aBO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact name of registrant as specified in its charter)
(State of incorporation) |
(I.R.S. Employer Identification No.) |
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(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(s) |
Name of each exchange on which registered |
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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 |
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Emerging growth company |
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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 is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No
The issuer had
RUNWAY GROWTH FINANCE CORP.
FORM 10‑Q FOR THE QUARTER ENDED September 30, 2022
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RUNWAY GROWTH FINANCE CORP.
Statements of Assets and Liabilities
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September 30, 2022 |
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December 31, 2021 |
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(Unaudited) |
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Assets |
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Investments at fair value: |
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Non-control/non-affiliate investments at fair value (cost of $ |
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$ |
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$ |
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Affiliate investments at fair value (cost of $ |
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— |
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Control investments at fair value (cost of $ |
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Investment in U.S. Treasury Bills at fair value (cost of $ |
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— |
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Total investments at fair value (cost of $ |
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Cash and cash equivalents |
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Accrued interest receivable |
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Other accounts receivable |
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Prepaid expenses |
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Total assets |
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Liabilities |
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Debt: |
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Credit facilities, net |
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2026 Notes, net |
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2027 Notes, net |
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— |
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Total debt, less unamortized deferred debt costs |
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Reverse repurchase agreement |
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— |
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Accrued incentive fees |
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Due to affiliate |
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Interest payable |
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Accrued expenses and other liabilities |
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Total liabilities |
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Net assets |
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Common stock, par value |
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Additional paid-in capital |
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Distributable (losses) |
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Treasury stock |
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— |
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Total net assets |
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$ |
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$ |
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Shares of common stock outstanding ($ |
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Net asset value per share |
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$ |
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$ |
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See notes to financial statements.
1
RUNWAY GROWTH FINANCE CORP.
Statements of Operations
(Unaudited)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Investment income |
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From non-control/non-affiliate investments: |
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Interest income |
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$ |
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$ |
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$ |
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$ |
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Payment in-kind interest income |
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Dividend income |
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Fee income |
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From affiliate investments: |
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Interest income |
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Payment in-kind interest income |
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Fee income |
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From control investments: |
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Interest income |
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Payment in-kind interest income |
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Other income |
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Total investment income |
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Operating expenses |
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Management fees |
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Incentive fees |
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Interest expense |
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Professional fees |
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Overhead allocation expense |
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Insurance expense |
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Administration fee |
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Debt financing fees |
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Directors' fees |
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Tax expense |
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Other expenses |
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Total operating expenses |
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Net investment income |
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Realized and unrealized gain (loss) on investments |
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Realized gain (loss) on non control/non-affiliate investments, including U.S. Treasury Bills |
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( |
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Realized gain (loss) on control investments |
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( |
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Net realized gain (loss) on investments |
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( |
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Net change in unrealized appreciation (depreciation) on non control/non-affiliate investments, including U.S. Treasury Bills |
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( |
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( |
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( |
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( |
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Net change in unrealized appreciation (depreciation) on affiliate investments |
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( |
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( |
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Net change in unrealized appreciation (depreciation) on control investments |
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( |
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( |
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Net change in unrealized appreciation (depreciation) on investments and U.S. Treasury Bills |
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( |
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( |
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( |
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( |
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Net increase (decrease) in net assets resulting from operations |
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$ |
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$ |
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$ |
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$ |
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Net increase in net assets resulting from operations per common share |
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$ |
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$ |
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$ |
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$ |
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Net investment income per common share |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding |
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See notes to financial statements.
2
RUNWAY GROWTH FINANCE CORP.
Statements of Changes in Net Assets
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Increase (decrease) in net assets from operations: |
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Net investment income |
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$ |
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$ |
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$ |
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$ |
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Realized gain (loss) on non control/non-affiliate investments, including U.S. Treasury Bills |
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( |
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Realized gain (loss) on control investments |
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— |
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— |
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( |
) |
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— |
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Net change in unrealized appreciation (depreciation) on non control/non-affiliate investments, including U.S. Treasury Bills |
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( |
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( |
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( |
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( |
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Net change in unrealized appreciation (depreciation) on affiliate investments |
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( |
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— |
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( |
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— |
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Net change in unrealized appreciation (depreciation) on control investments |
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( |
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( |
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Net increase in net assets resulting from operations |
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Distributions to stockholders from: |
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Dividends paid to shareholders |
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( |
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( |
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( |
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Total distributions to stockholders |
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( |
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( |
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( |
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Capital share transactions: |
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Issuance of shares of common stock |
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— |
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— |
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Issuance of common stock under dividend reinvestment plan |
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— |
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— |
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Acquisition of treasury shares |
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( |
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— |
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( |
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— |
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Offering costs |
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— |
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( |
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( |
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Net increase (decrease) in net assets resulting from capital share transactions |
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( |
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( |
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Total increase (decrease) in net assets |
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( |
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Net assets at beginning of period |
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Net assets at end of period |
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$ |
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$ |
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$ |
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$ |
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Capital share activity |
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Shares issued |
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— |
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— |
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Treasury shares acquired |
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( |
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— |
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( |
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Shares outstanding at beginning of period |
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Shares outstanding at end of period |
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See notes to financial statements.
3
RUNWAY GROWTH FINANCE CORP.
Statements of Cash Flows
(Unaudited)
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Nine Months Ended September 30, |
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2022 |
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2021 |
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Cash flows from operating activities |
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Net increase in net assets resulting from operations |
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$ |
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$ |
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Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: |
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Purchases of investments |
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( |
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Purchases of U.S. Treasury Bills |
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— |
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Payment in-kind interest |
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( |
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( |
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Sales or repayments of investments |
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Sales or maturities of U.S. Treasury Bills |
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Realized (gain) loss on investments, including U.S. Treasury Bills |
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( |
) |
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Net change in unrealized appreciation (depreciation) on investments, including U.S. Treasury Bills |
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Amortization of fixed income premiums or accretion of discounts |
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( |
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Amortization of deferred debt costs |
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Changes in operating assets and liabilities: |
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Accrued interest receivable |
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( |
) |
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Other accounts receivable |
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( |
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Prepaid expenses |
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( |
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Accrued incentive fees |
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Due to affiliate |
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Interest payable |
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Accrued expenses and other liabilities |
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Net cash provided by (used in) operating activities |
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( |
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Cash flows from financing activities |
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Payments of deferred financing costs |
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( |
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( |
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Payments of deferred offering costs |
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— |
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( |
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Borrowings under credit facilities |
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Repayments under credit facilities |
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( |
) |
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( |
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Proceeds from 2026 Notes |
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— |
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Proceeds from 2027 Notes |
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— |
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Proceeds from reverse repurchase agreements |
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— |
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Repayments of reverse repurchase agreements |
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( |
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( |
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Acquisition of treasury shares |
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( |
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— |
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Dividends paid to stockholders |
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( |
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( |
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Offering costs |
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( |
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Net cash received from common stock issued |
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— |
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|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
( |
) |
|
Net increase (decrease) in cash |
|
|
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
||
Supplemental and non-cash financing cash flow information: |
|
|
|
|
|
|
|
|
||
Taxes paid |
|
$ |
|
|
|
$ |
|
— |
|
|
Interest paid |
|
|
|
|
|
|
|
|
||
Non-cash portfolio purchases |
|
|
|
|
|
|
|
|
||
Non-cash dividend reinvestments |
|
|
|
— |
|
|
|
|
|
|
Subscriptions receivable |
|
|
|
— |
|
|
|
|
|
|
See notes to financial statements.
4
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Circadence Corporation |
|
LIBOR+ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(4)(8) |
|||||
Dtex Systems, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
FiscalNote, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
VTX Intermediate Holdings, Inc. (dba VertexOne) |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Biotechnology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Mustang Bio, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
TRACON Pharmaceuticals, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Biotechnology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Interactions Corporation |
|
SOFR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
ShareThis, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Education Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Turning Tech Intermediate, Inc. (dba Echo 360, Inc.) |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Education Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Electronic Equipment & Instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Intellisite Holdings, Inc. (dba Epic IO Technologies, Inc.) |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Electronic Equipment & Instruments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
5
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Moximed, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(8) |
|||||
Revelle Aesthetics, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Health Care Equipment - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allurion Technologies, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
EBR Systems, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Gynesonics, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Mingle Healthcare Solutions, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(8) |
|||||
Route 92 Medical, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
SetPoint Medical Corporation |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
VERO Biotech LLC |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Health Care Technology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Human Resource & Employment Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CloudPay, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(8)(12) |
|||||
Snagajob.com, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Human Resource & Employment Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Internet Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Marley Spoon AG |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(8)(11) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(8)(11) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(8)(11) |
|||||
Total Internet Retail - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
6
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
|||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Internet Software and Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bombora, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(4)(8) |
||||||
Fidelis Cybersecurity, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
INRIX, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
||||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
||||||
Synack, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
||||||
Total Internet Software and Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Property & Casualty Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Kin Insurance, Inc. |
|
PRIME+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
||||||
Total Property & Casualty Insurance - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Senior Secured Term Loans - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Second Lien Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
System Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dejero Labs Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(10) |
||||||
Total System Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Second Lien Term Loans - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Preferred Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aria Systems, Inc. |
|
Series G |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
CareCloud, Inc. |
|
11% Series A Cumulative Redeemable Perpetual |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15)(17) |
||||
Total Health Care Technology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Preferred Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
See notes to financial statements.
7
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
|||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
FiscalNote, Inc. |
|
|
|
|
|
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(7)(19) |
||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Technology Hardware, Storage & Peripherals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Quantum Corporation |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(15)(17) |
||||
zSpace, Inc. |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
|||
Total Technology Hardware, Storage & Peripherals - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Common Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
STN Video Inc. |
|
Class B Non-Voting Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(3)(7) |
|||||
Total Advertising - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
3DNA Corp. (dba NationBuilder) |
|
Series C-1 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
|||||
Aria Systems, Inc. |
|
Series G Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
Circadence Corporation |
|
Series A-6 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
|
|
Series A-6 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
Dtex Systems, Inc. |
|
Series C-Prime Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
|
|
Series C-Prime Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
FiscalNote, Inc. |
|
Earnout |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(13) |
|||||
Porch Group, Inc. |
|
Earnout |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
(7)(13)(15) |
|||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biotechnology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mustang Bio, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
TRACON Pharmaceuticals, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
Total Biotechnology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Computer & Electronics Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Massdrop, Inc. |
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||||
Total Computer & Electronics Retail - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
See notes to financial statements.
8
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Interactions Corporation |
|
Common Stock |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(7) |
|||||
ShareThis, Inc. |
|
Series D-3 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Electronic Equipment & Instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Epic IO Technologies, Inc. |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(13) |
||||
Total Electronic Equipment & Instruments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Moximed, Inc. |
|
Series C Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Revelle Aesthetics, Inc. |
|
Series A-2 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Health Care Equipment - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allurion Technologies, Inc. |
|
Series C Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
|
|
Series D-1 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
CareCloud, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
EBR Systems, Inc. |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(13) |
||||
Gynesonics, Inc. |
|
Series G Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Mingle Healthcare Solutions, Inc. |
|
Series AA Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Route 92 Medical, Inc. |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(13) |
||||
SetPoint Medical Corporation |
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
VERO Biotech LLC |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(13) |
||||
Total Health Care Technology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Human Resource & Employment Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CloudPay, Inc. |
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(12) |
|||||
|
|
Series D Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(12) |
|||||
Snagajob.com, Inc. |
|
Series B-1 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Human Resource & Employment Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
9
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Internet Software and Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Bombora, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(7) |
|||||
Fidelis Cybersecurity, Inc. |
|
Common Stock |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(16) |
||||
INRIX, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Longtail Ad Solutions, Inc. (dba JW Player) |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Synack, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Internet Software and Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Property & Casualty Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Kin Insurance, Inc. |
|
Series D-3 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Property & Casualty Insurance - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Specialized Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
AllClear ID, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Credit Sesame, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Specialized Consumer Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
System Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Dejero Labs Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(10) |
|||||
Scale Computing, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Total System Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
System Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
RealWear, Inc. |
|
Series A Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
|
|
Series A Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
|
|
Series A Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total System Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Non-Control/Non-Affiliate Investments ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
10
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition Date |
|
Maturity Date |
|
|
Principal/ Shares |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
|||||||
Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18) |
||||
Common Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Coginiti Corp |
|
|
|
|
|
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(7) |
||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Common Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Coginiti Corp |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
(7) |
|||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total Affiliate Investments ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14) |
||||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pivot3 Holdings, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(7) |
||||||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Senior Secured Term Loans - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Preferred Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pivot3 Holdings, Inc. |
|
Series 1 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
|||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Preferred Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Control Investments ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Investments ( |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
||||
See notes to financial statements.
11
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
* Value as a percentage of net assets.
See notes to financial statements.
12
1RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
The Company classifies its investment portfolio in accordance with the requirements of the 1940 Act. Control investments are investments in which the Company owns more than 25% of the voting securities or maintains greater than 50% representation on the board. Affiliate investments are investments in which the Company owns between 5% and 25% (inclusive) of the voting securities and does not have rights to maintain greater than 50% representation on the board. Transactions related to the Company’s affiliate and control investments during the nine months ended September 30, 2022 are as follows:
|
|
|
For the Nine Months Ended September 30, 2022 (Unaudited) |
|
||||||||||||||||||||||||||||||||
|
|
|
Amount of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in |
|
|
|
|
|
|||||||||
|
|
|
Investment |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Net Realized |
|
|
Unrealized |
|
|
Fair Value |
|
||||||||||||
|
|
|
Income Earned |
|
|
as of |
|
|
Gross |
|
|
Gross |
|
|
Gains |
|
|
Appreciation |
|
|
as of |
|
||||||||||||||
Portfolio Company(4) |
|
Investment Description |
2022 |
|
|
December 31, 2021 |
|
|
Additions(1) |
|
|
Reductions(2) |
|
|
(Losses) |
|
|
(Depreciation) |
|
|
September 30, 2022(3) |
|
||||||||||||||
Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Coginiti Corp |
|
LIBOR+ |
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
— |
|
|
$ |
|
— |
|
|
$ |
|
— |
|
||
Total Senior Secured Term Loans |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
||
Common Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Coginiti Corp |
|
Common Stock |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||
Total Common Stocks |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Coginiti Corp |
|
Warrant for Common Stock, exercise price $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||
Total Warrants |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||
Total Affiliate Investments |
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
— |
|
|
$ |
|
( |
) |
|
$ |
|
|
|||
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Mojix, Inc. |
|
LIBOR+ |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
— |
|
|
$ |
|
( |
) |
|
$ |
|
— |
|
|||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|||
Pivot3 Holdings, Inc. |
|
LIBOR+ |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||
Total Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||||
Preferred Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Mojix, Inc. |
|
Series A-1 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
||
Pivot3 Holdings, Inc. |
|
Series 1 Preferred Stock |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Total Preferred Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Mojix, Inc. |
|
Warrant for Common Stock, exercise price $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|
Warrant for Common Stock, exercise price $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
Warrant for Common Stock, exercise price $ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Total Warrants |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
Total Control Investments |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
|
||||
See notes to financial statements.
13
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
See notes to financial statements.
14
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments (Unaudited) – (continued)
September 30, 2022
The following tables show the fair value of our portfolio of investments (excluding any U.S. Treasury Bills held) by geographic region and industry as of September 30, 2022:
|
|
Investments at Fair Value |
||||||||
Geographic Region |
|
Investments at Fair Value |
|
|
Percentage of Net Assets |
|||||
Northeastern United States |
|
$ |
|
|
|
|
|
% |
||
Western United States |
|
|
|
|
|
|
|
|
||
South Central United States |
|
|
|
|
|
|
|
|
||
Midwestern United States |
|
|
|
|
|
|
|
|
||
Southeastern United States |
|
|
|
|
|
|
|
|
||
United Kingdom |
|
|
|
|
|
|
|
|
||
Northwestern United States |
|
|
|
|
|
|
|
|
||
Germany |
|
|
|
|
|
|
|
|
||
Canada |
|
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
|
|
% |
||
|
|
September 30, 2022 |
||||||||
Industry |
|
Investments at Fair Value |
|
|
Percentage of Net Assets |
|||||
Health Care Technology |
|
$ |
|
|
|
|
|
% |
||
Application Software |
|
|
|
|
|
|
|
|
||
Internet Software and Services |
|
|
|
|
|
|
|
|
||
Human Resource & Employment Services |
|
|
|
|
|
|
|
|
||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
||
Property & Casualty Insurance |
|
|
|
|
|
|
|
|
||
Internet Retail |
|
|
|
|
|
|
|
|
||
Biotechnology |
|
|
|
|
|
|
|
|
||
Electronic Equipment & Instruments |
|
|
|
|
|
|
|
|
||
Health Care Equipment |
|
|
|
|
|
|
|
|
||
Education Services |
|
|
|
|
|
|
|
|
||
System Software |
|
|
|
|
|
|
|
|
||
Technology Hardware, Storage & Peripherals |
|
|
|
|
|
|
|
|
||
Specialized Consumer Services |
|
|
|
|
|
|
|
|
||
Computer & Electronics Retail |
|
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
|
|
% |
||
See notes to financial statements.
15
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments
December 31, 2021
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition |
|
Maturity |
|
Principal/ |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Aginity, Inc. |
|
LIBOR+ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(4) |
|||||
|
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) |
|||||
Circadence Corporation |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(8) |
|||||
Dtex Systems, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
FiscalNote, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
VTX Intermediate Holdings, Inc. (dba VertexOne) |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
ShareThis, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Education Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Turning Tech Intermediate, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Education Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Electronic Equipment & Instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Intellisite Holdings, Inc. (dba Epic IO Technologies, Inc.) |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Electronic Equipment & Instruments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allurion Technologies, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
CrossRoads Extremity Systems, LLC |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) |
|||||
Gynesonics, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Mingle Healthcare Solutions, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(8) |
|||||
Route 92 Medical, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
SetPoint Medical Corporation |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
VERO Biotech LLC |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Health Care Technology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
16
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition |
|
Maturity |
|
Principal/ |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Human Resource & Employment Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CloudPay, Inc. |
|
LIBOR+ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(3)(13) |
|||||
Snagajob.com, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Human Resource & Employment Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Internet Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Brilliant Earth, LLC |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Marley Spoon AG |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(12) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(12) |
|||||
Total Internet Retail - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Internet Software and Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Bombora, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(8) |
|||||
Fidelis Cybersecurity, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
INRIX, Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|||||
Total Internet Software and Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Senior Secured Term Loans - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Second Lien Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
System Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Dejero Labs Inc. |
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(4)(11) |
|||||
Total System Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Second Lien Term Loans - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Preferred Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Aria Systems, Inc. |
|
Series G |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CareCloud, Inc. |
|
11% Series A Cumulative Redeemable Perpetual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16)(19) |
||||
Total Health Care Technology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Preferred Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
17
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition |
|
Maturity |
|
Principal/ |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Common Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Porch Group, Inc. |
|
|
|
|
|
|
|
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
(7)(16)(19) |
|||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Internet Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Brilliant Earth Group, Inc. |
|
Class P Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)(18) |
||||
Total Internet Retail - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Technology Hardware, Storage & Peripherals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Quantum Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(16)(19) |
||||
zSpace, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
|||
Total Technology Hardware, Storage & Peripherals - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Common Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
STN Video Inc. |
|
Class B Non-Voting Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(3)(7) |
||||
Total Advertising - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
3DNA Corp. (dba NationBuilder) |
|
Series C-1 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Aginity, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Aria Systems, Inc. |
|
Series G Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Circadence Corporation |
|
Series A-6 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
|
|
Series A-6 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Dtex Systems, Inc. |
|
Series C-Prime Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
|
|
Series C-Prime Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
FiscalNote, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Porch Group, Inc. |
|
Earnout |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
(7)(13)(15) |
||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Computer & Electronics Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Massdrop, Inc. |
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Computer & Electronics Retail - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
18
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition |
|
Maturity |
|
Principal/ |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
ShareThis, Inc. |
|
Series D-3 Preferred Stock |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(7) |
|||||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Electronic Equipment & Instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Intellisite Holdings, Inc. (dba Epic IO Technologies, Inc.) |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(14) |
||||
Total Electronic Equipment & Instruments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Education Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Aspen Group Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Education Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allurion Technologies, Inc. |
|
Series C Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
CareCloud, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
CrossRoads Extremity Systems, LLC |
|
Series C Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Gynesonics, Inc. |
|
Series G Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Mingle Healthcare Solutions, Inc. |
|
Series AA Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Route 92 Medical, Inc. |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(14) |
||||
SetPoint Medical Corporation |
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
VERO Biotech LLC |
|
Success fee |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(7)(14) |
||||
Total Health Care Technology - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Human Resource & Employment Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CloudPay, Inc. |
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(13) |
|||||
|
|
Series D Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(13) |
|||||
Snagajob.com, Inc. |
|
Series B-1 Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Human Resource & Employment Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
19
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition |
|
Maturity |
|
Principal/ |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Internet Software and Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Bombora, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(7) |
|||||
Fidelis Cybersecurity, Inc. |
|
Common Stock |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
(7)(16) |
||
INRIX, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Longtail Ad Solutions, Inc. (dba JW Player) |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Internet Software and Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Specialized Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
AllClear ID, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Credit Sesame, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|||||
Total Specialized Consumer Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
System Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Dejero Labs Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)(7)(11) |
|||||
Scale Computing, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Total System Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Technology Hardware, Storage & Peripherals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
RealWear, Inc. |
|
Series A Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
|
|
Series A Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
|
|
Series A Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Total Technology Hardware, Storage & Peripherals - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Non-Control/Non-Affiliate Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14) |
|||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Mojix, Inc. |
|
LIBOR+ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
(4)(7)(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(7)(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(7)(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(7)(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(7)(8) |
|||||
|
|
LIBOR+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)(7)(8) |
|||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
See notes to financial statements.
20
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
Portfolio Companies |
|
Investment Description(1),(5),(9) |
|
Acquisition |
|
Maturity |
|
Principal/ |
|
|
Cost |
|
|
Fair Value(2),(6) |
|
|
Footnotes |
||||||
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Pivot3 Holdings, Inc. |
|
LIBOR+ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(4)(7) |
|||||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Senior Secured Term Loans - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Preferred Stocks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Mojix, Inc. |
|
Series A-1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Pivot3 Holdings, Inc. |
|
Series 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
|||
Total Data Processing & Outsourced Services - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Preferred Stocks - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Application Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Mojix, Inc. |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
(7) |
||||
Total Application Software - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Control Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
U.S. Treasury Bill, |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
(9) |
|||||
Total U.S. Treasury - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Total Investments - |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|||
See notes to financial statements.
21
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
*
See notes to financial statements.
22
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
The Company classifies its investment portfolio in accordance with the requirements of the 1940 Act. Control investments are investments in which the Company owns more than 25% of the voting securities or maintains greater than 50% representation on the board. Affiliate investments are investments in which the Company owns between 5% and 25% (inclusive) of the voting securities and does not have rights to maintain greater than 50% representation on the board. The Company’s affiliate and control investments as of December 31, 2021, along with the transactions during the year ended December 31, 2021 are as follows:
|
|
|
|
|
|
|
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For the Year Ended December 31, 2021 |
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Net Change in |
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Fair Value |
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Net Realized |
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Unrealized |
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Fair Value |
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as of |
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Gross |
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Gross |
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Gains |
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Appreciation |
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as of |
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Portfolio Company(4) |
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Investment Description |
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December 31, 2020 |
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Additions(1) |
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Reductions(2) |
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(Losses) |
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(Depreciation) |
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December 31, 2021(3) |
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Control Investments |
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Senior Secured Term Loans |
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||||||
Mojix, Inc. |
|
LIBOR+ |
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
— |
|
|
$ |
|
— |
|
|
$ |
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|
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$ |
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|||
|
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LIBOR+ |
|
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|
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— |
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|
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— |
|
|
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— |
|
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|
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|
|||
|
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LIBOR+ |
|
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|
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— |
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|
|
— |
|
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— |
|
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|||
|
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LIBOR+ |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
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|
|
|
|||
|
|
LIBOR+ |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
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— |
|
|
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|
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|
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|
|||
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LIBOR+ |
|
|
|
|
|
|
|
— |
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|
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|
( |
) |
|
|
|
— |
|
|
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|
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|||
|
|
LIBOR+ |
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
Pivot3 Holdings, Inc. |
|
LIBOR+ |
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
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|
|||
|
|
LIBOR+ |
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— |
|
|
|
|
|
|
|
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( |
) |
|
|
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— |
|
|
|
|
|
|
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— |
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||
|
|
LIBOR+ |
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
||
Total Senior Secured Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
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|
||||
Preferred Stocks |
|
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|
|
|
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||||||
Mojix, Inc. |
|
Series A-1 Preferred Stock |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
||
Pivot3 Holdings, Inc. |
|
Series 1 Preferred Stock |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Total Preferred Stocks |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
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( |
) |
|
|
|
|
||
Warrants |
|
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||||||
Mojix, Inc. |
|
Warrant for Common Stock, exercise price $ |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
Warrant for Common Stock, exercise price $ |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
Warrant for Common Stock, exercise price $ |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Total Warrants |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Total Control investments |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
|
||||
See notes to financial statements.
23
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
See notes to financial statements.
24
RUNWAY GROWTH FINANCE CORP.
Schedule of Investments – (continued)
December 31, 2021
The following tables show the fair value of our portfolio of investments (excluding any U.S. Treasury Bills held) by geographic region and industry as of December 31, 2021:
|
|
December 31, 2021 |
|||||||
|
|
Investments at |
|
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Percentage of |
||||
Geographic Region |
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Fair Value |
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Net Assets |
||||
Western United States |
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$ |
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% |
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Northeastern United States |
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South Central United States |
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Southeastern United States |
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|
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Northwestern United States |
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||
United Kingdom |
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||
Germany |
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|
||
Midwestern United States |
|
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Canada |
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|
|
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|
||
Total |
|
$ |
|
|
|
|
% |
||
|
|
December 31, 2021 |
|||||||
|
|
Investments at |
|
|
Percentage of |
||||
Industry |
|
Fair Value |
|
|
Net Assets |
||||
Application Software |
|
$ |
|
|
|
|
% |
||
Healthcare Technology |
|
|
|
|
|
|
|
||
Internet Retail |
|
|
|
|
|
|
|
||
Internet Software & Services |
|
|
|
|
|
|
|
||
Human Resource & Employment Services |
|
|
|
|
|
|
|
||
Data Processing & Outsourced Services |
|
|
|
|
|
|
|
||
Education Services |
|
|
|
|
|
|
|
||
Electronic Equipment & Instruments |
|
|
|
|
|
|
|
||
System Software |
|
|
|
|
|
|
|
||
Technology Hardware, Storage & Peripherals |
|
|
|
|
|
|
|
||
Specialized Consumer Services |
|
|
|
|
|
|
|
||
Computer & Electronics Retail |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
|
% |
||
See notes to financial statements.
25
RUNWAY GROWTH FINANCE CORP.
Notes to Financial Statements
Note 1 – Organization
Runway Growth Finance Corp. (formerly known as Runway Growth Credit Fund Inc.) (the “Company”), is a Maryland corporation that was formed on August 31, 2015. On August 18, 2021, the Company changed its name to “Runway Growth Finance Corp.” from “Runway Growth Credit Fund Inc.” The Company is an externally managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected to be treated, has qualified, and intends to continue 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 was formed primarily to lend to, and selectively invest in, high growth-potential companies in technology, life sciences, healthcare information and services, business services, select consumer services and products in other high-growth industries in the United States. The Company’s investment objective is to maximize its total return to its stockholders primarily through current income on its loan portfolio, and secondarily through capital appreciation on its warrants and other equity positions. The Company’s investment activities are managed by its external investment adviser, Runway Growth Capital LLC (“RGC”). The Company’s administrator, Runway Administrator Services LLC (the “Administrator”), is a wholly owned subsidiary of RGC and provides administrative services necessary for the Company to operate.
In October 2015, in connection with the Company’s formation, the Company issued and sold
Beginning October 15, 2019 and ending September 29, 2021, the Company had completed multiple closings under its second private offering (the “Second Private Offering”) and had accepted aggregate capital commitments of $
On March 31, 2020 and March 24, 2021, the Company had issued in aggregate
On October 25, 2021, the Company closed its initial public offering ("IPO"), issuing
Since inception, the Company has issued an additional
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim unaudited financial statements of the Company are prepared on the accrual basis of accounting in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the requirements for reporting on Form 10‑Q 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, considered necessary for the fair presentation of financial statements for the interim period have been included. The results of operations for the current interim period are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31,
26
2022, including the impact of the coronavirus (“COVID-19”) pandemic thereon. The interim unaudited financial statements and notes hereto should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report on Form 10-K, as modified by the annual report on Form 10-K/A for the year ended December 31, 2021, filed with the SEC on March 2, 2022 and March 14, 2022, respectively.
Certain items in the September 30, 2021 financial statements have been reclassified to conform to the September 30, 2022 presentation with no net effect on the net increase in net assets resulting from operations.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash represents deposits held at financial institutions, while cash equivalents are highly liquid investments held at financial institutions with an original maturity of three months or less at the date of acquisition. From time to time, the Company’s cash and cash equivalents exceed federally insured limits, subjecting the Company to risks related to the uninsured balance. Cash and cash equivalents are held at large, established, high credit-quality financial institutions, and management believes that risk of loss associated with any uninsured balance is remote.
Deferred Debt Costs
The Company records costs related to the issuance of debt obligations as deferred debt costs. These costs are deferred and amortized using the straight-line method over the stated maturity life of the obligations. Deferred debt costs associated with the Company's Credit Facility and unsecured notes are netted with the outstanding principal balance on the Company's Statement of Assets and Liabilities, unless there are no outstanding borrowings, in which case the deferred debt costs are presented as an asset. For more information, see “Note 10 –Borrowings.”
Reverse Repurchase Agreement
The Company has, and may in the future, enter into reverse repurchase agreements, under the terms of a Master Repurchase Agreement (the “Master Repurchase Agreement”), with selected commercial banks and broker-dealers, under which the Company acquires securities as collateral (debt obligation) subject to an obligation of the counterparty to repurchase and the Company to resell the securities (obligation) at an agreed upon time and price. The Company, through the custodian or a sub-custodian, receives delivery of the underlying securities collateralizing reverse repurchase agreements. The Company requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian’s vault, all securities held as collateral for reverse repurchase agreements. The Company and the counterparties are permitted to sell, re-pledge, or use the collateral associated with the transaction. It is the Company’s policy that the market value of the collateral be at least equal to
The Company had
Investment Transactions and Related Investment Income
Security transactions, if any, are recorded on a trade-date basis. Realized gains or losses from the repayment or sale of investments are measured using the specific identification method. The amortized cost basis of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums and upfront loan origination fees. The Company reports changes
27
from the prior period in fair value of investments that are measured at fair value as a component of net change in unrealized appreciation (depreciation) on investments on the Statements of Operations.
Dividends are recorded on the applicable ex-dividend date. Interest income, if any, adjusted for amortization of market premium and accretion of market discount, is recorded on an accrual basis to the extent that the Company expects to collect such amounts. Original issue discount (“OID”), principally representing the estimated fair value of detachable equity, warrants or contractual success fees obtained in conjunction with the Company’s debt investments, loan origination fees, end of term payments, and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective interest method. Loan origination fees received in connection with the closing of investments are reported as unearned income, which is included as amortized cost of the investment; the unearned income from such fees is accreted into interest income over the contractual life of the loan based on the effective interest method. Upon prepayment of a loan or debt security, any unamortized loan origination fees, end-of-term payments, and unamortized market discounts are recorded as interest income and any prepayment penalties are recorded as fee income.
The Company currently holds, and expects to hold in the future, some investments in its portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest is computed at the contractual rate specified in each loan agreement and is added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment. PIK interest, which is a non-cash source of income, is included in the Company’s taxable income and therefore affects the amount of income the Company is required to distribute to stockholders to maintain its qualification as a RIC for U.S. federal income tax purposes, even though the Company has not yet collected the cash. For the three and nine months ended September 30, 2022, approximately
Non-Accrual of Investments
Debt investments are placed on non-accrual status when principal, interest, and other obligations become materially past due or when there is reasonable doubt that principal, interest, and other obligations will be collected in full. At the point of non-accrual, the Company will generally cease recognizing interest income on the debt investment until all principal and interest due have been paid or the Company believes the borrower has demonstrated the ability to repay its current and future contractual obligations. Additionally, any OID associated with the debt investment is no longer accreted to interest income as of the date the loan is placed on non-accrual status. Any payments received on non-accrual loans are first applied to principal prior to recovery of any foregone interest or end of term payment fees. Non-accrual loans are restored to accrual status when past due principal or interest are paid, and, in management’s judgment are likely to remain current. The Company may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection such that the Company will be made whole on the investment, inclusive of interest and end of term payment fees.
As of September 30, 2022, and December 31, 2021, the Company has
Valuation of Investments
The Company measures the value of its investments at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), issued by the FASB. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The audit committee of the Company’s Board of Directors (the “Audit Committee”) assists the Board of Directors in valuing investments that are not publicly traded or for which current market values are not readily available. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. With respect to portfolio investments for which market quotations are not readily available, the Company’s Board of Directors, with the assistance of the Audit Committee, RGC and its senior investment team and independent
28
valuation agents, is responsible for determining, in good faith, the fair value of such investments in accordance with the valuation policy approved by the Board of Directors. If more than one valuation method is used to measure fair value, the results are evaluated and weighted, as appropriate, considering the reasonableness of the range indicated by those results. The Company considers a range of fair values based upon the valuation techniques utilized and selects the value within that range that was most representative of fair value based on current market conditions as well as other factors RGC’s senior investment team considers relevant.
The Company’s Board of Directors makes this fair value determination on a quarterly basis and any other time when a decision regarding the fair value of the portfolio investments is required. A determination of fair value involves subjective judgments and estimates and depends on the facts and circumstances. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC Topic 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level within the hierarchy of information used in the valuation. In accordance with ASC Topic 820, these inputs are summarized in the three levels listed below:
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of observable input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.
Under ASC Topic 820, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset, which may be a hypothetical market, and excludes transaction costs. The principal market for any asset is the market with the greatest volume and level of activity for such asset in which the reporting entity would or could sell or transfer the asset. In determining the principal market for an asset or liability under ASC Topic 820, it is assumed that the reporting entity has access to such market as of the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable and willing and able to transact.
With respect to investments for which market quotations are not readily available, the Company undertakes a multi-step valuation process each quarter, as described below:
29
The Company’s investments are primarily loans made to and equity and warrants of high growth-potential companies focused in technology, life sciences, healthcare information and services, business services, select consumer services and products and other high-growth industries. These investments are considered Level 3 assets under ASC Topic 820 because there is no known or accessible market or market indices for these types of debt instruments and, thus, RGC’s senior investment team must estimate the fair value of these investment securities based on models utilizing unobservable inputs.
Rule 2a-5 under the 1940 Act was adopted by the SEC in December 2020 and establishes a framework for determining fair value in good faith for purposes of the 1940 Act. The Company complied with the mandatory provisions of Rule 2a-5 by the September 2022 compliance date.
Investment Valuation Techniques
Valuation methodologies involve a significant degree of judgment. There is no single standard for determining the fair value of investments that do not have an active public market. Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time. The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed. In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a fair value may then be determined.
Debt Investments: To determine the fair value of the Company’s debt investments, the Company compares the cost basis of the debt investment, which includes original issue discount, if any, to the resulting fair value determined using a discounted cash flow model, unless another model is more appropriate based on the circumstances at the measurement date. The discounted cash flow approach entails analyzing the interest rate spreads for recently completed financing transactions that are similar in nature to the Company’s investments, in order to determine a comparable range of effective market interest rates for its investments. The range of interest rate spreads utilized is based on borrowers with similar credit profiles. All remaining expected cash flows of the investment are discounted using this range of interest rates to determine a range of fair values for the debt investment.
This valuation process includes, among other things, evaluating the underlying investment performance, the portfolio company’s current financial condition and ability to raise additional capital, as well as macro-economic events that may impact valuations. These events include, but are not limited to, current market yields and interest rate spreads of similar securities as of the measurement date. Significant increases or decreases in these unobservable inputs could result in a significantly higher or lower fair value measurement; however, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in these unobservable inputs.
Under certain circumstances, the Company may use an alternative technique to value the debt investments to be acquired by the Company that better reflects the fair value of the investment, such as the price paid or realized in a recently completed transaction or a binding offer received in an arms-length transaction, the use of multiple probability-weighted cash flow models when the expected future cash flows contain elements of variability or estimates of proceeds that would be received in a liquidation scenario.
Warrants: Fair value of warrants is primarily determined using a Black Scholes option-pricing model. Privately held warrants and equity-related securities are valued based on an analysis of various factors including, but not limited to, the following:
30
Under certain circumstances, the Company may use an alternative technique to value warrants that better reflects the warrants’ fair values, such as an expected settlement of a warrant in the near term, a model that incorporates a put feature associated with the warrant, or the price paid or realized in a recently completed transaction or binding offer received in an arms-length transaction. The fair value may be determined based on the expected proceeds to be received from such settlement or based on the net present value of the expected proceeds from the put option.
Equity Investments. The fair value of an equity investment in a privately held company is initially the face value of the amount invested. The Company adjusts the fair value of equity investments in private companies upon the completion of a new third-party round of equity financing subsequent to the Company’s investment. The Company may make adjustments to fair value, absent a new equity financing event, based upon positive or negative changes in a portfolio company’s financial or operational performance. The Company may also reference comparable transactions and/or secondary market transactions in connection with its determination of fair value. The fair value of an equity investment in a publicly traded company is based upon the closing public share price on the date of measurement. These assets are recorded at fair value on a recurring basis.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, including cash and accrued liabilities, approximate fair value due to their short-term nature. Fair value of the Company’s Credit Facility is estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments at the measurement date, if applicable. As of both September 30, 2022 and December 31, 2021, the Company believes that the carrying value of its Credit Facility approximates fair value. The 2026 Notes are carried at cost and with their longer maturity dates, fair value is estimated by discounting remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the notes. As of September 30, 2022, the Company believes that the carrying value of the 2026 Notes and 2027 Notes approximates fair value.
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 has the ability or 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 possesses, or has the right to acquire within 60 days or less, beneficial ownership of more than
31
Investments are recognized when the Company assumes an obligation to acquire a financial instrument and assumes the risks for gains or losses related to that instrument. Investments are derecognized when the Company assumes an obligation to sell a financial instrument and foregoes the risks for gains or losses related to that instrument. Specifically, the Company records all security transactions on a trade date basis. Investments in other, non-security financial instruments, such as limited partnerships or private companies, are recorded on the basis of subscription date or redemption date, as applicable. Amounts for investments recognized or derecognized but not yet settled will be reported as receivables for investments sold and payables for investments acquired, respectively, on the Statements of Assets and Liabilities.
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, 2016, and has qualified and intends to continue to qualify for the tax treatment applicable to RICs. Generally, a RIC is not subject to U.S. federal income taxes on distributed income and gains so long as it meets certain source-of-income and asset diversification requirements and it distributes at least 90% of its net ordinary income and net short-term capital gains in excess of its net long-term capital losses, if any, to its stockholders. So long as the Company obtains and maintains its status as a RIC, it generally will not pay corporate-level U.S. federal 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 Company represents obligations of the Company’s investors and will not be reflected in the financial statements of the Company. The Company intends to make sufficient distributions to maintain its RIC status each year and it does not anticipate paying any material U.S. federal income taxes in the future.
The Company accounts for income taxes in conformity with ASC Topic 740, Income Taxes ("ASC 740"). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in the Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions deemed to meet a "more-likely-than-not" threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations. There were no material uncertain income tax positions at September 30, 2022 or December 31, 2021. Although we file federal and state tax returns, our major tax jurisdiction is federal. The previous three tax year-ends and the interim tax period since then remain subject to examination by the Internal Revenue Service.
If the Company does not timely distribute (or is not deemed to have distributed) each calendar year the sum of (1) at least
If the Company does not qualify to be treated as a RIC for any taxable year, 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 to be treated 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 U.S. federal income 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. 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 as a RIC. If the Company fails to requalify as a RIC for a period greater than two taxable years, it may be subject to regular corporate-level U.S. federal income 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.
Per Share Information
Basic and diluted earnings per common share is calculated using the weighted-average number of common shares outstanding for the period presented. For the three and nine months ended September 30, 2022 and 2021, basic and diluted earnings per share of
32
common stock were the same because there were
Distributions
The Company generally intends to distribute, out of assets legally available for distribution, substantially all of its available earnings, on a quarterly basis, subject to the discretion of the Board of Directors. For the three and nine months ended September 30, 2022, the Company declared and paid dividends in the amount of $
Organization and Offering Costs
Organization costs include, among other things, the cost of organizing as a Maryland corporation, including the cost of legal services and other fees pertaining to the Company’s organization, all of which are expensed as incurred. Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the Company’s public and private offering materials as well as travel-related expenses related to the Company’s public and private offerings. Pursuant to the investment advisory agreement in place between the Company and RGC at the time of the Initial Private Offering, the Company and RGC agreed that organization and offering costs incurred in connection with the Initial Private Offering would be borne by the Company up to a maximum amount of $
Offering costs related to the Second Private Offering were accumulated and charged to additional paid in capital at the time of closing beginning in 2019. These offering costs related to the Second Private Offering were subject to a cap of $
Offering costs related to the IPO were accumulated and charged to additional paid in capital at the time of closing in October 2021. We had accumulated and recorded $
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848),” which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2024. ASU No. 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates and is currently evaluating the impact of adopting ASU No. 2020-04 and 2021-01 on the financial statements. The Company did not utilize the optional expedients and exceptions provided in this guidance during the three and nine months ended September 30, 2022 and 2021.
In June 2022, the FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of the security. The amendments in ASU 2022-03 are effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently assessing the impact of ASU 2022-03 on its consolidated financial statements.
33
Note 3 – 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.
At September 30, 2022, the Company had $
Portfolio Company |
|
Investment Type |
|
September 30, 2022 |
|
||
Allurion Technologies, Inc. |
|
Senior Secured Term Loan |
|
$ |
|
|
|
CloudPay, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Dtex Systems, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
EBR Systems, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
INRIX, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Intellisite Holdings, Inc. (dba Epic IO Technologies, Inc.) |
|
Senior Secured Term Loan |
|
|
|
|
|
Interactions Corporation |
|
Senior Secured Term Loan |
|
|
|
|
|
Kin Insurance, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Moximed, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Mustang Bio, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Revelle Aesthetics, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Route 92 Medical, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
SetPoint Medical Corporation |
|
Senior Secured Term Loan |
|
|
|
|
|
ShareThis, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Snagajob.com, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Synack, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
TRACON Pharmaceuticals, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
VERO Biotech LLC |
|
Senior Secured Term Loan |
|
|
|
|
|
Total unused commitments to extend financing |
|
|
|
$ |
|
|
|
At December 31, 2021, the Company had $
Portfolio Company |
|
Investment Type |
|
December 31, 2021 |
|
||
Allurion Technologies, Inc. |
|
Senior Secured Term Loan |
|
$ |
|
|
|
CloudPay, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
CrossRoads Extremity Systems, LLC |
|
Senior Secured Term Loan |
|
|
|
|
|
Dtex Systems, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Gynesonics, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
INRIX, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Intellisite Holdings, Inc. (dba Epic IO Technologies, Inc.) |
|
Senior Secured Term Loan |
|
|
|
|
|
Marley Spoon AG |
|
Senior Secured Term Loan |
|
|
|
|
|
Route 92 Medical, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
SetPoint Medical Corporation |
|
Senior Secured Term Loan |
|
|
|
|
|
ShareThis, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
Snagajob.com, Inc. |
|
Senior Secured Term Loan |
|
|
|
|
|
VERO Biotech LLC |
|
Senior Secured Term Loan |
|
|
|
|
|
Total unused commitments to extend financing |
|
|
|
$ |
|
|
|
The Company’s management believes that its available cash balances and availability under the Credit Facility provides sufficient funds to cover its unfunded commitments as of September 30, 2022. The Company has evaluated the expected net future cash flows related to unfunded commitments and determined the fair value to be
The Company is currently not subject to any material legal proceedings, nor, to its knowledge, is any material proceeding threatened against the Company. 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 any such legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its business, financial condition or results of operations.
Other Commitments and Contingencies
On February 24, 2022, the Board of Directors approved a repurchase program (the “Repurchase Program”) under which the Company may repurchase up to $
34
at management’s discretion from time to time in open-market transactions, in accordance with all applicable securities laws and regulations. Unless extended by the Board of Directors, the repurchase program will terminate 12 months from the date it was approved. As of September 30, 2022,
Note 4 – Concentration of Credit Risk
Note 5 – Net Increase in Net Assets Resulting from Operations per Common Share
The following information sets forth the computation of basic income per common share for the three and nine months ended September 30, 2022 and 2021:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||||
Net increase in net assets resulting from operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Weighted average shares outstanding for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Per Share Data(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Diluted |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Note 6 – Net Assets
The Company has the authority to issue
On October 25, 2021, the Company closed its IPO, issuing
Prior to October 25, 2021, the Company entered into subscription agreements (the “Subscription Agreements”) with investors providing for the private placement of the Company’s common shares. Under the terms of the Subscription Agreements, investors were required to fund drawdowns to purchase the Company’s common shares up to the amount of their respective capital commitment on an as-needed basis each time the Company delivered a drawdown notice to its investors.
In connection with the Initial Private Offering, the Company issued
On March 31, 2020 and March 24, 2021, the Company had issued in aggregate
35
During the three months ended September 30, 2022, the Company repurchased
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Additional |
|
|
Distributable |
|
|
Total |
|
||||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
(Losses) Earnings |
|
|
Net Assets |
|
||||||||||||
Balance, beginning of period |
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
Issuance of common stock |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Reinvestment of dividends |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Acquisition of treasury shares |
|
|
— |
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
Offering costs |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Net investment income |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Dividends declared |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Tax reconciliation of stockholders' equity in accordance with US GAAP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Balance, end of period |
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
During the nine months ended September 30, 2022, the Company repurchased
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Additional |
|
|
Distributable |
|
|
Total |
|
||||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
(Losses) Earnings |
|
|
Net Assets |
|
||||||||||||
Balance, beginning of period |
|
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
Issuance of common stock |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Reinvestment of dividends |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Acquisition of treasury shares |
|
|
— |
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
Offering costs |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Net investment income |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Dividends declared |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Tax reconciliation of stockholders' equity in accordance with US GAAP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Balance, end of period |
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
During the three months ended September 30, 2021, the Company issued
|
|
Common Stock |
|
|
Additional |
|
|
Distributable |
|
|
Total |
|
||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
(Losses) Earnings |
|
|
Net Assets |
|
|||||||||
Balance, beginning of period |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Reinvestment of dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Offering costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Net investment income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Dividends declared |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Tax reconciliation of stockholders' equity in accordance with U.S. GAAP |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Balance, end of period |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
36
During the nine months ended September 30, 2021, the Company issued
|
|
Common Stock |
|
|
Additional |
|
|
Distributable |
|
|
Total |
|
||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
(Losses) Earnings |
|
|
Net Assets |
|
|||||||||
Balance, beginning of period |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Reinvestment of dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Offering costs |
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Net investment income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Dividends declared |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Tax reconciliation of stockholders' equity in accordance with U.S. GAAP |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Balance, end of period |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
The shares of common stock issued, the price per share and the proceeds raised, from inception through September 30, 2022, are detailed in the following table:
Issuance Date |
|
Shares Issued |
|
|
|
Price per Share |
|
|
|
Gross Proceeds |
|
|||
|
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
$ |
|
|
|||
(1)
Note 7 – Related Party Agreements and Transactions
Amended and Restated Advisory Agreement
On November 29, 2016, the Company’s Board of Directors approved an investment advisory agreement between RGC and the Company, under which RGC, subject to the overall supervision of the Board of Directors, manages the day-to-day operations of and provides investment advisory services to the Company (together with a subsequent amendment thereto, the “Prior Agreement”). On August 3, 2017, the Board of Directors approved certain amendments to the Prior Agreement (the “First Amended and Restated Advisory
37
Agreement”) and recommended that the Company’s stockholders approve the First Amended and Restated Advisory Agreement. The First Amended and Restated Advisory Agreement became effective on
Pursuant to the Advisory Agreement, the Company pays RGC a fee for its investment advisory and management services consisting of
Base Management Fee
The base management fee is payable on the first day of each calendar quarter.
For purposes of the Advisory Agreement, a “Spin-Off transaction” includes either a transaction whereby (a) the Company offers its stockholders the option to elect to either (i) retain their ownership of shares of the Company’s common stock, or (ii) exchange their shares of the Company’s common stock for shares of common stock in a newly formed entity (the “Public Fund”) that will elect to be regulated as a BDC under the 1940 Act and treated as a RIC under Subchapter M of the Code (the “Public Fund Spin Off”); or (b) the Company completes a listing of the Company’s securities on any securities exchange (an “Exchange Listing”). The base management fee will be an amount equal to
RGC earned base management fees of $
Incentive Fee
The incentive fee, which provides RGC with a share of the income that RGC generates for the Company, consists of an investment-income component and a capital-gains component, which are largely independent of each other, with the result that one component may be payable even if the other is not.
Under the investment-income component (the “Income Incentive Fee”), the Company pays RGC each quarter an incentive fee with respect to the Company’s Pre-Incentive Fee net investment income. The Income Incentive Fee is calculated and payable quarterly
38
in arrears based on the Pre-Incentive Fee net investment income for the immediately preceding fiscal quarter. Payments based on Pre-Incentive Fee net investment income will be based on the Pre-Incentive Fee net investment income earned for the quarter. For this purpose, “Pre-Incentive Fee net investment income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial and consulting fees or other fees that the Company receives from portfolio companies) that the Company accrues during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the amended and restated administration agreement with the Administrator (the “Administration Agreement”), and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee net investment income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with pay in kind interest and zero coupon securities), accrued income the Company has not yet received in cash; provided, however, that the portion of the Income Incentive Fee attributable to deferred interest features will be paid, only if and to the extent received in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write off or similar treatment of the investment giving rise to any deferred interest accrual, applied in each case in the order such interest was accrued. Such subsequent payments in respect of previously accrued income will not reduce the amounts payable for any quarter pursuant to the calculation of the Income Incentive Fee described above. Pre-Incentive Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Pre-Incentive Fee net investment income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less liabilities) at the end of the immediately preceding fiscal quarter, will be compared to a “hurdle rate” of
Prior to the consummation of the IPO, in the event that (a) the sum of the Company’s cumulative net realized losses since the date of the Company’s election to be regulated as a BDC exceeded
Under the capital gains component of the incentive fee (the “Capital Gains Fee”), the Company will pay RGC, as of the end of each calendar year,
RGC earned incentive fees of $
39
payable pending receipt of cash by the Company. Both currently payable in cash, $
The capital gains incentive fee consists of fees related to realized gains, realized capital losses and unrealized capital depreciation. With respect to the incentive fee expense accrual related to the capital gains incentive fee, U.S. GAAP requires that the capital gains invective fee accrual consider the cumulative aggregate unrealized appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized appreciation were realized even though such unrealized appreciation is not permitted to be considered in calculating the fee actually payable under the Advisory Agreement. As of each of September 30, 2022 and December 31, 2021, there was
Spin-Off Incentive Fee
The Income Incentive Fee is payable in connection with a Public Fund Spin-Off, including the IPO, as follows. The Income Incentive Fee is calculated as of the date of the completion of each Public Fund Spin-Off and will equal the amount of Income Incentive Fee that would be payable to RGC if (1) all of the Company’s investments were liquidated for their current value and any unamortized deferred portfolio investment-related fees would be deemed accelerated, (2) the proceeds from such liquidation were used to pay all of the Company’s outstanding liabilities, and (3) the remainder were distributed to the Company’s stockholders and paid as incentive fee in accordance with the Income Incentive Fee described in clauses (1) and (2) above for determining the amount of the Income Incentive Fee; provided, however, that in no event will the Income Incentive Fee paid in connection with the completion of the Public Fund Spin-Off (x) include the portion of the Income Incentive Fee attributable to deferred interest features of a particular investment that is not transferred pursuant to the Public Fund Spin-Off until such time as the deferred interest is received in cash, or (y) exceed
The Capital Gains Fee is payable in respect of the exchanged shares of the Company’s common stock in connection with the Public Fund Spin-Off and is calculated as of the date of the completion of the Public Fund Spin-Off as if such date were a calendar year-end for purposes of calculating and paying the Capital Gains Fee.
Administration Agreement
The Company reimburses the Administrator for the allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including furnishing the Company with office facilities, equipment and clerical, bookkeeping and recordkeeping services at such facilities, as well as providing other administrative services. In addition, the Company reimburses the Administrator for the fees and expenses associated with performing compliance functions, and the Company’s allocable portion of the compensation of certain of its officers, including the Company’s Chief Financial Officer, Chief Compliance Officer and any administrative support staff.
The Company reimbursed the Administrator $
40
provide additional administration services for the Company, were $
License Agreement
The Company has entered into a license agreement with RGC (the “License Agreement”) pursuant to which RGC has granted the Company a personal, non-exclusive, royalty-free right and license to use the name “Runway Growth Finance”. Under the License Agreement, the Company has the right to use the “Runway Growth Finance” name for so long as RGC or one of its affiliates remains the Company’s investment adviser. Other than with respect to this limited license, the Company has no legal right to the “Runway Growth Finance” name.
Oaktree Strategic Relationship
In connection with the strategic relationship, OCM purchased an aggregate of
In connection with OCM’s commitment, the Company entered into a stockholder agreement, dated December 15, 2016, with OCM, pursuant to which OCM has a right to nominate a member of the Company’s Board of Directors for election for so long as OCM holds shares of the Company’s common stock in an amount equal to, in the aggregate, at least one-third (
Note 8 – Fair Value Measurements
The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC Topic 820. See Note 2 for discussion of the Company’s valuation policies.
The following tables present information about the Company’s assets and liabilities measured at fair value as of September 30, 2022 and December 31, 2021, respectively:
|
|
As of September 30, 2022 (Unaudited) |
|
|||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Senior Secured Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Second Lien Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Preferred Stock |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
As of December 31, 2021 |
|
|||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|||
Senior Secured Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Second Lien Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Preferred Stock |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|||
Warrants |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Total Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury Bill |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Total Investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
The Company recognizes transfers into and out of the levels indicated above at the end of each reporting period. During the period ended September 30, 2022, the Company had common stock investments with restrictions lifted, resulting in an asset transfer out
41
of Level 2 and into Level 1 at the fair value of $
The following table presents a rollforward of Level 3 assets measured at fair value as of September 30, 2022:
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Senior Secured Term Loans |
|
|
Second Lien Term Loans |
|
|
Warrants |
|
|
Total |
|
||||||||||||
Fair value at December 31, 2021 |
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||||
Amortization of fixed income premiums or accretion of discounts |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Purchases of investments(1) |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sales or repayments of investments(1) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Transfers out of Level 3 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Realized gain (loss) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Change in unrealized appreciation (depreciation) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
Fair value at September 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Change in unrealized appreciation (depreciation on Level 3 investments still held as of September 30, 2022 |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
The following table presents a rollforward of Level 3 assets measured at fair value as of September 30, 2021:
|
|
Preferred Stock |
|
|
Senior Secured |
|
|
Second Lien Term Loans |
|
|
Warrants |
|
|
Total |
|
||||||||||
Fair value at December 31, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
|
||||
Amortization of fixed income premiums or accretion of discounts |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Purchases of investments(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||||
Sales or repayments of investments(1) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Transfers out of Level 3 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Realized gain (loss) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Change in unrealized appreciation (depreciation) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
Fair value at September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
|
||||
Change in unrealized appreciation (depreciation) on Level 3 investments still held as of September 30, 2021 |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
— |
|
|
$ |
|
( |
) |
|
$ |
|
( |
) |
42
The following table provides quantitative information regarding Level 3 fair value measurements as of September 30, 2022:
Description |
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable Inputs |
|
Range (Weighted Average) |
||
Common Stock |
|
$ |
|
|
|
Recent private market and merger and acquisition transaction prices |
|
N/A |
|
N/A |
|
Preferred Stock |
|
|
|
|
|
Recent private market and merger and acquisition transaction prices |
|
N/A |
|
N/A |
|
Senior Secured Term Loans(1) |
|
|
|
|
|
Discounted Cash Flow analysis |
|
Discount rate |
|
||
|
|
|
|
|
|
Market approach |
|
Origination yield |
|
||
|
|
|
|
|
|
PWERM |
|
Discount rate |
|
||
Second Lien Term Loans |
|
|
|
|
|
Discounted Cash Flow analysis |
|
Discount rate |
|
||
Warrants(2) |
|
|
|
|
|
Option pricing model |
|
Risk-free interest rate |
|
||
|
|
|
|
|
|
|
|
Average industry volatility |
|
||
|
|
|
|
|
|
|
|
Estimated time to exit |
|
||
|
|
|
|
|
|
|
|
Revenue multiples |
|
||
|
|
|
|
|
|
PWERM |
|
Discount rate |
|
||
|
|
|
|
|
|
|
|
Revenue multiples |
|
||
Total Level 3 Investments |
|
$ |
|
|
|
|
|
|
|
|
|
The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2021:
Description |
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable Inputs |
|
Range (Weighted Average) |
||
Preferred Stock |
|
$ |
|
|
|
Recent private market and merger and acquisition transaction prices |
|
N/A |
|
N/A |
|
Senior Secured Term Loans(1) |
|
|
|
|
|
Discounted Cash Flow analysis |
|
Discount rate |
|
||
|
|
|
|
|
|
Market approach |
|
Origination yield |
|
||
|
|
|
|
|
|
PWERM |
|
Discount rate |
|
||
Second Lien Term Loans(1) |
|
|
|
|
|
Discounted Cash Flow analysis |
|
Discount rate |
|
||
Warrants(2) |
|
|
|
|
|
Option pricing model |
|
Risk-free interest rate |
|
||
|
|
|
|
|
|
|
|
Average industry volatility |
|
||
|
|
|
|
|
|
|
|
Estimated time to exit |
|
||
|
|
|
|
|
|
|
|
Revenue multiples |
|
||
|
|
|
|
|
|
PWERM |
|
Discount rate |
|
||
|
|
|
|
|
|
|
|
Revenue multiples |
|
||
Total Level 3 Investments |
|
$ |
|
|
|
|
|
|
|
|
|
Note 9 – Derivative Financial Instruments
In the normal course of business, the Company may utilize derivative contracts in connection with its investment activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The derivative activities and exposure to derivative contracts primarily involve equity price risks. In addition to the primary underlying risk, additional counterparty risk exists due to the potential inability of counterparties to meet the terms of their contracts.
Warrants
Warrants provide exposure and potential gains upon equity appreciation of the portfolio company’s equity value. A warrant has a limited life and expires on a certain date. As a warrant’s expiration date approaches, the time value of the warrant will decline. In addition, if the stock underlying the warrant declines in price, the intrinsic value of an “in the money” warrant will decline. Further, if
43
the price of the stock underlying the warrant does not exceed the strike price of the warrant on the expiration date, the warrant will expire worthless. As a result, there is the potential for the entire value of an investment in a warrant to be lost. The Company’s volume of warrant investment activity is closely correlated to its primary senior secured loans to portfolio companies. For the three and nine months ended September 30, 2022, the Company had a net realized gain/(loss) of $(
Counterparty risk exists from the potential failure of an issuer of warrants to settle its exercised warrants. The maximum risk of loss from counterparty risk is the fair value of the contracts and the purchase price of the warrants. The Company’s Board of Directors considers the effects of counterparty risk when determining the fair value of its investments in warrants.
Note 10 – Borrowings
The following table shows the Company's borrowings as of September 30, 2022 and December 31, 2021:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||||||||||||||||||
|
|
Total Commitment |
|
|
Principal |
|
|
Deferred Debt Cost(1) |
|
|
Carrying Value |
|
|
Total Commitment |
|
|
Principal |
|
|
Deferred Debt Cost(1) |
|
|
Carrying Value |
|
||||||||||||||||
Credit Facility |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
2026 Notes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||||
July 2027 Notes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|||
August 2027 Notes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
(1) Net of accumulated amortization.
For the three and nine months ended September 30, 2022, the components of interest expense, amortization of deferred debt costs, and the unused fees on the Credit Facility (as defined below) on the Company's borrowings were as follows:
|
|
Three Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2022 |
||||||||||||||||||||||||||||||||||||||||||||||
|
|
Interest Expense |
|
|
Amortization |
|
|
Unused Facility and Other Fees |
|
|
Total |
|
|
Weighted |
|
Interest Expense |
|
|
Amortization |
|
|
Unused Facility and Other Fees |
|
|
Total |
|
|
Weighted |
||||||||||||||||||||||
Credit Facility |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
||||||||||
2026 Notes |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
% |
||||||||
July 2027 Notes |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
% |
||||||||
August 2027 Notes |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
% |
||||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||||||||
|
|
Three Months Ended September 30, 2021 |
|
Nine Months Ended September 30, 2021 |
||||||||||||||||||||||||||||||||||||||||||||||
|
|
Interest Expense |
|
|
Amortization |
|
|
Unused Facility and Other Fees |
|
|
Total |
|
|
Weighted |
|
Interest Expense |
|
|
Amortization |
|
|
Unused Facility and Other Fees |
|
|
Total |
|
|
Weighted |
||||||||||||||||||||||
Credit Facility |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
||||||||||
2026 Notes |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
% |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
% |
July 2027 Notes |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
% |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
% |
August 2027 Notes |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
% |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
% |
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||||||||
Credit Facility
On May 31, 2019, the Company entered into a Credit Agreement with KeyBank National Association, acting as administrative agent and syndication agent and the other lenders party thereto, which initially provided the Company with a $
44
September 30, 2022, the Company had $
Borrowings under the Credit Facility bear interest at a rate equal to the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin rate that ranges from
The Credit Facility is collateralized by all eligible investment assets held by the Company. The Credit Facility contains representations and warranties and affirmative and negative covenants customary for secured financings of this type, including certain financial covenants such as a consolidated tangible net worth requirement and a required asset coverage ratio.
For the three and nine months ended September 30, 2022, the weighted average outstanding debt balance was $
2026 Notes
On December 10, 2021, the Company completed a private debt offering of $
The 2026 Notes bear an interest rate of
Aggregate offering costs in connection with the 2026 Notes issuance, including the underwriter’s discount and commissions, were $
July 2027 Notes
On July 28, 2022, the Company issued and sold $
The July 2027 Notes bear an interest rate of
Aggregate offering costs in connection with the July 2027 Notes issuance, including the underwriter’s discount and commissions, were $
45
August 2027 Notes
On August 31, 2022, the Company completed a private debt offering of $
The August 2027 Notes bear an interest rate of
Aggregate offering costs in connection with the August 2027 Notes issuance, including the underwriter’s discount and commissions, were $
46
Note 11 – Financial Highlights
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||||||||||
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
||||||||||||||||
Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net asset value at beginning of period |
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
||||
Net investment income(1)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Realized gain (loss)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|||
Change in unrealized appreciation (depreciation)(1) |
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Dividends(1) |
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Accretion (dilution)(1)(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net asset value at end of period |
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
||||
Total return based on net asset value(2) |
|
|
|
( |
) |
% |
|
|
|
( |
) |
% |
|
|
|
( |
) |
% |
|
|
|
( |
) |
% |
Weighted average shares outstanding for the period, basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ratio/Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net assets at end of period |
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
||||
Average net assets(5) |
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
|
|
|
||||
Ratio of net operating expenses to average net assets(6)(7) |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
||||
Ratio of net increase (decrease) in net assets resulting from operations to average net assets(7) |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
||||
Portfolio turnover rate(8) |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
|
|
|
|
% |
||||
Note 12 – Tax Information
Federal income tax regulations differ from accounting principles generally accepted in the United States and distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary in nature. Permanent differences are reclassified among capital accounts in the financial statements to reflect their appropriate tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.
The following table sets forth the tax cost basis and the estimated aggregate gross unrealized appreciation and depreciation from investments for federal income tax purposes as of and for the period ended September 30, 2022 and the year ended December 31, 2021:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||||
|
|
(Unaudited) |
|
|
|
|
|
|||
Tax cost on investments |
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
||
Unrealized appreciation |
|
$ |
|
|
|
$ |
|
|
||
Unrealized depreciation |
|
|
|
( |
) |
|
|
|
( |
) |
Net unrealized appreciation/(depreciation) from investments |
|
$ |
|
( |
) |
|
$ |
|
|
|
47
Note 13 - Subsequent Events
The Company evaluated events subsequent to September 30, 2022 through November 3, 2022.
On October 4, 2022, the Company's investment in Fidelis Cybersecurity, Inc was partially repaid resulting in $
On October 12, 2022, the Company funded an investment of $
On October 20, 2022, the Company funded an investment of $
On
On October 27, 2022, the Company funded an investment of $
48
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This quarterly report on Form 10‑Q contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
49
Although we believe the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” in in Part I, Item 1A of our annual report on Form 10-K, as modified by the annual report on Form 10-K/A for the year ended December 31, 2021, filed with the SEC on March 2, 2022 and March 14, 2022, respectively.
We have based the forward-looking statements included in this Form 10‑Q on information available to us on the date of this Form 10‑Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including our annual reports on Form 10‑K, quarterly reports on Form 10‑Q and current reports on Form 8‑K.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this quarterly report on Form 10‑Q.
Overview
We are an externally managed, non-diversified closed-end investment management company that was formed on August 31, 2015 as a corporation under the laws of the State of Maryland. On August 18, 2021, we changed our name to “Runway Growth Finance Corp.” from “Runway Growth Credit Fund Inc.” We have elected to be regulated as a BDC under the 1940 Act. In addition, we have elected to be treated, have qualified, and intend to continue to qualify annually as a RIC under Subchapter M of the Code. If we fail to qualify as a RIC for any taxable year, we will be subject to corporate-level U.S. federal income tax on any net taxable income for such year. As a BDC and a RIC, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source-of-income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our investment company taxable income and net tax-exempt interest.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company until the last day of our fiscal year following the fifth anniversary of our IPO on October 25, 2021, or until the earliest of (i) the last day of the first fiscal year in which we have total annual gross revenue of $1,070,000,000 or more, (ii) December 31 of the fiscal year in which we become a “large accelerated filer” as defined in Rule 12b‑2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”), (which would occur if the market value of our common stock held by non-affiliates exceeds $700.0 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period. For so long as we remain an emerging growth company under the JOBS Act, we will be subject to reduced public company reporting requirements.
We are externally managed by RGC, an investment adviser that has registered with the SEC under the Investment Advisers Act of 1940, as amended. The Administrator, a wholly-owned subsidiary of RGC, provides all the administrative services necessary for us to operate.
In October 2015, in connection with our formation, we issued and sold 1,667 shares of common stock to R. David Spreng, our President, Chief Executive Officer and Chairman of our Board of Directors, for an aggregate purchase price of $25,000. The sale of shares of common stock was approved by the unanimous consent of the sole director at the time. On December 1, 2017, we completed
50
our Initial Private Offering, in which we issued 18,241,157 shares of our common stock to stockholders for a total purchase price of $275,000,000 in reliance on exemptions from the registration requirements of the Securities Act, and other applicable securities laws.
As of September 30, 2022, we had completed multiple closings under our second private offering (the “Second Private Offering”) and had accepted aggregate capital commitments of $181,673,500. As of September 30, 2022, in connection with the Second Private Offering we have issued 9,617,379 shares of our common stock for a total purchase price of $144,260,683. Concurrent with the IPO, all undrawn commitments under the Second Private Offering were cancelled.
On October 25, 2021, we closed our IPO, issuing 6,850,000 shares of our common stock at a public offering price of $14.60 per share. Net of underwriting fees and offering costs, we received net cash proceeds of $93.0 million. Our common stock began trading on the Nasdaq Global Select Market under the symbol “RWAY” on October 21, 2021.
As of September 30, 2022, we have issued 22,564 shares as an additional direct investment by Runway Growth Holdings LLC, an affiliate of RGC, at a per-share price of $15.00 for a total purchase price of $338,453. As of September 30, 2022, we have issued an additional 6,647,847 shares as part of our dividend reinvestment plan. Refer to "Note 6- Net Assets" for further detail.
On August 10, 2020, we, RGC, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates were granted an order (the “Order”), amended on August 30, 2022, that permits us greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if the Board determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by RGC or its affiliates in a manner consistent with our investment objective or criteria, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. We believe that the ability to co-invest with similar investment structures and accounts sponsored or managed by RGC or its affiliates will provide additional investment opportunities and the ability to achieve greater diversification. Under the terms of the Order, a majority of our independent directors are required to make certain determinations in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective, criteria, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.
On August 30, 2022, we received an amendment to our existing Order to permit us to, subject to the satisfaction of certain conditions, co-invest in our existing portfolio companies with certain affiliates that are private funds even if such other funds had not previously invested in such existing portfolio company. Without this order, such affiliated funds that are private funds would not be able to participate in such co-investments with us unless the affiliated funds had previously acquired securities of the portfolio company in a co-investment transaction with us.
As of September 30, 2022, approximately 69% of our debt investments had variable rates based on LIBOR. We are actively considering and discussing the preferred alternative benchmark and prioritizing the inclusion of LIBOR fallback language in our documentation. The Alternative Reference Rates Committee (“ARCC”) has recommended using the SOFR rate as an alternative benchmark for U.S. based debt securities.
Portfolio Composition and Investment Activity
Portfolio Composition
At September 30, 2022, we had investments in 43 portfolio companies, representing 24 companies in which we held loan and warrant investments, two companies in which we held loan investments and shares of common, preferred stock, or a combination with warrants, three companies in which we held a loan investment only, nine companies in which we held warrant investments only, and five companies in which we held shares of common or preferred stock only, or a combination with warrants. At December 31, 2021, we had investments in 39 portfolio companies, representing 20 companies where we held loan and warrant investments, 12 companies
51
where we held warrant interests only, and we held one U.S. Treasury Bill. The following table shows the fair value of our investments, by asset class, as of September 30, 2022 and December 31, 2021:
|
|
September 30, 2022 (Unaudited) |
|
December 31, 2021 |
||||||||||||||||||||||||||||
Investments |
|
Cost |
|
|
Fair Value |
|
|
|
% of Total Portfolio |
|
Cost |
|
|
Fair Value |
|
|
|
% of Total Portfolio |
||||||||||||||
Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Stocks |
|
$ |
|
8,714,957 |
|
|
$ |
|
3,138,051 |
|
|
|
|
0.3 |
|
% |
|
$ |
|
4,709,744 |
|
|
$ |
|
11,463,865 |
|
|
|
|
1.6 |
|
% |
Senior Secured Term Loans |
|
|
|
881,833,193 |
|
|
|
|
862,527,989 |
|
|
|
|
94.8 |
|
|
|
|
|
629,009,432 |
|
|
|
|
623,053,646 |
|
|
|
|
85.4 |
|
|
Second Lien Term Loans |
|
|
|
13,450,968 |
|
|
|
|
13,403,245 |
|
|
|
|
1.5 |
|
|
|
|
|
12,872,588 |
|
|
|
|
12,872,588 |
|
|
|
|
1.8 |
|
|
Preferred Stocks |
|
|
|
14,381,866 |
|
|
|
|
12,712,553 |
|
|
|
|
1.4 |
|
|
|
|
|
17,337,836 |
|
|
|
|
17,037,125 |
|
|
|
|
2.3 |
|
|
Warrants |
|
|
|
18,212,941 |
|
|
|
|
18,387,107 |
|
|
|
|
2.0 |
|
|
|
|
|
18,393,141 |
|
|
|
|
20,087,550 |
|
|
|
|
2.7 |
|
|
Total Portfolio Investments |
|
|
|
936,593,925 |
|
|
|
|
910,168,945 |
|
|
|
|
100.0 |
|
|
|
|
|
682,322,741 |
|
|
|
|
684,514,774 |
|
|
|
|
93.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. Treasury Bill |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
45,001,250 |
|
|
|
|
45,001,500 |
|
|
|
|
6.2 |
|
|
Total Investments |
|
$ |
|
936,593,925 |
|
|
$ |
|
910,168,945 |
|
|
|
|
100.0 |
|
% |
|
$ |
|
727,323,991 |
|
|
$ |
|
729,516,274 |
|
|
|
|
100.0 |
|
% |
For the three and nine months ended September 30, 2022, our debt investment portfolio had a dollar-weighted annualized yield of 14.43% and 13.49%, respectively. For the three and nine months ended September 30, 2021, our debt investment portfolio had a dollar-weighted annualized yield of 15.34% and 14.17%, respectively. We calculate the yield on dollar-weighted debt investments for any period measured as (1) total related investment income during the period divided by (2) the daily average of the fair value of debt investments outstanding during the period. As of September 30, 2022, our debt investments had a dollar-weighted average outstanding term of 54 months at origination and a dollar-weighted average remaining term of 42 months, or approximately 3.5 years. As of September 30, 2022, substantially all of our debt investments had an original committed principal amount of between $6 million and $85 million, repayment terms of between 36 months and 61 months and pay cash interest at annual interest rates of between 8.53% and 14.53%.
The following table shows our dollar-weighted annualized yield by investment type for the three and nine months ended September 30, 2022 and 2021:
|
|
Fair Value(1) |
|
Cost(2) |
||||||||||||||||||||||||||||||||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||||||||||||||||||
Investment type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Debt investments |
|
|
14.43 |
|
% |
|
|
15.34 |
|
% |
|
|
13.49 |
|
% |
|
|
14.17 |
|
% |
|
|
14.10 |
|
% |
|
|
14.87 |
|
% |
|
|
13.30 |
|
% |
|
|
13.93 |
|
% |
Equity interest |
|
|
3.64 |
|
% |
|
|
2.41 |
|
% |
|
|
3.36 |
|
% |
|
|
2.60 |
|
% |
|
|
3.16 |
|
% |
|
|
3.60 |
|
% |
|
|
3.38 |
|
% |
|
|
3.40 |
|
% |
All investments |
|
|
13.95 |
|
% |
|
|
13.96 |
|
% |
|
|
12.94 |
|
% |
|
|
13.06 |
|
% |
|
|
13.55 |
|
% |
|
|
14.06 |
|
% |
|
|
12.77 |
|
% |
|
|
13.15 |
|
% |
Investment Activity
The value of our investment portfolio will change over time due to changes in the fair value of our underlying investments, as well as changes in the composition of our portfolio resulting from purchases of new and follow-on investments as well as repayments and sales of existing investments. During the nine months ended September 30, 2022, the Company funded $210.4 million in eight new portfolio companies and $182.4 million in ten existing portfolio companies, net of upfront loan origination fees. The Company also received $143.2 million in loan repayments from six portfolio companies and $7.2 million in proceeds from the termination of warrants, sale of preferred stock, and sale of common stock. During the nine months ended September 30, 2021, the Company funded $140.1 million in nine new portfolio companies and $97.0 million in ten existing portfolio companies. The Company also received $76.1 million in loan repayments from eight portfolio companies and $2.9 million in proceeds from the termination of warrants.
52
Portfolio Reconciliation
The following is a reconciliation of our investment portfolio, including U.S. Treasury Bills, for the nine months ended September 30, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||
Beginning Investment Portfolio |
|
$ |
|
729,516,274 |
|
|
$ |
|
621,826,650 |
|
||||||||||||
Purchases of Investments(1) |
|
|
|
399,164,647 |
|
|
|
|
239,458,881 |
|
||||||||||||
Purchases of U.S. Treasury Bills |
|
|
|
— |
|
|
|
|
115,000,509 |
|
||||||||||||
Amortization of Fixed Income Premiums or Accretion of Discounts |
|
|
|
4,575,984 |
|
|
|
|
5,539,659 |
|
||||||||||||
Sales or Repayments of Investments |
|
|
|
(143,144,652 |
) |
|
|
|
(197,534,296 |
) |
||||||||||||
Scheduled Principal Payments of Investments |
|
|
|
(7,265,675 |
) |
|
|
|
(5,671,437 |
) |
||||||||||||
Sales and Maturities of U.S. Treasury Bills |
|
|
|
(44,999,747 |
) |
|
|
|
(124,999,118 |
) |
||||||||||||
Realized Gain (Loss) on Investments |
|
|
|
939,377 |
|
|
|
|
(4,094,970 |
) |
||||||||||||
Net Change in Unrealized Appreciation (Depreciation) on Investments |
|
|
|
(28,617,263 |
) |
|
|
|
(3,172,841 |
) |
||||||||||||
Ending Investment Portfolio |
|
$ |
|
910,168,945 |
|
|
$ |
|
646,353,037 |
|
||||||||||||
Asset Quality
In addition to various risk management and monitoring tools, RGC uses an investment rating system to characterize and monitor the quality of our debt investment portfolio. Equity securities and Treasury Bills are not graded. This debt investment rating system uses a five-level numeric scale. The following is a description of the conditions associated with each investment rating:
Investment |
|
Rating Definition |
|
|
|
1 |
|
Performing above plan and/or strong enterprise profile, value, financial performance/coverage. Maintaining full covenant and payment compliance as agreed. |
2 |
|
Performing at or reasonably close to plan. Acceptable business prospects, enterprise value, financial coverage. Maintaining key covenant and payment compliance as agreed. All new loans are initially graded Category 2. |
3 |
|
Performing below plan of record. Potential elements of concern over performance, trends and business outlook. Loan-to-value remains adequate. Potential key covenant non-compliance. Full payment compliance. |
4 |
|
Performing materially below plan. Non-compliant with material financial covenants. Payment default/deferral could result without corrective action. Requires close monitoring. Business prospects, enterprise value and collateral coverage declining. These investments may be in workout, and there is a possibility of loss of return but no loss of principal is expected. |
5 |
|
Going concern nature in question. Substantial decline in enterprise value and all coverages. Covenant and payment default imminent if not currently present. Investments are nearly always in workout. May experience partial and/or full loss. |
The following table shows the investment ratings of our debt investments at fair value as of September 30, 2022 and December 31, 2021:
|
|
As of September 30, 2022 (Unaudited) |
|
As of December 31, 2021 |
|
||||||||||||||||||||||||||
Investment Rating |
|
Fair Value |
|
|
|
% of Total Portfolio |
|
Number of Portfolio Companies |
|
|
|
Fair Value |
|
|
|
% of Total Portfolio |
|
Number of Portfolio Companies |
|
||||||||||||
1 |
|
$ |
|
— |
|
|
|
|
— |
|
% |
|
|
— |
|
|
|
$ |
|
91,424,112 |
|
|
|
|
12.5 |
|
% |
|
|
2 |
|
2 |
|
|
|
730,875,660 |
|
|
|
|
80.3 |
|
|
|
|
22 |
|
|
|
|
|
479,114,147 |
|
|
|
|
65.7 |
|
|
|
|
17 |
|
3 |
|
|
|
140,588,533 |
|
|
|
|
15.4 |
|
|
|
|
6 |
|
|
|
|
|
47,490,324 |
|
|
|
|
6.5 |
|
|
|
|
4 |
|
4 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
3,247,863 |
|
|
|
|
0.4 |
|
|
|
|
1 |
|
5 |
|
|
|
4,467,041 |
|
|
|
|
0.5 |
|
|
|
|
1 |
|
|
|
|
|
14,649,788 |
|
|
|
|
2.0 |
|
|
|
|
1 |
|
|
|
$ |
|
875,931,234 |
|
|
|
|
96.2 |
|
% |
|
|
29 |
|
|
|
$ |
|
635,926,234 |
|
|
|
|
87.2 |
|
% |
|
|
25 |
|
53
The global COVID-19 pandemic, to date, has had limited impact on the investment ratings of our debt investments, taken as a whole. However, the ongoing impact of the global COVID-19 pandemic is uncertain and we can make no assurances that the pandemic or changes in the macroeconomic environment will not have a negative impact on our investment portfolio in the future. In addition, none of our portfolio companies are engaged in cryptocurrency speculation or cryptocurrency mining.
Loans and Debt Securities on Non-Accrual Status
Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of September 30, 2022, we had one loan to Pivot3 Holdings, Inc., at a fair value of $4,467,041 on non-accrual status, which represents 0.78% of the Company’s net assets. As of December 31, 2021, we had six loans to Mojix, Inc. and one loan to Pivot3 Holdings, Inc., representing an aggregate principal funded of $30,278,707 at a fair value of $28,259,976, on non-accrual status, which represented 4.66% of our net assets.
Results of Operations
An important measure of our financial performance is net increase/(decrease) in net assets resulting from operations, which includes net investment income/(loss), net realized gain/(loss) and net unrealized appreciation/(depreciation). Net investment income/(loss) is the difference between our income from interest, dividends, fees and other investment income and our operating expenses, including interest on borrowed funds. Net realized gain/(loss) on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost. Net unrealized appreciation/(depreciation) on investments is the net change in the fair value of our investment portfolio.
Comparison of the Three Months Ended September 30, 2022 and 2021
|
|
Three Months Ended September 30, |
|
|||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||
|
|
Total |
|
|
Per Share(1) |
|
|
Total |
|
|
Per Share(1) |
|
||||||||
Investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and dividend income |
|
$ |
|
26,882,500 |
|
|
$ |
|
0.66 |
|
|
$ |
|
17,627,628 |
|
|
$ |
|
0.53 |
|
Other income |
|
|
|
446,204 |
|
|
|
|
0.01 |
|
|
|
|
982,438 |
|
|
|
|
0.03 |
|
Total investment income |
|
|
|
27,328,704 |
|
|
|
|
0.67 |
|
|
|
|
18,610,066 |
|
|
|
|
0.56 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management fees |
|
|
|
3,065,581 |
|
|
|
|
0.08 |
|
|
|
|
2,301,656 |
|
|
|
|
0.07 |
|
Incentive fees |
|
|
|
3,625,686 |
|
|
|
|
0.09 |
|
|
|
|
2,686,475 |
|
|
|
|
0.08 |
|
Interest expense |
|
|
|
3,588,289 |
|
|
|
|
0.09 |
|
|
|
|
812,852 |
|
|
|
|
0.02 |
|
Professional fees |
|
|
|
720,115 |
|
|
|
|
0.02 |
|
|
|
|
612,854 |
|
|
|
|
0.02 |
|
Overhead allocation expense |
|
|
|
258,191 |
|
|
|
|
0.01 |
|
|
|
|
249,141 |
|
|
|
|
0.01 |
|
Insurance expense |
|
|
|
268,806 |
|
|
|
|
0.01 |
|
|
|
|
23,087 |
|
|
|
|
— |
|
Administration fee |
|
|
|
161,245 |
|
|
|
|
— |
|
|
|
|
179,500 |
|
|
|
|
0.01 |
|
Debt financing fees |
|
|
|
794,124 |
|
|
|
|
0.02 |
|
|
|
|
738,087 |
|
|
|
|
0.02 |
|
Directors' fees |
|
|
|
90,727 |
|
|
|
|
— |
|
|
|
|
67,750 |
|
|
|
|
— |
|
Tax expense |
|
|
|
- |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Other expenses |
|
|
|
258,991 |
|
|
|
|
0.01 |
|
|
|
|
197,540 |
|
|
|
|
0.01 |
|
Total operating expenses |
|
|
|
12,831,755 |
|
|
|
|
0.31 |
|
|
|
|
7,868,942 |
|
|
|
|
0.24 |
|
Net investment income |
|
|
|
14,496,949 |
|
|
|
|
0.36 |
|
|
|
|
10,741,124 |
|
|
|
|
0.32 |
|
Realized gain (loss) on investments |
|
|
|
406,917 |
|
|
|
|
0.01 |
|
|
|
|
718,310 |
|
|
|
|
0.02 |
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
(3,182,093 |
) |
|
|
|
(0.08 |
) |
|
|
|
(1,228,382 |
) |
|
|
|
(0.04 |
) |
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
11,721,773 |
|
|
$ |
|
0.29 |
|
|
$ |
|
10,231,052 |
|
|
$ |
|
0.31 |
|
54
Investment Income
Our investment objective is to maximize total return to our stockholders primarily through current income on our loan portfolio, and secondarily through capital appreciation on our warrants and other equity positions. We intend to achieve our investment objective by investing in high growth-potential, private companies. We typically invest in senior secured and second lien secured loans that generally fall into two strategies: Sponsored Growth Lending and Non-Sponsored Growth Lending. Our Sponsored Growth Lending strategy also typically includes the receipt of warrants and/or other equity from venture-backed companies. We expect our investments in loans will generally range from between $5.0 million to $85.0 million, and the upper end of this range may increase as we raise additional capital.
We generate revenue in the form of interest on the debt securities that we hold and distributions and capital gains on other interests that we acquire in our portfolio companies. We expect that the debt we invest in will generally have stated terms of 36 to 60 months. Interest on debt securities is generally payable quarterly or semiannually, primarily based on a floating rate index, and subject to certain floors determined by market rates at the time the investment is made. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions. Original issue discounts and market discounts or premiums will be capitalized, and we will accrete or amortize such amounts as interest income. We record prepayment premiums on loans and debt securities as interest income. Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.
Non-recurring income included in investment income are unamortized original issue discounts recorded as interest income. Other non-recurring income consisting of early prepayment fees, amendment fees, legal fees, and reimbursable income are recorded as fee income when earned. Any other fee income for services rendered, if any, are recorded as other income when earned.
Investment income for the three months ended September 30, 2022 and 2021 was $27,328,704 and $18,610,066, respectively, and includes non-recurring income of $709,345 and $3,403,585, respectively. The increase in investment income for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to interest income and driven by our deployment of capital, increased invested balance, and increased market interest rates.
Operating Expenses
Our primary operating expenses include the payment of fees to RGC under the Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement, professional fees, and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, including those relating to:
55
Operating expenses for the three months ended September 30, 2022 and 2021 were $12,831,755 and $7,868,942, respectively. Operating expenses increased for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to an increase in incentive fees, management fees, debt financing fees, and interest expense. Operating expenses per share for the three months ended September 30, 2022 and 2021 were $0.31 per share and $0.24 per share, respectively.
Incentive Fees
Incentive fees for the three months ended September 30, 2022 and 2021 were $3,625,686 and $2,686,475, respectively. Incentive fees increased for the three months ended September 30, 2022 from the three months ended September 30, 2021 primarily due to an increase in net investment income. $3,208,431 of the incentive fees for the three months ended September 30, 2022 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2022. $417,255 of the incentive fees for the three months ended September 30, 2022 were deferred and accrued, and included in Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2022. $2,171,245 of the incentive fees for the three months ended September 30, 2021 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2021. $515,230 of the incentive fees for the three months ended September 30, 2021 were deferred and accrued, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2021. Incentive fees related to PIK or deferred interest are accrued and payment is deferred until such interest is collected in cash. Incentive fees per share for the three months ended September 30, 2022 and 2021 were $0.09 and $0.08 per share, respectively.
Net Investment Income
Net investment income for the three months ended September 30, 2022 and 2021 was $14,496,949 and $10,741,124, respectively. Net investment income increased for the three months ended September 30, 2022 from the three months ended September 30, 2021, primarily due to an increase in net investment income arising increased interest rates. Net investment income per share for the three months ended September 30, 2022 and 2021 was $0.36 per share and $0.32 per share, respectively.
Net Realized Gain (Loss) on Investments
The net realized gain on investments of $406,917 for the three months ended September 30, 2022 was primarily due to the gain on a portion of our investment in the common stock of Brilliant Earth Group, Inc and partially offset by a loss of our investment in the warrants in Aspen Group Inc. The net realized gain on investments of $718,310 for the three months ended September 30, 2021 was primarily due to the gain on a portion of our investment in the common stock of Porch Group, Inc. and Ouster, Inc. and warrants of Brilliant Earth LLC.
56
Net Change in Unrealized Appreciation (Depreciation) on Investments
Net change in unrealized depreciation on investments of $3,182,093 for the three months ended September 30, 2022 was primarily due to decreases in the fair value of our senior secured loan to Pivot3 Holdings, Inc. The net change in unrealized depreciation on investments of $1,228,382 for the three months ended September 30, 2021 was primarily due to decreases in the fair value of our investment in the common stock of Ouster, Inc. and warrants in CareCloud, Inc. and Circadence Coporation and partially offset by an increase in the fair value of our senior secured loan in Mojix, Inc.
Net Increase (Decrease) in Net Assets Resulting from Operations
We had a net increase in net assets resulting from operations of $11,721,773 for the three months ended September 30, 2022, as compared to a net increase in net assets resulting from operations of $10,231,052 for the three months ended September 30, 2021. The net increase in net assets resulting from operations for the three months ended September 30, 2022 from the three months ended September 30, 2021 was primarily due to decreases in unrealized depreciation in our portfolio and an increase in operating expenses for the three months ended September 30, 2022.
Comparison of the nine months ended September 30, 2022 and 2021
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||
|
|
Total |
|
|
Per Share(1) |
|
|
Total |
|
|
Per Share(1) |
|
||||||||
Investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and dividend income |
|
$ |
|
70,216,822 |
|
|
$ |
|
1.71 |
|
|
$ |
|
51,114,763 |
|
|
$ |
|
1.58 |
|
Other income |
|
|
|
1,528,871 |
|
|
|
|
0.04 |
|
|
|
|
2,663,677 |
|
|
|
|
0.08 |
|
Total investment income |
|
|
|
71,745,693 |
|
|
|
|
1.74 |
|
|
|
|
53,778,440 |
|
|
|
|
1.66 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management fees |
|
|
|
8,487,820 |
|
|
|
|
0.21 |
|
|
|
|
6,647,207 |
|
|
|
|
0.21 |
|
Incentive fees |
|
|
|
8,590,821 |
|
|
|
|
0.21 |
|
|
|
|
6,498,482 |
|
|
|
|
0.20 |
|
Interest expense |
|
|
|
6,070,906 |
|
|
|
|
0.15 |
|
|
|
|
2,302,582 |
|
|
|
|
0.07 |
|
Professional fees |
|
|
|
1,968,036 |
|
|
|
|
0.05 |
|
|
|
|
1,433,360 |
|
|
|
|
0.04 |
|
Overhead allocation expense |
|
|
|
713,457 |
|
|
|
|
0.02 |
|
|
|
|
655,260 |
|
|
|
|
0.02 |
|
Insurance expense |
|
|
|
806,042 |
|
|
|
|
0.02 |
|
|
|
|
69,638 |
|
|
|
|
— |
|
Administration fee |
|
|
|
497,896 |
|
|
|
|
0.01 |
|
|
|
|
420,360 |
|
|
|
|
0.01 |
|
Debt financing fees |
|
|
|
2,226,658 |
|
|
|
|
0.05 |
|
|
|
|
1,447,288 |
|
|
|
|
0.04 |
|
Directors' fees |
|
|
|
261,727 |
|
|
|
|
0.01 |
|
|
|
|
201,750 |
|
|
|
|
0.01 |
|
Tax expense |
|
|
|
1,073 |
|
|
|
|
— |
|
|
|
|
41 |
|
|
|
|
— |
|
Other expenses |
|
|
|
685,841 |
|
|
|
|
0.02 |
|
|
|
|
539,142 |
|
|
|
|
0.02 |
|
Total operating expenses |
|
|
|
30,310,277 |
|
|
|
|
0.74 |
|
|
|
|
20,215,110 |
|
|
|
|
0.62 |
|
Net investment income |
|
|
|
41,435,416 |
|
|
|
|
1.01 |
|
|
|
|
33,563,330 |
|
|
|
|
1.04 |
|
Realized gain (loss) on investments |
|
|
|
939,377 |
|
|
|
|
0.02 |
|
|
|
|
(4,076,766 |
) |
|
|
|
(0.13 |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
(28,617,263 |
) |
|
|
|
(0.70 |
) |
|
|
|
(3,172,841 |
) |
|
|
|
(0.10 |
) |
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
13,757,530 |
|
|
$ |
|
0.33 |
|
|
$ |
|
26,313,723 |
|
|
$ |
|
0.81 |
|
Investment Income
Investment income for the nine months ended September 30, 2022 and 2021 was $71,745,693 and $53,778,440, respectively, and includes non-recurring income of $3,357,795 and $6,972,631, respectively. The increase in investment income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to interest income and driven by our deployment of capital, increased invested balance, prepayments, end-of-term payments, and increased market interest rates.
Operating Expenses
Operating expenses for the nine months ended September 30, 2022 and 2021 were $30,310,277 and $20,215,110 respectively. Operating expenses increased for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to an increase in incentive fees, management fees, debt financing fees, and interest expense. Operating expenses per share for the nine months ended September 30, 2022 and 2021 were $0.74 per share and $0.62 per share, respectively.
57
Incentive Fees
Incentive fees for the nine months ended September 30, 2022 and 2021 were $8,590,821 and $6,498,482, respectively. Incentive fees increased for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to an increase in net investment income arising from increased market interest rates and from the income acceleration from the loan repayment in Mojix, Inc. $7,293,008 of the incentive fees for the nine months ended September 30, 2022 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2022. $1,297,812 of the incentive fees for the nine months ended September 30, 2022 were deferred and accrued, and included in Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2022. $5,140,115 of the incentive fees for the nine months ended September 30, 2021 were earned, payable in cash, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2021. $1,358,367 of the incentive fees for the nine months ended September 30, 2021 were deferred and accrued, and included under Accrued incentive fees on the Statement of Assets and Liabilities as of September 30, 2021. Incentive fees related to PIK or deferred interest are accrued and payment is deferred until such interest is collected in cash. Incentive fees per share for the nine months ended September 30, 2022 and 2021 were $0.21and $0.20 per share, respectively.
Net Investment Income
Net investment income for the nine months ended September 30, 2022 and 2021 was $41,435,416 and $33,563,330, respectively. Net investment income increased for the nine months ended September 30, 2022 from the nine months ended September 30, 2021, primarily due to an increase in interest income resulting from an increase in the size of the investment portfolio and increased market interest rates and from the income acceleration from the loan repayment in Mojix, Inc. Net investment income per share for the nine months ended September 30, 2022 and 2021 was $1.01 per share and $1.04 per share, respectively.
Net Realized Gain (Loss) on Investments
The net realized gain on investments of $939,377 for the nine months ended September 30, 2022 was primarily due to the gain on a portion of our investment in the common stock of Brilliant Earth Group, Inc. partially offset by the loss on our investments in the preferred stock and warrants in CareCloud, Inc and Aspen Group Inc. The net realized loss on investments of $4,076,766 for the nine months ended September 30, 2021 was primarily due to the loss on a portion of our investment in the preferred stock of CareCloud, Inc.
Net Change in Unrealized Appreciation (Depreciation) on Investments
Net change in unrealized depreciation on investments of $28,617,263 for the nine months ended September 30, 2022 was primarily due to decreases in the fair value of our senior secured loan to Pivot3 Holdings, Inc., common stock of Brilliant Earth Group, Inc., and common stock of Coginiti Corp. The net change in unrealized depreciation on investments of $3,172,841 for the nine months ended September 30, 2021 was primarily due to decreases in the fair value of our senior secured loans to Pivot3 Holdings, Inc. and our investment in the preferred stock of Pivot3 Holdings, Inc. This was partially offset by an increase in the fair value of our investment in the common stock of Ouster, Inc. and Brilliant Earth LLC.
Net Increase (Decrease) in Net Assets Resulting from Operations
We had a net increase in net assets resulting from operations of $13,757,530 for the nine months ended September 30, 2022, as compared to a net increase in net assets resulting from operations of $26,313,723 for the nine months ended September 30, 2021. The net decrease in net assets resulting from operations for the nine months ended September 30, 2022 from the nine months ended September 30, 2021 was primarily due to an increase in unrealized depreciation in our portfolio and an increase in operating expenses for the nine months ended September 30, 2022.
Financial Condition, Liquidity and Capital Resources
We generate cash primarily from the net proceeds of the offering of our securities and cash flows from our operations, including investment sales and repayments as well as income earned on investments and cash equivalents. We may also fund a portion of our investments through borrowings under the Credit Facility (discussed below). We expect that we may also generate cash from any financing arrangements we may enter into in the future and any future offerings of our equity or debt securities. We may fund a portion of our investments through borrowings from banks and issuances of senior securities, which may be secured or unsecured, through registered offerings or private placements. Our primary use of funds is to make investments in eligible portfolio companies, pay our operating expenses and make distributions to holders of our common stock.
58
During the nine months ended September 30, 2022, cash and cash equivalents increased to $5,774,074 from $4,696,693 as of December 31, 2021. This increase was primarily the result of the purchase of investments in portfolio companies and was partially offset by the repayment of investments, proceeds from our 2027 Notes, and net borrowings under the Credit Facility.
Equity Activity
We have the authority to issue 100,000,000 shares of common stock, $0.01 par value per share.
On October 8, 2015, we issued 1,667 shares of our common stock to R. David Spreng, our President, Chief Executive Officer and Chairman of our Board of Directors, for an aggregate purchase price of $25,000. The remaining shares were issued in connection with the Initial Private Offering, the Second Private Offering, pursuant to the dividend reinvestment plan or the IPO as follows:
Issuance Date |
|
Shares Issued |
|
|
|
Price per Share |
|
|
|
Gross Proceeds |
|
|||
October 8, 2015 |
|
|
1,667 |
|
|
$ |
|
15.00 |
|
|
$ |
|
25,000 |
|
December 22, 2016 |
|
|
333,333 |
|
|
|
|
15.00 |
|
|
|
|
5,000,000 |
|
April 19, 2017 |
|
|
1,000,000 |
|
|
|
|
15.00 |
|
|
|
|
15,000,000 |
|
June 26, 2017 |
|
|
1,666,667 |
|
|
|
|
15.00 |
|
|
|
|
25,000,000 |
|
September 12, 2017 |
|
|
2,666,667 |
|
|
|
|
15.00 |
|
|
|
|
40,000,000 |
|
December 22, 2017 |
|
|
3,000,000 |
|
|
|
|
15.00 |
|
|
|
|
45,000,000 |
|
May 31, 2018(1) |
|
|
70,563 |
|
|
|
|
14.82 |
|
|
|
|
1,045,570 |
|
August 31, 2018(1) |
|
|
117,582 |
|
|
|
|
14.92 |
|
|
|
|
1,754,244 |
|
September 27, 2018 |
|
|
1,997,337 |
|
|
|
|
15.02 |
|
|
|
|
30,000,000 |
|
November 15, 2018(1) |
|
|
202,779 |
|
|
|
|
15.07 |
|
|
|
|
3,055,498 |
|
January 14, 2019 |
|
|
4,344,964 |
|
|
|
|
15.19 |
|
|
|
|
66,000,000 |
|
March 26, 2019(1) |
|
|
326,431 |
|
|
|
|
15.14 |
|
|
|
|
4,942,168 |
|
May 21, 2019(1) |
|
|
374,783 |
|
|
|
|
15.13 |
|
|
|
|
5,670,467 |
|
May 24, 2019 |
|
|
3,232,189 |
|
|
|
|
15.16 |
|
|
|
|
49,000,000 |
|
July 16, 2019(1) |
|
|
464,986 |
|
|
|
|
15.13 |
|
|
|
|
7,035,236 |
|
August 26, 2019(1) |
|
|
480,121 |
|
|
|
|
14.76 |
|
|
|
|
7,088,143 |
|
October 15, 2019 |
|
|
1,666,667 |
|
|
|
|
15.00 |
|
|
|
|
25,000,000 |
|
November 12, 2019(1) |
|
|
43,979 |
|
|
|
|
14.76 |
|
|
|
|
649,123 |
|
December 20, 2019 |
|
|
3,333,333 |
|
|
|
|
15.00 |
|
|
|
|
50,000,000 |
|
December 23, 2019(1) |
|
|
487,166 |
|
|
|
|
14.52 |
|
|
|
|
7,073,650 |
|
March 20, 2020(1) |
|
|
575,132 |
|
|
|
|
14.58 |
|
|
|
|
8,385,423 |
|
March 31, 2020 |
|
|
21,021 |
|
|
|
|
15.00 |
|
|
|
|
315,308 |
|
May 20, 2020(1) |
|
|
529,020 |
|
|
|
|
14.25 |
|
|
|
|
7,538,541 |
|
August 6, 2020(1) |
|
|
550,639 |
|
|
|
|
14.41 |
|
|
|
|
7,934,712 |
|
October 15, 2020 |
|
|
3,333,333 |
|
|
|
|
15.00 |
|
|
|
|
50,000,000 |
|
November 12, 2020(1) |
|
|
593,692 |
|
|
|
|
14.46 |
|
|
|
|
8,584,772 |
|
March 19, 2021(1) |
|
|
618,815 |
|
|
|
|
14.84 |
|
|
|
|
9,183,220 |
|
March 24, 2021 |
|
|
20,461 |
|
|
|
|
15.00 |
|
|
|
|
306,911 |
|
May 13, 2021(1) |
|
|
637,127 |
|
|
|
|
14.77 |
|
|
|
|
9,410,371 |
|
August 12, 2021(1) |
|
|
575,032 |
|
|
|
|
14.61 |
|
|
|
|
8,401,215 |
|
September 29, 2021 |
|
|
1,265,128 |
|
|
|
|
15.00 |
|
|
|
|
18,976,917 |
|
October 25, 2021 |
|
|
6,850,000 |
|
|
|
|
14.60 |
|
|
|
|
100,010,000 |
|
Total |
|
|
41,380,614 |
|
|
|
|
|
|
$ |
|
617,386,489 |
|
|
Stock Repurchase Plans
On February 24, 2022, the Board of Directors approved the Repurchase Program under which the Company may repurchase up to $25 million of its outstanding common stock. Under the Repurchase Program, purchases may be made at management’s discretion from time to time in open-market transactions, in accordance with all applicable securities laws and regulations. Unless extended by the Board of Directors, the repurchase program will terminate 12-months from the date it was approved.
The following table provides information regarding our repurchases of our common stock pursuant to the Repurchase Program for the nine months ended September 30, 2022.
|
|
|
Total Number of Shares Repurchased |
|
|
|
Average Price Paid Per Share |
|
|
Approximate Dollar Value of Shares That Have Been Purchased Under the Plan |
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan |
|
||||||
Quarter ended March 31, 2022 |
|
|
|
31,782 |
|
|
$ |
|
12.88 |
|
|
$ |
|
409,223 |
|
|
$ |
|
24,590,777 |
|
Quarter ended June 30, 2022 |
|
|
|
381,710 |
|
|
|
|
12.76 |
|
|
|
|
4,870,014 |
|
|
|
|
19,720,763 |
|
Quarter ended September 30, 2022 |
|
|
|
331,264 |
|
|
|
|
12.14 |
|
|
|
|
4,022,696 |
|
|
|
|
15,698,067 |
|
59
Contractual Obligations
At September 30, 2022, the Company had $329,284,615 in unfunded loan commitments, many of which are subject to portfolio company performance milestones, to provide debt financing to 18 portfolio companies. The Company’s management believes that its available cash balances and availability under the Credit Facility, provides sufficient funds to cover its unfunded commitments as of September 30, 2022. See “Note 10 – Borrowings” to our financial statements in Part I, Item 1 of this Form 10‑Q for more information on the Company's borrowings.
Portfolio Company |
|
Investment Type |
|
September 30, 2022 |
|
||
Allurion Technologies, Inc. |
|
Senior Secured Term Loan |
|
$ |
|
15,000,000 |
|
CloudPay, Inc. |
|
Senior Secured Term Loan |
|
|
|
15,000,000 |
|
Dtex Systems, Inc. |
|
Senior Secured Term Loan |
|
|
|
10,000,000 |
|
EBR Systems, Inc. |
|
Senior Secured Term Loan |
|
|
|
30,000,000 |
|
INRIX, Inc. |
|
Senior Secured Term Loan |
|
|
|
5,000,000 |
|
Intellisite Holdings, Inc. (dba Epic IO Technologies, Inc.) |
|
Senior Secured Term Loan |
|
|
|
10,000,000 |
|
Interactions Corporation |
|
Senior Secured Term Loan |
|
|
|
10,000,000 |
|
Kin Insurance, Inc. |
|
Senior Secured Term Loan |
|
|
|
25,000,000 |
|
Moximed, Inc. |
|
Senior Secured Term Loan |
|
|
|
15,000,000 |
|
Mustang Bio, Inc. |
|
Senior Secured Term Loan |
|
|
|
45,000,000 |
|
Revelle Aesthetics, Inc. |
|
Senior Secured Term Loan |
|
|
|
12,500,000 |
|
Route 92 Medical, Inc. |
|
Senior Secured Term Loan |
|
|
|
42,000,000 |
|
SetPoint Medical Corporation |
|
Senior Secured Term Loan |
|
|
|
25,000,000 |
|
ShareThis, Inc. |
|
Senior Secured Term Loan |
|
|
|
3,000,000 |
|
Snagajob.com, Inc. |
|
Senior Secured Term Loan |
|
|
|
6,784,615 |
|
Synack, Inc. |
|
Senior Secured Term Loan |
|
|
|
25,000,000 |
|
TRACON Pharmaceuticals, Inc. |
|
Senior Secured Term Loan |
|
|
|
25,000,000 |
|
VERO Biotech LLC |
|
Senior Secured Term Loan |
|
|
|
10,000,000 |
|
Total unused commitments to extend financing |
|
|
|
$ |
|
329,284,615 |
|
|
|
Payments Due by Period |
|
||||||||||||||||||||||
|
|
Total |
|
|
Less than 1 Year |
|
|
|
1-3 years |
|
|
|
3-5 years |
|
|
More than 5 Years |
|
||||||||
Credit Facility |
|
$ |
|
175,000,000 |
|
|
$ |
|
— |
|
|
$ |
|
— |
|
|
$ |
|
175,000,000 |
|
|
$ |
|
— |
|
2026 Notes |
|
|
|
70,000,000 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
70,000,000 |
|
|
|
|
— |
|
2027 Notes |
|
|
|
100,500,000 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
100,500,000 |
|
|
|
|
|
|
Total |
|
$ |
|
345,500,000 |
|
|
$ |
|
— |
|
|
$ |
|
— |
|
|
$ |
|
345,500,000 |
|
|
$ |
|
— |
|
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
Distributions
To the extent that we have funds available, we intend to make quarterly distributions to our stockholders. Our stockholder distributions, if any, will be determined by our Board of Directors. Any distribution to our stockholders will be declared out of assets legally available for distribution. We anticipate that distributions will be paid from income primarily generated by interest and dividend income earned on investments made by us.
We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions.
If newly issued shares are used to implement the dividend reinvestment plan, the number of shares to be issued to a shareholder will be determined by dividing the total dollar amount of the cash dividend or distribution payable to a shareholder by the market price per share of our common stock at the close of regular trading on the Nasdaq Global Select Market on the payment date of a distribution, or if no sale is reported for such day, the average of the reported bid and ask prices. However, if the market price per share on the payment date of a cash dividend or distribution exceeds the most recently computed net asset value per share, we will issue shares at the greater of (i) the most recently computed net asset value per share and (ii) 95% of the current market price per share (or such lesser discount to the current market price per share that still exceeded the most recently computed net asset value per share).
If shares are purchased in the open market to implement the dividend reinvestment plan, the number of shares to be issued to a shareholder shall be determined by dividing the dollar amount of the cash dividend payable to such shareholder by the weighted average price per share for all shares purchased by the plan administrator in the open market in connection with the dividend.
60
The number of shares to be issued to a participant in the dividend reinvestment plan are rounded downward to the nearest whole number to avoid the issuance of fractional shares, and any fractional share otherwise issuable to a participant but for this provision is instead be paid to such participant in cash contemporaneously with the issuance of such shares in connection with such cash dividend.
During the three and nine months ended September 30, 2022, we declared and paid dividends in the amount of $13,450,710 and $37,005,717, respectively, of which $12,783,588 and $26,708,902, respectively, was distributed in cash and the remainder distributed in shares to stockholders pursuant to the Company’s dividend reinvestment plan. During the year ended December 31, 2021, we declared and paid dividends in the amount of $44,942,937, of which $17,948,126 was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment plan.
The timing and amount of our distributions, if any, will be determined by our Board of Directors and will be declared out of assets legally available for distribution. The following table shows the dividends per share declared since our formation through September 30, 2022.
Date Declared |
|
Record Date |
|
Payment Date |
|
Amount per Share |
|
||
May 3, 2018 |
|
May 15, 2018 |
|
May 31, 2018 |
|
$ |
|
0.15 |
|
July 26, 2018 |
|
August 15, 2018 |
|
August 31, 2018 |
|
$ |
|
0.25 |
|
November 1, 2018 |
|
October 31, 2018 |
|
November 15, 2018 |
|
$ |
|
0.35 |
|
March 22, 2019 |
|
March 22, 2019 |
|
March 26, 2019 |
|
$ |
|
0.40 |
|
May 2, 2019 |
|
May 7, 2019 |
|
May 21, 2019 |
|
$ |
|
0.45 |
|
May 2, 2019 |
|
May 31, 2019 |
|
July 16, 2019 |
|
$ |
|
0.46 |
|
July 30, 2019 |
|
August 5, 2019 |
|
August 26, 2019 |
|
$ |
|
0.45 |
|
September 27, 2019 |
|
September 30, 2019 |
|
November 12, 2019 |
|
$ |
|
0.04 |
|
December 9, 2019 |
|
December 10, 2019 |
|
December 23, 2019 |
|
$ |
|
0.40 |
|
March 5, 2020 |
|
March 6, 2020 |
|
March 20, 2020 |
|
$ |
|
0.40 |
|
May 7, 2020 |
|
May 8, 2020 |
|
May 21, 2020 |
|
$ |
|
0.35 |
|
August 5, 2020 |
|
August 6, 2020 |
|
August 20, 2020 |
|
$ |
|
0.36 |
|
October 1, 2020 |
|
October 1, 2020 |
|
November 12, 2020 |
|
$ |
|
0.38 |
|
March 4, 2021 |
|
March 5, 2021 |
|
March 19, 2021 |
|
$ |
|
0.37 |
|
April 29, 2021 |
|
April 30, 2021 |
|
May 13, 2021 |
|
$ |
|
0.37 |
|
July 19, 2021 |
|
July 20, 2021 |
|
August 12, 2021 |
|
$ |
|
0.34 |
|
October 28, 2021 |
|
November 8, 2021 |
|
November 22, 2021 |
|
$ |
|
0.25 |
|
February 24, 2022 |
|
March 8, 2022 |
|
March 2, 2022 |
|
$ |
|
0.27 |
|
April 28, 2022 |
|
May 10, 2022 |
|
May 24, 2022 |
|
$ |
|
0.30 |
|
July 28, 2022 |
|
August 9, 2022 |
|
August 23, 2022 |
|
$ |
|
0.33 |
|
Critical Accounting Policies
Basis of Presentation
The preparation of the financial statements and related disclosures in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reports. Actual results could materially differ from those estimates. We believe that our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments, include the valuation of investments and our election to be treated, and intent to qualify annually, as a RIC. See “Note 2 — Summary of Significant Accounting Policies” to our financial statements in Part I, Item 1 of this Form 10‑Q, which describes our critical accounting policies and recently adopted accounting pronouncements not yet required to be adopted by us.
Valuation of Investments
We measure the value of our portfolio investments at fair value in accordance with ASC Topic 820, Fair Value Measurements (“ASC Topic 820”) issued by the FASB. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Audit Committee assists our Board of Directors in valuing investments that are not publicly traded or for which current market values are not readily available. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. With respect to portfolio investments for which market quotations are not readily available, our Board of Directors, with the assistance of the Audit Committee, RGC and its senior investment team and independent valuation agents, is responsible for determining, in good faith, the fair value of such portfolio investments in accordance with the valuation policy approved by our Board of Directors. If more than one valuation method is used to measure fair value, the results are evaluated and weighted, as appropriate, considering the reasonableness of the range
61
indicated by those results. We consider a range of fair values based upon the valuation techniques utilized and select the value within that range that was most representative of fair value based on current market conditions as well as other factors RGC’s senior investment team considers relevant.
Our Board of Directors makes this fair value determination on a quarterly basis and any other time when a decision regarding the fair value of the portfolio investments is required. A determination of fair value involves subjective judgments and estimates and depends on the facts and circumstances. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC Topic 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level within the hierarchy of information used in the valuation. In accordance with ASC Topic 820, these inputs are summarized in the three levels listed below:
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of observable input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
Under ASC Topic 820, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset, which may be a hypothetical market, and excludes transaction costs. The principal market for any asset is the market with the greatest volume and level of activity for such asset in which the reporting entity would or could sell or transfer the asset. In determining the principal market for an asset or liability under ASC Topic 820, it is assumed that the reporting entity has access to such market as of the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable and willing and able to transact.
With respect to investments for which market quotations are not readily available, our Board of Directors undertakes a multi-step valuation process each quarter, as described below:
62
Our investments are primarily loans made to high growth-potential companies focused in technology, life sciences, healthcare information and services, business services, select consumer services and products and other high-growth industries. These investments are considered Level 3 assets under ASC Topic 820 because there is no known or accessible market or market indices for these types of debt instruments and, thus, RGC’s senior investment team must estimate the fair value of these investment securities based on models utilizing unobservable inputs.
Rule 2a-5 under the 1940 Act was adopted by the SEC in December 2020 and establishes a framework for determining fair value in good faith for purposes of the 1940 Act. The Company complied with the mandatory provision of Rule 2a-5 by the September 2022 compliance date.
Investment Valuation Techniques
Debt Investments. To determine the fair value of our debt investments, we compare the cost basis of the debt investment, which includes original issue discount, to the resulting fair value determined using a discounted cash flow model, unless another model is more appropriate based on the circumstances at the measurement date. The discounted cash flow approach entails analyzing the interest rate spreads for recently completed financing transactions that are similar in nature to our investments, in order to determine a comparable range of effective market interest rates for our investments. The range of interest rate spreads utilized is based on borrowers with similar credit profiles. All remaining expected cash flows of the investment are discounted using this range of interest rates to determine a range of fair values for the debt investment.
This valuation process includes, among other things, evaluating the underlying investment performance, the portfolio company’s current financial condition and ability to raise additional capital, as well as macro-economic events that may impact valuations. These events include, but are not limited to, current market yields and interest rate spreads of similar securities as of the measurement date. Significant increases or decreases in these unobservable inputs could result in a significantly higher or lower fair value measurement; however, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in these unobservable inputs; however, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in these unobservable inputs.
Under certain circumstances, we may use an alternative technique to value the debt investments to be acquired by us that better reflects the fair value of the investment, such as the price paid or realized in a recently completed transaction or a binding offer received in an arms-length transaction, the use of multiple probability-weighted cash flow models when the expected future cash flows contain elements of variability or estimates of proceeds that would be received in a liquidation scenario.
Warrants. Fair value of warrants is primarily determined using a Black Scholes option-pricing model. Privately held warrants and equity-related securities are valued based on an analysis of various factors including, but not limited to, the following:
63
Under certain circumstances we may use an alternative technique to value warrants that better reflects the warrants’ fair values, such as an expected settlement of a warrant in the near term, a model that incorporates a put feature associated with the warrant, or the price paid or realized in a recently completed transaction or binding offer received in an arms-length transaction. The fair value may be determined based on the expected proceeds to be received from such settlement or based on the net present value of the expected proceeds from the put option.
These valuation methodologies involve a significant degree of judgment. There is no single standard for determining the fair value of investments that do not have an active public market. Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time. The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed. In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a fair value may then be determined.
Equity Investments. The fair value of an equity investment in a privately held company is initially the face value of the amount invested. We adjust the fair value of equity investments in private companies upon the completion of a new third-party round of equity financing subsequent to our investment. We may make adjustments to fair value, absent a new equity financing event, based upon positive or negative changes in a portfolio company’s financial or operational performance. We may also reference comparable transactions and/or secondary market transactions in connection with our determination of fair value. The fair value of an equity investment in a publicly traded company is based upon the closing public share price on the date of measurement. These assets are recorded at fair value on a recurring basis. These valuation methodologies involve a significant degree of judgment. There is no single standard for determining the fair value of investments that do not have an active public market. Valuations of privately held investments are inherently uncertain, as they are based on estimates, and their values may fluctuate over time. The determination of fair value may differ materially from the values that would have been used if an active market for these investments existed. In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a fair value may then be determined.
Fair Value
The Company’s assets measured at fair value on a recurring basis subject to the requirements of ASC Topic 820 at September 30, 2022 and December 31, 2021 were as follows:
|
|
As of September 30, 2022 (Unaudited) |
|
|||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
$ |
|
496,498 |
|
|
$ |
|
1,413,356 |
|
|
$ |
|
1,228,197 |
|
|
$ |
|
3,138,051 |
|
Senior Secured Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
862,527,989 |
|
|
|
|
862,527,989 |
|
Second Lien Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
13,403,245 |
|
|
|
|
13,403,245 |
|
Preferred Stock |
|
|
|
12,327,868 |
|
|
|
|
— |
|
|
|
|
384,685 |
|
|
|
|
12,712,553 |
|
Warrants |
|
|
|
— |
|
|
|
|
66,950 |
|
|
|
|
18,320,157 |
|
|
|
|
18,387,107 |
|
Total Portfolio Investments |
|
|
|
12,824,366 |
|
|
|
|
1,480,306 |
|
|
|
|
895,864,273 |
|
|
|
|
910,168,945 |
|
Total Investments |
|
$ |
|
12,824,366 |
|
|
$ |
|
1,480,306 |
|
|
$ |
|
895,864,273 |
|
|
$ |
|
910,168,945 |
|
64
|
|
As of December 31, 2021 |
|
|||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
$ |
|
2,559,932 |
|
|
$ |
|
8,903,933 |
|
|
$ |
|
— |
|
|
$ |
|
11,463,865 |
|
Senior Secured Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
623,053,646 |
|
|
|
|
623,053,646 |
|
Second Lien Term Loans |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
12,872,588 |
|
|
|
|
12,872,588 |
|
Preferred Stock |
|
|
|
15,704,705 |
|
|
|
|
— |
|
|
|
|
1,332,420 |
|
|
|
|
17,037,125 |
|
Warrants |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
20,087,550 |
|
|
|
|
20,087,550 |
|
Total Portfolio Investments |
|
|
|
18,264,637 |
|
|
|
|
8,903,933 |
|
|
|
|
657,346,204 |
|
|
|
|
684,514,774 |
|
U.S. Treasury Bill |
|
|
|
45,001,500 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
45,001,500 |
|
Total Investments |
|
$ |
|
63,266,137 |
|
|
$ |
|
8,903,933 |
|
|
$ |
|
657,346,204 |
|
|
$ |
|
729,516,274 |
|
Investment Transactions and Related Investment Income
Security transactions, if any, are recorded on a trade-date basis. We measure realized gains or losses from the repayment or sale of investments using the specific identification method. The amortized cost basis of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums and upfront loan origination fees. We report changes in fair value of investments that are measured at fair value as a component of net change in unrealized appreciation (depreciation) on investments on the statement of operations.
Dividends are recorded on the applicable ex-dividend date. Interest income, if any, adjusted for amortization of market premium and accretion of market discount, is recorded on an accrual basis to the extent that we expect to collect such amounts. OID, principally representing the estimated fair value of detachable equity or warrants obtained in conjunction with our debt investments, loan origination fees, end of term payments, and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective interest method. Loan origination fees received in connection with the closing of investments are reported as unearned income, which is included as amortized cost of the investment; the unearned income from such fees is accreted over the contractual life of the loan based on the effective interest method. Upon prepayment of a loan or debt security, any prepayment penalties, unamortized loan origination fees, end of term payments and unamortized market discounts are recorded as interest income.
Management and Incentive Fees
We accrue for base management fees and incentive fees. The accrual for incentive fees includes the recognition of incentive fees on unrealized capital gains, even though such incentive fees are neither earned nor payable to RGC until the gains are both realized and in excess of unrealized depreciation on investments. See “Note 7 –Related Party Agreements and Transactions” to our financial statements in Part I, Item 1 of this Form 10‑Q for more information on the Advisory Agreement and the fee structure thereunder.
Income Taxes
We have elected to be treated, have qualified and intend to qualify annually, as a RIC under Subchapter M of the Code. Generally, a RIC is not subject to U.S. federal income taxes on distributed income and gains if it distributes at least 90% of its net ordinary income and net short-term capital gains in excess of its net long-term capital losses, if any, to its stockholders. So long as we qualify, and maintain our status, as a RIC, we generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute at least annually to our stockholders as dividends. Rather, any tax liability related to income earned by us represents obligations of our investors and will not be reflected in the financial statements of the Company. We intend to make sufficient distributions to maintain our RIC tax treatment each year and we do not anticipate paying any material U.S. federal income taxes in the future.
Recent Developments
We evaluated events subsequent to September 30, 2022 through November 3, 2022.
On October 4, 2022, our investment in Fidelis Cybersecurity, Inc was partially repaid resulting in $6,000,000 being repaid and a final payment fee of $600,000 for total proceeds of $6,600.000.
On October 12, 2022, we funded an investment of $20,000,000 to Nalu Medical, Inc.
On October 20, 2022, we funded an investment of $44,000,000 to Brivo Systems, LLC.
65
On October 27, 2022, we declared a dividend of $0.36 per share payable on November 22, 2022 to shareholders of record as of November 8, 2022.
On October 27, 2022, we funded an investment of $5,000,000 to Allurion Technologies, Inc.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We commenced investment activities in portfolio securities during the quarter ended June 30, 2017 and commenced investment activities in U.S. Treasury Bills during the quarter ended December 31, 2016.
We are subject to financial market risk, including changes in the valuations of our investment portfolio. Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.
Valuation Risk
Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. 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 our 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 used had a ready market for the investments existed, and it is possible that the difference could be material.
Interest Rate Risk
Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. In a prolonged low interest rate environment, including a reduction of LIBOR to zero, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results.
We typically expect that interest rates on the investments held in our portfolio will be based on LIBOR, SOFR or the U.S. Prime Rate, with many of these investments also having a floor. As of September 30, 2022, 97%, or $869,649,915 (at cost), of our debt portfolio investments bore interest at variable rates, which are U.S. Prime Rate, SOFR or LIBOR-based and subject to certain floors, and one of our debt portfolio investments bore interest at a fixed rate. Interest rate floors are established based on prevailing rates at the time of the investment. As a policy, any interest above the cash cap, if applicable, as determined on an individual loan basis, will accrue to principal and be treated as PIK interest. A hypothetical 200 basis point increase or decrease in the interest rates on our variable-rate debt investments could increase our investment income by a maximum of $17,460,063 and decrease our investment income by a maximum of $16,166,067, due to certain floors, on an annual basis. In a low interest rate environment, debt investments with interest rate floors substantially in excess of current prevailing interest rates may be more likely to experience early termination.
Borrowings under the Credit Facility bear interest, at our election at the time of drawdown, at a rate per annum equal to the SOFR rate for the applicable interest period, subject to a SOFR rate floor of 0.15%, plus (1) 3.35% at any time that there are fourteen or fewer obligors that are not affiliates of the Company with respect to the loan; (2) 3.10% at any time that there are fifteen or more obligors that are not affiliates but fewer than thirty obligors that are not affiliates with respect to the loan; and (3) 2.95% at any time that there are thirty or more obligors that are not affiliates with respect to the loan; and (b) when the Company’s leverage ratio on the last day of the immediately preceding interest period was greater than 1.0x, 3.35%.
66
On March 5, 2021, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings) and (ii) the overnight and 1, 3, 6 and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA’s proposed new powers that the UK government is legislating to grant to them. Additionally, on March 15, 2022, President Biden signed into law the Consolidated Appropriations Act of 2022, which among other things, provides for the use of interest rates based on SOFR in certain contracts currently based on LIBOR and a safe harbor from liability for utilizing SOFR-based interest rates as a replacement for LIBOR.
The elimination of LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations. In addition, we may need to renegotiate agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate, in order to replace LIBOR with the new standard that is established, which may have an adverse effect on our overall financial condition or results of operations. Following the replacement of LIBOR, some or all of these agreements may bear interest a lower interest rate, which could have an adverse impact on our results of operations. In addition, the amendments to the terms of our Credit Facility in connection with the discontinuation of LIBOR may cause the Credit Facility to bear interest at a higher rate, which would increase the cost of our borrowings and, in turn, affect our results of operations.
Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income would be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.
We regularly measure exposure to interest rate risk. We assess interest rate risk and manage interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.
In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved, and may be exacerbated by market disruptions, including the continued impact of the COVID-19 pandemic on foreign financial markets.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a‑15 under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act.
There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any such legal proceedings cannot be predicted with certainty, we do not expect that any such proceedings will have a material effect upon our financial condition or results of operations.
Item 1A. Risk Factors.
You should carefully consider the risks described below and all other information contained in this quarterly report on Form 10‑Q, including our interim financial statements and the related notes thereto, before making a decision to purchase our securities. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. If that happens, you may lose all or part of your investment. Other than as set forth below, there have been no material changes known to us during the period ended September 30, 2022 to the risk factors discussed in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K, as modified by the annual report on Form 10-K/A for the year ended December 31, 2021, filed with the SEC on March 2, 2022 and March 14, 2022, respectively.
The Russian invasion of Ukraine may have a material adverse impact on us and our portfolio companies.
On February 24, 2022, the President of Russia, Vladimir Putin, announced a military invasion of Ukraine. In response, countries worldwide, including the United States, have imposed sanctions against Russia on certain businesses and individuals, including, but not limited to, those in the banking, import and export sectors. This invasion has led, is currently leading, and for an unknown period of time will continue to lead to disruptions in local, regional, national, and global markets and economies affected thereby. These disruptions caused by the invasion have included, and may continue to include, political, social, and economic disruptions and uncertainties that may affect our business operations or the business operations of our portfolio companies.
Inflation may adversely affect our business by impacting the results of operations and the financial condition of our portfolio companies.
Recent market indicators show a rise in inflation, and the Federal Reserve has raised certain benchmark interest rates in an effort to slow inflation. As inflation increases, certain of our portfolio companies may be impacted, which could adversely affect their operating results and impact their ability to pay interest and principal on our loans. In addition, a decrease in our portfolio companies’ operating results may adversely impact the fair value of those investments, which could result in future realized or unrealized losses, reducing our net assets from operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Other than pursuant to our dividend reinvestment plan, and except as previously reported by us on our current reports on Form 8‑K, we did not sell any securities during the period covered by this Form 10‑Q that were not registered under the Securities Act.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
None.
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Item 6. Exhibits
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
3.1 |
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3.2 |
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3.3 |
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4.1 |
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4.2 |
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10.2 |
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10.3 |
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31.1 |
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31.2 |
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32.1 |
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
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32.2 |
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
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101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
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RUNWAY GROWTH FINANCE CORP. |
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Date: November 3, 2022 |
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By: |
/s/ R. David Spreng |
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R. David Spreng |
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President, Chief Executive Officer and Chairman of the Board of Directors |
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Date: November 3, 2022 |
By: |
/s/ Thomas B. Raterman |
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Thomas B. Raterman |
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Chief Financial Officer, Treasurer and Secretary |
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(Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, R. David Spreng, as Chief Executive Officer, certify that:
Date: November 3, 2022 |
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By: |
/s/ R. David Spreng |
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R. David Spreng |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas B. Raterman, as Chief Financial Officer, certify that:
Date: November 3, 2022 |
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By: |
/s/ Thomas B. Raterman |
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Thomas B. Raterman |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Runway Growth Finance Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 3, 2022 |
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By: |
/s/ R. David Spreng |
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R. David Spreng |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Runway Growth Finance Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 3, 2022 |
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By: |
/s/ Thomas B. Raterman |
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Thomas B. Raterman |
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Chief Financial Officer |