximum principal amount under the Credit Facilities of $60 million), subject in each case to availability under the borrowing base, which is based on unused capital commitments.

Borrowings under the Credit Facilities bear interest, at our election at the time of drawdown, at a rate per annum equal to (i) in the case of LIBOR rate loans, the LIBOR rate for the applicable interest period plus 2.50% or (ii) in the case of prime rate loans, CIBC’s prime commercial rate at the time of the borrowing minus 0.50%.

The Credit Facilities mature on September 19, 2019 and are secured by a perfected first priority security interest in our right, title, and interest in and to the capital commitments of our private investors, including our right to make capital calls, receive and apply capital contributions, enforce remedies and claims related thereto together with capital call proceeds and related rights, and a pledge of the collateral account into which capital call proceeds are deposited.

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

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

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

The Company anticipates continued usage of the Credit Agreement as well as other potential debt financing alternatives to fund future portfolio growth.

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

During the year ended December 31, 2018, the Company drew down $74,500,000 and repaid $15,000,000, of which $59,500,000 remained outstanding at December 31, 2018.

During the year ended December 31, 2019, the Company drew down $162,250,000 on the Credit Agreement and 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% per annum.

See “Note 10 — Credit Facilities” to our financial statements in Part II, Item 8 of this Form 10-K for more information on the Credit Facilities.

See “Note 10 — Credit Facilities” to our financial statements in Part II, Item 8 of this Form 10-K for more information on the Credit Agreement and Credit Facilities.

Off-Balance Sheet Arrangements

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To the extent that we have funds available, we intend to make quarterly distributions to our stockholders.

Our stockholder distributions, if any, will be determined by our Board of Directors.

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

Our stockholder distributions, if any, will be determined by our Board of Directors and 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.

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During the year ended December 31, 2019, we declared and paid dividends in the amount of $40,651,334, of which $8,192,547 was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment program.

During the year ended December 31, 2017, we did not declare or pay any dividends or distributions.

During the year ended December 31, 2018, we declared and paid dividends in the amount of $7,283,810, of which $1,428,498 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.

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Date Declared

May 15, 2018

May 31, 2018

July 26, 2018

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March 26, 2019

May 21, 2019

May 31, 2019

July 16, 2019

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December 23, 2019

March 5, 2020

March 6, 2020

March 20, 2020

August 5, 2020

August 6, 2020

August 20, 2020

October 1, 2020

November 12, 2020

Critical Accounting Policies

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The preparation of the financial statements and related disclosures in conformity with U.S.

GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reports.

GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities

at the date of the financial statements, and revenues and expenses during the period reports.

Actual results could materially differ from those estimates.

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Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Audit Committee is responsible for assisting our Board of Directors in valuing investments that are not publicly traded or for which current market values are not readily available.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from

independent pricing services, broker-dealers or market makers.

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.

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.

The Audit Committee assists our Board of Directors in valuing investments that are not publicly traded or for which current market values are not readily available.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers.

With respect to portfolio investments for which market quotations are not readily available, our Board of Directors, with the assistance of the Audit Committee, RGC and its senior investment team and independent valuation agents, is responsible for determining, in good faith, the fair value in accordance with the valuation policy approved by our Board of Directors.

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

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 December 31, 2020 and 2019 were as follows:

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Portfolio Investments

Corporate Bonds

Senior Secured Term Loans

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Senior Secured Term Loans

Preferred Stock

Total Portfolio Investments

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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.

Dividends are recorded on the ex-dividend date.

Dividends are recorded on the applicable ex-dividend date.

Interest income, if any, adjusted for amortization of market premium and accretion of market discount, is recorded on an accrual basis to the extent that we expect to collect such amounts.

Original issue discount, principally representing the estimated fair value of detachable equity or warrants obtained in conjunction with our debt investments, loan origination fees, end of term payments, and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective interest method.

Original issue discount, principally representing the estimated fair value of detachable equity, warrants, or contractual success fees obtained in conjunction with our debt investments, loan origination fees, end of term payments, and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective interest method.

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;

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We accrue for base management fees and incentive fees.

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 II, Item 8 of this Form 10-K for more information on the Amended Advisory Agreement and the fee structure thereunder.

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

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 II, Item 8 of this Form 10-K for more information on the 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.

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

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Recent Developments

Subsequent to December 31, 2019, through March 19, 2020, we funded the following transactions:

Investment Name

Cost Allocated

January 7, 2020

Credit Sesame, Inc.

January 30, 2020

Aginity, Inc.

March 9, 2020

Aginity, Inc.

March 10, 2020

Aginity, Inc.

March 16, 2020

Solutions, Inc.

(dba JW Player)

On January 8, 2020, in connection with CareCloud’s sale to MTBC, Inc., the Company extinguished $25.0 million in outstanding principal balance and terminated the associated warrants.

The Company, in return, received consideration in the amount of approximately $23.3 million from MTBC, Inc.

The consideration consisted of the following:

warrants to purchase 1,000,000 shares of Common Stock at $7.50 per share;

warrants to purchase 1,000,000 shares of Common Stock at $10.00 per share;

and, 760,000 shares of 11% Series A Preferred Stock.

On January 9, 2020, in conjunction with its sale to Inphi Corporation and concurrently Synopays, Inc., eSilicon Corporation prepaid its outstanding principal balance of $26,625,000 on the senior secured loan.

In addition, the Company received cash proceeds of $2,749,949 in conjunction with the termination of its warrants in eSilicon Corporation for total proceeds of $30,853,855.

On January 30, 2020, MingleHealth Care Solutions, Inc.

prepaid $1,583,333 on its outstanding principal balance.

On March 2, 2020, RealWear, Inc.

prepaid $21,993,938 on its outstanding principal balance.

In addition, the Company received cash proceeds of $1,544,606 in conjunction with ETP and interest for total proceeds of $23,538,544.

On March 5, 2020, the Board of Directors declared a dividend in the amount of $0.40 per share payable on March 20, 2020 to stockholders of record as of March 6, 2020.

On March 10, 2020, Aginity Inc.

was sold for net proceeds to the Company of $4,000,000 in the form of a senior secured note of the purchaser and a warrant to purchase 81,177 shares of the purchaser’s common stock for a nominal aggregate exercise price, resulting in a realized loss of approximately $6,525,000.

On March 16, 2020, RealWear, Inc.

prepaid the remainder of $2,691,862 on its outstanding principal balance.

In addition, the Company received cash proceeds of $145,428 in conjunction with ETP and interest for total proceeds of $2,837,290.

TABLE OF CONTENTS

We evaluated events subsequent to December 31, 2020, through March 11, 2021.

On January 26, 2021, the Company funded an investment of $250,000 to The Kairn Corporation.

On January 27, 2021, as part of an overall reorganization of Pivot3, Inc., Pivot3, Inc.

changed its name to Pivot3 Holdings, Inc.

and the Company:

(i) funded a $1,000,000 investment of Series 1 Preferred Stock, and (ii) converted the $1,000,000 Convertible Bridge Loan into Series 1 Preferred Stock.

Further, in conjunction with the reorganization, our Series D warrants were effectively canceled and as such we recorded a $216,610 realized loss.

On February 11, 2021, the Company funded an investment of $500,000 to Mojix, Inc.

On February 23, 2021, the Company funded an investment of $2,000,000 to Massdrop, Inc.

On March 2, 2021, 3DNA Corp.

prepaid its outstanding principal balance of $7,500,000.

In addition, the Company received cash proceeds of $598,438 in conjunction with ETP, prepayment fees, and interest for total proceeds of $8,098,438.

On March 4, 2021, the Company declared a dividend of $0.37 per share payable on March 19, 2021 to shareholders of record as of March 5, 2021.

The Company set December 31, 2020 as the valuation date for shares issued in connection with the dividend pursuant to the Company’s dividend reinvestment plan.

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What changed 10-K

Item 7. Management’s Discussion and Analysis