UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
(Mark One)
FOR
THE FISCAL YEAR ENDED
COMMISSION
FILE NUMBER:
(Exact name of registrant as specified in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| Global Select Market | ||||
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐
The
aggregate market value of common stock beneficially owned by non-affiliates of the Registrant on June 30, 2022, based on the closing
price on that date of $6.40 on the Nasdaq Global Select Market, was $
DOCUMENTS INCORPORATED BY REFERENCE
EXPLANATORY NOTE
This Amendment is being filed solely for the purpose of correcting the “Report of Independent Registered Public Accounting Firm” included in the Original Form 10-K (the “Report”) to (i) include reference to Marcum LLP’s audit of all periods presented in the Company’s financial highlights (presented in Note 8 to the Consolidated Financial Statements), with exception for the year ended December 31, 2018, which was audited by a predecessor firm, and (ii) to note, in accordance with Accounting Standard 3105.58, that the financial highlights for the year ended December 31, 2018 were audited by a predecessor firm. The changes made to the Report do not in any way change the conclusions expressed in the Report included in the Original Form 10-K.
Pursuant to Rule 12b-15, this Amendment also contains new certifications for our Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, which are attached as exhibits hereto. Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, the Company has included the entire text of Part II, Item 8 in this Amendment.
Except for the amendment to correct the Report and certifications referred to above, no other changes are made to the Original Form 10-K. The Original Form 10-K continues to speak as of the date of the Original Form 10-K and except as described above this Amendment does not reflect events occurring after the filing of the Original Form 10-K, nor does it modify or update in any way the disclosures contained in the Original Form 10-K. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K and the Company's other filings with the SEC.
PART II
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
| 2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of SuRo Capital Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities of SuRo Capital Corp. and subsidiaries (the “Company”) including the consolidated schedule of investments as of December 31, 2022 and 2021, the related consolidated statements of operations, cash flows, and changes in net assets for each of the three years in the period ended December 31, 2022, the financial highlights (presented in Note 8) for the periods presented, with exception for the year ended December 31, 2018, which was audited by a predecessor firm, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations, changes in net assets and its cash flows for each of the three years in the period ended December 31, 2022 and the financial highlights for the periods presented, with exception for the year ended December 31, 2018, which was audited by a predecessor firm, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2022 and 2021, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Valuation of Investments – Level 3 Investments in Preferred Stock, Common Stock, Debt Investments and Options
As described in Note 4 to the financial statements, approximately 59% of the Company’s $242 million total investments in securities as of December 31, 2022 represents investments in level 3 preferred stock, common stock, debt investments and options issued by private companies whose fair value, as disclosed by management, is determined in good faith by the Board of Directors. Management applied significant judgment in determining the fair value of these level 3 investments, which involved the use of significant unobservable inputs with respect to the revenue and/or other multiples utilized, liquidation value, financing risk, term to expiration and discount rates.
The principal considerations for our determination that performing procedures relating to the valuation of level 3 investments in preferred stock, common stock, debt investments and options is a critical audit matter are the significant judgment involved by management in determining the fair value of these level 3 investments, including the use of various valuation techniques and significant unobservable inputs, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating the audit evidence obtained relating to the valuation techniques and significant unobservable inputs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements and financial highlights. Our principle audit procedures included, among others:
(i) testing the completeness and accuracy of management’s valuations, including evaluating the appropriateness of management’s methodologies, evaluating the reasonableness of assumptions and significant unobservable inputs, including revenue and/or other multiples utilized, liquidation value, financing risk, term to expiration and discount rates; and
(ii) the involvement of professionals with specialized skills and knowledge to assist in the assessment of the fair values for a sample of investments, including reviewing the valuation methodologies, assessing the assumptions utilized in developing the estimates, and evaluating the reasonableness of management’s conclusions in deriving the valuations.
/s/
March 16, 2023
We have served as the Company’s auditor since 2019.
| 3 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
| December 31, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Investments at fair value: | ||||||||
| Non-controlled/non-affiliate investments (cost of $ | $ | $ | ||||||
| Non-controlled/affiliate investments (cost of $ | ||||||||
| Controlled investments (cost of $ | ||||||||
| Total Portfolio Investments | ||||||||
| Investments in U.S. Treasury bills (cost of $ | ||||||||
| Total Investments (cost of $ | ||||||||
| Cash | ||||||||
| Proceeds receivable | ||||||||
| Escrow proceeds receivable | ||||||||
| Interest and dividends receivable | ||||||||
| Deferred financing costs | ||||||||
| Prepaid expenses and other assets(1) | ||||||||
| Total Assets | ||||||||
| LIABILITIES | ||||||||
| Accounts payable and accrued expenses(1) | ||||||||
| Accrued interest payable | ||||||||
| Dividends payable | ||||||||
| 6.00% Notes due December 30, 2026(2) | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Notes 7 and 10) | ||||||||
| Net Assets | $ | $ | ||||||
| NET ASSETS | ||||||||
| Common stock, par value $ per share ( authorized; and issued and outstanding, respectively) | $ | $ | ||||||
| Paid-in capital in excess of par | ||||||||
| Accumulated net investment loss | ( | ) | ( | ) | ||||
| Accumulated net realized gain on investments, net of distributions | ||||||||
| Accumulated net unrealized appreciation/(depreciation) of investments | ( | ) | ||||||
| Net Assets | $ | $ | ||||||
| Net Asset Value Per Share | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| (1) | |
| (2) |
| 4 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| INVESTMENT INCOME | ||||||||||||
| Non-controlled/non-affiliate investments: | ||||||||||||
| Interest income | $ | $ | $ | |||||||||
| Dividend income | ||||||||||||
| Non-controlled/affiliate investments: | ||||||||||||
| Interest income/(reversal of accrued interest) | ( | ) | ||||||||||
| Dividend income | ||||||||||||
| Controlled investments: | ||||||||||||
| Interest income | ||||||||||||
| Dividend income | ||||||||||||
| Interest income from U.S. Treasury bills | ||||||||||||
| Total Investment Income | ||||||||||||
| OPERATING EXPENSES | ||||||||||||
| Compensation expense | ||||||||||||
| Directors’ fees(1) | ||||||||||||
| Professional fees | ||||||||||||
| Interest expense | ||||||||||||
| Income tax expense | ||||||||||||
| Other expenses | ||||||||||||
| Total Operating Expenses | ||||||||||||
| Net Investment Loss | ( | ) | ( | ) | ( | ) | ||||||
| Realized Gain/(Loss) on Investments: | ||||||||||||
| Non-controlled/non-affiliated investments | ( | ) | ||||||||||
| Non-controlled/affiliate investments | ( | ) | ||||||||||
| Net Realized Gain/(Loss) on Investments | ( | ) | ||||||||||
| Change in Unrealized Appreciation/(Depreciation) of Investments: | ||||||||||||
| Non-controlled/non-affiliated investments | ( | ) | ( | ) | ||||||||
| Non-controlled/affiliate investments | ( | ) | ( | ) | ( | ) | ||||||
| Controlled investments | ( | ) | ||||||||||
| Net Change in Unrealized Appreciation/(Depreciation) of Investments | ( | ) | ( | ) | ||||||||
| Net Change in Net Assets Resulting from Operations | $ | ( | ) | $ | $ | |||||||
| Net Change in Net Assets Resulting from Operations per Common Share: | ||||||||||||
| Basic | $ | ( | ) | $ | $ | |||||||
| Diluted(2) | $ | ( | ) | $ | $ | |||||||
| Weighted-Average Common Shares Outstanding | ||||||||||||
| Basic | ||||||||||||
| Diluted(2) | ||||||||||||
See accompanying notes to consolidated financial statements.
| (1) | |
| (2) |
| 5 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Change in Net Assets Resulting from Operations | ||||||||||||
| Net investment loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net realized gain/(loss) on investments | ( | ) | ||||||||||
| Net change in unrealized appreciation/(depreciation) of investments | ( | ) | ( | ) | ||||||||
| Net Change in Net Assets Resulting from Operations | ( | ) | ||||||||||
| Distributions | ||||||||||||
| Dividends declared | ( | ) | ( | ) | ( | ) | ||||||
| Total Distributions | ( | ) | ( | ) | ( | ) | ||||||
| Change in Net Assets Resulting from Capital Transactions | ||||||||||||
| Issuance of common stock from public offering | ||||||||||||
| Issuance of common stock from conversion of | ||||||||||||
| Stock-based compensation(1) | ||||||||||||
| Issuance of common stock from stock dividend | ||||||||||||
| Repurchases of common stock | ( | ) | ( | ) | ||||||||
| Net Change in Net Assets Resulting from Capital Transactions | ( | ) | ||||||||||
| Total Change in Net Assets | ( | ) | ||||||||||
| Net Assets at Beginning of Year | ||||||||||||
| Net Assets at End of Year | $ | $ | $ | |||||||||
| Capital Share Activity | ||||||||||||
| Shares outstanding at beginning of year | ||||||||||||
| Issuance of common stock from public offering | ||||||||||||
| Issuance of common stock under restricted stock plan, net | ||||||||||||
| Issuance of common stock from conversion of | ||||||||||||
| Issuance of common stock from stock dividend | ||||||||||||
| Shares repurchased | ( | ) | ( | ) | ||||||||
| Shares Outstanding at End of Year | ||||||||||||
See accompanying notes to consolidated financial statements.
| (1) |
| 6 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Cash Flows from Operating Activities | ||||||||||||
| Net change in net assets resulting from operations | $ | ( | ) | $ | $ | |||||||
| Adjustments to reconcile net change in net assets resulting from operations to net cash provided by/(used in) operating activities: | ||||||||||||
| Net realized (gain)/loss on investments | ( | ) | ( | ) | ||||||||
| Net change in unrealized (appreciation)/depreciation of investments | ( | ) | ||||||||||
| Amortization of discount on | ||||||||||||
| Amortization of discount on | ||||||||||||
| Stock-based compensation(1) | ||||||||||||
| Adjustments to escrow proceeds receivable | ( | ) | ||||||||||
| Forfeited interest on | ||||||||||||
| Purchases of investments in: | ||||||||||||
| Portfolio investments | ( | ) | ( | ) | ( | ) | ||||||
| U.S. Treasury bills | ( | ) | ( | ) | ||||||||
| Proceeds from sales or maturity of investments in: | ||||||||||||
| Portfolio investments | ||||||||||||
| U.S. Treasury bills | ||||||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Prepaid expenses and other assets | ||||||||||||
| Interest and dividends receivable | ( | ) | ( | ) | ||||||||
| Proceeds receivable | ( | ) | ||||||||||
| Escrow proceeds receivable | ( | ) | ( | ) | ||||||||
| Payable for securities purchased | ( | ) | ||||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||||||
| Payable to executive officers | ( | ) | ||||||||||
| Income tax payable | ( | ) | ||||||||||
| Accrued interest payable | ( | ) | ( | ) | ( | ) | ||||||
| Net Cash Provided by/(Used in) Operating Activities | ( | ) | ( | ) | ||||||||
| Cash Flows from Financing Activities | ||||||||||||
| Proceeds from the issuance of common stock, net | ||||||||||||
| Proceeds from the issuance of | ||||||||||||
| Redemption of | ( | ) | ||||||||||
| Deferred debt issuance costs | ( | ) | ||||||||||
| Repurchases of common stock | ( | ) | ( | ) | ||||||||
| Cash dividends paid | ( | ) | ( | ) | ( | ) | ||||||
| Cash paid for fractional shares | ( | ) | ( | ) | ||||||||
| Deferred financing costs | ( | ) | ( | ) | ( | ) | ||||||
| Net Cash Provided by/(Used in) Financing Activities | ( | ) | ( | ) | ||||||||
| Total Increase/(Decrease) in Cash Balance | ( | ) | ||||||||||
| Cash Balance at Beginning of Year | ||||||||||||
| Cash Balance at End of Year | $ | $ | ||||||||||
| Supplemental Information: | 2022 | 2021 | 2020 | |||||||||
| Interest paid | $ | $ | ||||||||||
| Taxes paid | ||||||||||||
| Conversion of | ||||||||||||
See accompanying notes to consolidated financial statements.
| (1) |
| 7 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2022
| Portfolio Investments* | Headquarters/ Industry | Date of Initial Investment | Shares/ Principal | Cost | Fair Value | % of Net Assets | ||||||||||||||
| NON-CONTROLLED/NON-AFFILIATE | ||||||||||||||||||||
| Learneo, Inc. (f/k/a Course Hero, Inc.) | Redwood City, CA | |||||||||||||||||||
| Preferred shares, Series A 8% | $ | $ | % | |||||||||||||||||
| Preferred shares, Series C 8% | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Blink Health, Inc. | New York, NY | |||||||||||||||||||
| Preferred shares, Series A | % | |||||||||||||||||||
| Preferred shares, Series C | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Orchard Technologies, Inc. | New York, NY | |||||||||||||||||||
| Preferred shares, Series D | % | |||||||||||||||||||
| Simple Agreement for Future Equity | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Locus Robotics Corp. | Wilmington, MA | |||||||||||||||||||
| Preferred shares, Series F | % | |||||||||||||||||||
| Aspiration Partners, Inc. | Marina Del Rey, CA | |||||||||||||||||||
| Preferred shares, Series A | % | |||||||||||||||||||
| Preferred shares, Series C-3 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Whoop, Inc. | Boston, MA | |||||||||||||||||||
| Preferred shares, Series C | % | |||||||||||||||||||
| Forge Global, Inc.** | San Francisco, CA | |||||||||||||||||||
| Common shares(3)(14) | % | |||||||||||||||||||
| Nextdoor Holdings, Inc.** | San Francisco, CA | |||||||||||||||||||
| Common shares, Class B(3) | % | |||||||||||||||||||
| NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.)** | New Canaan, CT | |||||||||||||||||||
| Common shares ***(3) | % | |||||||||||||||||||
| Shogun Enterprises, Inc. (d/b/a Hearth) | Austin, TX | |||||||||||||||||||
| Preferred shares, Series B-1 | % | |||||||||||||||||||
| Preferred shares, Series B-2 | % | |||||||||||||||||||
| Convertible Note 0.5%, Due 4/18/2024*** | $ | % | ||||||||||||||||||
| Total | % | |||||||||||||||||||
| True Global Ventures 4 Plus Pte Ltd**(8) | Singapore, Singapore | |||||||||||||||||||
| Limited Partner Fund Investment | **(8) | % | ||||||||||||||||||
| Residential Homes for Rent, LLC (d/b/a Second Avenue) | Chicago, IL | |||||||||||||||||||
| Preferred shares, Series A(6) | % | |||||||||||||||||||
| Term loan 15%, Due 12/23/2023***(11) | $ | % | ||||||||||||||||||
| Total | % | |||||||||||||||||||
| Trax Ltd.** | Singapore, Singapore | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Preferred shares, Investec Series | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| PayJoy, Inc. | San Francisco, CA | |||||||||||||||||||
| Preferred shares | % | |||||||||||||||||||
| Aventine Property Group, Inc. | Chicago, IL | |||||||||||||||||||
| Common shares*** | % | |||||||||||||||||||
| Varo Money, Inc.** | San Francisco, CA | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
| 8 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2022
| Portfolio Investments* | Headquarters/ Industry | Date of Initial Investment | Shares/ Principal | Cost | Fair Value | % of Net Assets | ||||||||||||||
| Skillsoft Corp.** | Nashua, NH | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Commercial Streaming Solutions Inc. (d/b/a BettorView)(7) | Las Vegas, NV | |||||||||||||||||||
| Simple Agreement for Future Equity | % | |||||||||||||||||||
| Rebric, Inc. (d/b/a Compliable)(7) | Denver, CO | |||||||||||||||||||
| Preferred shares, Series Seed-4 | % | |||||||||||||||||||
| Xgroup Holdings Limited (d/b/a Xpoint)**(7) | Dubai, UAE | |||||||||||||||||||
| Convertible Note 6%, Due 8/17/2023*** | $ | % | ||||||||||||||||||
| YouBet Technology, Inc. (d/b/a FanPower)(7) | New York, NY | |||||||||||||||||||
| Preferred shares, Series Seed-2 | % | |||||||||||||||||||
| EDGE Markets, Inc.(7) | San Diego, CA | |||||||||||||||||||
| Preferred shares, Series Seed | % | |||||||||||||||||||
| Churchill Sponsor VII LLC**(12) | New York, NY | |||||||||||||||||||
| Common share units | **(12) | % | ||||||||||||||||||
| Warrant units | **(12) | % | ||||||||||||||||||
| Total | **(12) | % | ||||||||||||||||||
| AltC Sponsor LLC**(12) | New York, NY | |||||||||||||||||||
| Share units | **(12) | % | ||||||||||||||||||
| Rent the Runway, Inc.** | New York, NY | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Churchill Sponsor VI LLC**(12) | New York, NY | |||||||||||||||||||
| Common share units | **(12) | % | ||||||||||||||||||
| Warrant units | **(12) | % | ||||||||||||||||||
| Total | **(12) | % | ||||||||||||||||||
| Kahoot! ASA** | Oslo, Norway | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Neutron Holdings, Inc. (d/b/a/ Lime) | San Francisco, CA | |||||||||||||||||||
| Junior Preferred shares, Series 1-D | % | |||||||||||||||||||
| Junior Preferred Convertible Note 4% Due 5/11/2027(4) | $ | % | ||||||||||||||||||
| Common Warrants, Strike Price $0.01, Expiration Date 5/11/2027 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Fullbridge, Inc. | Cambridge, MA | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Promissory Note 1.47%, Due 11/9/2021(4)(13) | $ | % | ||||||||||||||||||
| Total | % | |||||||||||||||||||
| Treehouse Real Estate Investment Trust, Inc. | Chicago, IL | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Kinetiq Holdings, LLC | Philadelphia, PA | |||||||||||||||||||
| Common shares, Class A | % | |||||||||||||||||||
| Total Non-controlled/Non-affiliate | $ | $ | % | |||||||||||||||||
See accompanying notes to consolidated financial statements.
| 9 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2022
| Portfolio Investments* | Headquarters/ Industry | Date of Initial Investment | Shares/ Principal | Cost | Fair Value | % of Net Assets | ||||||||||||||
| NON-CONTROLLED/AFFILIATE(1) | ||||||||||||||||||||
| StormWind, LLC(5) | Scottsdale, AZ | |||||||||||||||||||
| Preferred shares, Series D 8% | $ | $ | % | |||||||||||||||||
| Preferred shares, Series C 8% |
|
% | ||||||||||||||||||
| Preferred shares, Series B 8% | % | |||||||||||||||||||
| Preferred shares, Series A 8% | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV, Inc.) | San Mateo, CA | |||||||||||||||||||
| Derivative Security, Expiration Date 8/23/2024(10) | (10) | % | ||||||||||||||||||
| Convertible Promissory Note 8% Due 8/23/2024(4)(10) | $ | % | ||||||||||||||||||
| Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/2023 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Ozy Media, Inc. | Mountain View, CA | |||||||||||||||||||
| Preferred shares, Series C-2 6% | % | |||||||||||||||||||
| Preferred shares, Series B 6% | % | |||||||||||||||||||
| Preferred shares, Series A 6% | % | |||||||||||||||||||
| Preferred shares, Series Seed 6% | % | |||||||||||||||||||
| Common Warrants, Strike Price $0.01, Expiration Date 4/9/2028 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Maven Research, Inc. | San Francisco, CA | |||||||||||||||||||
| Preferred shares, Series C | % | |||||||||||||||||||
| Preferred shares, Series B | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Curious.com, Inc. | Menlo Park, CA | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Total Non-controlled/Affiliate | $ | $ | % | |||||||||||||||||
| CONTROLLED(2) | ||||||||||||||||||||
| Architect Capital PayJoy SPV, LLC** | San Francisco, CA | |||||||||||||||||||
| Membership Interest in Lending SPV*** (2) | $ | $ | $ | % | ||||||||||||||||
| Colombier Sponsor LLC**(12) | New York, NY | |||||||||||||||||||
| Class B Units | % | |||||||||||||||||||
| Class W Units | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) | Cupertino, CA | |||||||||||||||||||
| Preferred shares, Class A(9) | % | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Total Controlled | $ | $ | % | |||||||||||||||||
| Total Portfolio Investments | $ | $ | % | |||||||||||||||||
| U.S. Treasury | ||||||||||||||||||||
| U.S. Treasury bill, 0%, due 3/30/2023***(3) | $ | % | ||||||||||||||||||
| U.S. Treasury bill, 0%, due 6/29/2023***(3) | $ | % | ||||||||||||||||||
| Total | % | |||||||||||||||||||
| TOTAL INVESTMENTS | $ | $ | % | |||||||||||||||||
See accompanying notes to consolidated financial statements.
| 10 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2022
| * | |
| ** | |
| *** |
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (7) |
| 11 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2022
| (8) | |
| (9) | |
| (10) | |
| (11) | |
| (12) | |
| (13) | |
| (14) |
| 12 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2021
| Portfolio Investments* | Headquarters/ Industry | Date of Initial Investment | Shares/ Principal | Cost | Fair Value | % of Net Assets | ||||||||||||||
| NON-CONTROLLED/NON-AFFILIATE | ||||||||||||||||||||
| Course Hero, Inc. | Redwood City, CA | |||||||||||||||||||
| Preferred shares, Series A 8% | $ | $ | % | |||||||||||||||||
| Preferred shares, Series C 8% | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Forge Global, Inc. | San Francisco, CA | |||||||||||||||||||
| Common shares, Class AA | % | |||||||||||||||||||
| Junior Preferred shares | % | |||||||||||||||||||
| Junior Preferred warrants, Strike Price $12.42, Expiration Date 11/9/2025 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Blink Health, Inc. | New York, NY | |||||||||||||||||||
| Preferred shares, Series A | % | |||||||||||||||||||
| Preferred shares, Series C | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Nextdoor Holdings, Inc.** | San Francisco, CA | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Aspiration Partners, Inc. | Marina Del Rey, CA | |||||||||||||||||||
| Preferred shares, Series A | % | |||||||||||||||||||
| Preferred shares, Series C-3 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Trax Ltd.** | Singapore, Singapore | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Preferred shares, Investec series | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Orchard Technologies, Inc. | New York, NY | |||||||||||||||||||
| Preferred shares, Series D | % | |||||||||||||||||||
| Skillsoft Corp.**(18) | Nashua, NH | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Varo Money, Inc. | San Francisco, CA | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.)** | New York, NY | |||||||||||||||||||
| Common shares***(3)(16) | % | |||||||||||||||||||
| Rover Group, Inc.**(13) | Seattle, WA | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Shogun Enterprises, Inc. | Austin, TX | |||||||||||||||||||
| Preferred shares, Series B-1 | % | |||||||||||||||||||
| Preferred shares, Series B-2 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Enjoy Technology, Inc.** | Menlo Park, CA | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Neutron Holdings, Inc. (d/b/a/ Lime) | San Francisco, CA | |||||||||||||||||||
| Junior Preferred shares, Series 1-D | % | |||||||||||||||||||
| Junior Preferred Convertible Note 4% Due 5/11/2027*** | $ | % | ||||||||||||||||||
| Common Warrants, Strike Price $0.01, Expiration Date 5/11/2027 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
| 13 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| Portfolio Investments* | Headquarters/ Industry | Date of Initial Investment | Shares/ Principal | Cost | Fair Value | % of Net Assets | ||||||||||||||
| Residential Homes for Rent, LLC (d/b/a Second Avenue) | Chicago, IL | |||||||||||||||||||
| Preferred shares, Series A(6) | $ | $ | % | |||||||||||||||||
| Term loan 15%, Due 12/23/2023***(14) | $ | % | ||||||||||||||||||
| Total | % | |||||||||||||||||||
| PayJoy, Inc. | San Francisco, CA | |||||||||||||||||||
| Preferred shares | % | |||||||||||||||||||
| Rent the Runway, Inc.** | New York, NY | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Aventine Property Group, Inc.(12) | Chicago, IL | |||||||||||||||||||
| Common shares*** |
|
% | ||||||||||||||||||
| Commercial Streaming Solutions Inc. (d/b/a BettorView)(7) | Las Vegas, NV | |||||||||||||||||||
| Simple Agreement for Future Equity | % | |||||||||||||||||||
| Rebric, Inc. (d/b/a Compliable)(7) | Denver, CO | |||||||||||||||||||
| Preferred shares, Series Seed-4 | % | |||||||||||||||||||
| Palantir Lending Trust SPV I **(11) | Palo Alto, CA | |||||||||||||||||||
| Equity Participation in Underlying Collateral(3) | % | |||||||||||||||||||
| True Global Ventures 4 Plus Pte Ltd**(8) | Singapore, Singapore | |||||||||||||||||||
| Limited Partner Fund Investment | % | |||||||||||||||||||
| YouBet Technology, Inc. (d/b/a PickUp)(7) | New York, NY | |||||||||||||||||||
| Preferred shares, Series Seed-2 | % | |||||||||||||||||||
| Kahoot! ASA**(19) | Oslo, Norway | |||||||||||||||||||
| Common shares(3) | % | |||||||||||||||||||
| Churchill Sponsor VII LLC**(17) | New York, NY | |||||||||||||||||||
| Common share units | % | |||||||||||||||||||
| Warrant units | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| AltC Sponsor LLC**(17) | New York, NY | |||||||||||||||||||
| Share units | % | |||||||||||||||||||
| Churchill Sponsor VI LLC**(17) | New York, NY | |||||||||||||||||||
| Common share units | % | |||||||||||||||||||
| Warrant units | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Fullbridge, Inc. | Cambridge, MA | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Promissory Note 1.47%, Due 11/9/2021(4)(20) | $ | % | ||||||||||||||||||
| Total | 8,421,364 | — | — | % | ||||||||||||||||
| Treehouse Real Estate Investment Trust, Inc.(12) | Chicago, IL | |||||||||||||||||||
| Common shares*** | % | |||||||||||||||||||
| Kinetiq Holdings, LLC | Philadelphia, PA | |||||||||||||||||||
| Common shares, Class A | % | |||||||||||||||||||
| Total Non-controlled/Non-affiliate | $ | $ | % | |||||||||||||||||
See accompanying notes to consolidated financial statements.
| 14 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| Portfolio Investments* | Headquarters/ Industry | Date of Initial Investment | Shares/ Principal | Cost | Fair Value | % of Net Assets | ||||||||||||||
| NON-CONTROLLED/AFFILIATE(1) | ||||||||||||||||||||
| StormWind, LLC(5) | Scottsdale, AZ | |||||||||||||||||||
| Preferred shares, Series D 8% | $ | $ | % | |||||||||||||||||
| Preferred shares, Series C 8% |
|
% | ||||||||||||||||||
| Preferred shares, Series B 8% | % | |||||||||||||||||||
| Preferred shares, Series A 8% | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV, Inc.) | San Mateo, CA | |||||||||||||||||||
| Derivative Security, Expiration Date 8/23/2024(10) | (10) | % | ||||||||||||||||||
| Convertible Promissory Note 8% Due 8/23/2024(4)(10) | $ | % | ||||||||||||||||||
| Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/2022 | % | |||||||||||||||||||
| Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/2023 | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Ozy Media, Inc. | Mountain View, CA | |||||||||||||||||||
| Preferred shares, Series C-2 6% | % | |||||||||||||||||||
| Common Warrants, Strike Price $0.01, Expiration Date 4/9/2028 | % | |||||||||||||||||||
| Preferred shares, Series B 6% | % | |||||||||||||||||||
| Preferred shares, Series A 6% | % | |||||||||||||||||||
| Preferred shares, Series Seed 6% | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Maven Research, Inc. | San Francisco, CA | |||||||||||||||||||
| Preferred shares, Series C 8% | % | |||||||||||||||||||
| Preferred shares, Series B 5% | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Curious.com, Inc. | Menlo Park, CA | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Total Non-controlled/Affiliate | $ | $ | % | |||||||||||||||||
| CONTROLLED(2) | ||||||||||||||||||||
| Architect Capital PayJoy SPV, LLC** | San Francisco, CA | |||||||||||||||||||
| Membership Interest in Lending SPV***(15) | $ | $ | $ | % | ||||||||||||||||
| Colombier Sponsor LLC**(17) | New York, NY | |||||||||||||||||||
| Class B Units |
|
% | ||||||||||||||||||
| Class W Units | % | |||||||||||||||||||
| Total |
|
% | ||||||||||||||||||
| SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) | Cupertino, CA | |||||||||||||||||||
| Preferred shares, Class A(9) | % | |||||||||||||||||||
| Common shares | % | |||||||||||||||||||
| Total | % | |||||||||||||||||||
| Total Controlled | $ | $ | % | |||||||||||||||||
| Total Portfolio Investments | $ | $ | % | |||||||||||||||||
See accompanying notes to consolidated financial statements.
| * | |
| ** | |
| *** |
| 15 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (7) | |
| (8) | |
| (9) | |
| (10) | |
| (11) | |
| (12) | |
| (13) |
| 16 |
SURO CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2021
| (14) | |
| (15) | |
| (16) | |
| (17) | |
| (18) | |
| (19) | |
| (20) |
| 17 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 1—NATURE OF OPERATIONS
SuRo Capital Corp. (“we”, “us”, “our”, “Company” or “SuRo Capital”), formerly known as Sutter Rock Capital Corp. and as GSV Capital Corp. and formed in September 2010 as a Maryland corporation, is an internally-managed, non-diversified closed-end management investment company. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and has elected to be treated, and intends to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company’s date of inception was January 6, 2011, which is the date we commenced development stage activities. The Company’s common stock is currently listed on the Nasdaq Global Select Market under the symbol “SSSS” (formerly “GSVC”). Prior to November 24, 2021, our common stock traded on the Nasdaq Capital Market under the same symbol (“SSSS”). The Company began its investment operations during the second quarter of 2011.
The table below displays the Company’s subsidiaries as of December 31, 2022, which, other than GSV Capital Lending, LLC (“GCL”) and SuRo Capital Sports, LLC, are collectively referred to as the “Taxable Subsidiaries.” The Taxable Subsidiaries were formed to hold certain portfolio investments. The Taxable Subsidiaries, including their associated portfolio investments, are consolidated with the Company for accounting purposes, but have elected to be treated as separate entities for U.S. federal income tax purposes. GCL was formed to originate portfolio loan investments within the state of California and is consolidated with the Company for accounting purposes. Refer to “Note 2—Significant Accounting Policies—Basis of Consolidation” below for further detail.
| Subsidiary | Jurisdiction of Incorporation | Formation Date | Percentage Owned | |||||
| GCL | % | |||||||
| SuRo Capital Sports, LLC (“SuRo Sports”) | % | |||||||
| Subsidiaries below are referred to collectively, as the “Taxable Subsidiaries” | ||||||||
| GSVC AE Holdings, Inc. (“GAE”) | % | |||||||
| GSVC AV Holdings, Inc. (“GAV”) | % | |||||||
| GSVC SW Holdings, Inc. (“GSW”) | % | |||||||
| GSVC SVDS Holdings, Inc. (“SVDS”) | % | |||||||
The Company’s investment objective is to maximize its portfolio’s total return, principally by seeking capital gains on its equity and equity-related investments, and to a lesser extent, income from debt investments. The Company invests principally in the equity securities of what it believes to be rapidly growing venture-capital-backed emerging companies. The Company may invest in these portfolio companies through offerings of the prospective portfolio companies, transactions on secondary marketplaces for private companies, or negotiations with selling stockholders. In addition, the Company may invest in private credit and in founders equity, founders warrants, forward purchase agreements, and private investment in public equity transactions of special purpose acquisition companies. The Company may also invest on an opportunistic basis in select publicly traded equity securities or certain non-U.S. companies that otherwise meet its investment criteria, subject to any applicable limitations under the 1940 Act.
| 18 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company are prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10-K and Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is an investment company following the specialized accounting and reporting guidance specified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies. In the opinion of management, all adjustments, all of which were of a normal recurring nature, were considered necessary for the fair presentation of consolidated financial statements for the period have been included.
Basis of Consolidation
Under Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’ (“AICPA”) Audit and Accounting Guide for Investment Companies, the Company is precluded from consolidating any entity other than another investment company, a controlled operating company that provides substantially all of its services and benefits to the Company, and certain entities established for tax purposes where the Company holds a 100% interest. Accordingly, the Company’s consolidated financial statements include its accounts and the accounts of the Taxable Subsidiaries, GCL, and SuRo Sports, its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires the Company’s management to make a number of significant estimates. These include estimates of the fair value of certain assets and liabilities and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reporting period. It is likely that changes in these estimates may occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ materially from such estimates.
Uncertainties and Risk Factors
The Company is subject to a number of risks and uncertainties in the nature of its operations, as well as vulnerability due to certain concentrations. Refer to “Risk Factors” in Part I, Item 1A of this Form 10-K for a detailed discussion of the risks and uncertainties inherent in the nature of the Company’s operations. Refer to “Note 4—Investments at Fair Value” for an overview of the Company’s industry and geographic concentrations.
Investments at Fair Value
The Company applies fair value accounting in accordance with GAAP and the AICPA’s Audit and Accounting Guide for Investment Companies. The Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date.
| 19 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Level 2—Valuations based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
Level 3—Valuations based on unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. The majority of the Company’s investments are Level 3 investments and are subject to a high degree of judgment and uncertainty in determining fair value.
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within the Level 3 table set forth in “Note 4—Investments at Fair Value” may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the measurement period in which the reclassifications occur. Refer to “Levelling Policy” below for a detailed discussion of the levelling of the Company’s financial assets or liabilities and events that may cause a reclassification within the fair value hierarchy.
Securities for which market quotations are readily available on an exchange are valued at the most recently available closing price of such security as of the valuation date, unless there are legal or contractual restrictions on the sale or use of such security that under ASC 820-10-35 should be incorporated into the security’s fair value measurement as a characteristic of the security that would transfer to market participants who would buy the security. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined to be adequate, the Company uses the quote obtained.
Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of management, our Board of Directors or the valuation committee of the Company’s Board of Directors (the “Valuation Committee”), does not reliably represent fair value, shall each be valued as follows:
| 1. | The quarterly valuation process begins with each portfolio company or investment being initially valued by the internal investment professionals responsible for the portfolio investment; | |
| 2. | Preliminary valuation conclusions are then documented and discussed with senior management; | |
| 3. | For all investments for which there are no readily available market quotations, the Valuation Committee engages an independent third-party valuation firm to conduct independent appraisals, review management’s preliminary valuations and make its own independent assessment; | |
| 4. | The Valuation Committee applies the appropriate valuation methodology to each portfolio asset in a consistent manner, considers the inputs provided by management and the independent third-party valuation firm, discusses the valuations and recommends to the Company’s Board of Directors a fair value for each investment in the portfolio; and | |
| 5. | The Company’s Board of Directors then discusses the valuations recommended by the Valuation Committee and determines in good faith the fair value of each investment in the portfolio. |
| 20 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
In valuing the Company’s investments in venture investment funds (“Venture Investment Funds”), the Company applies the practical expedient provided by the ASC Topic 820 relating to investments in certain entities that calculate net asset value (“NAV”) per share (or its equivalent). ASC Topic 820 permits an entity holding investments in certain entities that either are investment companies, or have attributes similar to an investment company, and calculate NAV per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment.
In making a good faith determination of the fair value of investments, the Board applies valuation methodologies consistent with industry practice. Valuation methods utilized include, but are not limited to, the following: comparisons to prices from secondary market transactions; venture capital financings; public offerings; purchase or sales transactions; analysis of financial ratios and valuation metrics of portfolio companies that issued such private equity securities to peer companies that are public; analysis of the portfolio company’s most recent financial statements, forecasts and the markets in which the portfolio company does business, and other relevant factors. The Company assigns a weighting based upon the relevance of each method to assist the Board in determining the fair value of each investment.
For investments that are not publicly traded or that do not have readily available market quotations, the Valuation Committee generally engages an independent valuation firm to provide an independent valuation, which the Company’s Board of Directors considers, among other factors, in making its fair value determinations for these investments. For the current and prior fiscal year, the Valuation Committee engaged an independent valuation firm to perform valuations of 100% of the Company’s investments for which there were no readily available market quotations.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements.
Equity Investments
Equity investments for which market quotations are readily available in an active market are generally valued at the most recently available closing market prices and are classified as Level 1 assets. Equity investments with readily available market quotations that are subject to sales restrictions due to an initial public offering (“IPO”) by the portfolio company will be classified as Level 1. Any other equity investments with readily available market quotations that are subject to sales restrictions that would transfer to market participants who would buy the security may be valued at a discount for a lack of marketability (“DLOM”), to the most recently available closing market prices depending upon the nature of the sales restriction. These investments are generally classified as Level 2 assets. The DLOM used is generally based upon the market value of publicly traded put options with similar terms.
The fair values of the Company’s equity investments for which market quotations are not readily available are determined based on various factors and are classified as Level 3 assets. To determine the fair value of a portfolio company for which market quotations are not readily available, the Board applies the appropriate respective valuation methodology for the asset class or portfolio holding, which may involve analyzing the relevant portfolio company’s most recently available historical and projected financial results, public market comparables, and other factors. The Board may also consider other events, including the transaction in which the Company acquired its securities, subsequent equity sales by the portfolio company, and mergers or acquisitions affecting the portfolio company. In addition, the Board may consider the trends of the portfolio company’s basic financial metrics from the time of its original investment until the measurement date, with material improvement of these metrics indicating a possible increase in fair value, while material deterioration of these metrics may indicate a possible reduction in fair value.
| 21 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
In determining the fair value of equity or equity-linked securities (including warrants to purchase common or preferred stock) in a portfolio company, the Board considers the rights, preferences and limitations of such securities. In cases where a portfolio company’s capital structure includes multiple classes of preferred and common stock and equity-linked securities with different rights and preferences, the Company may use an option pricing model to allocate value to each equity-linked security, unless it believes a liquidity event such as an acquisition or a dissolution is imminent, or the portfolio company is unlikely to continue as a going concern. When equity-linked securities expire worthless, any cost associated with these positions is recognized as a realized loss on investments in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. In the event these securities are exercised into common or preferred stock, the cost associated with these securities is reassigned to the cost basis of the new common or preferred stock. These conversions are noted as non-cash operating items on the Consolidated Statements of Cash Flows.
Debt Investments
Given the nature of the Company’s current debt investments (excluding U.S. Treasuries), principally convertible and promissory notes issued by venture-capital-backed portfolio companies, these investments are classified as Level 3 assets because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. The Company’s debt investments are valued at estimated fair value as determined in good faith by the Company’s Board of Directors.
Options
The Company’s Board of Directors determines the fair value of options based on methodologies that can include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate. These investments are classified as Level 3 assets because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. The Company’s options are valued at estimated fair value as determined by the Company’s Board of Directors.
Special Purpose Acquisition Companies
The Company’s Board of Directors measures its Special Purpose Acquisition Company (“SPAC”) investments at fair value, which is equivalent to cost until a SPAC transaction is announced. After a SPAC transaction is announced, the Company’s Board of Directors will determine the fair value of SPAC investments based on fair value analyses that can include option pricing models, probability-weighted expected return method analyses and other techniques as deemed appropriate. Upon completion of the SPAC transaction, the Board utilizes the public share price of the entity, less a DLOM if there are restrictions on selling. The Company’s SPAC investments are valued at estimated fair value as determined in good faith by the Company’s Board of Directors.
Portfolio Company Investment Classification
The Company is a non-diversified company within the meaning of the 1940 Act. The Company classifies its investments by level of control. As defined in the 1940 Act, control investments are those where the investor retains the power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual directly or indirectly owns beneficially more than 25% of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist when a company or individual directly or indirectly owns, controls or holds the power to vote 5% or more of the outstanding voting securities of a portfolio company. Refer to the Consolidated Schedules of Investments as of December 31, 2022 and December 31, 2021, for details regarding the nature and composition of the Company’s investment portfolio.
Levelling Policy
The portfolio companies in which the Company invests may offer their shares in IPOs. The Company’s shares in such portfolio companies are typically subject to lock-up agreements for 180 days following the IPO. Upon the IPO date, the Company transfers its investment from Level 3 to Level 1 due to the presence of an active market, or Level 2 if limited by the lock-up agreement. The Company prices the investment at the closing price on a public exchange as of the measurement date. In situations where there are lock-up restrictions, as well as legal or contractual restrictions on the sale or use of such security that under ASC 820-10-35 should be incorporated into the security’s fair value measurement as a characteristic of the security that would transfer to market participants who would buy the security, the Company will classify the investment as Level 2 subject to an appropriate DLOM to reflect the restrictions upon sale. The Company transfers investments between levels based on the fair value at the beginning of the measurement period in accordance with FASB ASC 820. For investments transferred out of Level 3 due to an IPO, the Company transfers these investments based on their fair value at the IPO date.
| 22 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Securities Transactions
Securities transactions are accounted for on the date the transaction for the purchase or sale of the securities is entered into by the Company (i.e., trade date). Securities transactions outside conventional channels, such as private transactions, are recorded as of the date the Company obtains the right to demand the securities purchased or to collect the proceeds from a sale and incurs an obligation to pay for securities purchased or to deliver securities sold, respectively.
Valuation of Other Financial Instruments
The carrying amounts of the Company’s other, non-investment financial instruments, consisting of cash, receivables, accounts payable, and accrued expenses, approximate fair value due to their short-term nature.
Cash
The Company places its cash primarily with U.S. Bank Trust Company, National Association, and may place cash with other high-quality financial institutions. The cash held in these accounts may exceed the Federal Deposit Insurance Corporation insured limit. The Company believes the risk of loss associated with any uninsured balance is remote.
Escrow Proceeds Receivable
A
portion of the proceeds from the sale of portfolio investments are held in escrow as a recourse for indemnity claims that may arise under
the sale agreement or other related transaction contingencies. Amounts held in escrow are held at estimated realizable value and included
in net realized gains (losses) on investments in the Consolidated Statements of Operations for the period in which they occurred and
are adjusted as needed. Any remaining escrow proceeds balances from these transactions reasonably expected to be received are reflected
on the Consolidated Statement of Assets and Liabilities as escrow proceeds receivable. Escrow proceeds receivable resulting from contingent
consideration are to be recognized when the amount of the contingent consideration becomes realized or realizable. As of December 31,
2022 and December 31, 2021, the Company had $
Deferred Financing Costs
The
Company records origination costs related to lines of credit as deferred financing costs. These costs are deferred and amortized as part
of interest expense using the straight-line method over the respective life of the line of credit. For modifications to a line of credit,
any unamortized origination costs are expensed. Included within deferred financing costs are offering costs incurred relating to the
Company’s shelf registration statement on Form N-2. The Company defers these offering costs until capital is raised pursuant to
the shelf registration statement or until the shelf registration statement expires. For equity capital raised, the offering costs reduce
paid-in capital resulting from the offering. For debt capital raised, the associated offering costs are amortized over the life of the
debt instrument. As of December 31, 2022 and December 31, 2021, the Company had deferred financing costs of $
| December 31, 2022 | December 31, 2021 | |||||||
| Deferred debt issuance costs | $ | $ | ||||||
| Deferred offering costs | ||||||||
| Deferred Financing Costs | $ | $ | ||||||
| 23 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Operating Leases & Related Deposits
The
Company accounts for its operating leases as prescribed by ASC 842, Leases, which requires lessees to recognize a right-of-use
asset on the balance sheet, representing its right to use the underlying asset for the lease term, and a corresponding lease liability
for all leases with terms greater than 12 months. The lease expense is presented as a single lease cost that is amortized on a straight-line
basis over the life of the lease. Non-lease components (maintenance, property tax, insurance and parking) are not included in the lease
cost. On June 3, 2019, the Company entered a
Stock-based Compensation
Using the fair value recognition provisions as prescribed by ASC 718, Stock Compensation, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the appropriate service period. Determining the fair value of stock-based awards requires considerable judgment, including estimating the expected term of stock options and the expected volatility of our stock price. Differences between actual results and these estimates could have a material effect on our financial results. Forfeitures are accounted for as they occur. Refer to “Note 11—Stock-Based Compensation” for further detail.
Revenue Recognition
The Company recognizes gains or losses on the sale of investments using the specific identification method. The Company recognizes interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. The Company recognizes dividend income on the ex-dividend date.
Investment Transaction Costs and Escrow Deposits
Commissions
and other costs associated with an investment transaction, including legal expenses not reimbursed by the portfolio company, are included
in the cost basis of purchases and deducted from the proceeds of sales. The Company makes certain acquisitions on secondary markets,
which may involve making deposits to escrow accounts until certain conditions are met, including the underlying private company’s
right of first refusal. If the underlying private company does not exercise or assign its right of first refusal and all other conditions
are met, then the funds in the escrow account are delivered to the seller and the account is closed. Such transactions would be reflected
on the Consolidated Statement of Assets and Liabilities as escrow deposits. As of December 31, 2022 and December 31, 2021, the Company
had
Unrealized Appreciation or Depreciation of Investments
Unrealized appreciation or depreciation is calculated as the difference between the fair value of the investment and the cost basis of such investment.
| 24 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
U.S. Federal and State Income Taxes
The Company elected to be treated as a RIC under Subchapter M of the Code beginning with its taxable year ended December 31, 2014, has qualified to be treated as a RIC for subsequent taxable years and intends to continue to operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least the sum of 90% of our investment company taxable income (“ICTI”), including payment-in-kind interest income, as defined by the Code, and 90% of our net tax-exempt interest income (which is the excess of its gross tax-exempt interest income over certain disallowed deductions) for each taxable year (the “Annual Distribution Requirement”). Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward into the next tax year ICTI in excess of current year dividend distributions. Any such carryforward ICTI must be distributed on or before December 31 of the subsequent tax year to which it was carried forward.
If the Company meets the Annual Distribution Requirement, but does not distribute (or is not deemed to have distributed) each calendar year a sum of (1) 98% of its net ordinary income for each calendar year, (2) 98.2% of its capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the “Excise Tax Avoidance Requirement”), it generally will be required to pay an excise tax equal to 4% of the amount by which the Excise Tax Avoidance Requirement exceeds the distributions for the year. To the extent that the Company determines that its estimated current year annual taxable income will exceed estimated current year dividend distributions from such taxable income, the Company will accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.
So long as the Company qualifies and maintains its tax treatment as a RIC, it generally will not be subject to U.S. federal and state income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the RIC will represent obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company. Included in the Company’s consolidated financial statements, the Taxable Subsidiaries are taxable subsidiaries, regardless of whether the Company is a RIC. These Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expenses as a result of their ownership of the portfolio companies. Such income tax expenses and deferred taxes, if any, will be reflected in the Company’s consolidated financial statements.
If it is not treated as a RIC, the Company will be taxed as a regular corporation (a “C corporation”) under Subchapter C of the Code for such taxable year. If the Company has previously qualified as a RIC but is subsequently unable to qualify for treatment as a RIC, and certain amelioration provisions are not applicable, the Company would be subject to tax on all of its taxable income (including its net capital gains) at regular corporate rates. The Company would not be able to deduct distributions to stockholders, nor would it be required to make distributions. Distributions, including distributions of net long-term capital gain, would generally be taxable to its stockholders as ordinary dividend income to the extent of the Company’s current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate stockholders would be eligible to claim a dividend received deduction with respect to such dividend; non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of the Company’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s adjusted tax basis, and any remaining distributions would be treated as a capital gain. In order to requalify as a RIC, in addition to the other requirements discussed above, the Company would be required to distribute all of its previously undistributed earnings attributable to the period it failed to qualify as a RIC by the end of the first year that it intends to requalify for tax treatment as a RIC. If the Company fails to requalify for tax treatment as a RIC for a period greater than two taxable years, it may be subject to regular corporate tax on any net built-in gains with respect to certain of its assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if the Company had been liquidated) that it elects to recognize on requalification or when recognized over the next five years. The Company was taxed as a C Corporation for its 2012 and 2013 taxable years. Refer to “Note 9—Income Taxes” for further details.
| 25 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The Company elected to be treated as a RIC for the taxable year ended December 31, 2014 in connection with the filing of its 2014 tax return. As a result, the Company was required to pay a corporate-level U.S. federal income tax on the amount of the net built-in gains in its assets (the amount by which the net fair market value of the Company’s assets exceeds the net adjusted basis in its assets) either (1) as of the date it converted to a RIC (i.e., the beginning of the first taxable year that the Company qualifies as a RIC, which would be January 1, 2014), or (2) to the extent that the Company recognized such net built-in gains during the five-year recognition period beginning on the date of conversion. As of January 1, 2014, the Company had net unrealized built-in gains, but did not incur a built-in-gains tax for the 2014 tax year due to the fact that there were sufficient net capital loss carryforwards to completely offset recognized built-in gains as well as available net operating losses. The five-year recognition period ended on December 31, 2018.
Net change in net assets resulting from operations per basic common share is computed using the weighted-average number of shares outstanding for the period presented. Diluted net change in net assets resulting from operations per common share is computed by dividing net increase/(decrease) in net assets resulting from operations for the period adjusted to include the pre-tax effects of interest incurred on potentially dilutive securities, by the weighted-average number of common shares outstanding plus any potentially dilutive shares outstanding during the period. The Company used the if-converted method in accordance with FASB ASC 260, Earnings Per Share (“ASC 260”) to determine the number of potentially dilutive shares outstanding. Refer to “Note 6—Net Increase in Net Assets Resulting from Operations per Common Share—Basic and Diluted” for further detail.
Recently Issued or Adopted Accounting Standards
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company does not anticipate the new standard will have a material impact to the consolidated financial statements and related disclosures.
In June 2022, the FASB issued ASU No. 2022-03 “Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” This change prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. The standard is effective for annual periods beginning after December 15, 2023, and should be applied prospectively. Early adoption is permitted. The adoption of ASU 2022-03 is not expected to have a material impact on the Company’s future financial statements.
In April 2020, as part of the Securities Offering Reform for Closed-End Investment Companies final rule, the Securities and Exchange Commission (“SEC”) adopted certain structured data reporting requirements for BDCs to submit financial statement information using Inline eXtensible Business Reporting Language (XBRL) format to the extent required of operating companies. BDCs that are eligible to file a short-form registration statement will be subject to the above structuring requirements with respect to Forms filed on or after August 1, 2022. The Company adopted the XBRL format beginning August 1, 2022.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which made various technical changes and corrections intended to provide clarifications to existing guidance, as well as simplifications to wording or structure of existing guidance. The Company adopted the modified disclosure requirements during the period ended March 31, 2021.
| 26 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
In December 2020, the SEC adopted Rule 2a-5, which established requirements for satisfying a fund board’s obligation to determine fair value in good faith for purposes of the 1940 Act. The rule permits boards to assign the determination of fair value to a “valuation designee,” who may be the fund’s investment adviser or, if the fund is internally managed, an officer of the fund. The rule also defines a market quotation as “readily available” only when that quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date. In connection with the adoption of new Rule 2a-5, the SEC also adopted new Rule 31a-4, which requires funds to maintain documentation to support fair value determinations and documentation related to the designation of the valuation designee. The Company adopted amended valuation policies and procedures to comply with new Rule 2a-5 and Rule 31a-4 in advance of the compliance date of September 8, 2022. The Company did not designate a valuation designee, and the Board retains the sole responsibility to determine fair value in good faith under the 1940 Act.
In December 2021, the SEC published Staff Accounting Bulletin No. 120 (“SAB 120”) to provide accounting and disclosure guidance for stock compensation awards made to executives and conforming amendments to the Staff Accounting Bulletin Series to align with the current authoritative accounting guidance in ASC 718, Compensation – Stock Compensation. In part, SAB 120 requires that an entity disclose how it determines the current price of underlying shares for grant-date fair value, the policy for when an adjustment to the share price is required, how it determines the amount of an adjustment to the share price and any significant assumptions used in determining an adjustment to the share price. SAB 120 is effective for all stock compensation awards issued after December 1, 2021. The Company is in compliance with the guidance pursuant to SAB 120 for any share-based compensation disclosures. See “Note 11 – Stock-Based Compensation” for further discussion of the Company’s policies and procedures regarding share-based compensation. The Company does not expect the impact of SAB 120 to be material to the consolidated financial statements and the notes thereto.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.
NOTE 3—RELATED-PARTY ARRANGEMENTS
Consulting Agreement
On and effective March 12, 2019, we entered into a Consulting Agreement (the “Consulting Agreement”) with Michael T. Moe, the former Chairman of our Board of Directors and the Chief Executive Officer and Chief Investment Officer of GSV Asset Management, our former investment adviser, for the purpose of assisting us with certain transition services following the termination of the Company’s Investment Advisory Agreement and our internalization. Pursuant to the Consulting Agreement, Mr. Moe provided certain transition services to us related to our existing portfolio investments for which Mr. Moe previously had oversight in his role as the Chief Executive Officer and Chief Investment Officer of GSV Asset Management. Such transition services included providing information to us regarding such portfolio companies, including as a member of a portfolio company’s board of directors, assisting with the transition of portfolio company board seats as requested by us, making appropriate introductions to representatives of portfolio companies, and providing other similar types of services that we may reasonably request.
The
term of the Consulting Agreement commenced on March 12, 2019 and continued for eighteen months in accordance with its terms. Pursuant
to the Consulting Agreement, we paid Mr. Moe a total amount equal to $
For
the years ended December 31, 2022, 2021, and 2020, the Company incurred $
Amended and Restated Trademark License Agreement
On and effective March 12, 2019, we entered into an Amended and Restated Trademark License Agreement (the “Amended and Restated License Agreement”) with GSV Asset Management in connection with the termination of the Investment Advisory Agreement and the Company’s internalization.
| 27 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
GSV Asset Management is the owner of the trade name “GSV”, and other state or unregistered “GSV” marks, including the trading symbol “GSVC” (collectively, the “Licensed Marks”). Pursuant to the Amended and Restated License Agreement, GSV Asset Management granted us a non-transferable, non-sublicensable, and non-exclusive right and license to use the Licensed Marks, solely in connection with the operation of our existing business.
The
term of the Amended and Restated License Agreement commenced on March 12, 2019 and continued for eighteen months in accordance with its
terms. Pursuant to the Amended and Restated License Agreement, we paid GSV Asset Management a total amount equal to $
For
the years ended December 31, 2022, 2021 and 2020, the Company incurred $
Other Arrangements
The Company’s executive officers and directors serve or may serve as officers, directors, or managers of entities that operate in a line of business similar to the Company’s, including new entities that may be formed in the future. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of the Company or the Company’s stockholders.
The 1940 Act prohibits the Company from participating in certain negotiated co-investments with certain affiliates unless it receives an order from the SEC permitting it to do so. As a BDC, the Company is prohibited under the 1940 Act from participating in certain transactions with certain of its affiliates without the prior approval of the Board of Directors, including its independent directors, and, in some cases, the SEC. The affiliates with which the Company may be prohibited from transacting include its officers, directors, and employees and any person controlling or under common control with the Company, subject to certain exceptions.
In the ordinary course of business, the Company may enter into transactions with portfolio companies that may be considered related-party transactions. To ensure that the Company does not engage in any prohibited transactions with any persons affiliated with the Company, the Company has implemented certain written policies and procedures whereby the Company’s executive officers screen each of the Company’s transactions for any possible affiliations between the proposed portfolio investment, the Company, companies controlled by the Company, and the Company’s executive officers and directors.
The
Company’s investment in Churchill Sponsor VI LLC, the sponsor of Churchill Capital Corp. VI, a special purpose acquisition company,
constituted a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Mark D. Klein, the Company’s Chairman,
Chief Executive Officer and President, has a non-controlling interest in the entity that controls Churchill Sponsor VI LLC, and is a
non-controlling member of the board of directors of Churchill Capital Corp VI. The Company’s investment in Churchill Sponsor VII
LLC, the sponsor of Churchill Capital Corp. VII, a special purpose acquisition company, also constituted a “remote-affiliate”
transaction for purposes of the 1940 Act in light of the fact that Mr. Klein has a non-controlling interest in the entity that controls
Churchill Sponsor VII LLC, and is a non-controlling member of the board of directors of Churchill Capital Corp. VII. In addition, Mr.
Klein’s brother, Michael Klein, is a control person of such Churchill entities. As of December 31, 2022, the fair values of the
Company’s investments in Churchill Sponsor VI LLC and Churchill Sponsor VII LLC were $
The
Company’s investment in Skillsoft Corp. (f/k/a Software Luxembourg Holding S.A.) (“Skillsoft”) constituted a “remote-affiliate”
transaction for purposes of the 1940 Act in light of the fact that Mr. Klein has a non-controlling interest in the entity that controls
Churchill Sponsor II LLC, the sponsor of Churchill Capital Corp. II, a special purpose acquisition company, and is a non-controlling member
of the board of directors of Churchill Capital Corp. II, through which the Company executed a private investment in public equity transaction
in order to acquire common shares of Skillsoft alongside the merger of Skillsoft and Churchill Capital Corp II. In addition, Mr. Klein’s
brother, Michael Klein, is a control person of such Churchill entities. As of December 31, 2022, the fair value of the Company’s
investment in Skillsoft Corp. was $
| 28 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The Company’s initial investment in Shogun Enterprises, Inc. on February
26, 2021 constituted a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Keri Findley,
a former senior managing director of the Company until her departure on March 9, 2022, was at the time of investment, a non-controlling
member of the board of directors of Shogun Enterprises, Inc., and held a minority equity interest in such portfolio company. The Company’s
investment in Architect Capital PayJoy SPV, LLC also constituted a “remote-affiliate” transaction for purposes of the 1940
Act in light of the fact that Ms. Findley, at the time of investment, was a non-controlling member of the board of directors of the investment
manager to Architect Capital PayJoy SPV, LLC, and held a minority equity interest in such investment manager. As of December 31, 2022,
the fair values of the Company’s remote-affiliate investments in Shogun Enterprises, Inc. (d/b/a Hearth) and Architect Capital PayJoy
SPV, LLC were $
In addition, Ms. Findley and Claire Councill, a former investment professional
of the Company until her departure on April 15, 2022, are non-controlling members of the board of directors of Colombier Acquisition Corp.,
a special purpose acquisition company, which is sponsored by Colombier Sponsor LLC, one of the Company’s portfolio companies. The
Company’s investment in AltC Sponsor LLC, the sponsor of AltC Acquisition Corp, a special purpose acquisition company, constituted
a “remote-affiliate” transaction for purposes of the 1940 Act in light of the fact that Mr. Klein has a non-controlling interest
in one of the entities that controls AltC Sponsor LLC, and Allison Green, the Company’s Chief Financial Officer, Chief Compliance
Officer, Treasurer and Secretary, is a non-controlling member of the board of directors of AltC Acquisition Corp. As of December 31, 2022,
the fair values of the Company’s aggregate investments in each of Colombier Sponsor LLC and AltC Sponsor LLC were $
NOTE 4—INVESTMENTS AT FAIR VALUE
Investment Portfolio Composition
The
Company’s investments in portfolio companies consist primarily of equity securities (such as common stock, preferred stock and
options to purchase common and preferred stock) and to a lesser extent, debt securities, issued by private and publicly traded companies.
The Company may also, from time to time, invest in U.S. Treasury securities. Non-portfolio investments represent investments in U.S.
Treasury securities. As of December 31, 2022, the Company had
| 29 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The following tables summarize the composition of the Company’s investment portfolio by security type at cost and fair value as of December 31, 2022 and December 31, 2021:
| December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Cost | Fair Value | Percentage of Net Assets | Cost | Fair Value | Percentage of Net Assets | |||||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||||||||||
| Preferred Stock | $ | $ | % | $ | $ | % | ||||||||||||||||||
| Common Stock | % | % | ||||||||||||||||||||||
| Debt Investments | % | % | ||||||||||||||||||||||
| Options | % | % | ||||||||||||||||||||||
| Total Private Portfolio Companies | % | % | ||||||||||||||||||||||
| Publicly Traded Portfolio Companies | ||||||||||||||||||||||||
| Common Stock | % | % | ||||||||||||||||||||||
| Options | % | % | ||||||||||||||||||||||
| Total Publicly Traded Portfolio Companies | % | % | ||||||||||||||||||||||
| Total Portfolio Investments | % | % | ||||||||||||||||||||||
| Non-Portfolio Investments | ||||||||||||||||||||||||
| U.S. Treasury Bills | % | % | ||||||||||||||||||||||
| Total Investments | $ | $ | % | $ | $ | % | ||||||||||||||||||
The geographic and industrial compositions of the Company’s portfolio at fair value as of December 31, 2022 and December 31, 2021 were as follows:
| As of December 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
| Fair Value | Percentage of Portfolio | Percentage of Net Assets | Fair Value | Percentage of Portfolio | Percentage of Net Assets | |||||||||||||||||||
| Geographic Region | ||||||||||||||||||||||||
| West | $ | % | % | $ | % | % | ||||||||||||||||||
| Northeast | % | % | % | % | ||||||||||||||||||||
| Midwest | % | % | % | % | ||||||||||||||||||||
| International | % | % | % | % | ||||||||||||||||||||
| Total | $ | % | % | $ | % | % | ||||||||||||||||||
| As of December 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
| Fair Value | Percentage of Portfolio | Percentage of Net Assets | Fair Value | Percentage of Portfolio | Percentage of Net Assets | |||||||||||||||||||
| Industry | ||||||||||||||||||||||||
| Education Technology | $ | % | % | $ | % | % | ||||||||||||||||||
| Financial Technology | % | % | % | % | ||||||||||||||||||||
| Marketplaces | % | % | % | % | ||||||||||||||||||||
| Big Data/Cloud | % | % | % | % | ||||||||||||||||||||
| Social/Mobile | % | % | % | % | ||||||||||||||||||||
| Sustainability | % | % | % | % | ||||||||||||||||||||
| Total | $ | % | % | $ | % | % | ||||||||||||||||||
| 30 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The table below details the composition of the Company’s industrial themes presented in the preceding tables:
| Industry Theme | Industry | |
| Education Technology | Business Education | |
| Education Software | ||
| Interactive Learning | ||
| Online Education | ||
| Big Data/Cloud | Data Analysis | |
| Gaming Licensing | ||
| Retail Technology | ||
| Geolocation Technology | ||
| Warehouse Automation | ||
| Marketplaces | Global Innovation Platform | |
| Knowledge Networks | ||
| Micromobility | ||
| On-Demand Commerce | ||
| Peer-to-Peer Pet Services | ||
| Pharmaceutical Technology | ||
| Real Estate Platform | ||
| Subscription Fashion Rental | ||
| Financial Technology | Cannabis REIT | |
| Financial Services | ||
| Home Improvement Finance | ||
| Mobile Finance Technology | ||
| Online Marketplace Finance | ||
| Gaming Technology | ||
| Special Purpose Acquisition Company | ||
| Venture Investment Fund | ||
| Social/Mobile | Digital Media Platform | |
| Digital Media Technology | ||
| Interactive Media & Services | ||
| Mobile Access Technology | ||
| Social Data Platform | ||
| Fitness Technology | ||
| Social Networking | ||
| Sustainability | Clean Technology |
| 31 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Investment Valuation Inputs
The fair values of the Company’s investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of December 31, 2022 and December 31, 2021 are as follows:
| As of December 31, 2022 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Securities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| Investments at Fair Value | ||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||
| Preferred Stock | $ | $ | $ | $ | ||||||||||||
| Common Stock | ||||||||||||||||
| Debt Investments | ||||||||||||||||
| Options | ||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||
| Publicly Traded Portfolio Companies | ||||||||||||||||
| Common Stock | ||||||||||||||||
| Non-Portfolio Investments | ||||||||||||||||
| U.S. Treasury bills | ||||||||||||||||
| Total Investments at Fair Value | $ | $ | $ | $ | ||||||||||||
| As of December 31, 2021 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Securities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| Investments at Fair Value | ||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||
| Preferred Stock | $ | $ | $ | $ | ||||||||||||
| Common Stock | ||||||||||||||||
| Debt Investments | ||||||||||||||||
| Options | ||||||||||||||||
| Private Portfolio Companies | ||||||||||||||||
| Publicly Traded Portfolio Companies | ||||||||||||||||
| Common Stock | ||||||||||||||||
| Options | ||||||||||||||||
| Publicly Traded Portfolio Companies | ||||||||||||||||
| Total Investments at Fair Value | $ | $ | $ | $ | ||||||||||||
| 32 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Significant Unobservable Inputs for Level 3 Assets and Liabilities
In accordance with FASB ASC 820, Fair Value Measurement, the tables below provide quantitative information about the Company’s fair value measurements of its Level 3 assets as of December 31, 2022 and December 31, 2021. In addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The tables below are not intended to be all-inclusive, but rather provide information on the significant Level 3 inputs as they relate to the Company’s fair value measurements. To the extent an unobservable input is not reflected in the tables below, such input is deemed insignificant with respect to the Company’s Level 3 fair value measurements as of December 31, 2022 and December 31, 2021. Significant changes in the inputs in isolation would result in a significant change in the fair value measurement, depending on the input and the materiality of the investment. Refer to “Note 2—Significant Accounting Policies—Investments at Fair Value” for more detail.
As of December 31, 2022
| Asset | Fair Value | Valuation Approach/ Technique(1) | Unobservable Inputs(2) | Range (Weighted Average)(3) | ||||||||
| Common stock in private companies | $ | |||||||||||
| Preferred stock in private companies | $ | |||||||||||
| Debt investments | $ | |||||||||||
| Options | $ | |||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) |
| 33 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
As of December 31, 2021
| Asset | Fair Value | Valuation Approach/ Technique(1) | Unobservable Inputs(2) | Range (Weighted Average)(3) | ||||||||
| Common stock in private companies | $ | |||||||||||
| Preferred stock in private companies | $ | |||||||||||
| Debt investments | $ | |||||||||||
| Options | $ | |||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) |
| 34 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The aggregate values of Level 3 assets and liabilities changed during the year ended December 31, 2022 as follows:
| Year Ended December 31, 2022 | ||||||||||||||||||||
Common Stock | Preferred Stock | Debt Investments | Options | Total | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Fair Value as of December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Transfers out of Level 3(1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Purchases, capitalized fees and interest | ||||||||||||||||||||
| Sales/Maturity of investments | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Realized gains/(losses) | ( | ) | ||||||||||||||||||
| Net change in unrealized appreciation/(depreciation) included in earnings | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Fair Value as of December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Net change in unrealized appreciation/ (depreciation) of Level 3 investments still held as of December 31, 2022 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||
| (1) |
| Portfolio Company | Conversion from | Conversion to | ||
| Forge Global, Inc. | Common Shares, Class AA Junior Preferred Shares Junior Preferred Warrants, Strike Price $, Expiration Date | Public Common shares (Level 2) Common warrants, Strike Price $, Expiration Date |
The aggregate values of Level 3 assets and liabilities changed during the year ended December 31, 2021 as follows:
| Year Ended December 31, 2021 | ||||||||||||||||||||
Common Stock | Preferred Stock | Debt Investments | Options | Total | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Fair Value as of December 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||
| Transfers out of Level 3(1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Purchases, capitalized fees and interest | ||||||||||||||||||||
| Sales/Maturity of investments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Realized gains/(losses) | ( | ) | ||||||||||||||||||
| Net change in unrealized appreciation/(depreciation) included in earnings | ( | ) | ||||||||||||||||||
| Fair Value as of December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Net change in unrealized appreciation/ (depreciation) of Level 3 investments still held as of December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| (1) |
| Portfolio Company | Conversion from | Conversion to | ||
| Coursera, Inc. | Preferred shares, Series F Preferred shares, Series B | Public Common shares (Level 2) | ||
| Churchill Capital Corp. II | Common shares, Class A | Skillsoft Corp. Public Common shares (Level 2) | ||
| NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.) | Common shares | Public Common shares (Level 2) | ||
| A Place for Rover, Inc. (f/k/a DogVacay, Inc.) | Common shares | Rover Group, Inc. Public Common shares (Level 2) | ||
| Enjoy Technology, Inc. | Preferred shares, Series B Preferred shares, Series A Convertible Promissory Note | Public Common shares (Level 2) | ||
| Nextdoor Holdings, Inc. | Common shares | Public Common shares (Level 2) | ||
| Rent the Runway, Inc. | Preferred shares, Series G | Public Common shares (Level 2) |
| 35 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Schedule of Investments In, and Advances to, Affiliates
Transactions during the year ended December 31, 2022 involving the Company’s controlled investments and non-controlled/affiliate investments were as follows:
| Type/Industry/Portfolio Company/Investment | Principal/ Quantity | Interest, Fees, or Dividends Credited in Income | Fair Value at December 31, 2021 | Transfer In/ (Out) | Purchases, Capitalized Fees, Interest and Amortization | Sales | Realized Gains/(Losses) | Unrealized Gains/(Losses) | Fair Value at December 31, 2022 | Percentage of Net Assets | ||||||||||||||||||||||||||||||
| CONTROLLED INVESTMENTS*(2) | ||||||||||||||||||||||||||||||||||||||||
| Options | ||||||||||||||||||||||||||||||||||||||||
| Special Purpose Acquisition Company | ||||||||||||||||||||||||||||||||||||||||
| Colombier Sponsor LLC**–Class W Units(7) | $ | $ | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||
| Total Options | % | |||||||||||||||||||||||||||||||||||||||
| Preferred Stock | ||||||||||||||||||||||||||||||||||||||||
| Clean Technology | ||||||||||||||||||||||||||||||||||||||||
| SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Preferred shares, Class A(4) | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Preferred Stock | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Clean Technology | ||||||||||||||||||||||||||||||||||||||||
| SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Common shares | % | |||||||||||||||||||||||||||||||||||||||
| Mobile Finance Technology | ||||||||||||||||||||||||||||||||||||||||
| Architect Capital PayJoy SPV, LLC**–Membership Interest in Lending SPV*** | $ | % | ||||||||||||||||||||||||||||||||||||||
| Special Purpose Acquisition Company | ||||||||||||||||||||||||||||||||||||||||
| Colombier Sponsor LLC**–Class B Units(7) | % | |||||||||||||||||||||||||||||||||||||||
| Total Common Stock | % | |||||||||||||||||||||||||||||||||||||||
| TOTAL CONTROLLED INVESTMENTS*(2) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | % | |||||||||||||||||||||||||||||
| NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | ||||||||||||||||||||||||||||||||||||||||
| Debt Investments | ||||||||||||||||||||||||||||||||||||||||
| Global Innovation Platform | ||||||||||||||||||||||||||||||||||||||||
| OneValley,
Inc. (f/k/a NestGSV, Inc.) –Convertible Promissory Note 8%, Due | $ | $ | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||
| Total Debt Investments | % | |||||||||||||||||||||||||||||||||||||||
| Preferred Stock | ||||||||||||||||||||||||||||||||||||||||
| Knowledge Networks | ||||||||||||||||||||||||||||||||||||||||
| Maven Research, Inc.–Preferred shares, Series C | % | |||||||||||||||||||||||||||||||||||||||
| Maven Research, Inc.–Preferred shares, Series B | % | |||||||||||||||||||||||||||||||||||||||
| Total Knowledge Networks | % | |||||||||||||||||||||||||||||||||||||||
| Digital Media Platform | ||||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series C-2 6% | % | |||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series B 6% | % | |||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series A 6% | % | |||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series Seed 6% | % | |||||||||||||||||||||||||||||||||||||||
| Total Digital Media Platform | % | |||||||||||||||||||||||||||||||||||||||
| Interactive Learning | ||||||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series D 8%(5) | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series C 8%(5) | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series B 8%(5) | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series A 8%(5) | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Interactive Learning | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Preferred Stock | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Options | ||||||||||||||||||||||||||||||||||||||||
| Digital Media Platform | ||||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Common Warrants, Strike Price
$, Expiration Date | $ | $ | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||
| Global Innovation Platform | ||||||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred
Warrant Series B, Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV,
Inc.)–Preferred Warrant Series B, Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| OneValley,
Inc. (f/k/a NestGSV, Inc.)–Derivative Security, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Global Innovation Platform | ( | ) | ( | ) | % | |||||||||||||||||||||||||||||||||||
| Total Options | ( | ) | ( | ) | % | |||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Online Education | ||||||||||||||||||||||||||||||||||||||||
| Curious.com, Inc.–Common shares | % | |||||||||||||||||||||||||||||||||||||||
| Total Common Stock | % | |||||||||||||||||||||||||||||||||||||||
| TOTAL NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | % | |||||||||||||||||||||||||||
| 36 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
| * | |
| ** | |
| *** |
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (7) |
| 37 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Schedule of Investments In, and Advances to, Affiliates
Transactions during the year ended December 31, 2021 involving the Company’s controlled investments and non-controlled/affiliate investments were as follows:
| Type/Industry/Portfolio Company/Investment | Principal/ Quantity | Interest, Fees, or Dividends Credited in Income | Fair Value at December 31, 2020 | Transfer In/ (Out) | Purchases, Capitalized Fees, Interest and Amortization | Sales | Realized Gains/(Losses) | Unrealized Gains/(Losses) | Fair Value at December 31, 2021 | Percentage of Net Assets | ||||||||||||||||||||||||||||||
| CONTROLLED INVESTMENTS*(2) | ||||||||||||||||||||||||||||||||||||||||
| Options | ||||||||||||||||||||||||||||||||||||||||
| Special Purpose Acquisition Company | ||||||||||||||||||||||||||||||||||||||||
| Colombier Sponsor LLC**–Class W Units(9) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | % | |||||||||||||||||||||||||||||
| Total Options | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | ||||||||||||||||||||||||||||||||||||||||
| Clean Technology | ||||||||||||||||||||||||||||||||||||||||
| SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Preferred shares, Class A(4) | % | |||||||||||||||||||||||||||||||||||||||
| Total Preferred Stock | % | |||||||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Clean Technology | ||||||||||||||||||||||||||||||||||||||||
| SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)–Common shares | % | |||||||||||||||||||||||||||||||||||||||
| Mobile Finance Technology | ||||||||||||||||||||||||||||||||||||||||
| Architect Capital PayJoy SPV, LLC**–Membership Interest in Lending SPV***(7) | $ | ( | ) | % | ||||||||||||||||||||||||||||||||||||
| Special Purpose Acquisition Company | ||||||||||||||||||||||||||||||||||||||||
| Colombier Sponsor LLC**–Class B Units(9) | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Common Stock | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| TOTAL CONTROLLED INVESTMENTS*(2) | $ | $ | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||
| NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | ||||||||||||||||||||||||||||||||||||||||
| Debt Investments | ||||||||||||||||||||||||||||||||||||||||
| Corporate Education | ||||||||||||||||||||||||||||||||||||||||
| CUX, Inc. (d/b/a CorpU)–Senior Subordinated Convertible
Promissory Note 4% Due | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | % | ||||||||||||||||||||||||||||
| Global Innovation Platform | ||||||||||||||||||||||||||||||||||||||||
| OneValley,
Inc. (f/k/a NestGSV, Inc.) –Convertible Promissory Note 8% Due | $ | $ | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||
| Total Debt Investments | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | ||||||||||||||||||||||||||||||||||||||||
| Corporate Education | ||||||||||||||||||||||||||||||||||||||||
| CUX, Inc. (d/b/a CorpU)–Convertible preferred shares, Series D 6% | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| CUX, Inc. (d/b/a CorpU) -Convertible preferred shares, Series C 8% | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Corporate Education | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Knowledge Networks | ||||||||||||||||||||||||||||||||||||||||
| Maven Research, Inc.–Preferred shares, Series C | % | |||||||||||||||||||||||||||||||||||||||
| Maven Research, Inc.–Preferred shares, Series B | % | |||||||||||||||||||||||||||||||||||||||
| Total Knowledge Networks | % | |||||||||||||||||||||||||||||||||||||||
| Digital Media Platform | ||||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series C-2 6% | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series B 6% | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series A 6% | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Preferred shares, Series Seed 6% | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Digital Media Platform | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Interactive Learning | ||||||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series D 8%(5) | % | |||||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series C 8%(5) | % | |||||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series B 8%(5) | % | |||||||||||||||||||||||||||||||||||||||
| StormWind, LLC–Preferred shares, Series A 8%(5) | $ | $ | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||
| Total Interactive Learning | % | |||||||||||||||||||||||||||||||||||||||
| Total Preferred Stock | ( | ) | ( | ) | % | |||||||||||||||||||||||||||||||||||
| Options | ||||||||||||||||||||||||||||||||||||||||
| Digital Media Platform | ||||||||||||||||||||||||||||||||||||||||
| Ozy Media, Inc.–Common Warrants, Strike Price
$, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Global Innovation Platform | ||||||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV,
Inc.)–Preferred Warrant Series A-3 - Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV,
Inc.)–Preferred Warrant Series A-4, Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred
Warrant Series A-4, Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred
Warrant Series B, Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV, Inc.)–Preferred
Warrant Series B, Strike Price $, Expiration Date | % | |||||||||||||||||||||||||||||||||||||||
| OneValley, Inc. (f/k/a NestGSV,
Inc.)–Preferred Warrant Series B, Strike Price $, Expiration Date | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Derivative
Security, Expiration Date | % | |||||||||||||||||||||||||||||||||||||||
| Total Global Innovation Platform | ( | ) | % | |||||||||||||||||||||||||||||||||||||
| Total Options | ( | ) | ( | ) | % | |||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Online Education | ||||||||||||||||||||||||||||||||||||||||
| Curious.com, Inc.–Common shares | % | |||||||||||||||||||||||||||||||||||||||
| Cannabis REIT | ||||||||||||||||||||||||||||||||||||||||
| NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.)**–Common shares***(8) | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | % | |||||||||||||||||||||||||||
| Total Common Stock | ( | ) | ( | ) | % | |||||||||||||||||||||||||||||||||||
| TOTAL NON-CONTROLLED/AFFILIATE INVESTMENTS*(1) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | % | |||||||||||||||||||||||||
| 38 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
| * | |
| ** | |
| *** |
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) | |
| (7) | |
| (8) | |
| (9) |
| 39 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 5—COMMON STOCK
Share Repurchase Program
On August 8, 2017, the Company announced a $ million discretionary open-market share repurchase program of shares of the Company’s common stock, $ par value per share, of up to $ million until the earlier of (i) August 6, 2018 or (ii) the repurchase of $ million in aggregate amount of the Company’s common stock (the “Share Repurchase Program”). On November 7, 2017, the Company’s Board of Directors authorized an extension of, and an increase in the amount of shares of the Company’s common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) November 6, 2018 or (ii) the repurchase of $ million in aggregate amount of the Company’s common stock. On May 3, 2018, the Company’s Board of Directors authorized a $ million increase in the amount of shares of the Company’s common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) November 6, 2018 or (ii) the repurchase of $million in aggregate amount of the Company’s common stock. On November 1, 2018, our Board of Directors authorized a $ million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) October 31, 2019 or (ii) the repurchase of $ million in aggregate amount of our common stock. On August 5, 2019, our Board of Directors authorized a $ million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) August 4, 2020 or (ii) the repurchase of $ million in aggregate amount of our common stock. On March 9, 2020, our Board of Directors authorized a $ million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) March 8, 2021 or (ii) the repurchase of $ million in aggregate amount of our common stock. On October 28, 2020, our Board of Directors authorized a $ million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) October 31, 2021 or (ii) the repurchase of $ million in aggregate amount of our common stock. On October 27, 2021, our Board of Directors approved an extension of the Share Repurchase Program until the earlier of (i) October 31, 2022 or (ii) the repurchase of $ million in aggregate amount of our common stock. On March 13, 2022, our Board of Directors authorized a $ million increase in the amount of shares of our common stock that may be repurchased under the discretionary Share Repurchase Program until the earlier of (i) October 31, 2022 or (ii) the repurchase of $ million in aggregate amount of our common stock. On October 19, 2022, the Company’s Board of Directors approved an extension of the Share Repurchase Program until the earlier of (i) October 31, 2023 or (ii) the repurchase of $ million in aggregate amount of the Company’s common stock.
The timing and number of shares to be repurchased will depend on a number of factors, including market conditions and alternative investment opportunities. The Share Repurchase Program may be suspended, terminated or modified at any time for any reason and does not obligate the Company to acquire any specific number of shares of its common stock. Under the Share Repurchase Program, we may repurchase our outstanding common stock in the open market provided that we comply with the prohibitions under our insider trading policies and procedures and the applicable provisions of the 1940 Act and the Securities Exchange Act of 1934, as amended.
During the year ended December 31, 2022, the Company repurchased shares of the Company’s common stock under the Share Repurchase Program. During the year ended December 31, 2021, the Company did not repurchase any shares of common stock under the Share Repurchase Program. As of December 31, 2022, the dollar value of shares that remained available to be purchased by the Company under the Share Repurchase Program was approximately $ million.
Modified Dutch Auction Tender Offer
On August 8, 2022, the Company commenced a modified “Dutch Auction” tender offer (the “Modified Dutch Auction Tender Offer”) to purchase up to shares of its common stock from its stockholders, which expired on . In accordance with the terms of the Modified Dutch Auction Tender Offer, the Company selected the lowest price per share of not less than $ per share and not greater than $ per share.
Pursuant to the Modified Dutch Auction Tender Offer, the Company repurchased shares, representing of its then outstanding shares, on or about September 12, 2022 at a price of $ per share. The Company used available cash to fund the purchases of its shares of common stock in the Modified Dutch Auction Tender Offer and to pay for all related fees and expenses.
| 40 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Amended and Restated 2019 Equity Incentive Plan
Refer to “Note 11—Stock-Based Compensation” for a description of the Company’s restricted shares of common stock granted under the Amended & Restated 2019 Equity Incentive Plan (as defined therein).
Dividends Paid in Common Stock
On
May 4, 2021, the Company’s Board of Directors declared a dividend of $ per share that was paid on June 30, 2021 to stockholders
of record as of the close of business on May 18, 2021. The ex-dividend date was May 17, 2021. The dividend was paid in cash and shares
of the Company’s common stock at the election of the stockholders, although the total amount of cash to be distributed to all stockholders
was limited to no more than 50% of the total dividend paid to all stockholders. The total dividend amount paid to all stockholders consisted
of approximately $
On
August 3, 2021, the Company’s Board of Directors declared a dividend of $ per share that was paid on September 30, 2021 to
stockholders of record as of the close of business on August 18, 2021. The ex-dividend date was August 17, 2021. The dividend was paid
in cash and shares of the Company’s common stock at the election of the stockholders, although the total amount of cash to be distributed
to all stockholders was limited to no more than 50% of the total dividend paid to all stockholders. The total dividend amount paid to
all stockholders consisted of approximately $
On
November 2, 2021, the Company’s Board of Directors declared a dividend of $ per share that was paid on December 30, 2021 to
stockholders of record as of the close of business on November 17, 2021. The ex-dividend date was November 16, 2021. The dividend was
paid in cash and shares of the Company’s common stock at the election of the stockholders, although the total amount of cash to
be distributed to all stockholders was limited to no more than 50% of the total dividend paid to all stockholders. The total dividend
amount paid to all stockholders consisted of approximately $
Conversion of 4.75% Convertible Senior Notes due 2023
During
the year ended December 31, 2021, the Company issued shares of its common stock and cash for fractional shares
upon the conversion of approximately $
At-the-Market Offering
On
July 29, 2020, the Company entered into an At-the-Market Sales Agreement, dated July 29, 2020 (the “Initial Sales Agreement”),
with BTIG, LLC, JMP Securities LLC and Ladenburg Thalmann & Co., Inc. (collectively, the “Agents”). Under the Initial
Sales Agreement, the Company may, but has no obligation to, issue and sell up to $
| 41 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Sales of the Shares, if any, will be made by any method that is deemed to be an “at-the-market” offering as defined in Rule 415 under the Securities Act, including sales made directly on the Nasdaq Global Select Market or sales made to or through a market maker other than on an exchange, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at other negotiated prices. Actual sales in the ATM Program will depend on a variety of factors to be determined by the Company from time to time.
The
Agents will receive a commission from the Company equal to up to
During
the year ended December 31, 2022, the Company issued and sold shares under the ATM Program at a weighted-average
price of $ per share, for gross proceeds of $
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Earnings per common share–basic: | ||||||||||||
| Net change in net assets resulting from operations | $ | ( | ) | $ | $ | |||||||
| Weighted-average common shares–basic | ||||||||||||
| Earnings per common share–basic | $ | ( | ) | $ | $ | |||||||
| Earnings per common share–diluted: | ||||||||||||
| Net change in net assets resulting from operations | $ | ( | ) | $ | $ | |||||||
| Adjustment for interest and amortization on 4.75% Convertible Senior Notes due 2023(1) | ||||||||||||
| Net change in net assets resulting from operations, as adjusted | $ | ( | ) | $ | $ | |||||||
| Adjustment for dilutive effect of 4.75% Convertible Senior Notes due 2023(1) | ||||||||||||
| Weighted-average common shares outstanding–diluted | ||||||||||||
| Earnings per common share–diluted | $ | ( | ) | $ | $ | |||||||
| (1) |
NOTE 7—COMMITMENTS AND CONTINGENCIES
In
the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in a portfolio
company at some future date or over a specified period of time. As of December 31, 2022 and December 31, 2021, the Company had $
From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of its rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its business, financial condition or results of operations. The Company is not currently a party to any material legal proceedings.
| 42 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Operating Leases & Related Deposits
The
Company currently has one operating lease for office space for which the Company has recorded a right-of-use asset and lease liability
for the operating lease obligation. The lease commenced June 3, 2019 and expires
As
of December 31, 2022 and December 31, 2021, the Company booked a right-of-use asset and operating lease liability of $
The following table shows future minimum payments under the Company’s operating lease as of December 31, 2022:
| For the Years Ended December 31, | Amount | |||
| 2023 | ||||
| 2024 | ||||
| $ | ||||
| 43 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 8—FINANCIAL HIGHLIGHTS
| Year Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | ||||||||||||||||
| Per Basic Share Data | ||||||||||||||||||||
| Net asset value at beginning of the year | $ | $ | $ | $ | $ | |||||||||||||||
| Net investment loss(1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net realized gain/(loss) on investments(1) | ( | ) | ( | ) | ||||||||||||||||
| Realized loss on partial repurchase of 5.25% Convertible Senior Notes due 2018(1) | ( | ) | ||||||||||||||||||
| Net change in unrealized appreciation/(depreciation) of investments(1) | ( | ) | ( | ) | ||||||||||||||||
| Benefit from taxes on unrealized depreciation of investments(1) | ||||||||||||||||||||
| Dividends declared | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Issuance of common stock from stock dividend | ||||||||||||||||||||
| Issuance of common stock from public offering(1) | ||||||||||||||||||||
| Issuance of common stock from conversion of 4.75% Convertible Notes due 2023(1) | ( | ) | ( | ) | ||||||||||||||||
| Repurchase of common stock(1) | ||||||||||||||||||||
| Stock-based compensation(1) | ||||||||||||||||||||
| Net asset value at end of year | $ | $ | $ | $ | $ | |||||||||||||||
| Per share market value at end of year | $ | $ | $ | $ | $ | |||||||||||||||
| Total return based on market value(2) | ( | )% | % | % | % | ( | )% | |||||||||||||
| Total return based on net asset value(2) | ( | )% | % | % | % | % | ||||||||||||||
| Shares outstanding at end of year | ||||||||||||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||
| Net assets at end of year | $ | $ | $ | $ | $ | |||||||||||||||
| Average net assets | $ | $ | $ | $ | $ | |||||||||||||||
| Ratio of gross operating expenses to average net assets(3) | % | % | % | % | % | |||||||||||||||
| Ratio of incentive fee waiver to average net assets | % | % | % | % | ( | )% | ||||||||||||||
| Ratio of management fee waiver to average net assets | % | % | % | % | ( | )% | ||||||||||||||
| Ratio of income tax provision to average net assets | % | % | % | ( | )% | ( | )% | |||||||||||||
| Ratio of net operating expenses to average net assets(3) | % | % | % | % | % | |||||||||||||||
| Ratio of net investment loss to average net assets(3) | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ||||||||||
| Portfolio Turnover Ratio | % | % | % | % | % | |||||||||||||||
| (1) | |
| (2) | |
| (3) |
| 44 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 9—INCOME TAXES
The Company elected to be treated as a RIC under Subchapter M of the Code beginning with its taxable year ended December 31, 2014 and has qualified to be treated as a RIC for subsequent taxable years. The Company intends to continue to operate so as to qualify to be subject to tax treatment as a RIC under Subchapter M of the Code and, as such, will not be subject to U.S. federal income tax on the portion of taxable income (including gains) distributed as dividends for U.S. federal income tax purposes to stockholders. Taxable income includes the Company’s taxable interest, dividend and fee income, reduced by certain deductions, as well as taxable net realized investment gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as such gains or losses are not included in taxable income until they are realized.
To
qualify and be subject to tax as a RIC, the Company is required to meet certain income and asset diversification tests in addition to
distributing dividends of an amount generally at least equal to
During
the year ended December 31, 2022, the Company declared distributions of $ per share. The determination of the tax attributes of the
Company’s distributions is made annually as of the end of the Company’s taxable year generally based upon its taxable income
for the full taxable year and distributions paid for the full taxable year. As a result, a determination made on a by-dividend basis
may not be representative of the actual tax attributes of the Company’s distributions for a full taxable year. If the Company had
determined the tax attributes of our distributions taxable year-to-date as of December 31, 2022,
As
a RIC, the Company will be subject to a
Depending
on the level of taxable income earned in a taxable year, the Company may choose to carry over taxable income in excess of current taxable
year distributions from such taxable income into the next taxable year and incur a
The Company has taxable subsidiaries which hold certain portfolio investments in an effort to limit potential legal liability and/or comply with source-income type requirements contained in the RIC tax provisions of the Code. These taxable subsidiaries are consolidated for GAAP and the portfolio investments held by the taxable subsidiaries are included in the Company’s consolidated financial statements and are recorded at fair value. These taxable subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities as a result of their ownership of certain portfolio investments. Any income generated by these taxable subsidiaries generally would be subject to tax at normal corporate tax rates based on its taxable income.
| 45 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The Company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year, except that it may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.
As
of December 31, 2022 and December 31, 2021, the Company recorded a deferred tax liability of $
For U.S. federal and state income tax purposes, a portion of the Taxable Subsidiaries’ net operating loss carryforwards and basis differences may be subject to limitations on annual utilization in case of a change in ownership, as defined by federal and state law. The amount of such limitations, if any, has not been determined. Accordingly, the amount of such tax attributes available to offset future profits may be significantly less than the actual amounts of the tax attributes.
The Company and the Taxable Subsidiaries identified their major tax jurisdictions as U.S. federal, New York, and California and may be subject to the taxing authorities’ examination for the tax years 2019–2022 and 2018–2022, respectively. Further, the Company and the Taxable Subsidiaries accrue all interest and penalties related to uncertain tax positions as incurred. As of December 31, 2022, there were no material interest or penalties incurred related to uncertain tax positions.
Permanent differences between ICTI and net investment income for financial reporting purposes are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. During the years ended December 31, 2022 and 2021, the Company reclassified for book purposes amounts arising from permanent book/tax differences related as follows:
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Capital in excess of par value | $ | ( | ) | $ | ( | ) | ||
| Accumulated undistributed net investment loss | ||||||||
| Accumulated net realized gains from investments | ( | ) | ||||||
For income tax purposes, distributions paid to stockholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The tax character of distributions declared in the years ended December 31, 2022, 2021, and 2020 was as follows:
| Year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Ordinary income | $ | $ | $ | |||||||||
| Long-term capital gain | ||||||||||||
| Return of capital | ||||||||||||
| Distributions on a tax basis | ||||||||||||
For
federal income tax purposes, the tax cost of investments owned at December 31, 2022 and 2021, was $
| 46 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
At December 31, 2022 and 2021, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Company’s Consolidated Statements of Assets and Liabilities by temporary and other book/tax differences, primarily relating to the tax treatment of certain investments in partnerships and wholly-owned subsidiary corporations, and organizational expenses, as follows:
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Undistributed ordinary income/(loss) | $ | ( | ) | $ | ( | ) | ||
| Accumulated net realized gains/(losses) on investments | ( | ) | ||||||
| Unrealized appreciation/(depreciation) | ( | ) | ||||||
| Components of distributable earnings at year end | $ | ( | ) | $ | ||||
NOTE 10—DEBT CAPITAL ACTIVITIES
6.00% Notes due 2026
On
December 17, 2021, the Company issued $
The 6.00% Notes due 2026 are direct unsecured obligations of the Company and rank pari passu, or equal in right of payment, with all outstanding and future unsecured, unsubordinated indebtedness of the Company; senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 6.00% Notes due 2026; effectively subordinated to any of the Company’s future secured indebtedness (including indebtedness that is initially unsecured in respect of which the Company subsequently grants a security interest), to the extent of the value of the assets securing such indebtedness (provided, however, that the Company has agreed under the Indenture to not incur any secured or unsecured indebtedness that would be senior to the 6.00% Notes due 2026 while the 6.00% Notes due 2026 are outstanding, subject to certain exceptions); and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.
The
6.00% Notes due 2026 are listed for trading on the Nasdaq Global Select Market under the symbol “SSSSL”. The reported closing
market price of SSSSL on December 31, 2022 and December 31, 2021 was $
| 47 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
4.75% Convertible Senior Notes due 2023
On
March 28, 2018, the Company issued $
All
of these conditions were met and on February 19, 2021, the Company caused notices to be issued to the holders of the 4.75% Convertible
Senior Notes due 2023 regarding the Company’s exercise of its option to redeem, in whole, the issued and outstanding 4.75% Convertible
Senior Notes due 2023, pursuant to the governing indenture.
On
the Redemption Date, the Company redeemed $
The
initial conversion rate for the 4.75% Convertible Senior Notes due 2023 was shares of the Company’s common stock for each
$
The indenture governing the 4.75% Convertible Senior Notes due 2023 contained customary financial reporting requirements and contained certain restrictions on mergers, consolidations, and asset sales. The indenture also contained certain events of default, the occurrence of which could have caused the 4.75% Convertible Senior Notes due 2023 to become due and payable before their maturity or immediately.
During the year ended December 31, 2021, the Company issued shares
of its common stock and cash for fractional shares upon the conversion of approximately $
| 48 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The table below shows a reconciliation from the aggregate principal amount of 4.75% Convertible Senior Notes due 2023 to the balance shown on the Consolidated Statement of Assets and Liabilities.
| December 31, 2022 | December 31, 2021 | |||||||
| Initial aggregate principal amount of 4.75% Convertible Senior Notes due 2023 | $ | $ | ||||||
| Conversion of 4.75% Convertible Senior Notes due 2023 | ( | ) | ||||||
| Redemption of 4.75% Convertible Senior Notes due 2023 | ( | ) | ||||||
| Direct deduction of deferred debt issuance costs | ||||||||
| 4.75% Convertible Senior Notes due 2023 Payable | $ | $ | ||||||
The 4.75% Convertible Senior Notes due 2023 were the Company’s general, unsecured, senior obligations and ranked senior in right of payment to any future indebtedness that was expressly subordinated in right of payment to the 4.75% Convertible Senior Notes due 2023, equal in right of payment to any existing and future unsecured indebtedness that was not so subordinated to the 4.75% Convertible Senior Notes due 2023, effectively junior to any future secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all future indebtedness (including trade payables) incurred by the Company’s subsidiaries.
In
connection with the issuance of the 4.75% Convertible Senior Notes due 2023, the Company was required under the terms of its credit facility
with Western Alliance Bank (the “Credit Facility”) to deposit any proceeds from the 4.75% Convertible Senior Notes due 2023
offering into an account at Western Alliance Bank and was required to maintain at least $
2019 Equity Incentive Plan
On
June 5, 2019, our Board of Directors adopted, and our stockholders approved, an equity-based incentive plan (the “2019 Equity Incentive
Plan”), which authorized equity awards to be granted for up to shares of our common stock. Under the 2019 Equity Incentive
Plan, the exercise price of awards would be set on the grant date and could not be less than the fair market value per share on such
date, however, that in the case of an incentive stock option granted to an employee who, at the time of the grant of such option, owned
stock representing more than ten percent (
On July 17, 2019, stock options providing the right to purchase up to shares were granted under the 2019 Equity Incentive Plan with an exercise price equal to the market price of our common stock at the grant date. of years with 1/3 vesting immediately on the grant date, 1/3 vesting on July 17, 2020, and the remaining 1/3 vesting on July 17, 2021.
Cancellation of Stock Option Awards Under 2019 Equity Incentive Plan
On April 28, 2020, all stock option awards granted under the 2019 Equity Incentive Plan were canceled for no payment pursuant to an option cancellation agreement (the “Option Cancellation Agreement”). As a result, there are no stock option awards outstanding under the 2019 Equity Incentive Plan. In accordance with FASB ASC 718, Compensation – Stock Compensation (“ASC 718”) all unrecognized compensation cost related to still unvested shares was recognized as of the date of cancellation. For more information, including a description of the Option Cancellation Agreement, please refer to our current report on Form 8-K filed with the SEC on April 29, 2020. Such description of the Option Cancellation Agreement is qualified in its entirety by reference to the text of such Option Cancellation Agreement filed as Exhibit 10.3 to our quarterly report on Form 10-Q for the period ended March 31, 2020 filed with the SEC on May 8, 2020.
| 49 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
The Company follows ASC 718 to account for stock options granted. Under ASC 718, compensation expense associated with stock-based compensation is measured at the grant date based on the fair value of the award and is recognized over the vesting period. Determining the appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires judgment, including estimating stock price volatility, forfeiture rate, and expected option life. The time-based options granted on July 17, 2019 were ascribed a weighted-average fair value of $ per share. The fair value of options granted under the 2019 Equity Incentive Plan was based upon a Black Scholes option pricing model using the assumptions in the following table:
| Input Assumptions | As of July 17, 2019 Grant Date | |||
| Term (years) | ||||
| Volatility | % | |||
| Risk-free rate | % | |||
| Dividend yield | % | |||
| Number of Shares | Weighted-Average Exercise Price | Weighted-Average Grant Date Fair Value | ||||||||||
| Outstanding as of December 31, 2019 | $ | $ | ||||||||||
| Vested and Exercisable as of December 31, 2019 | $ | $ | ||||||||||
| Cancelled | ( | ) | $ | $ | ||||||||
| Outstanding as of December 31, 2022 and December 31, 2021 | ||||||||||||
As of December 31, 2022 and December 31, 2021, there was $of total unrecognized compensation cost related to non-vested stock options granted under the 2019 Equity Incentive Plan, as the options were cancelled effective April 28, 2020.
Amended and Restated 2019 Equity Incentive Plan
On June 19, 2020, our Board of Directors adopted, and our stockholders approved, an amendment and restatement of the Company’s 2019 Equity Incentive Plan (the “Amended & Restated 2019 Equity Incentive Plan”) under which the Company is authorized to grant equity awards for up to shares of its common stock. In accordance with the exemptive relief granted to the Company by the SEC on June 16, 2020 with respect to the Amended & Restated 2019 Equity Incentive Plan, the Company is generally authorized to (i) issue restricted shares as part of the compensation package for certain of its employees, officers and all directors, including non-employee directors (collectively, the “Participants”), (ii) issue options to acquire shares of its common stock (“Options”) to certain employees, officers and employee directors as a part of such compensation packages, (iii) withhold shares of the Company’s common stock or purchase shares of common stock from the Participants to satisfy tax withholding obligations relating to the vesting of restricted shares or the exercise of Options granted to the certain Participants pursuant to the Amended & Restated 2019 Equity Incentive Plan, and (iv) permit the Participants to pay the exercise price of Options granted to them with shares of the Company’s common stock.
Under
the Amended & Restated 2019 Equity Incentive Plan, each non-employee director will receive an annual grant of $
| 50 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Other than such restricted shares granted to non-employee directors, the Company’s Compensation Committee may determine the time or times at which Options and restricted shares granted to other Participants will vest or become payable or exercisable, as applicable. The exercise price of each Option will not be less than 100% of the fair market value of the Company’s common stock on the date the option is granted. However, any optionee who owns more than 10% of the combined voting power of all classes of the Company’s outstanding common stock (a “10% Stockholder”), will not be eligible for the grant of an incentive stock option unless the exercise price of the incentive stock option is at least 110% of the fair market value of the Company’s common stock on the date of grant. Generally, no Option will be exercisable after the expiration of ten years from the date of grant. In the case of an Option granted to a 10% Stockholder, the term of an incentive stock option will be for no more than five years from the date of grant.
During the year ended December 31, 2022, the Company granted restricted shares to the Company’s officers pursuant to the Amended & Restated 2019 Equity Incentive Plan. These restricted shares have a vesting period of years. The Company determined that the fair values, based on the grant date close price of such restricted shares granted under the Amended & Restated 2019 Equity Incentive Plan during the year ended December 31, 2022 were approximately $ in the aggregate. On July 2, 2021, restricted shares related to the 2020 non-employee director grants vested. The Company expensed the full value of restricted stock compensation related to annual non-employee director grants on the vesting date. On June 1, 2022, restricted shares related to the 2021 non-employee director grants vested.
For the years ended December 31, 2022 and 2021, we recognized stock-based compensation expense of $ and $, respectively. As of December 31, 2022 there were approximately $of total unrecognized compensation costs related to the restricted share grants. Compensation expense associated with the restricted shares is recognized on a quarterly basis over the respective vesting periods.
| Number of Restricted Shares | ||||
| Outstanding as of December 31, 2021 | ||||
| Granted | ||||
| Vested(1) | ( | ) | ||
| Forfeited | ( | ) | ||
| Outstanding as of December 31, 2022 | ||||
| Vested as of December 31, 2022 | ||||
| (1) |
The Amended & Restated 2019 Equity Incentive Plan provides for the concept of “net share settlement.” Specifically, it provides that the Company is authorized to withhold the Common Stock at the time the restricted shares are vested and taxed in satisfaction of the Participant’s tax obligations. On June 16, 2020, the Company received exemptive relief from the SEC to permit such withholding of shares.
| 51 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 12—SUBSEQUENT EVENTS
Portfolio Activity
From January 1, 2023 through March 15, 2023, the Company exited or received proceeds from the following investments:
| Portfolio Company | Transaction Date | Shares Sold | Average Net Share Price (1) | Net Proceeds | Realized Loss(2) | |||||||||||||
| Rent the Runway, Inc.(3) | $ | $ | $ | ( | ) | |||||||||||||
| Kahoot! ASA(4) | ( | ) | ||||||||||||||||
| NewLake Capital Partners, Inc. (f/k/a GreenAcreage Real Estate Corp.)(5) | ( | ) | ||||||||||||||||
Residential Homes For Rent, LLC (d/b/a Second Avenue)(6) | N/A | N/A | ||||||||||||||||
| Total | $ | $ | ( | ) | ||||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) | |
| (6) |
From January 1, 2023 through March 15, 2023, the Company made the following investments (not including capitalized transaction costs):
| Portfolio Company | Investment | Transaction Date | Amount ($) | |||||
| Orchard Technologies, Inc.(1) | $ | |||||||
| Total | $ | |||||||
| (1) |
The
Company is frequently in negotiations with various private companies with respect to investments in such companies. Investments in private
companies are generally subject to satisfaction of applicable closing conditions. In the case of secondary market transactions, such
closing conditions may include approval of the issuer, waiver or failure to exercise rights of first refusal by the issuer and/or its
stockholders and termination rights by the seller or the Company. Equity investments made through the secondary market may involve making
deposits in escrow accounts until the applicable closing conditions are satisfied, at which time the escrow accounts will close and such
equity investments will be effectuated. From January 1, 2023 through March 15, 2023, the Company had $
| 52 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Notice of Terminating Custody Agreements
On March 10, 2023, the Company and U.S. Bank Trust Company, National Association (the “Custodian”) and U.S. Bank National Association (the “Document Custodian” and, together with the Custodian, the “U.S. Bank Entities”) agreed to terminate, effective as of May 9, 2023 or such later date as the parties mutually agree, the Custody Agreement, dated as of October 28, 2022, between the Company and the Custodian (the “Securities Custody Agreement”), and the Document Custody Agreement, dated as of October 28, 2022, between the Company and the Document Custodian (the “Document Custody Agreement” and, together with the Securities Custody Agreement, the “Custody Agreements”). The Company has commenced a transition process with the U.S. Bank Entities, and are currently in discussions with a number of reputable qualified custodians that it expects will be able to fulfill the Company’s needs in providing the custodial services currently provided by the U.S. Bank Entities without disruption. The termination of the Custody Agreements followed a determination by the parties that the arrangements set forth by the Custody Agreements were no longer mutually beneficial. The Company does not believe that such termination will have a material adverse impact on its operations or financial condition. See “Item 9B. Other Information” of this Form 10-K for additional information.
| 53 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 13—SELECTED QUARTERLY FINANCIAL DATA
| Quarter Ended | ||||||||||||||||
| December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||
| Total Investment Income | $ | $ | $ | $ | ||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Investment Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Realized Gain/(Loss) on Investments | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Change in Unrealized Appreciation/(Depreciation) of Investments | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Net Increase/(Decrease) in Net Assets from Operations per Common Share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Weighted Average Common Shares Outstanding–Basic | ||||||||||||||||
| Weighted Average Common Shares Outstanding–Diluted | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||
| Total Investment Income | $ | $ | $ | $ | ||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Investment Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Realized Gain on Investments | ||||||||||||||||
| Net Change in Unrealized Appreciation/(Depreciation) of Investments | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | ( | ) | $ | $ | $ | ||||||||||
| Net Increase/(Decrease) in Net Assets from Operations per Common Share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | $ | ||||||||||
| Diluted | $ | ( | ) | $ | $ | $ | ||||||||||
| Weighted Average Common Shares Outstanding–Basic | ||||||||||||||||
| Weighted Average Common Shares Outstanding–Diluted | ||||||||||||||||
| 54 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
| Quarter Ended | ||||||||||||||||
| December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | |||||||||||||
| Total Investment Income | $ | $ | $ | $ | ||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Investment Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Realized Gain/(Loss) on Investments | ( | ) | ||||||||||||||
| Net Change in Unrealized Appreciation/(Depreciation) of Investments | ( | ) | ||||||||||||||
| Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | $ | $ | $ | ( | ) | ||||||||||
| Net Increase/(Decrease) in Net Assets from Operations per Common Share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ( | ) | ||||||||||
| Diluted | $ | $ | $ | $ | ( | ) | ||||||||||
| Weighted Average Common Shares Outstanding–Basic | ||||||||||||||||
| Weighted Average Common Shares Outstanding–Diluted | ||||||||||||||||
| 55 |
SURO CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 14—SUPPLEMENTAL FINANCIAL DATA
Summarized Financial Information of Unconsolidated Subsidiaries
In accordance with the SEC’s Regulation S-X and GAAP, the Company is not permitted to consolidate any subsidiary or other entity that is not an investment company, including those in which the Company has a controlling interest; however, the Company must disclose certain financial information related to any subsidiaries or other entities that are considered to be “significant subsidiaries” under the applicable rules of Regulation S-X.
In May 2020, the SEC adopted rule amendments that impacted the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules amended the definition of “significant subsidiary” in a manner that was intended to more accurately capture those portfolio companies that were more likely to materially impact the financial condition of an investment company.
The Company’s three controlled portfolio companies as of December 31, 2022, SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.), Architect Capital PayJoy SPV, LLC and Colombier Sponsor LLC, did not meet the definition of a “significant subsidiary” as set forth in Rule 1-02(w)(2). For comparability purposes, the Company has omitted the previously disclosed summarized financial information of the Company’s significant subsidiaries for the quarter ended December 31, 2021 as the Company’s significant subsidiaries would not have been considered significant subsidiaries under the Final Rules.
| 56 |
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed or incorporated by reference as part of this annual report on Form 10-K:
| (1) | Financial Statements—Refer to Part II, Item 8 of this Form 10-K, which are incorporated herein by reference. |
| (2) | Financial Statement Schedules—None. We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the financial statements or notes to the financial statements. |
| (3) | Exhibits |
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
| (1) | Previously filed in connection with Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-171578), filed on March 30, 2011, and incorporated by reference herein. |
| 57 |
| (2) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852), filed on June 1, 2011, and incorporated by reference herein. |
| (3) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852) filed on August 1, 2019, and incorporated by reference herein. |
| (4) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852) filed on June 16, 2020, and incorporated by reference herein. |
| (5) | Previously filed in connection with Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2 (File No. 333-175655), filed on September 20, 2011, and incorporated by reference herein. |
| (6) | Previously filed in connection with the Registrant’s Registration Statement on Form N-2 (File No. 333-239681), filed on July 2, 2020 and incorporated by reference herein. |
| (7) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852) filed on December 17, 2021 and incorporated by reference herein. |
| (8) | Previously filed in connection with the Registrant’s Annual Report on Form 10-K (File No. 814-00852) filed on March 11, 2022 and incorporated by reference herein. |
| (9) | Previously filed in connection with the Registrant’s Registration Statement on Form S-8 (File No. 333-239662) filed on July 2, 2020, and incorporated by reference herein. |
| (10) | Previously filed in connection with Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2 (File No. 333-171578), filed on April 15, 2011, and incorporated by reference herein. |
| (11) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852) filed on November 1, 2022, and incorporated by reference herein. |
| (12) | Previously filed in connection with the Registrant’s Quarterly Report on Form 10-Q (File No. 814-00852), filed on May 6, 2021 and incorporated by reference herein. |
| (13) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852) filed on August 3, 2020 and incorporated by reference herein. |
| (14) | Previously filed in connection with the Registrant’s Current Report on Form 8-K (File No. 814-00852) filed on September 23, 2020 and incorporated by reference herein. |
| (15) | Previously filed in connection with the Registrant’s Annual Report on Form 10-K (File No. 814-00852), filed on March 13, 2020 and incorporated by reference herein. |
| (16) | Previously filed in connection with the Registrant’s Annual Report on Form 10-K (File No. 814-00852), filed on March 16, 2023 and incorporated by reference herein. |
| * | Filed herewith. |
| 58 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SURO CAPITAL CORP. | |||
| Date: | August 15, 2023 | By: | /s/ Mark D. Klein |
| Mark D. Klein | |||
| Chairman, President and Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| Date: | August 15, 2023 | By: | /s/ Allison Green |
| Allison Green | |||
| Chief Financial Officer, Chief Compliance Officer, Treasurer, and Corporate Secretary | |||
| (Principal Financial and Accounting Officer) | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: August 15, 2023 | By: | /s/ Mark D. Klein |
Mark D. Klein | ||
Chairman, President and Chief Executive Officer (Principal Executive Officer) | ||
| Date: August 15, 2023 | By: | /s/ Allison Green |
Allison Green | ||
Chief Financial Officer, Chief Compliance Officer, Treasurer, and Corporate Secretary (Principal Financial and Accounting Officer) | ||
| Date: August 15, 2023 | By: | /s/ Leonard A. Potter |
Leonard A. Potter | ||
| Director | ||
| Date: August 15, 2023 | By: | /s/ Ronald M. Lott |
Ronald M. Lott | ||
| Director | ||
| Date: August 15, 2023 | By: | /s/ Marc Mazur |
Marc Mazur | ||
| Director | ||
| Date: August 15, 2023 | By: | /s/ Lisa Westley |
Lisa Westley | ||
| Director |
| 59 |
Exhibit 31.1
Certification of Chief Executive Officer of SuRo Capital Corp.
pursuant to Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Mark D. Klein, certify that:
| 1. | I have reviewed this annual report on Form 10-K/A of SuRo Capital Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated this 15th day of August, 2023.
| By: | /s/ Mark Klein | |
| Mark D. Klein | ||
| Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer of SuRo Capital Corp.
pursuant to Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Allison Green, certify that:
| 1. | I have reviewed this annual report on Form 10-K/A of SuRo Capital Corp.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated this 15th day of August, 2023.
| By: | /s/ Allison Green | |
| Allison Green | ||
| Chief Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the annual report on Form 10-K for the year ended December 31, 2022, as amended on August 15, 2023 (the “Report”) of SuRo Capital Corp. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Mark D. Klein, the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| /s/ Mark D. Klein | |
| Name: Mark D. Klein | |
| Date: August 15, 2023 |
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the annual report on Form 10-K for the year ended December 31, 2022, as amended on August 15, 2023 (the “Report”) of SuRo Capital Corp. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Allison Green, the Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| /s/ Allison Green | |
| Name: Allison Green | |
| Date: August 15, 2023 |