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What changed in Trinity Capital Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Trinity Capital Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+424 added−451 removedSource: 10-K (2024-12-31) vs 10-K (2024-03-06)

Top changes in Trinity Capital Inc.'s 2024 10-K

424 paragraphs added · 451 removed · 308 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

61 edited+10 added−9 removed114 unchanged
Biggest changeOur senior management team, led by Kyle Brown, comprises the majority of the senior management team that managed the Legacy Funds and sourced the Legacy Portfolio.
Biggest changeOur senior management team, led by Kyle Brown, comprises the majority of the senior management team that managed the Legacy Funds and sourced the Legacy Portfolio, and we believe is well positioned to take advantage of potential investment opportunities available in the marketplace. 8 Table of Contents • Kyle Brown, our Chief Executive Officer, President and Chief Investment Officer, has been with Trinity since 2015 and is responsible for managing Trinity’s investment activities.
In all cases, we seek to put in place Uniform Commercial Code filings to perfect our security position, and to update these filings as necessary to reflect changes in our collateral. 13 Table of Contents Investment Process Investment Originations; New Deals Referred We have a multi-channel sourcing strategy focused primarily on growth-stage venture capital firms, private equity firms, technology banks and, to a lesser extent, brokers who focus on our business.
In all cases, we seek to put in place Uniform Commercial Code filings to perfect our security position, and to update these filings as necessary to reflect changes in our collateral. 13 Table of Contents Investment Process Investment Originations; New Deals Referred We have a multi-channel sourcing strategy focused primarily on growth-oriented venture capital firms, private equity firms, technology banks and, to a lesser extent, brokers who focus on our business.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • continue to qualify as a BDC under the 1940 Act at all times during each taxable year; • derive in each taxable year at least 90% of gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, net 20 Table of Contents income from certain “qualified publicly traded partnerships,” or other income derived with respect to the business of investing in such stock or securities (the “90% Income Test”); and • diversify our holdings so that at the end of each quarter of the taxable year: o at least 50% of the value of our assets consists of cash, cash equivalents, U.S.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • continue to qualify as a BDC under the 1940 Act at all times during each taxable year; • derive in each taxable year at least 90% of gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to the business of investing in such stock or securities (the “90% Income Test”); and • diversify our holdings so that at the end of each quarter of the taxable year: o at least 50% of the value of our assets consists of cash, cash equivalents, U.S.
The expertise, knowledge and experience of these individuals allows them to understand and evaluate the business plans, products and financing needs of growth-stage companies, including the risks related thereto. · Direct origination networks that benefit from relationships with venture banks, institutional equity investors and entrepreneurs built during the term of operations of the Legacy Funds, which began in 2008.
The expertise, knowledge and experience of these individuals allows them to understand and evaluate the business plans, products and financing needs of growth-oriented companies, including the risks related thereto. · Direct origination networks that benefit from relationships with venture banks, institutional equity investors and entrepreneurs built during the term of operations of the Legacy Funds, which began in 2008.
TrinCap Funding, LLC (“TCF”), a Delaware limited liability company, was formed on August 5, 2021 as a wholly owned subsidiary of the Company to serve as a bankruptcy-remote entity for purposes of securing lending in conjunction with a $300 million credit agreement, as amended, with KeyBank, National Association (“KeyBank”) (such credit facility, the “KeyBank Credit Facility”).
TrinCap Funding, LLC (“TCF”), a Delaware limited liability company, was formed on August 5, 2021 as a wholly owned subsidiary of the Company to serve as a bankruptcy-remote entity for purposes of securing lending in conjunction with a credit agreement, as amended, with KeyBank, National Association (“KeyBank”) (such credit facility, as amended, the “KeyBank Credit Facility”).
We believe that the equipment financing market is even more fragmented, with the majority of equipment financing providers unable to fund investments for more than $10 million. We believe there are significant growth opportunities for us to expand our market share in the venture debt market and become a one-stop shop for loans and equipment financings for growth-stage companies.
We believe that the equipment financing market is even more fragmented, with the majority of equipment financing providers unable to fund investments for more than $10 million. We believe there are significant growth opportunities for us to expand our market share in the venture debt market and become a one-stop shop for loans and equipment financings for growth-oriented companies.
More importantly, we believe traditional lenders are typically unable to underwrite the risk associated with these companies effectively. The cash flow characteristics of many growth-stage companies include significant research and development expenditures and high projected revenue growth, thus often making such companies difficult to evaluate from a credit perspective.
More importantly, we believe traditional lenders are typically unable to underwrite the risk associated with these companies effectively. The cash flow characteristics of many growth-oriented companies include significant research and development expenditures and high projected revenue growth, thus often making such companies difficult to evaluate from a credit perspective.
We believe that demand for loans and equipment financings to growth-stage companies is currently underserved, given the high level of activity in venture capital equity market for the growth-stage companies in which we invest. We believe certain venture lending companies have begun to focus on larger investment opportunities, potentially creating additional opportunities for us in the near term.
We believe that demand for loans and equipment financings to growth-oriented companies is currently underserved, given the high level of activity in venture capital equity market for the growth-oriented companies in which we invest. We believe certain venture lending companies have begun to focus on larger investment opportunities, potentially creating additional opportunities for us in the near term.
We target investments in growth-stage companies with institutional investor support, experienced management teams, promising products and offerings, and large expanding markets. We define “growth-stage companies” as companies that have significant ownership and active participation by sponsors and expected annual revenues of up to $100 million.
We target investments in growth-oriented companies with institutional investor support, experienced management teams, promising products and offerings, and large expanding markets. We define “growth-oriented companies” as companies that have significant ownership and active participation by sponsors and expected annual revenues of up to $100 million.
This system allows our analysts to receive a full set of financial statements and projections and quickly fill out a rating sheet for each potential investment, which includes using a series of weighted calculations to provide an initial “pass” or “fail” rating on the potential investment, as well as identifying specific risks for further consideration. 9 Table of Contents · Scalable software platforms developed during the term of operations of the Legacy Funds, which support our underwriting processes and loan monitoring functions.
This system allows our analysts to receive a full set of financial statements and projections and quickly fill out a rating sheet for each potential investment, which includes using a series of weighted calculations to provide an initial “pass” or “fail” rating on the potential investment, as well as identifying specific risks for further consideration. · Scalable software platforms developed during the term of operations of the Legacy Funds, which support our underwriting processes and loan monitoring functions.
Due to the difficulties described above, we believe traditional lenders generally refrain from lending and/or providing equipment financing to growth-stage companies, instead preferring the risk-reward profile of traditional fixed asset-based lending. We believe traditional lenders generally do not have flexible product offerings that meet the needs of growth-stage companies.
Due to the difficulties described above, we believe traditional lenders generally refrain from lending and/or providing equipment financing to growth-oriented companies, instead preferring the risk-reward profile of traditional fixed asset-based lending. We believe traditional lenders generally do not have flexible product offerings that meet the needs of growth-oriented companies.
We may, from time to time, receive fees for these services. In the event that such fees are received, we expect that they will be incorporated into our operating income and passed through to our stockholders, given the nature of our structure as an internally managed BDC.
We may, from time to time, receive fees for these services. In the event that such fees are received, we expect that they will be incorporated into our operating income and passed through to our stockholders, given the nature of our structure as an internally managed BDC. Temporary Investments.
Growth-Stage Companies are Underserved by Traditional Lenders. We believe many viable growth-stage companies have been unable to obtain sufficient growth financing from traditional lenders, including financial services companies such as commercial banks and finance companies, because traditional lenders have continued to consolidate and have adopted a more risk-averse approach to lending.
Growth-Oriented Companies are Underserved by Traditional Lenders. We believe many viable growth-oriented companies have been unable to obtain sufficient growth financing from traditional lenders, including financial services companies such as commercial banks and finance companies, because traditional lenders have continued to consolidate and have adopted a more risk-averse approach to lending.
Further, we are one of an even smaller subset of specialty lenders that offers both loans and equipment financings. Our other potential competitive advantages include: · In-house engineering and operations expertise to evaluate growth-stage companies’ business products and plans.
Further, we are one of an even smaller subset of specialty lenders that offers both loans and equipment financings. Our other potential competitive advantages include: · In-house engineering and operations expertise to evaluate growth-oriented companies’ business products and plans.
Subject to the requirements under the 1940 Act, which requires that we invest at least 70% of our total assets in qualifying assets, we may also engage in other lending activities by investing in assets that are not qualifying assets under the requirements of the 1940 Act, including asset-backed lending, which may constitute up to 30% of our total assets.
Subject to the requirements under the 1940 Act, which require that we invest at least 70% of our total assets in qualifying assets, we may also engage in other lending activities by investing in assets that are not qualifying assets under the requirements of the 1940 Act, including asset-backed lending, which may constitute up to 30% of our total assets.
We have a history of employing technology experts, including those with engineering and operations expertise, who have developed proven technology and hold patents in their names, as well as executives and other employees who have experience with the products and business plans of growth-stage companies.
We have a history of employing technology experts, including those with engineering and operations expertise, who have developed proven technology and hold patents in their names, as well as executives and other employees who have experience with the products and business plans of growth-oriented companies.
An eligible portfolio company is defined in the 1940 Act as any issuer which: a. is organized under the laws of, and has its principal place of business in, the United States; b. is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and c. satisfies any of the following: i. does not have any class of securities that is traded on a national securities exchange; ii. has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million; iii. is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or iv. is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million; (2) Securities of any eligible portfolio company controlled by us; (3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements; (4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company; (5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities; or (6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. 18 Table of Contents In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
An eligible portfolio company is defined in the 1940 Act as any issuer which: a. is organized under the laws of, and has its principal place of business in, the United States; b. is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and c. satisfies any of the following: i. does not have any class of securities that is traded on a national securities exchange; 17 Table of Contents ii. has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million; iii. is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or iv. is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million; (2) Securities of any eligible portfolio company controlled by us; (3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements; (4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company; (5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities; or (6) Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
We believe that growth-stage companies and their financial sponsors will continue to view debt, including loans and equipment financings, as an attractive source of capital because it augments the capital provided by venture capital and private equity funds.
We believe that growth-oriented companies and their financial sponsors will continue to view debt, including loans and equipment financings, as an attractive source of capital because it augments the capital provided by venture capital and private equity funds.
We focus on building relationships with investors who have raised recent funds and have the ability to provide ongoing support to their portfolio companies. We receive referrals directly to the executive officers of growth-stage companies from these various stakeholders.
We focus on building relationships with investors who have raised recent funds and have the ability to provide ongoing support to their portfolio companies. We receive referrals directly to the executive officers of growth-oriented companies from these various stakeholders.
Issuance of Derivative Securities. Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options, restricted stock or rights to purchase shares of capital stock that it may have outstanding at any time.
Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options, restricted stock or rights to purchase shares of capital stock that it may have outstanding at any time.
Subject to the requirements of the 1940 Act, we are not limited to investing in any particular industry or geographic area and seek to invest in under-financed segments of the private credit markets. Our loans generally may have initial interest-only periods of up to 24 months, and our equipment financings generally begin amortizing immediately.
Subject to the requirements of the 1940 Act, we are not limited to investing in any particular industry or geographic area and seek to invest in under-financed segments of the private credit markets. 7 Table of Contents Our loans generally may have initial interest-only periods of up to 24 months, and our equipment financings generally begin amortizing immediately.
We target growth-stage companies that have recently issued equity to raise cash to offset potential cash flow needs related to projected growth, have achieved positive cash flow to cover debt service, or have institutional investors committed to providing additional funding.
We target growth-oriented companies that have recently issued equity to raise cash to offset potential cash flow needs related to projected growth, have achieved positive cash flow to cover debt service, or have institutional investors committed to providing additional funding.
We seek to be the first contact for venture bankers who focus on growth-stage companies and who have a portfolio company that would benefit from term debt or equipment financings.
We seek to be the first contact for venture bankers who focus on growth-oriented companies and who have a portfolio company that would benefit from term debt or equipment financings.
Generally, we believe many growth-stage companies target a portion of their capital to be debt and equipment financing in an attempt to minimize ownership dilution to existing investors and company founders.
Generally, we believe many growth-oriented companies target a portion of their capital to be debt and equipment financing in an attempt to minimize ownership dilution to existing investors and company founders.
Corporate Information Our principal executive offices are located at 1 N 1st Street, Suite 302, Phoenix, AZ 85004. We maintain a website on the Internet at www.trinitycap.com.
Corporate Information Our principal executive offices are located at 1 N 1st Street, Suite 302, Phoenix, AZ 85004. We maintain a website on the Internet at www.trinitycapital.com.
In addition, we will take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. 17 Table of Contents Regulation as a Business Development Company We have elected to be regulated as a BDC under the 1940 Act.
In addition, we will take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Regulation as a Business Development Company We have elected to be regulated as a BDC under the 1940 Act.
Leveraging the experience of our investment professionals, we seek to target companies at their growth-stage of development and seek to identify financing opportunities ignored by the traditional direct lending community.
Leveraging the experience of our investment professionals, we seek to target companies at their growth-oriented of development and seek to identify financing opportunities ignored by the traditional direct lending community.
We primarily seek to invest in loans and equipment financings to growth-stage companies that have generally completed product development and are in need of capital to fund revenue growth.
We primarily seek to invest in loans and equipment financings to growth-oriented companies that have generally completed product development and are in need of capital to fund revenue growth.
Investment opportunities that score an acceptable initial rating are moved on for further consideration. Preliminary Due Diligence and Executive Summary The next phase of the due diligence process involves a structured call with the management team of the prospective portfolio company.
Investment opportunities that score an acceptable initial rating are moved on for further consideration. 14 Table of Contents Preliminary Due Diligence and Executive Summary The next phase of the due diligence process involves a structured call with the management team of the prospective portfolio company.
Our management team and investment professionals anticipate potential problems by monitoring reporting requirements and having frequent calls with the management teams of our portfolio companies. Investment Risk Rating System Our portfolio management team uses an ongoing investment risk rating system to characterize and monitor our outstanding loans and equipment financings.
Our management team and investment professionals anticipate potential problems by monitoring reporting requirements and having frequent calls with the management teams of our portfolio companies. 15 Table of Contents Investment Risk Rating System Our portfolio management team uses an ongoing investment risk rating system to characterize and monitor our outstanding loans and equipment financings.
Furthermore, as a BDC, we are prohibited from protecting any director or 19 Table of Contents officer against any liability to stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
Private capital in the form of loans and equipment financings from specialty finance companies continues to be an important source of funding for growth-stage companies.
Private capital in the form of loans and equipment financings from specialty finance companies continues to be an important source of funding for growth-oriented companies.
Following the management call, if the opportunity still appears to be worthy of consideration, an executive summary memorandum is prepared by the due diligence team for consideration and voting by the Investment Committee. The executive summary memorandum is distributed to the Investment 14 Table of Contents Committee, and the deal terms for the investment are defined.
Following the management call, if the opportunity still appears to be worthy of consideration, an executive summary memorandum is prepared by the due diligence team for consideration and voting by the Investment Committee. The executive summary memorandum is distributed to the Investment Committee, and the deal terms for the investment are defined.
Market Opportunity We believe that an attractive market opportunity exists for providing debt and equipment financings to growth-stage companies for the following reasons: • Growth-stage companies have generally been underserved by traditional lending sources. • Unfulfilled demand exists for loans and equipment financings to growth-stage companies due to the complexity of evaluating risk in these investments. • Debt investments with warrants are less dilutive than traditional equity financing and complement equity financing from venture capital and private equity funds. • Equity funding of growth-stage companies, including venture capital backed companies, has increased steadily over the last ten years, resulting in new lending and equipment financing opportunities. • The annual venture debt market in the U.S. surpassed $30 billion for the fourth consecutive year in 2023.
Market Opportunity We believe that an attractive market opportunity exists for providing debt and equipment financings to growth-oriented companies for the following reasons: • growth-oriented companies have generally been underserved by traditional lending sources. • Unfulfilled demand exists for loans and equipment financings to growth-oriented companies due to the complexity of evaluating risk in these investments. • Debt investments with warrants are less dilutive than traditional equity financing and complement equity financing from venture capital and private equity funds. • Equity funding of growth-oriented companies, including venture capital backed companies, has increased steadily over the last ten years, resulting in new lending and equipment financing opportunities. 10 Table of Contents • The annual venture debt market in the U.S. surpassed $30 billion for the fourth consecutive year in 2024.
We seek to achieve our investment objective by making investments consisting primarily of term loans and equipment financings and, to a lesser extent, working capital loans, equity and equity-related investments. Our equipment financings involve loans for general or specific use, including acquiring equipment, that are secured by the equipment or other assets of the portfolio company.
We seek to achieve our investment objective by making investments consisting of term loans, equipment financings and asset-based lending and, to a lesser extent, working capital loans, equity and equity-related investments. Our equipment financings involve loans for general or specific use, including acquiring equipment, that are secured by the equipment or other assets of the portfolio company.
For our investment risk rating system, we review seven different criteria and, based on our review of such criteria, we assign a risk rating on a scale of 1 to 5, as set forth in the following illustration. As of December 31, 2023, the Company’s debt investment portfolio had a weighted average risk rating score of 2.7.
For our investment risk rating system, we review seven different criteria and, based on our review of such criteria, we assign a risk rating on a scale of 1 to 5, as set forth in the following illustration. As of December 31, 2024, the Company’s debt investment portfolio had a weighted average risk rating score of 2.9.
If our expenses in a given year exceed investment company taxable income, we would experience a net 21 Table of Contents operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years. In addition, expenses can be used only to offset investment company taxable income, not net capital gain.
If our expenses in a given year exceed investment company taxable income, we would experience a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years. In addition, expenses can be used only to offset investment company taxable income, not net capital gain.
We are committed to providing a safe, harassment-free work environment guided by principles of fair and equal treatment and focused on employee engagement. 8 Table of Contents Potential Competitive Advantages We believe that we are one of only a select group of specialty lenders that has our depth of knowledge, experience, and track record in lending to growth-stage companies.
We are committed to providing a safe, harassment-free work environment guided by principles of fair and equal treatment and focused on employee engagement. Potential Competitive Advantages We believe that we are one of only a select group of specialty lenders that has our depth of knowledge, experience, and track record in lending to growth-oriented companies.
Investors may receive returns from three sources — the loan’s interest payments or equipment financing payments and the associated contractual fees; the final principal payment; and, contingent upon a successful change of control or initial public offering, proceeds from the equity positions or contingent exit fees obtained at loan or equipment financing origination.
Investors may receive returns from three sources — the loan’s interest payments or equipment financing payments and the associated contractual fees; the final principal payment; and, contingent upon a successful change of control or IPO, proceeds from the equity positions or contingent exit fees obtained at loan or equipment financing origination.
Temporary Investments. Pending investment in other types of qualifying assets, as described above, our investments can consist of cash, cash equivalents, U.S. government securities or high quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of our assets would be qualifying assets.
Pending investment in other types of qualifying assets, as described above, our investments can consist of cash, cash equivalents, U.S. government securities or high quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of our assets would be qualifying assets. 18 Table of Contents Issuance of Derivative Securities.
Significant Managerial Assistance. A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above.
A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above.
These banks often will provide revolving credit facilities to growth-stage companies and we seek to provide term debt and/or equipment financings to their portfolio companies. We also focus on sourcing deals from the partners of growth-stage institutional investors, including growth-stage venture capital firms and private equity firms.
These banks often will provide revolving credit facilities to growth-oriented companies and we seek to provide term debt and/or equipment financings to their portfolio companies. 9 Table of Contents We also focus on sourcing deals from the partners of growth-oriented institutional investors, including growth-oriented venture capital firms and private equity firms.
Human Capital Resources and Management Team We are an internally managed BDC employing 68 dedicated professionals as of December 31, 2023, including 43 investment, origination and portfolio management professionals, all of whom have experience working on investment and financing transactions for growth- and early-stage companies. All of our employees are located in the United States.
Human Capital Resources and Management Team We are an internally managed BDC employing 88 dedicated professionals as of December 31, 2024, including 58 investment, origination and portfolio management professionals, all of whom have experience working on investment and financing transactions for growth- and early-stage companies. All of our employees are located in the United States.
From time to time, we will identify investments that require closer monitoring or become workout assets. We will develop a workout strategy for workout assets and our Investment Committee will monitor the progress against 15 Table of Contents the strategy.
From time to time, we will identify investments that require closer monitoring or become workout assets. We will develop a workout strategy for workout assets and our Investment Committee will monitor the progress against the strategy.
The financing products offered by traditional lenders typically impose restrictive covenants and conditions on borrowers, including limiting cash outflows and requiring a significant depository relationship to facilitate rapid liquidation. 10 Table of Contents Unfulfilled Demand for Loans and Equipment Financings to Growth-Stage Companies.
The financing products offered by traditional lenders typically impose restrictive covenants and conditions on borrowers, including limiting cash outflows and requiring a significant depository relationship to facilitate rapid liquidation. Unfulfilled Demand for Loans and Equipment Financings to Growth-Oriented Companies.
On January 16, 2020, through a series of transactions (the “Formation Transactions”), we acquired Trinity Capital Investment, LLC, Trinity Capital Fund II, L.P. (“Fund II”), Trinity Capital Fund III, L.P., Trinity Capital Fund IV, L.P. and Trinity Sidecar Income Fund, L.P.
On January 16, 2020, through a series of transactions, we acquired Trinity Capital Investment, LLC, Trinity Capital Fund II, L.P., Trinity Capital Fund III, L.P., Trinity Capital Fund IV, L.P. and Trinity Sidecar Income Fund, L.P.
Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and o no more than 25% of the value of our assets is invested in the (i) securities, other than U.S. government securities or securities of other RICs, of one issuer, (ii) securities, other than securities of other RICs, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) securities of one or more “qualified publicly traded partnerships” (the “Diversification Tests”).
Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and o no more than 25% of the value of our assets is invested in the (i) securities, other than U.S. government securities or securities of other RICs, of one issuer, (ii) securities, other than securities of other RICs, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) securities of one or more “qualified publicly traded partnerships” (the “Diversification Tests”). 20 Table of Contents We may be required to recognize taxable income in circumstances in which we do not receive cash.
(collectively, the “Legacy Funds”) and all of their respective assets, including their respective investment portfolios (the “Legacy Portfolio”), as well as Trinity Capital Holdings, LLC (“Trinity Capital Holdings”), a holding company whose subsidiaries managed and/or had the right to receive fees from certain of the Legacy Funds.
(collectively, the “Legacy Funds”) and all of their respective assets, including their respective investment portfolios (the “Legacy Portfolio”), as well as Trinity Capital Holdings, LLC, a holding company whose subsidiaries managed and/or had the right to receive fees from certain of the Legacy Funds. We used a portion of the proceeds from the Private Offerings to complete these transactions.
Since we focus on investing in portfolio companies alongside venture capital firms and technology banks, we anticipate that most of our opportunities will come from sectors that those sources finance. 11 Table of Contents Characteristics of Target Portfolio Companies We seek to invest in a cross-section of growth-stage companies.
Our portfolio companies are selected from a wide range of industries, technologies and geographic regions. Since we focus on investing in portfolio companies alongside venture capital firms and technology banks, we anticipate that most of our opportunities will come from sectors that those sources finance. Characteristics of Target Portfolio Companies We seek to invest in a cross-section of growth-oriented companies.
Failure to Qualify as a RIC If we are unable to qualify for treatment as a RIC in the future, and certain remedial procedures are not satisfied, we would be subject to U.S. federal income tax on such income at regular corporate rates (and also would be subject to any applicable state and local taxes), regardless of whether we make any distributions to stockholders.
In the event we realize net capital gains from such transactions, a stockholder may receive a larger capital gain distribution than it would have received in the absence of such transactions. 21 Table of Contents Failure to Qualify as a RIC If we are unable to qualify for treatment as a RIC in the future, and certain remedial procedures are not satisfied, we would be subject to U.S. federal income tax on such income at regular corporate rates (and also would be subject to any applicable state and local taxes), regardless of whether we make any distributions to stockholders.
Our employees drive the success of our business and investment strategy, including achieving our investment objective. We offer competitive compensation, benefits and training programs to develop our employees’ skills and expertise.
The Investment Committee approves proposed investments by majority consent in accordance with investment guidelines and procedures established by the Investment Committee. Our employees drive the success of our business and investment strategy, including achieving our investment objective. We offer competitive compensation, benefits and training programs to develop our employees’ skills and expertise.
Our loans and equipment financings generally range from $5 million to $50 million, and we generally limit each loan or equipment financing to approximately five percent or less of our total assets.
Our loans and equipment financings generally range from $5 million to $50 million, and we generally limit each loan or equipment financing to approximately five percent or less of our total assets. We believe investments of this scale are generally sufficient to support near-term growth needs of most growth-oriented companies.
On December 14, 2022, we received exemptive relief from the SEC that allows us to organize, as a direct wholly owned portfolio company, a subsidiary that intends to operate as an investment adviser registered under the Investment Advisers Act of 1940, as amended, pursuant to which it will provide investment management and other services to one or more privately-offered pooled investment vehicles, registered management investment companies, BDCs and/or investment accounts, and receive advisory fees for such services.
Equity Incentive Plans” to our consolidated financial statements included with this annual report on Form 10-K for additional information. 19 Table of Contents On December 14, 2022, we received exemptive relief from the SEC that allows us to organize, acquire, wholly own and operate the Adviser Sub, as an investment adviser registered under the Investment Advisers Act of 1940, as amended, pursuant to which the Adviser Sub will provide investment management and other services to one or more privately-offered pooled investment vehicles, registered management investment companies, BDCs and/or investment accounts, and receive advisory fees for such services.
In addition, because growth-stage companies generally reach a more mature stage prior to reaching a liquidity event, we believe our investments could provide the capital needed to grow or recapitalize during the extended growth period sometimes required prior to liquidity events.
In addition, because growth-oriented companies generally reach a more mature stage prior to reaching a liquidity event, we believe our investments could provide the capital needed to grow or recapitalize during the extended growth period sometimes required prior to liquidity events. 11 Table of Contents Investment Philosophy, Strategy and Process Overview We lend money in the form of term loans and equipment financings and, to a lesser extent, working capital loans to growth-oriented companies.
See “Regulation as a Business Development Company — Significant Managerial Assistance” for additional information. Competition Our prospective markets are highly competitive and are characterized by competitive factors that vary based upon product and geographic region.
Competition Our prospective markets are highly competitive and are characterized by competitive factors that vary based upon product and geographic region.
TCF is included as a consolidated subsidiary of the Company in our consolidated financial statements. Overview We are a specialty lending company that provides debt, including loans and equipment financings, to growth-stage companies, including venture-backed companies and companies with institutional equity investors. Our investment objective is to generate current income and, to a lesser extent, capital appreciation through our investments.
Overview We are a specialty lending company that provides debt, including loans, equipment financings and asset-based lending, to growth-oriented companies, including institutional investor-backed companies. Our investment objective is to generate current income and, to a lesser extent, capital appreciation through our investments across five distinct vertical markets.
Brown, Gerald Harder, Kyle Brown, and Ron Kundich and a vertical market leader (on a rotating basis throughout the year). We consider these individuals to be our portfolio managers. The Investment Committee approves proposed investments by majority consent in accordance with investment guidelines and procedures established by the Investment Committee.
All investment decisions are made by our investment committee (the “Investment Committee”), whose members consist of Steven L. Brown, Gerald Harder, Kyle Brown, Ron Kundich and a vertical market leader (on a rotating basis throughout the year). We consider these individuals to be our portfolio managers.
We believe investments of this scale are generally sufficient to support near-term growth needs of most growth-stage companies. 7 Table of Contents The following illustrates the lifecycle stage at which we seek to invest in our portfolio companies, although we may, at our discretion, invest in other lifecycle stages.
The following illustrates the lifecycle stage at which we seek to invest in our portfolio companies, although we may, at our discretion, invest in other lifecycle stages.
Such required distributions may be made from cash assets or by liquidation of investments, if necessary. We may realize gains or losses from such liquidations. In the event we realize net capital gains from such transactions, a stockholder may receive a larger capital gain distribution than it would have received in the absence of such transactions.
Such required distributions may be made from cash assets or by liquidation of investments, if necessary. We may realize gains or losses from such liquidations.
Our management team has prior management experience, including with early-stage tech startups, and employs a highly systematized investment approach. Our senior management team, led by Kyle Brown, comprises the majority of the senior management team that managed the Legacy Funds and sourced the Legacy Portfolio. All investment decisions are made by the Investment Committee, whose members consist of Steven L.
Our management team has prior management experience, including with early-stage tech startups, and employs a highly systematized investment approach.
These equity incentive plans were approved by our Board on October 17, 2019, and by our stockholders on June 17, 2021 at our 2021 Annual Meeting of Stockholders. See “Note 8. Equity Incentive Plans” to our consolidated financial statements included with this annual report on Form 10-K for additional information.
These equity incentive plans were initially approved by our Board on October 17, 2019, and by our stockholders on June 17, 2021 at our 2021 Annual Meeting of Stockholders, and our Board approved amendments to increase the shares available for issuance under each plan on April 23, 2024, and our stockholders approved such amendments on June 12, 2024 at our 2024 Annual Meeting of Stockholders.
Removed
We used a portion of the proceeds from the Private Offerings to complete these transactions.
Added
On February 2, 2021, we completed our initial public offering (“IPO”) of 8,006,291 shares of our common stock at a price of $14.00 per share, inclusive of the underwriters’ option to purchase additional shares, which was exercised in full.
Removed
In the Formation Transactions, the Legacy Funds were merged with and into Trinity Capital, and we issued 9,183,185 shares of our common stock for an aggregate amount of approximately $137.7 million and paid approximately $108.7 million in cash to the Legacy Funds’ investors, which included the general partners/managers of the Legacy Funds (the “Legacy Investors”).
Added
Our common stock began trading on the Nasdaq Global Select Market on January 29, 2021 under the symbol “TRIN.” Proceeds from this offering were primarily used to pay down a portion of our existing indebtedness outstanding.
Removed
As part of the Formation Transactions, we also acquired 100% of the equity interests of Trinity Capital Holdings for an aggregate purchase price of $10.0 million, which was comprised of 533,332 shares of our common stock, totaling approximately $8.0 million, and approximately $2.0 million in cash.
Added
TCF is included as a consolidated subsidiary of the Company in our consolidated financial statements. 6 Table of Contents On December 5, 2022, we entered into a joint venture agreement with certain funds and accounts managed by a specialty credit manager to co-manage Senior Credit Corp 2022 LLC, a Delaware limited liability company (the “JV”).
Removed
In connection with the acquisition of such equity interests, we also assumed a $3.5 million severance related liability with respect to a former member of certain general partners of certain Legacy Funds. As a result of the Formation Transactions, Trinity Capital Holdings, a Delaware limited liability company, became a wholly owned subsidiary of the Company.
Added
The JV invests in secured loans and equipment financings to growth-stage companies that have been originated by us. On March 16, 2023, we formed an unconsolidated wholly owned subsidiary, Trinity Capital Adviser LLC, a Delaware limited liability company (“Adviser Sub”).
Removed
Since its acquisition, Trinity Capital Holdings has not engaged in any operations. 6 Table of Contents On January 29, 2021, our common stock began trading on the Nasdaq Global Select Market under the ticker symbol “TRIN,” and we completed our initial public offering of 8,006,291 shares of our common stock, par value $0.001, inclusive of an over-allotment option that was exercised in full on February 2, 2021 (“IPO”).
Added
We were granted exemptive relief by the SEC that permits us to organize, acquire, wholly own and operate the Adviser Sub as an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Adviser Act”).
Removed
Investment Philosophy, Strategy and Process Overview We lend money in the form of term loans and equipment financings and, to a lesser extent, working capital loans to growth-stage companies.
Added
The Adviser Sub may provide investment advisory and related services to one or more investment vehicles (the “Adviser Funds”) with ownership by one or more unrelated third-party investors and receive fee income for such services.
Removed
Our portfolio companies are selected from a wide range of industries, technologies and geographic regions.
Added
On June 28, 2024, we and a specialty credit manager each funded a portion of our respective capital commitments to commence operations of a credit fund, EPT 16 LLC, a Delaware limited liability company (“EPT 16”). EPT 16 has acquired and intends to acquire, hold and, as applicable, dispose of investments that have been originated by us.
Removed
Managerial Assistance As a BDC, we are required to offer, and provide upon request, significant managerial assistance to our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance.
Added
He has historically managed relationships with potential investment partners, including venture capital firms and technology bank lenders, allowing us to nearly triple the number of investment opportunities reviewed by our senior management after Mr. Brown joined the senior management of Trinity. • Steven L.
Removed
We may be required to recognize taxable income in circumstances in which we do not receive cash.
Added
Brown, our founder, is our Executive Chairman and has over 25 years of experience in venture equity and venture debt investing and working with growth-stage companies. • Gerald Harder, our Chief Operating Officer, has been with Trinity since 2016, and we believe his prior 30 years of engineering and operations experience adds significant value in guiding the Company’s operations team and steward strategy. • Ron Kundich, our Chief Credit Officer, is responsible for overseeing the Company’s lending, underwriting and credit processes. • Michael Testa, our Chief Financial Officer and Treasurer, has over 20 years of finance and accounting experience, having worked both at a credit-focused asset manager and a large global accounting firm.
Added
In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. Significant Managerial Assistance.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

143 edited+75 added−118 removed404 unchanged
Biggest changeRisks related to an investment in our securities include, but are not limited to, the following: • We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital. • Investing in our common stock may involve an above-average degree of risk, including the risk of dilution. • The market value of our securities may fluctuate significantly, which may make it difficult to resell our securities, including at an attractive price. • We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us. • Our 2025 Notes, our 4.375% Notes due 2026 (the “August 2026 Notes”), our 4.25% Notes due 2026 (the “December 2026 Notes”) and our 6.00% Convertible Notes due 2025 (the “Convertible Notes”) are each unsecured and therefore effectively subordinated to any secured indebtedness we currently have outstanding or may incur in the future and rank pari passu, or equal in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by us and our general liabilities.
Biggest changeRisks related to an investment in our securities include, but are not limited to, the following: • We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital. • Investing in our common stock may involve an above-average degree of risk, including the risk of dilution. • The market value of our securities may fluctuate significantly, which may make it difficult to resell our securities, including at an attractive price. 23 Table of Contents • We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us. • Our 4.375% Notes due 2026 (the “August 2026 Notes”), our 4.25% Notes due 2026 (the “December 2026 Notes”), our 7.875% Notes due March 2029 (the “March 2029 Notes”), our 7.875% Notes due September 2029 (the “September 2029 Notes”), and our 7.54% Series A Senior Notes, Tranche A, due October 29, 2027 (the “Series A 2027 Notes”), 7.60% Series A Senior Notes, Tranche B, due October 29, 2028 (the “Series A 2028 Notes”) and our 7.66% Series A Senior Notes, Tranche C, due October 29, 2029 (the “Series A 2029 Notes” and together with the Series A 2027 Notes and Series A 2028 Notes, the “Series A Notes”) are each unsecured and therefore effectively subordinated to any secured indebtedness we currently have outstanding or may incur in the future and rank pari passu, or equal in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by us and our general liabilities.
Loans may become non-performing for a variety of reasons. A loan or debt obligation may become non-performing for a variety of reasons. Such non-performing loans may require substantial workout negotiations or restructuring that may entail, among other things, a substantial reduction in the interest rate, a substantial write-down of the principal amount of the loan and/or the deferral of payments.
A loan or debt obligation may become non-performing for a variety of reasons. Such non-performing loans may require substantial workout negotiations or restructuring that may entail, among other things, a substantial reduction in the interest rate, a substantial write-down of the principal amount of the loan and/or the deferral of payments.
In particular, the terms of such indentures and the Notes and the Convertible Notes do not place any restrictions on our or our subsidiaries’ ability to: • issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be pari passu, or equal in right of payment, to the Notes or the Convertible Notes , (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes or the Convertible Notes to the extent of the value of the assets securing such indebtedness, (3) indebtedness or other obligations of ours that are guaranteed by one or more of our subsidiaries and which therefore are structurally senior to the Notes or the Convertible Notes and (4) securities, indebtedness or other obligations incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes or the Convertible Notes with respect to the assets of those subsidiaries, in each case other than an incurrence of indebtedness or other obligations that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a) of the 1940 Act or any successor provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC.
In particular, the terms of such indentures and the Notes do not place any restrictions on our or our subsidiaries’ ability to: • issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be pari passu, or equal in right of payment, to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the value of the assets securing such indebtedness, (3) indebtedness or other obligations of ours that are guaranteed by one or more of our subsidiaries and which therefore are structurally senior to the Notes and (4) securities, indebtedness or other obligations incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of those subsidiaries, in each case other than an incurrence of indebtedness or other obligations that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a) of the 1940 Act or any successor provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC.
The use of debt could have significant consequences on our future operations, including: • making it more difficult for us to meet our payment and other our current indebtedness and/or any other outstanding indebtedness we may incur in the future; • resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which event of default could result in substantially all of our debt becoming immediately due and payable; • reducing the availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; 28 Table of Contents • subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates; and • limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy.
The use of debt could have significant consequences on our future operations, including: • making it more difficult for us to meet our payment and other our current indebtedness and/or any other outstanding indebtedness we may incur in the future; • resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which event of default could result in substantially all of our debt becoming immediately due and payable; • reducing the availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates; and 27 Table of Contents • limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy.
This failure to meet obligations may be accompanied by a 35 Table of Contents deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment; • they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions, market conditions, and general economic downturns; • they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; • they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion, or maintain their competitive position.
This failure to meet obligations may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment; • they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions, market conditions, and general economic downturns; • they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; • they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion, or maintain their competitive position.
The respective terms of such indentures and the Notes and the Convertible Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on an investment in the Notes or the Convertible Notes.
The respective terms of such indentures and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on an investment in the Notes.
These conditions could continue for a prolonged period of time or worsen in the future. Given the ongoing and dynamic nature of recent market disruption and instability, it is difficult to predict the full impact of these conditions on our business.
These conditions could continue for a prolonged period of time or worsen in the future. Given the ongoing and dynamic nature of market disruption and instability, it is difficult to predict the full impact of these conditions on our business.
As a result, we may have to sell some of our investments at times or at prices that would not be advantageous to us, raise additional debt or equity capital or forgo new investment opportunities. • The higher yield of OID instruments reflects the payment deferral and credit risk associated with these instruments. • Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation. • OID instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. • OID instruments generally represent a significantly higher credit risk than coupon loans. • OID income received by us may create uncertainty about the source of our cash distributions to stockholders.
As a result, we may have to sell some of our investments at times or at prices that would not be advantageous to us, raise additional debt or equity capital or forgo new investment opportunities. • The higher yield of OID instruments reflects the payment deferral and credit risk associated with these instruments. • Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation. • OID instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. • OID instruments generally represent a significantly higher credit risk than coupon loans. 44 Table of Contents • OID income received by us may create uncertainty about the source of our cash distributions to stockholders.
We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material nonpublic information regarding such portfolio company or we become subject to trading restrictions under the internal trading policies of those companies as a result of applicable law or regulations. 42 Table of Contents Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material nonpublic information regarding such portfolio company or we become subject to trading restrictions under the internal trading policies of those companies as a result of applicable law or regulations. 43 Table of Contents Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
The market value of our common stock may fluctuate significantly. The market value and liquidity, if any, of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.
The market value and liquidity, if any, of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.
In addition, other debt we issue or incur in the future could contain more protections for its holders than the Notes and the Convertible Notes, including under the respective indentures of such notes, including additional covenants and events of default.
In addition, other debt we issue or incur in the future could contain more protections for its holders than the Notes, including under the respective indentures of such notes, including additional covenants and events of default.
The revenues, income (or losses), and projected financial performance and valuations of growth-stage companies can and often do fluctuate suddenly and dramatically. For these reasons, investments in our portfolio companies, if rated by one or more ratings agency, would typically be rated below “investment grade,” which refers to securities rated by ratings agencies below the four highest rating categories.
The revenues, income (or losses), and projected financial performance and valuations of growth-oriented companies can and often do fluctuate suddenly and dramatically. For these reasons, investments in our portfolio companies, if rated by one or more ratings agency, would typically be rated below “investment grade,” which refers to securities rated by ratings agencies below the four highest rating categories.
In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock. 33 Table of Contents Deterioration in the economic conditions in the Eurozone and other regions or countries globally and the resulting instability in global financial markets may pose a risk to our business.
In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock. 62 Table of Contents Deterioration in the economic conditions in the Eurozone and other regions or countries globally and the resulting instability in global financial markets may pose a risk to our business.
We are subject to risks related to our investments, including, but not limited to the following: • Our investments are very risky and highly speculative and a lack of liquidity in our investments may adversely affect us. • Our investment strategy focuses on growth-stage companies which are subject to many risks, including dependence on the need to raise additional capital, volatility, intense competition, shortened product life cycles, changes in regulatory and governmental programs, periodic downturns, below investment grade ratings, which could cause you to lose all or part of your investment in us. • The equipment financing industry is highly competitive and competitive forces could adversely affect the financing rates and resale prices that we may realize on our equipment financing investment portfolio and the prices that we have to pay to acquire our investments. • Economic recessions or downturns could impair our portfolio companies and harm our operating results. • Our investments are geographically concentrated, which may result in a single occurrence in a particular geographic area having a disproportionate negative impact on our investment portfolio. • We may be subject to risks associated with our investments in senior loans, junior debt securities and covenant-lite loans. 23 Table of Contents • We are subject to risks associated with investing alongside other third parties.
We are subject to risks related to our investments, including, but not limited to the following: • Our investments are very risky and highly speculative and a lack of liquidity in our investments may adversely affect us. • Our investment strategy focuses on growth-oriented companies which are subject to many risks, including dependence on the need to raise additional capital, volatility, intense competition, shortened product life cycles, changes in regulatory and governmental programs, periodic downturns, below investment grade ratings, which could cause you to lose all or part of your investment in us. • The equipment financing industry is highly competitive and competitive forces could adversely affect the financing rates and resale prices that we may realize on our equipment financing investment portfolio and the prices that we have to pay to acquire our investments. • Economic recessions or downturns could impair our portfolio companies and harm our operating results. • Our investments are geographically concentrated, which may result in a single occurrence in a particular geographic area having a disproportionate negative impact on our investment portfolio. • We may be subject to risks associated with our investments in senior loans, junior debt securities and covenant-lite loans. • We are subject to risks associated with investing alongside other third parties.
Any default under the agreements governing our indebtedness or under other indebtedness to which we may be a party, that is not waived by the required lenders or holders and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and/or the Convertible Notes and substantially decrease the market value of any such notes.
Any default under the agreements governing our indebtedness or under other indebtedness to which we may be a party, that is not waived by the required lenders or holders and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and/or the Series A Notes and substantially decrease the market value of any such notes.
As a result, the Notes and the Convertible Notes are effectively subordinated, or junior, to any secured indebtedness or other obligations we or our subsidiaries have currently incurred, including under the KeyBank Credit Facility, and may incur in the future (or any indebtedness that is initially unsecured that we later secure) to the extent of the value of the assets securing such indebtedness.
As a result, the Notes and the Series A Notes are effectively subordinated, or junior, to any secured indebtedness or other obligations we or our subsidiaries have currently incurred, including under the KeyBank Credit Facility, and may incur in the future (or any indebtedness that is initially unsecured that we later secure) to the extent of the value of the assets securing such indebtedness.
Therefore, our growth-stage companies may face considerably more risk of loss than do companies at other stages of development. The equipment financing industry is highly competitive and competitive forces could adversely affect the financing rates and resale prices that we may realize on our equipment financing investment portfolio and the prices that we have to pay to acquire our investments.
Therefore, our growth-oriented companies may face considerably more risk of loss than do companies at other stages of development. The equipment financing industry is highly competitive and competitive forces could adversely affect the financing rates and resale prices that we may realize on our equipment financing investment portfolio and the prices that we have to pay to acquire our investments.
We will also be permitted to borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes, which borrowings would not be considered senior securities. 27 Table of Contents We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.
We will also be permitted to borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes, which borrowings would not be considered senior securities. 26 Table of Contents We may borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.
Currently, these provisions generally prohibit us from incurring additional borrowings, including through the issuance of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings; • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes or the Convertible Notes , including subordinated indebtedness, except that we have agreed that, for the period of time during which each of such notes are outstanding, we will not violate Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions.
Currently, these provisions generally prohibit us from incurring additional borrowings, including through the issuance of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings; 54 Table of Contents • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including subordinated indebtedness, except that we have agreed that, for the period of time during which each of such notes are outstanding, we will not violate Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions.
The nature and level of extreme weather conditions or other natural disasters cannot be predicted and may be exacerbated by global climate change. 64 Table of Contents Internal and external cybersecurity threats, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing the ability to conduct business effectively.
The nature and level of extreme weather conditions or other natural disasters cannot be predicted and may be exacerbated by global climate change. 66 Table of Contents Internal and external cybersecurity threats, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing the ability to conduct business effectively.
Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries and therefore the claims of our creditors, including holders of the Notes and the Convertible Notes with respect to the assets of such subsidiaries.
Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries and therefore the claims of our creditors, including holders of the Notes and the Series A Notes with respect to the assets of such subsidiaries.
Under this covenant, we will be permitted to declare a cash 52 Table of Contents dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions, but only up to such amount as is necessary for us to maintain our status as a RIC under Subchapter M of the Code.
Under this covenant, we will be permitted to declare a cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions, but only up to such amount as is necessary for us to maintain our status as a RIC under Subchapter M of the Code.
We are subject to risks related to our business and structure, including, but not limited to the following: • We depend upon our senior management team and investment professionals, including the members of our Investment Committee, for our success. • Our business model depends, to a significant extent, upon strong referral relationships with venture capital sponsors, and our inability to develop or maintain these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. • Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations. • Regulations governing our operations as a BDC affect our ability to and the way in which we raise additional capital. • Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy. • Provisions in our existing and future credit facilities may limit our operations. • We are exposed to risks associated with changes in interest rates, including the current rising interest rate environment. • Most or a substantial portion of our portfolio investments will be recorded at fair value as determined in good faith by the Board and, as a result, there may be uncertainty as to the value of our portfolio investments. • The Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse. • Internal and external cybersecurity threats, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing our ability to conduct business effectively.
We are subject to risks related to our business and structure, including, but not limited to the following: • We depend upon our senior management team and investment professionals, including the members of our Investment Committee, for our success. 22 Table of Contents • Our business model depends, to a significant extent, upon strong referral relationships with venture capital sponsors, and our inability to develop or maintain these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. • Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations. • Regulations governing our operations as a BDC affect our ability to and the way in which we raise additional capital. • Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy. • Provisions in our existing and future credit facilities may limit our operations. • We are exposed to risks associated with changes in interest rates and inflation rates. • Most or a substantial portion of our portfolio investments will be recorded at fair value as determined in good faith by the Board and, as a result, there may be uncertainty as to the value of our portfolio investments. • The Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse. • Internal and external cybersecurity threats, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing our ability to conduct business effectively.
We invest primarily in growth-stage companies, many of which may have narrow product lines and small market shares, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as to general economic downturns, compared to more mature companies.
We invest primarily in growth-oriented companies, many of which may have narrow product lines and small market shares, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as to general economic downturns, compared to more mature companies.
Treasury regulations as “passive foreign investment companies” and/or “controlled foreign corporations.” The rules relating to investment in these types of non-U.S. entities are designed to ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to corporate-level events) or taxed at increased tax rates at distribution or disposition.
Treasury regulations as “passive foreign investment companies” and/or “controlled foreign corporations.” The rules relating to investment in these types of non-U.S. entities are designed to ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to 59 Table of Contents corporate-level events) or taxed at increased tax rates at distribution or disposition.
Our target growth-stage companies are geographically concentrated and are therefore highly susceptible to materially negative local, political, natural and economic events. In addition, high growth industries are generally characterized by abrupt business cycles and intense competition.
Our target growth-oriented companies are geographically concentrated and are therefore highly susceptible to materially negative local, political, natural and economic events. In addition, high growth industries are generally characterized by abrupt business cycles and intense competition.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our financing arrangements or otherwise in an amount sufficient to enable us to pay our indebtedness, including under the KeyBank Credit Facility, the Notes, the Convertible Notes and/or any other outstanding indebtedness we may incur in the future, or to fund our other liquidity needs.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our financing arrangements or otherwise in an amount sufficient to enable us to pay our indebtedness, including under the KeyBank Credit Facility, the Notes, the Series A Notes and/or any other outstanding indebtedness we may incur in the future, or to fund our other liquidity needs.
We may, however, sell our common stock, or warrants, options, or rights to acquire our common stock, at a price below the 49 Table of Contents current net asset value of our common stock if our Board and independent directors determine that such sale is in our best interests and the best interests of our stockholders, and our stockholders, including a majority of those stockholders that are not affiliated with us, approve such sale.
We may, however, sell our common stock, or warrants, options, or rights to acquire our common stock, at a price below the current net asset value of our common stock if our Board and independent directors determine that such sale is in our best interests and the best interests of our stockholders, and our stockholders, including a majority of those stockholders that are not affiliated with us, approve such sale.
We may need to refinance all or a portion of our indebtedness, including under the KeyBank Credit Facility, the Notes, the Convertible Notes and/or any other outstanding indebtedness we may incur in the future, on or before the scheduled maturity.
We may need to refinance all or a portion of our indebtedness, including under the KeyBank Credit Facility, the Notes, the Series A Notes and/or any other outstanding indebtedness we may incur in the future, on or before the scheduled maturity.
We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all, or on terms that would not be disadvantageous to our shareholders or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements, including our payment obligations under the KeyBank Credit Facility, the Notes and/or the Convertible Notes.
We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all, or on terms that would not be disadvantageous to our shareholders or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements, including our payment obligations under the KeyBank Credit Facility, the Notes and/or the Series A Notes.
In these situations, all of the risks identified above regarding senior secured loans would be present and additional risks inherent in holding a junior security position would also be present, including that our second lien secured loans 36 Table of Contents generally would be subordinated to senior loans and other creditors may rank senior to us in the event of default, insolvency or liquidation.
In these situations, all of the risks identified above regarding senior secured loans would be present and additional risks inherent in holding a junior security position would also be present, including that our second lien secured loans generally would be subordinated to senior loans and other creditors may rank senior to us in the event of default, insolvency or liquidation.
Accordingly, financing these types of companies may entail a higher risk of loss than would financing companies that are able to utilize traditional credit sources. If our portfolio companies are unable to commercialize their technologies, products, business concepts or services, the returns on our investments could be adversely affected.
Accordingly, financing these types of companies may entail a higher risk of loss than would financing companies that are able to utilize traditional credit sources. 42 Table of Contents If our portfolio companies are unable to commercialize their technologies, products, business concepts or services, the returns on our investments could be adversely affected.
This may 41 Table of Contents have a significant impact if the companies are unable to obtain certain federal, state or foreign agency approval for their products or the marketing thereof, of if regulatory review processes extend longer than anticipated, and the companies need continued funding for their operations during these times.
This may have a significant impact if the companies are unable to obtain certain federal, state or foreign agency approval for their products or the marketing thereof, of if regulatory review processes extend longer than anticipated, and the companies need continued funding for their operations during these times.
Consequently, we may realize significantly less than the value at which we carry our investments. An inability to raise capital, and any 26 Table of Contents required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations.
Consequently, we may realize significantly less than the value at which we carry our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations.
To the extent original issue discount (“OID”) and payment-in-kind (“PIK") interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income. Our investments may include OID and PIK instruments.
To the extent original issue discount (“OID”) and PIK interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income. Our investments may include OID and PIK instruments.
In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes and the Convertible Notes.
In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes and the Series A Notes.
Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the KeyBank Credit Facility, the Notes, the Convertible Notes and/or any other outstanding indebtedness we may incur in the future.
Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the KeyBank Credit Facility, the Notes, the Series A Notes and/or any other outstanding indebtedness we may incur in the future.
Conversely, investors selling shares during a period in which the net asset value understates the value of investments will receive a lower price for their shares than the value the investment portfolio might warrant. 31 Table of Contents We will adjust quarterly the valuation of our portfolio to reflect the determination of the Board of the fair value of each investment in our portfolio.
Conversely, investors selling shares during a period in which the net asset value understates the value of investments will receive a lower price for their shares than the value the investment portfolio might warrant. We will adjust quarterly the valuation of our portfolio to reflect the determination of the Board of the fair value of each investment in our portfolio.
Additionally, adverse economic conditions or other factors particularly affecting a specific region could increase the risk of loss on our investments. Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment. Investment in leveraged companies involves a number of significant risks.
Additionally, adverse economic conditions or other factors particularly affecting a specific region could increase the risk of loss on our investments. 35 Table of Contents Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment. Investment in leveraged companies involves a number of significant risks.
Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted. Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted. 51 Table of Contents Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
Consequently, the Notes and the Convertible Notes are structurally subordinated, or junior, to the KeyBank Credit Facility and all existing and future indebtedness and other obligations (including trade payables) incurred by any of our subsidiaries, financing vehicles or similar facilities and any subsidiaries, financing vehicles or similar facilities that we may in the future acquire or establish.
Consequently, the Notes and the Series A Notes are structurally subordinated, or junior, to the KeyBank Credit Facility and all existing and future indebtedness and other obligations (including trade payables) incurred by any of our subsidiaries, financing vehicles or similar facilities and any subsidiaries, financing vehicles or similar facilities that we may in the future acquire or establish.
As part of our business strategy, we issued the Notes, the Convertible Notes, and entered into the KeyBank Credit Facility through our wholly owned subsidiary, TCF , and we may borrow from and issue senior debt securities to banks, insurance companies and other lenders or investors.
As part of our business strategy, we issued the Notes, the Series A Notes and entered into the KeyBank Credit Facility through our wholly owned subsidiary, TCF , and we may borrow from and issue senior debt securities to banks, insurance companies and other lenders or investors.
However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act 30 Table of Contents provisions applicable to BDCs.
However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs.
We are in the process of addressing our internal controls over financial 62 Table of Contents reporting and are establishing formal procedures, policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within the Company.
We are in the process of addressing our internal controls over financial reporting and are establishing formal procedures, policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within the Company.
We will remain an emerging growth company for up to five years following an IPO or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) December 31 of the fiscal year that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million 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 securities during the preceding three-year period. 63 Table of Contents We may experience fluctuations in our operating results.
We will remain an emerging growth company for up to five years following an IPO or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) December 31 of the fiscal year that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million 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 securities during the preceding three-year period.
Any credit ratings assigned to us, the Notes and/or the Convertible Notes are an assessment by rating agencies of our ability to pay our obligations when due. Consequently, real or anticipated changes to any such credit ratings will generally affect the liquidity and/or market value of the Notes and/or the Convertible Notes.
Any credit ratings assigned to us, the Notes and/or the Series A Notes are an assessment by rating agencies of our ability to pay our obligations when due. Consequently, real or anticipated changes to any such credit ratings will generally affect the liquidity and/or market value of the Notes and/or the Series A Notes.
If the holders of the August 2026 Notes and/or the 54 Table of Contents December 2026 Notes, as applicable, exercise their right to require us to repurchase all of such notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our existing or future debt instruments, even if the Change of Control Repurchase Event itself would not cause a default.
If the holders of the August 2026 Notes, December 2026 Notes and/or the Series A Notes, as applicable, exercise their right to require us to repurchase all of such notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our existing or future debt instruments, even if the Change of Control Repurchase Event itself would not cause a default.
In the past, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial 34 Table of Contents services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions.
In the past, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions.
As a result, our exposure to losses may be increased, which could result in an adverse impact on our revenues, net income and net asset value. Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens.
As a result, our exposure to losses may be increased, which could result in an adverse impact on our revenues, net income and net asset value. 37 Table of Contents Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens.
Such investments may involve risks not present in investments where a third party is not involved, including the possibility that such third party may at any time have economic or business interests or goals which are inconsistent with ours, or may be in a position to take 40 Table of Contents action contrary to our investment objectives.
Such investments may involve risks not present in investments where a third party is not involved, including the possibility that such third party may at any time have economic or business interests or goals which are inconsistent with ours, or may be in a position to take action contrary to our investment objectives.
Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations. From time-to-time, capital markets may experience periods of disruption and instability, including during portions of the last three fiscal years.
Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations. From time-to-time, capital markets may experience periods of disruption and instability, including as experienced during portions of the last four fiscal years.
These credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed herein that could impact the liquidity and/or market value of the Notes and/or the Convertible Notes.
These credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed herein that could impact the liquidity and/or market value of the Notes and/or the Series A Notes.
As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. A reduction in the interest rates on new investments relative to interest rates on current investments could have an adverse impact on our net investment income.
As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. A reduction in the interest rates on new investments, including relative to interest rates on current investments, and investments with floating rates could have an adverse impact on our net investment income.
A "publicly offered RIC" is a RIC whose shares are (i) continuously offered pursuant to a public offering, (ii) regularly traded on 61 Table of Contents an established securities market, or (iii) held by at least 500 persons at all times during the taxable year.
A "publicly offered RIC" is a RIC whose shares are (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market, or (iii) held by at least 500 persons at all times during the taxable year.
The respective indentures under which the Notes and the Convertible Notes were issued contain limited protection for holders of such notes. The respective indentures under which the Notes and the Convertible Notes were issued offer limited protection to holders of such notes.
The respective indentures under which the Notes were issued contain limited protection for holders of such notes. The respective indentures under which the Notes were issued offer limited protection to holders of such notes.
Upon the occurrence of a Change of Control Repurchase Event (as defined in the respective indenture that governs the August 2026 Notes and the December 2026 Notes), subject to certain conditions, we will be required to offer to repurchase all outstanding August 2026 Notes and the December 2026 Notes, as applicable, at 100% of their principal amount, plus accrued and unpaid interest.
Upon the occurrence of a Change of Control Repurchase Event (as defined in the respective indenture that governs the August 2026 Notes and the December 2026 Notes or the Note Purchase Agreement that governs the Series A Notes), subject to certain conditions, we will be required to offer to repurchase all outstanding August 2026 Notes, December 2026 Notes or Series A Notes, as applicable, at 100% of their principal amount, plus accrued and unpaid interest.
Credit ratings are not a recommendation to buy, sell or hold any security, and may be subject to revision or withdrawal at any time by the issuing organization in its sole discretion. There can be no assurance that a credit rating will remain for any given period of time.
Credit ratings are not a recommendation to buy, sell or hold any security, and may be subject to revision or withdrawal at any time by the issuing organization in its sole discretion. There can be no assurance that a credit rating will remain for any given period of time. 58 Table of Contents U.S.
For accounting purposes, any cash distributions to stockholders representing OID or market discount income are not treated as coming from paid-in capital, even though the cash to pay 43 Table of Contents them comes from the offering proceeds.
For accounting purposes, any cash distributions to stockholders representing OID or market discount income are not treated as coming from paid-in capital, even though the cash to pay them comes from the offering proceeds.
Our 45 Table of Contents investment strategy does not contemplate a significant number of investments in securities of non-U.S. companies. We expect that these investments would focus on the same investments that we make in U.S. growth-stage companies and, accordingly, would be complementary to our overall strategy and enhance the diversity of our holdings.
Our investment strategy does not contemplate a significant number of investments in securities of non-U.S. companies. We expect that these investments would focus on the same investments that we make in U.S. growth-oriented companies and, accordingly, would be complementary to our overall strategy and enhance the diversity of our holdings.
These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies. Senior Secured Loans.
These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies. 36 Table of Contents Senior Secured Loans.
The Notes and the Convertible Notes are obligations exclusively of Trinity Capital Inc. and not of any of our subsidiaries. None of our subsidiaries are a guarantor of the Notes and the Convertible Notes, and these notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.
The Notes and the Series A Notes are obligations exclusively of Trinity Capital Inc. and not of any of our existing subsidiaries. None of our existing subsidiaries are a guarantor of the Notes and the Series A Notes, and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.
Currently, we have secured indebtedness outstanding under the KeyBank Credit Facility and unsecured indebtedness outstanding related to the Notes and the Convertible Notes, and may incur additional indebtedness in the future.
Currently, we have secured indebtedness outstanding under the KeyBank Credit Facility and unsecured indebtedness outstanding related to the Notes and the Series A Notes, and may incur additional indebtedness in the future.
These market and economic disruptions could negatively impact the operating results of our portfolio companies. Any public health emergency, including outbreaks of existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
Any public health emergency, including outbreaks of existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
We issued the 2025 Notes, the August 2026 Notes, the December 2026 Notes (collectively, the “Notes”) and the Convertible Notes, and entered into the KeyBank Credit Facility through our wholly owned subsidiary, TCF, and may issue other debt securities or preferred stock and/or borrow money from other banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act.
We issued the August 2026 Notes, the December 2026 Notes, the March 2029 Notes, the September 2029 Notes (collectively, the “Notes”) and the Series A Notes and entered into the KeyBank Credit Facility through our wholly owned subsidiary, TCF, and may issue other debt securities or preferred stock and/or borrow money from other banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act.
The 2025 Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors.
The March 2029 Notes and/or September 2029 Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors.
In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business.
A significant portion of our investments may involve private securities. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business.
Secured indebtedness, including the indebtedness under the KeyBank Credit 51 Table of Contents Facility, is effectively senior to the Notes and the Convertible Notes to the extent of the value of the assets securing such indebtedness. The Notes and the Convertible Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
Secured indebtedness, including the indebtedness under the KeyBank Credit Facility, is effectively senior to the Notes and the Series A Notes to the extent of the value of the assets securing such indebtedness. 53 Table of Contents The Notes and the Series A Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
Taken as a whole, these changes could significantly increase the cost of using uncleared OTC derivatives to hedge risks, including interest rate and foreign exchange risk; reduce the level of exposure we are able to obtain for risk management purposes through OTC derivatives (including as the result of the CFTC imposing position limits on additional products); reduce the amounts available to us to make non-derivatives investments; impair liquidity in certain OTC derivatives; and adversely affect the quality of execution pricing obtained by us, all of which could adversely impact our investment returns.
Taken as a whole, these changes could significantly increase the cost of using uncleared OTC derivatives to hedge risks, including interest rate and foreign exchange risk; reduce the level of exposure we are able to obtain for risk management purposes through OTC derivatives (including as the result of the CFTC imposing position limits on additional products); reduce the amounts available to us to make non-derivatives investments; impair liquidity in certain OTC derivatives; and adversely affect the quality of execution pricing obtained by us, all of which could adversely impact our investment returns. 48 Table of Contents Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
All distributions will be paid at the discretion of the Board and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders.
All distributions will be paid at the discretion of the Board and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.
Any assets of any of our subsidiaries will not be directly available to satisfy the claims of our creditors, including the holders of the Notes and the Convertible Notes.
Any assets of any of our existing subsidiaries will not be directly available to satisfy the claims of our creditors, including the holders of the Notes and the Series A Notes.
Assumed Return on Our Portfolio (Net of Expenses) -10% -5% 0% 5% 10% Corresponding return to common stockholder (1) ( 29.1 )% ( 18.4 )% ( 7.6 )% 3.1 % 13.8 % (1) Assumes (i) $1,311.0 million in total assets, (ii) $645.5 million in outstanding principal indebtedness, (iii) $611.2 million in net assets as of December 31, 2023 and (iv) weighted average interest rate, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 7.2% as of December 31, 2023 .
Assumed Return on Our Portfolio (Net of Expenses) -10% -5% 0% 5% 10% Corresponding return to common stockholder (1) ( 29.8 )% ( 19.0 )% ( 8.2 )% 2.6 % 13.3 % (1) Assumes (i) $1,774.2 million in total assets, (ii) $888.0 million in outstanding principal indebtedness, (iii) $823.0 million in net assets as of December 31, 2024 and (iv) weighted average interest rate, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 7.6% as of December 31, 2024 .
The underwriters of the public offering of the 2025 Notes have advised us that they intend to make a market in the 2025 Notes, but they are not obligated to do so.
The underwriters of the public offering of the March 2029 Notes and September 2029 Notes have advised us that they intend to make a market in the March 2029 Notes and September 2029 Notes, but they are not obligated to do so.
Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first-priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first-priority liens: • the ability to cause the commencement of enforcement proceedings against the collateral; • the ability to control the conduct of such proceedings; • the approval of amendments to collateral documents; • releases of liens on the collateral; and 38 Table of Contents • waivers of past defaults under collateral documents.
Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first-priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first-priority liens: • the ability to cause the commencement of enforcement proceedings against the collateral; • the ability to control the conduct of such proceedings; • the approval of amendments to collateral documents; • releases of liens on the collateral; and • waivers of past defaults under collateral documents. 39 Table of Contents We may not have the ability to control or direct such actions, even if our rights are adversely affected.
Because the KeyBank Credit Facility and the respective indentures governing the Notes and the Convertible Notes each have, and any future debt will likely have, customary cross-default and cross-acceleration provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.
Because the KeyBank Credit Facility and the Note Purchase Agreement each have, and any future debt will likely have, customary cross-default and cross-acceleration provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.
There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios, which may be required by the preferred stock or convertible debt, or our current investment income might not be sufficient to meet the dividend requirements on the preferred stock or the interest payments on the debt securities.
This decline in net asset value would also tend to cause a greater decline in the market price, if any, for our common stock. 52 Table of Contents There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios, which may be required by the preferred stock or convertible debt, or our current investment income might not be sufficient to meet the dividend requirements on the preferred stock or the interest payments on the debt securities.
Some of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during periods of economic recession or downturn.
Economic recessions or downturns could impair our portfolio companies and harm our operating results. Some of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during periods of economic recession or downturn.
Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited. In August 2022, Rule 18f-4 under the 1940 Act, regarding the ability of a BDC (or a registered investment company) to use derivatives and other transactions that create future payment or delivery obligations, became effective.
In August 2022, Rule 18f-4 under the 1940 Act, regarding the ability of a BDC (or a registered investment company) to use derivatives and other transactions that create future payment or delivery obligations, became effective.
We hold a portion of our investments through our joint venture, Senior Credit Corp 2022 LLC, and may, from time to time, hold a portion of our investments through partnerships, joint ventures, securitization vehicles or other entities with third-party investors (collectively, “joint ventures”).
We hold a portion of our investments through the JV and may, from time to time, hold a portion of our investments through partnerships, joint ventures, securitization vehicles or other entities with third-party investors (collectively, “joint ventures”).
There is a risk that the collateral securing our secured loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise, may be liquidated at a price lower than what we consider to be fair value and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of a borrower to raise additional capital, which could materially and adversely affect our ability to recover our investment. 37 Table of Contents In addition, a substantial portion of the assets securing our investment may be in the form of intellectual property, inventory and equipment and, to a lesser extent, cash and accounts receivable.
There is a risk that the collateral securing our secured loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise, may be liquidated at a price lower than what we consider to be fair value and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of a borrower to raise additional capital, which could materially and adversely affect our ability to recover our investment.
Due to the lack of liquidity of the debt and equity and equity-related investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments.
Due to the lack of liquidity of the debt and equity and equity-related investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments. 45 Table of Contents Loans may become non-performing for a variety of reasons.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe may engage external experts, including cybersecurity assessors, consultants and auditors to evaluate cybersecurity measures and risk management processes as needed. We also depend on and engage various third parties, including suppliers, vendors and service providers in connection with our operations.
Biggest changeWe engage external experts, including cybersecurity assessors, consultants and auditors to evaluate cybersecurity measures and risk management processes as needed. We also depend on and engage various third parties, including suppliers, vendors and service providers in connection with our operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We do not own any real estate or other physical properties materially important to our operations. Currently, we lease office space in Phoenix, Arizona for our corporate headquarters. We also lease office space in San Diego, California. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.
Biggest changeItem 2. Properties We do not own any real estate or other physical properties materially important to our operations. Currently, we lease office space in Phoenix, Arizona for our corporate headquarters. We also lease office space in San Diego, California.
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We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted. 69 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFrom time to time, we may be a party to certain legal proceedings in the ordinary 66 Table of Contents course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies.
Biggest changeItem 3. Legal Proceedings We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceedings 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 future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.
While the outcome of any future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.
Removed
Item 3. Legal Proceedings We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceedings threatened against us.
Added
Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation relating to repurchases of our common stock during the year ended December 31, 2023 and 2022 is as follows: Total Number of Approximate Dollar Shares Purchased as Value of Shares that Part of Publicly May Yet Be Purchased Average Price Announced Plans or Under the Stock Period Paid per Share Programs Repurchase Program October 1 through December 31, 2022 $ 10.77 185,722 $ 23,000,012 January 1 through March 31, 2023 $ 10.91 91,691 $ 22,000,025 April 1 through December 31, 2023 (1) $ — — $ — Total $ 10.81 277,413 $ — (1) The Repurchase Program expired on November 11, 2023.
Biggest changeInformation relating to repurchases of our common stock during the year ended December 31, 2024 is as follows: Total Number of Approximate Dollar Shares Purchased as Value of Shares that Part of Publicly May Yet Be Purchased Average Price Announced Plans or Under the Stock Period Paid per Share Programs Repurchase Program January 1 through March 31, 2024 $ — $ — $ — April 1 through June 30, 2024 — — — July 1 through September 30, 2024 — — — October 1 through December 31, 2024 — — 30,000,000 Total $ — $ — $ 30,000,000 72 Table of Contents Distribution Policy In order to be subject to tax as a RIC, we must distribute to our stockholders, in respect of each taxable year, dividends for U.S. federal income tax purposes of an amount generally at least equal to the Annual Distribution Requirement.
These issuances were not subject to the registration requirements of the Securities Act. 70 Table of Contents Stock Performance Graph The following stock performance graph compares the cumulative stockholder return of an investment in our common stock, the NASDAQ Financial 100 Index, the S&P 500, the S&P BDC Index and an average of certain of our direct BDC peers.
These issuances were not subject to the registration requirements of the Securities Act. 73 Table of Contents Stock Performance Graph The following stock performance graph compares the cumulative stockholder return of an investment in our common stock, the NASDAQ Financial 100 Index, the S&P 500, the S&P BDC Index and an average of certain of our direct BDC peers.
(4) Consists of a quarterly dividend and a supplemental dividend. * Not determined at time of filing. 68 Table of Contents Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares.
(4) Consists of a quarterly dividend and a supplemental dividend. * Not determined at time of filing. 71 Table of Contents Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares.
However, as a RIC we will be subject to a 4% non-deductible U.S. federal excise tax on certain undistributed income and gains unless we make distributions treated as dividends for U.S. federal income tax purposes in a timely 69 Table of Contents manner to our stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance Requirement.
However, as a RIC we will be subject to a 4% non-deductible U.S. federal excise tax on certain undistributed income and gains unless we make distributions treated as dividends for U.S. federal income tax purposes in a timely manner to our stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance Requirement.
During 2023, 2022, and 2021, we issued 165,962, 187,923 and 281,149 shares, respectively, of common stock to stockholders in connection with the dividend reinvestment plan. Unregistered Sales of Equity Securities During the year ended December 31, 2023, we issued 165,962 shares of common stock for a total of approximately $2.2 million under the DRIP.
During 2024, 2023, and 2022, we issued 90,245, 165,962 and 187,923 shares, respectively, of common stock to stockholders in connection with the dividend reinvestment plan. Unregistered Sales of Equity Securities During the year ended December 31, 2024, we issued 90,245 shares of common stock for a total of approximately $1.3 million under the DRIP.
Price Range Class and Period Net Asset Value (1) High Low High Sales Price Premium (Discount) to Net Asset Value (2) Low Sales Price Premium (Discount) to Net Asset Value (2) Cash Dividend Per Share (3) Year Ending December 31, 2024 First Quarter (through March 5, 2024) * $ 14.99 $ 13.68 * * * Year Ending December 31, 2023 Fourth Quarter $ 13.19 $ 15.40 $ 13.33 16.7 % 1.0 % $ 0.50 Third Quarter $ 13.17 $ 15.29 $ 13.75 16.1 % 4.4 % $ 0.54 (4) Second Quarter $ 13.15 $ 13.91 $ 11.36 5.8 % ( 13.6 ) % $ 0.53 (4) First Quarter $ 13.07 $ 14.26 $ 10.91 9.1 % ( 16.5 ) % $ 0.47 Year Ending December 31, 2022 Fourth Quarter $ 13.15 $ 13.82 $ 10.24 5.1 % ( 22.1 ) % $ 0.61 (4) Third Quarter $ 13.74 $ 16.28 $ 12.07 18.5 % ( 12.2 ) % $ 0.60 (4) Second Quarter $ 14.62 $ 19.44 $ 14.27 33.0 % ( 2.4 ) % $ 0.57 (4) First Quarter $ 15.15 $ 20.11 $ 17.00 32.7 % 12.2 % $ 0.55 (4) (1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices.
Price Range Class and Period Net Asset Value (1) High Low High Sales Price Premium (Discount) to Net Asset Value (2) Low Sales Price Premium (Discount) to Net Asset Value (2) Cash Dividend Per Share (3) Year Ending December 31, 2025 First Quarter (through February 24, 2025) * $ 16.21 $ 14.26 * * * Year Ending December 31, 2024 Fourth Quarter $ 13.35 $ 14.87 $ 13.11 11.4 % ( 1.8 ) % $ 0.51 Third Quarter $ 13.13 $ 14.74 $ 13.57 12.3 % 3.4 % $ 0.51 Second Quarter $ 13.12 $ 15.26 $ 14.03 16.3 % 7.0 % $ 0.51 First Quarter $ 12.88 $ 15.08 $ 13.68 17.1 % 6.2 % $ 0.51 Year Ending December 31, 2023 Fourth Quarter $ 13.19 $ 15.40 $ 13.33 16.7 % 1.0 % $ 0.50 Third Quarter $ 13.17 $ 15.29 $ 13.75 16.1 % 4.4 % $ 0.54 (4) Second Quarter $ 13.15 $ 13.91 $ 11.36 5.8 % ( 13.6 ) % $ 0.53 (4) First Quarter $ 13.07 $ 14.26 $ 10.91 9.1 % ( 16.5 ) % $ 0.47 (1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices.
As of March 5, 2024, we had approximately 56 stockholders of record, which does not include stockholders for whom shares are held in nominee or “street” name.
As of February 24, 2025, we had approximately 49 stockholders of record, which does not include stockholders for whom shares are held in nominee or “street” name.
During the year ended December 31, 2022, we issued 187,923 shares of common stock for a total of approximately $3.0 million under the DRIP. On January 12, 2024, we issued 23,456 shares of our common stock pursuant to our distribution reinvestment plan, which related to the dividend declared on December 14, 2023.
During the year ended December 31, 2023, we issued 165,962 shares of common stock for a total of approximately $2.2 million under the DRIP. On January 15, 2025, we issued 20,349 shares of our common stock pursuant to our distribution reinvestment plan, which related to the dividend declared on December 12, 2024.
On March 5, 2024, the last reported closing sales price of our common stock on Nasdaq was $ 14.39 per share, which represented a premium of approximately 9.1 % to our net asset value per share of $ 13.19 as of December 31, 2023.
On February 24, 2025, the last reported closing sales price of our common stock on Na sdaq was $ 15.93 per share, which represented a premium of approximately 19.3 % to our net asset value per share of $ 13.35 as of December 31, 2024.
Issuer Purchases of Equity Securities On November 14, 2022, the Board authorized a stock repurchase plan permitting the Company to repurchase up to $25.0 million of common stock (the “Repurchase Program”). Under the Repurchase Program, the Company repurchased $1.0 million and $2.0 million of common stock during the years ended December 31, 2023 and December 31, 2022, respectively.
Issuer Purchases of Equity Securities On November 14, 2022, the Board authorized a stock repurchase plan permitting the Company to repurchase up to $25.0 million of the Company’s common stock (the “2022 Repurchase Program”).
The Repurchase Program was not renewed by the Board of Directors, and expired on November 11, 2023.
Under the 2022 Repurchase Program, the Company did not repurchase common stock during the year ended December 31, 2024 and repurchased $1.0 million of common stock during the year ended December 31, 2023. The 2022 Repurchase Program was not renewed by the Board of Directors, and expired on November 11, 2023.
Removed
Prior to our IPO, the shares of our common stock were offered and sold in transactions exempt from registration under the Securities Act. As such, there was no public market for shares of our common stock during year ended December 31, 2020.
Added
On November 7, 2024, the Board authorized a stock repurchase plan permitting the Company to repurchase up to $30.0 million of the Company’s common stock (the “2024 Repurchase Program”). Under the 2024 Repurchase Program, the Company did not repurchase common stock during the years ended December 31, 2024 and 2023.
Removed
Distribution Policy In order to be subject to tax as a RIC, we must distribute to our stockholders, in respect of each taxable year, dividends for U.S. federal income tax purposes of an amount generally at least equal to the Annual Distribution Requirement.
Added
The 2024 Share Repurchase Program is expected to be in effect until November 7, 2025, unless extended or until the aggregate repurchase amount that has been approved by the Board has been expended.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeSet forth below is a table showing the industry composition of our investment portfolio at cost and fair value as a percentage of total investments as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 Fair Fair Industry Cost Value Cost Value Space Technology 14.1 % 14.6 % 6.2 % 6.5 % Green Technology 10.5 % 11.2 % 12.3 % 14.0 % Finance and Insurance 10.6 % 10.5 % 9.9 % 10.4 % Real Estate Technology 7.2 % 7.2 % 8.9 % 8.8 % Food and Agriculture Technologies 6.9 % 7.0 % 8.8 % 9.3 % Consumer Products & Services 6.5 % 6.6 % 6.2 % 6.4 % Medical Devices 5.2 % 5.5 % 1.6 % 1.7 % Healthcare Technology 4.4 % 4.5 % 1.7 % 1.8 % Biotechnology 4.3 % 4.4 % 2.9 % 3.0 % Marketing, Media, and Entertainment 3.7 % 3.7 % 5.3 % 5.5 % Transportation Technology 3.4 % 3.1 % 2.7 % 2.7 % Digital Assets Technology and Services 2.5 % 2.8 % 5.3 % 4.1 % SaaS 2.6 % 2.7 % 2.5 % 2.7 % Automation & Internet of Things 2.6 % 2.7 % 4.7 % 5.0 % Connectivity 2.7 % 2.7 % 3.1 % 3.1 % Human Resource Technology 2.4 % 2.4 % 3.5 % 3.8 % Healthcare 2.4 % 2.1 % 7.7 % 5.3 % Supply Chain Technology 2.3 % 1.9 % 0.9 % 0.7 % Industrials 1.7 % 1.8 % 2.1 % 2.1 % Education Technology 1.4 % 1.2 % 1.6 % 1.3 % Multi-Sector Holdings (1) 0.8 % 0.9 % — — Construction Technology 1.8 % 0.5 % 2.1 % 1.8 % Total 100.0 % 100.0 % 100.0 % 100.0 % (1) Multi-Sector Holdings consists of the Company's investment in Senior Credit Corp 2022 LLC, a joint venture between the Company and the JV Partner.
Biggest changeSet forth below is a table showing the industry composition of our investment portfolio at cost and fair value as a percentage of total investments as of December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 Industry Cost Fair Value Cost Fair Value Finance and Insurance 18.1 % 18.7 % 10.6 % 10.5 % Medical Devices 9.7 % 10.0 % 5.2 % 5.5 % Green Technology 8.3 % 9.2 % 10.5 % 11.2 % SaaS 8.2 % 8.5 % 2.6 % 2.7 % Other Healthcare Services 8.1 % 8.3 % 0.0 % 0.0 % Space Technology 8.0 % 8.2 % 14.1 % 14.6 % Real Estate Technology 5.8 % 5.4 % 7.2 % 7.2 % Artificial Intelligence & Automation 4.7 % 4.9 % 2.6 % 2.7 % Healthcare Technology 4.5 % 4.2 % 6.8 % 6.6 % Biotechnology 3.2 % 3.4 % 4.3 % 4.4 % Consumer Products & Services 3.2 % 3.2 % 6.5 % 6.6 % Transportation Technology 3.6 % 2.4 % 3.4 % 3.1 % Marketing, Media, and Entertainment 2.2 % 2.2 % 3.7 % 3.7 % Connectivity 2.1 % 2.0 % 2.7 % 2.7 % Multi-Sector Holdings (1) 1.6 % 1.9 % 0.8 % 0.9 % Education Technology 1.9 % 1.7 % 1.4 % 1.2 % Human Resource Technology 1.9 % 1.7 % 2.4 % 2.4 % Supply Chain Technology 1.7 % 1.7 % 2.3 % 1.9 % Food and Agriculture Technologies 1.8 % 1.4 % 6.9 % 7.0 % Industrials 0.7 % 0.6 % 1.7 % 1.8 % Construction Technology 0.5 % 0.2 % 1.8 % 0.5 % Digital Assets Technology and Services 0.2 % 0.2 % 2.5 % 2.8 % Total 100.0 % 100.0 % 100.0 % 100.0 % (1) Multi-Sector Holdings consist of the Company's investments in Senior Credit Corp 2022 LLC, Trinity Capital Adviser LLC and EPT 16 LLC.
The Company recognizes interest income on an accrual basis and recognizes it as earned in accordance with the contractual terms of the loan agreement to the extent that such amounts are expected to be collected.
Income Recognition The Company recognizes interest income on an accrual basis and recognizes it as earned in accordance with the contractual terms of the loan agreement to the extent that such amounts are expected to be collected.
Our investment committee reviews the recommendations and/or changes to the investment risk ratings, which are submitted on a quarterly basis to the Board and its audit committee. 77 Table of Contents For our investment risk rating system, we review seven different criteria and, based on our review of such criteria, we assign a risk rating on a scale of 1 to 5, as set forth in the following illustration.
Our investment committee reviews the recommendations and/or changes to the investment risk ratings, which are submitted on a quarterly basis to the Board and its audit committee. 81 Table of Contents For our investment risk rating system, we review seven different criteria and, based on our review of such criteria, we assign a risk rating on a scale of 1 to 5, as set forth in the following illustration.
Given the nature of lending to venture capital-backed growth-stage companies, substantially all of the Company’s investments in these portfolio companies are considered Level 3 assets under ASC 820 because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged.
Given the nature of lending to venture capital-backed growth-oriented companies, substantially all of the Company’s investments in these portfolio companies are considered Level 3 assets under ASC 820 because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged.
For the year ended December 31, 2023, we experienced a net decrease in cash and cash equivalents in the amount of $5.9 million, which is the net result of $96.3 million of cash used in operating activities and $2.7 million of cash used in investing activities partially offset by $93.1 million of cash provided by financing activities.
During the year ended December 31, 2023, we experienced a net decrease in cash and cash equivalents in the amount of $5.9 million, which is the net result of $96.3 million of cash used in operating activities and $2.7 million of cash used in investing activities partially offset by $93.1 million of cash provided by financing activities.
Item 6. [ Reserved] 71 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Except where the context suggests otherwise, the terms “we,” “us,” “our,” and “the Company” refer to Trinity Capital Inc. and its consolidated subsidiaries.
Item 6. [ Reserved] 74 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Except where the context suggests otherwise, the terms “we,” “us,” “our,” and “the Company” refer to Trinity Capital Inc. and its consolidated subsidiaries.
Original issue discount ("OID") initially includes the estimated fair value of detachable warrants obtained in conjunction with the origination of debt securities, and is accreted into interest income over the term of the loan as a yield enhancement based on the effective yield method.
Original issue discount (“OID”) initially includes the estimated fair value of detachable warrants obtained in conjunction with the origination of debt securities, and is accreted into interest income over the term of the loan as a yield enhancement based on the effective yield method.
Interest income from payment-in-kind ("PIK") represents contractually deferred interest added to the loan balance recorded on an accrual basis to the extent such amounts are expected to be collected. In addition, the Company may also be entitled to an end-of-term (“EOT”) payment.
Interest income from payment-in-kind (“PIK”) represents contractually deferred interest added to the loan balance recorded on an accrual basis to the extent such amounts are expected to be collected. In addition, the Company may also be entitled to an end-of-term (“EOT”) payment.
Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material. Fair value estimates are made at discrete points in time based on relevant information.
Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material. 77 Table of Contents Fair value estimates are made at discrete points in time based on relevant information.
We seek to achieve our investment objective by making investments consisting primarily of term loans and equipment financings and, to a lesser extent, working capital loans, equity and equity-related investments. In addition, we may obtain warrants or contingent exit fees at funding from many of our portfolio companies, providing an additional potential source of investment returns.
We seek to achieve our investment objective by making investments consisting primarily of term loans, equipment financings and asset-based lending and, to a lesser extent, working capital loans, equity and equity-related investments. In addition, we may obtain warrants or contingent exit fees at funding from many of our portfolio companies, providing an additional potential source of investment returns.
We target growth-stage companies that have recently issued equity to raise cash to offset potential cash flow needs related to projected growth, have achieved positive cash flow to cover debt service, or have institutional investors committed to providing additional funding.
We target growth-oriented companies that have recently issued equity to raise cash to offset potential cash flow needs related to projected growth, have achieved positive cash flow to cover debt service, or have institutional investors committed to providing additional funding.
Cash and cash equivalents, taken together with available borrowings under the KeyBank Credit Facility, as of December 31, 2023, are expected to be sufficient for our investing activities and to conduct our operations in the near term and long term.
Cash and cash equivalents, taken together with available borrowings under the KeyBank Credit Facility, as of December 2024, are expected to be sufficient for our investing activities and to conduct our operations in the near term and long term.
These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The carrying amounts of the Company’s financial instruments, consisting of cash, investments, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments. Income Recognition Interest and Dividend Income.
These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The carrying amounts of the Company’s financial instruments, consisting of cash, investments, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.
Fiscal Year Ended December 31, 2021 A discussion of our portfolio composition and investment activity for the fiscal year ended December 31, 2021 is available in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 2, 2023 and is available on the SEC’s EDGAR database.
Fiscal Year Ended December 31, 2022 A discussion of our portfolio composition and investment activity for the fiscal year ended December 31, 2022 is available in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 6, 2024 and is available on the SEC’s EDGAR database.
Results of Operations The following discussion and analysis of our results of operations encompasses our consolidated results for the years ended December 31, 2023 and 2022.
Results of Operations The following discussion and analysis of our results of operations encompasses our consolidated results for the years ended December 31, 2024 and 2023.
The increase in investment income for the year ended December 31, 2023 is due to higher interest income and amortization of OID and EOT based on an increased principal value of income producing debt investments and higher stated interest rates.
The increase in investment income for the year ended December 31, 2024 is due to higher interest income and amortization of OID and EOT based on an increased principal value of income producing debt investments.
For the year ended December 31, 2023, we recognized approximately $181.9 million in total investment income as compared to approximately $92.0 million in total expenses including excise tax expense. For the year ended December 31, 2022 we recognized approximately $145.5 million in total investment income as compared to approximately $73.9 million in total expenses including excise tax expense.
For the year ended December 31, 2023 we recognized approximately $181.9 million in total investment income as compared to approximately $92.0 million in total expenses including excise tax expense.
As of December 31, 2023 and December 31, 2022, we had cash and cash equivalents of $4.8 million and $10.6 million, respectively, of which $3.1 million and $5.6 million, respectively, was held in the Goldman Sachs Financial Square Government Institutional Fund.
As of December 2024 and December 31, 2023, we had cash and cash equivalents of $9.6 million and $4.8 million, respectively, of which $3.8 million and $3.1 million, respectively, was held in the Goldman Sachs Financial Square Government Institutional Fund.
Our general and administrative expenses totaled approximately $6.6 million and $6.1 million for the years ended December 31, 2023 and 2022, respectively. The increase in general and administrative expenses for the year ended December 31, 2023 was primarily due to additional office rent and related expenses.
Our general and administrative expenses totaled approximately $8.9 million and $6.6 million for the years ended December 31, 2024 and 2023, respectively. The increase in general and administrative expenses for the year ended December 31, 2024 was primarily due to additional office rent and related expenses.
Specifically, on a quarterly basis, the Company identifies portfolio investments with respect to which an 73 Table of Contents independent valuation firm assists in valuing certain investments.
Specifically, on a quarterly basis, the Company identifies portfolio investments with respect to which an independent valuation firm assists in valuing certain investments.
Industry and sector concentrations will vary from period to period based on portfolio activity. 76 Table of Contents As of December 31, 2023 and December 31, 2022, the Company’s ten largest portfolio companies represented approximately 31.6% and 31.7%, respectively, of the total fair value of the Company’s investments in portfolio companies.
Industry and sector concentrations will vary from period to period based on portfolio activity. As of December 31, 2024 and December 31, 2023, the Company’s ten largest portfolio companies represented approximately 26.7% and 31.6%, respectively, of the total fair value of the Company’s investments in portfolio companies.
As a BDC and a RIC, we are required to comply with certain regulatory requirements. Our investment objective is to generate current income and, to a lesser extent, capital appreciation through our investments.
As a BDC and a RIC, we are required to comply with certain regulatory requirements. Our investment objective is to generate current income and, to a lesser extent, capital appreciation through our investments across five distinct vertical markets.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors.” Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Overview We are a specialty lending company providing debt, including loans and equipment financings, to growth-stage companies, including venture capital-backed companies and companies with institutional equity investors.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors.” Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Overview We are a specialty lending company providing debt, including loans, equipment financings and asset-based lending, to growth-oriented companies, including institutional investor-backed companies.
Senior Credit Corp 2022 LLC (1) 7,704 0.6 % — — Total Debt Investments $ 1,222,077 100.0 % $ 1,048,829 100.0 % (1) An investment risk rating is not applied to Senior Credit Corp 2022 LLC. At December 31, 2023 and December 31, 2022, our debt investments had a weighted average risk rating score of 2.7 and 2.8, respectively.
Senior Credit Corp 2022 LLC (1) 12,885 0.8 % 7,704 0.6 % Total Debt Investments $ 1,602,131 100.0 % $ 1,222,077 100.0 % (1) An investment risk rating is not applied to Senior Credit Corp 2022 LLC. At December 2024 and December 31, 2023, our debt investments had a weighted average risk rating score of 2.9 and 2.7, respectively.
Investment Activity During the year ended December 31, 2023, we invested approximately $414.3 million in 17 new portfolio companies, approximately $216.5 million in 25 existing portfolio companies, and approximately $11.0 million in the JV, excluding deferred fees.
During the year ended December 31, 2023, we invested approximately $414.3 million in 17 new portfolio companies, approximately $216.5 million in 25 existing portfolio companies, and approximately $11.0 million in the Multi-Sector Holdings, excluding deferred fees.
The increase in professional fees expenses for the year ended December 31, 2023, resulted primarily from increased legal fees, third-party valuation fees, and other consulting fees. General and Administrative Expenses General and administrative expenses include insurance premiums, rent, taxes and various other expenses related to our ongoing operations.
The decrease in professional fees expenses for the year ended December 31, 2024, resulted primarily from decreased third-party valuation fees and other consulting fees. General and Administrative Expenses General and administrative expenses include insurance premiums, rent, taxes and various other expenses related to our ongoing operations.
However, we may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection. 78 Table of Contents As of December 31, 2023, loans to three portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total cost of approximately $60.8 million, and a total fair value of approximately $43.2 million, or 3.5%, of the fair value of the Company’s debt investment portfolio.
However, we may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection. 82 Table of Contents As of December 2024, loans to three portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total cost of approximately $43.3 million, and a total fair value of approximately $12.7 million, or 0.8%, of the fair value of the Company’s debt investment portfolio.
Any exposure to the Company under these arrangements is unknown as it would involve future claims that may be made against the Company; however, based on the Company’s experience, the risk of loss is remote and no such claims are expected to occur. As such, the Company has not accrued any liability in connection with such indemnifications.
Any exposure to the Company under these arrangements is unknown as it would involve future claims that may be made against the Company; however, based on the Company’s experience, the risk of loss is remote and no such claims are expected to occur.
Operating Expenses and Excise Taxes Our operating expenses are comprised of interest and fees on our borrowings, employee compensation, professional fees, general and administrative expenses and excise taxes. Our operating expenses totaled approximately $92.0 million and $73.9 million for the years ended December 31, 2023 and 2022, respectively.
Net Operating Expenses and Excise Taxes Our operating expenses are comprised of interest and fees on our borrowings, employee compensation, professional fees, general and administrative expenses and excise taxes. Our operating expenses totaled approximately $121.8 million and $92.0 million for the years ended December 31, 2024 and 2023, respectively.
On December 5, 2022, the Company entered into a joint venture agreement with certain funds and accounts managed by a specialty credit manager (collectively, the “JV Partner”) to co-manage Senior Credit Corp 2022 LLC (the “JV”). The JV invests in secured loans and equipment financings to growth-stage companies that have been originated by the Company.
On December 5, 2022, we entered into a joint venture agreement with certain funds and accounts managed by a specialty credit manager to co-manage Senior Credit Corp 2022 LLC, a Delaware limited liability company (the “JV”). The JV invests in secured loans and equipment financings to growth-oriented companies that have been originated by us.
As a result, we are permitted to potentially borrow $2 for investment purposes of every $1 of investor equity. As of December 31, 2023, our asset coverage ratio was approximately 194.7% and our asset coverage ratio per unit was approximately $1,947.
As a result, we are permitted to potentially borrow $2 for investment purposes of every $1 of investor equity. As of December 2024, our asset coverage ratio was approximately 192.7% and our asset coverage ratio per unit was approximately $1,927.
Interest expense and other debt financing costs on our borrowings totaled approximately $44.3 million and $34.1 million for the years ended December 31, 2023 and 2022, respectively. Our weighted average effective interest rate, comprised of interest and amortization of fees and discount, was approximately 7.2% 79 Table of Contents and 6.2% for years ended December 31, 2023 and 2022.
Interest expense and other debt financing costs on our borrowings totaled approximately $61.9 million and $44.3 million for the years ended December 31, 2024 and 2023, respectively. Our weighted average effective interest rate, comprised of interest and amortization of fees and discount, was approximately 7.6% and 7.2% for years ended December 31, 2024 and 2023.
Net Increase (Decrease) in Net Assets Resulting from Operations and Earnings Per Share For the year ended December 31, 2023, basic and diluted net increase in net assets per common share was $1.98 and $1.89, respectively. For the year ended December 31, 2022, basic and diluted net decrease in net assets per common share was $0.96.
Net Increase (Decrease) in Net Assets Resulting from Operations and Earnings Per Share For the year ended December 31, 2024, basic and diluted net increase in net assets per common share was $2.19 and $2.10, respectively. For the year ended December 31, 2023, basic and diluted net decrease in net assets per common share was $1.98 and $1.89, respectively.
In order to complete these transactions, we used a portion of the proceeds from the Private Offerings. On February 2, 2021, we completed our initial public offering of 8,006,291 shares of our common stock at a price of $14.00 per share, inclusive of the underwriters’ option to purchase additional shares, which was exercised in full.
On February 2, 2021, we completed our initial public offering of 8,006,291 shares of our common stock at a price of $14.00 per share, inclusive of the underwriters’ option to purchase additional shares, which was exercised in full.
Net Increase (Decrease) in Net Assets Resulting from Operations Net increase in net assets resulting from operations during the year ended December 31, 2023, totaled approximately $76.9 million. Net decrease in net assets resulting from operations during the year ended December 31, 2022, totaled approximately $30.4 million.
Net Increase (Decrease) in Net Assets Resulting from Operations Net increase in net assets resulting from operations during the year ended December 31, 2024, totaled approximately $115.6 million. Net increase in net assets resulting from operations during the year ended December 31, 2023, totaled approximately $76.9 million.
The following table provides a summary of the changes in the investment portfolio for the years ended December 31, 2023 and 2022 (in thousands): Year Ended Year Ended December 31, 2023 December 31, 2022 Beginning Portfolio, at fair value $ 1,094,386 $ 873,470 Purchases, net of deferred fees 632,754 627,211 Non-cash conversion 21 — Principal payments received on investments (142,113 ) (124,018 ) Proceeds from early debt repayments (169,745 ) (149,769 ) Sales of investments (160,068 ) (62,767 ) Accretion of OID, EOT, and PIK payments 32,953 32,220 Net realized gain/(loss) (28,071 ) 32,853 Change in unrealized appreciation/(depreciation) 15,063 (134,814 ) Ending Portfolio, at fair value $ 1,275,180 $ 1,094,386 The level of our investment activity can vary substantially from period to period depending on many factors, including the amount of debt, including loans and equipment financings, and equity capital required by growth-stage companies, the general economic environment and market conditions and the competitive environment for the types of investments we make.
The following table provides a summary of the changes in the investment portfolio for the years ended December 31, 2024 and 2023 (in thousands): Year Ended Year Ended December 31, 2024 December 31, 2023 Beginning Portfolio, at fair value $ 1,275,180 $ 1,094,386 Purchases, net of deferred fees 1,218,931 632,754 Non-cash conversion — 21 Principal payments received on investments (207,328 ) (142,113 ) Proceeds from early debt repayments (313,207 ) (169,745 ) Sales of investments (287,331 ) (160,068 ) Accretion of OID, EOT, and PIK payments 39,574 32,953 Net realized gain/(loss) (9,730 ) (28,071 ) Net change in unrealized appreciation/(depreciation) 9,481 15,063 Ending Portfolio, at fair value $ 1,725,570 $ 1,275,180 The level of our investment activity can vary substantially from period to period depending on many factors, including the amount of debt, including loans and equipment financings, and equity capital required by growth-oriented companies, the general economic environment and market conditions and the competitive environment for the types of investments we make.
For the year ended December 31, 2022, total investment income was approximately $145.5 million, which represents an approximate effective yield of 15.1% on the average investments during the year.
For the year ended December 31, 2023, total investment income was approximately $181.9 million, which represents an approximate effective yield of 16.1% on the average investments during the year.
All distributions will be paid at the discretion of the Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time. 83 Table of Contents The following table summarizes distributions declared and/or paid by the Company since inception: Declaration Date Type Record Date Payment Date Per Share Amount May 7, 2020 Quarterly May 29, 2020 June 5, 2020 $ 0.22 August 10, 2020 Quarterly August 21, 2020 September 4, 2020 0.27 November 9, 2020 Quarterly November 20, 2020 December 4, 2020 0.27 December 22, 2020 Quarterly December 30, 2020 January 15, 2021 0.27 March 23, 2021 Quarterly March 31, 2021 April 16, 2021 0.28 June 15, 2021 Quarterly June 30, 2021 July 15, 2021 0.29 September 13, 2021 Quarterly September 30, 2021 October 15, 2021 0.33 December 16, 2021 Quarterly December 31, 2021 January 14, 2022 0.36 March 15, 2022 Quarterly March 31, 2022 April 15, 2022 0.40 March 15, 2022 Supplemental March 31, 2022 April 15, 2022 0.15 June 15, 2022 Quarterly June 30, 2022 July 15, 2022 0.42 June 15, 2022 Supplemental June 30, 2022 July 15, 2022 0.15 September 15, 2022 Quarterly September 30, 2022 October 14, 2022 0.45 September 15, 2022 Supplemental September 30, 2022 October 14, 2022 0.15 December 15, 2022 Quarterly December 30, 2022 January 13, 2023 0.46 December 15, 2022 Supplemental December 30, 2022 January 13, 2023 0.15 March 14, 2023 Quarterly March 31, 2023 April 14, 2023 0.47 June 14, 2023 Quarterly June 30, 2023 July 14, 2023 0.48 June 14, 2023 Supplemental June 30, 2023 July 14, 2023 0.05 September 13, 2023 Quarterly September 30, 2023 October 13, 2023 0.49 September 13, 2023 Supplemental September 30, 2023 October 13, 2023 0.05 December 14, 2023 Quarterly December 29, 2023 January 12, 2024 0.50 Total $ 6.66 Fiscal Year Ended December 31, 2021 A discussion of our financial condition, liquidity and capital resource for the fiscal year ended December 31, 2021 is available in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 2, 2023 and is available on the SEC’s EDGAR database.
The following table summarizes distributions declared and/or paid by the Company since inception: Declaration Date Type Record Date Payment Date Per Share Amount May 7, 2020 Quarterly May 29, 2020 June 5, 2020 $ 0.22 August 10, 2020 Quarterly August 21, 2020 September 4, 2020 0.27 November 9, 2020 Quarterly November 20, 2020 December 4, 2020 0.27 December 22, 2020 Quarterly December 30, 2020 January 15, 2021 0.27 March 23, 2021 Quarterly March 31, 2021 April 16, 2021 0.28 June 15, 2021 Quarterly June 30, 2021 July 15, 2021 0.29 September 13, 2021 Quarterly September 30, 2021 October 15, 2021 0.33 December 16, 2021 Quarterly December 31, 2021 January 14, 2022 0.36 March 15, 2022 Quarterly March 31, 2022 April 15, 2022 0.40 March 15, 2022 Supplemental March 31, 2022 April 15, 2022 0.15 June 15, 2022 Quarterly June 30, 2022 July 15, 2022 0.42 June 15, 2022 Supplemental June 30, 2022 July 15, 2022 0.15 September 15, 2022 Quarterly September 30, 2022 October 14, 2022 0.45 September 15, 2022 Supplemental September 30, 2022 October 14, 2022 0.15 December 15, 2022 Quarterly December 30, 2022 January 13, 2023 0.46 December 15, 2022 Supplemental December 30, 2022 January 13, 2023 0.15 March 14, 2023 Quarterly March 31, 2023 April 14, 2023 0.47 June 14, 2023 Quarterly June 30, 2023 July 14, 2023 0.48 June 14, 2023 Supplemental June 30, 2023 July 14, 2023 0.05 September 13, 2023 Quarterly September 30, 2023 October 13, 2023 0.49 September 13, 2023 Supplemental September 30, 2023 October 13, 2023 0.05 December 14, 2023 Quarterly December 29, 2023 January 12, 2024 0.50 March 14, 2024 Quarterly March 28, 2024 April 15, 2024 0.51 June 13, 2024 Quarterly June 28, 2024 July 15, 2024 0.51 September 18, 2024 Quarterly September 30, 2024 October 15, 2024 0.51 December 12, 2024 Quarterly December 31, 2024 January 15, 2025 0.51 Total $ 8.70 88 Table of Contents Fiscal Year Ended December 31, 2022 A discussion of our financial condition, liquidity and capital resource for the fiscal year ended December 31, 2022 is available in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 6, 2024 and is available on the SEC’s EDGAR database.
As of December 31, 2022, loans to two portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total cost of approximately $49.2 million, and a total fair value of approximately $17.8 million, or 1.7%, of the fair value of the Company’s debt investment portfolio.
As of December 31, 2023, loans to three portfolio companies and equipment financings to two portfolio companies were on non-accrual status with a total cost of approximately $60.8 million, and a total fair value of approximately $43.2 million, or 3.5%, of the fair value of the Company’s debt investment portfolio.
Investment Income The following table sets forth the components of investment income (in thousands): Year Ended Year Ended December 31, 2023 December 31, 2022 Stated interest income $ 141,850 $ 105,367 Amortization of OID and EOT 16,665 23,766 Acceleration of OID and EOT 7,725 9,703 PIK interest income 7,998 — Prepayment penalty and related fees 2,118 3,864 Dividend income 602 — Other fee income 4,897 2,800 Total investment income $ 181,855 $ 145,500 For the year ended December 31, 2023, total investment income was approximately $181.9 million, which represents an approximate effective yield of 16.1% on the average investments during the year.
Investment Income The following table sets forth the components of investment income (in thousands): Year Ended Year Ended December 31, 2024 December 31, 2023 Stated interest income $ 178,988 $ 141,850 Amortization of OID and EOT 27,794 16,665 Acceleration of OID and EOT 9,317 7,725 PIK interest income 9,055 7,998 Prepayment penalty and related fees 3,020 2,118 Dividend income 1,575 602 Other fee income 7,942 4,897 Total investment income $ 237,691 $ 181,855 For the year ended December 31, 2024, total investment income was approximately $237.7 million, which represents an approximate effective yield of 16.1% on the average investments during the year.
The following table shows the distribution of our secured loan and equipment financing investments on the 1 to 5 investment risk rating scale range at fair value as of December 31, 2023 and December 31, 2022 (dollars in thousands): December 31, 2023 December 31, 2022 Investment Risk Rating Investments at Percentage of Investments at Percentage of Scale Range Designation Fair Value Total Portfolio Fair Value Total Portfolio 4.0 - 5.0 Very Strong Performance $ 40,584 3.3 % $ 2,729 0.3 % 3.0 - 3.9 Strong Performance 277,867 22.9 % 239,872 22.9 % 2.0 - 2.9 Performing 805,730 65.9 % 756,596 72.1 % 1.6 - 1.9 Watch 56,740 4.6 % 39,315 3.7 % 1.0 - 1.5 Default/Workout 33,452 2.7 % 10,317 1.0 % Total Debt Investments excluding Senior Credit Corp 2022 LLC 1,214,373 99.4 % 1,048,829 100.0 % .
The following table shows the distribution of our secured loan and equipment financing investments on the 1 to 5 investment risk rating scale range at fair value as of December 31, 2024 and December 31, 2023 (dollars in thousands): December 31, 2024 December 31, 2023 Investment Risk Rating Investments at Percentage of Investments at Percentage of Scale Range Designation Fair Value Total Portfolio Fair Value Total Portfolio 4.0 - 5.0 Very Strong Performance $ 89,716 5.6 % $ 40,584 3.3 % 3.0 - 3.9 Strong Performance 453,584 28.3 % 277,867 22.9 % 2.0 - 2.9 Performing 972,001 60.7 % 805,730 65.9 % 1.6 - 1.9 Watch 62,883 3.9 % 56,740 4.6 % 1.0 - 1.5 Default/Workout 11,062 0.7 % 33,452 2.7 % Total Debt Investments excluding Senior Credit Corp 2022 LLC 1,589,246 99.2 % 1,214,373 99.4 % .
Professional Fees Expenses Professional fees expenses, consisting of legal fees, accounting fees, third-party valuation fees, and talent acquisition fees totaled approximately $5.4 million and $4.1 million for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2024 and 2023, the Company had 88 and 68 employees, respectively. Professional Fees Expenses Professional fees expenses, consisting of legal fees, accounting fees, third-party valuation fees, and talent acquisition fees totaled approximately $5.3 million and $5.4 million for the years ended December 31, 2024 and 2023, respectively.
Net unrealized appreciation and depreciation on investments for the years ended December 31, 2023 and 2022 is comprised of the following (in thousands): Year Ended Year Ended December 31, 2023 December 31, 2022 Gross unrealized appreciation $ 39,347 $ 21,498 Gross unrealized depreciation (57,390 ) (94,262 ) Net unrealized appreciation/(depreciation) reclassified related to net realized gains or losses 33,106 (62,050 ) Total net unrealized gains/(losses) on investments $ 15,063 $ (134,814 ) During the year ended December 31, 2023, our net unrealized appreciation totaled approximately $15.1 million, which included net unrealized depreciation of $7.2 million from our warrant investments, net unrealized appreciation of $11.2 million from our equity investments and net unrealized appreciation of $11.0 million from our debt investments.
Net unrealized appreciation and depreciation on investments for the years ended December 31, 2024 and 2023 is comprised of the following (in thousands): Year Ended Year Ended December 31, 2024 December 31, 2023 Gross unrealized appreciation $ 41,496 $ 39,347 Gross unrealized depreciation (58,712 ) (57,390 ) Net unrealized appreciation/(depreciation) reclassified related to net realized gains or losses 26,697 33,106 Total net unrealized gains/(losses) on investments $ 9,481 $ 15,063 During the year ended December 31, 2024, our net unrealized appreciation totaled approximately $9.5 million, which included net unrealized appreciation of $7.5 million from our warrant investments, net unrealized appreciation of $7.1 million from our equity investments and net unrealized depreciation of $5.1 million from our debt investments. 85 Table of Contents During the year ended December 31, 2023, our net unrealized appreciation totaled approximately $15.1 million, which included net unrealized appreciation of $11.2 million from our equity investments, net unrealized appreciation of $11.0 million from our debt investments and net unrealized depreciation of $7.2 million from our warrant investments.
We generally are required to invest at least 70% of our total assets in qualifying assets in accordance with the 1940 Act but may invest up to 30% of our total assets in non-qualifying assets, as permitted by the 1940 Act.
We generally are required to invest at least 70% of our total assets in qualifying assets in accordance with the 1940 Act but may invest up to 30% of our total assets in non-qualifying assets, as permitted by the 1940 Act. We target investments in growth-oriented companies, which are typically private companies, including institutional investor-based companies.
We target investments in growth-stage companies, which are typically private companies, including venture-backed companies and companies with institutional equity investors. We define “growth-stage companies” as companies that have significant ownership and active participation by sponsors, such as institutional investors or private equity firms, and expected annual revenues of up to $100 million.
We define “growth-oriented companies” as companies that have significant ownership and active participation by sponsors, such as institutional investors or private equity firms, and expected annual revenues of up to $100 million.
While the Company's Board has not elected to designate a valuation designee, the Company has adopted certain revisions to its valuation policies and procedures to comply with the applicable requirements of Rule 2a-5 and Rule 31a-4.
The SEC also adopted Rule 31a-4 under the 1940 Act (“Rule 31a-4”), which provides the recordkeeping requirements associated with fair value determinations. While the Company's Board has not elected to designate a valuation designee, the Company has adopted certain revisions to its valuation policies and procedures to comply with the applicable requirements of Rule 2a-5 and Rule 31a-4.
Fee and Other Income. The Company recognizes one-time fee income, including, but not limited to, structuring fees, prepayment penalties, and exit fees related to a change in ownership of the portfolio company, as other income when earned.
The Company recorded $1.6 million and $0.6 million in dividend income during the years ended December 31, 2024 and 2023, respectively. The Company recognizes one-time fee income, including, but not limited to, structuring fees, prepayment penalties, and exit fees related to a change in ownership of the portfolio company, as other income when earned.
During the year ended December 31, 2022, our gross realized gains primarily consisted of the sale of our equity positions in two portfolio companies, and our gross realized losses primarily consisted of the sale of our debt positions in three portfolio companies. 80 Table of Contents The net realized gains (losses) from the sales, repayments, or exits of investments for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands): Year Ended Year Ended December 31, 2023 December 31, 2022 Net realized gain/(loss) on investments: Gross realized gains $ 4,977 $ 54,117 Gross realized losses (33,048 ) (21,264 ) Total net realized gains/(losses) on investments $ (28,071 ) $ 32,853 Net Change in Unrealized Appreciation / (Depreciation) from Investments Net change in unrealized appreciation/(depreciation) from investments primarily reflects the net change in the fair value of the investment portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.
The net realized gains (losses) from the sales, repayments, or exits of investments for the years ended December 31, 2024 and 2023 were comprised of the following (in thousands): Year Ended Year Ended December 31, 2024 December 31, 2023 Net realized gain/(loss) on investments: Gross realized gains $ 24,474 $ 4,977 Gross realized losses (34,204 ) (33,048 ) Total net realized gains/(losses) on investments $ (9,730 ) $ (28,071 ) Net Change in Unrealized Appreciation / (Depreciation) from Investments Net change in unrealized appreciation/(depreciation) from investments primarily reflects the net change in the fair value of the investment portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.
A portion of these unfunded contractual commitments as of December 31, 2023 and December 31, 2022 are dependent upon the portfolio company reaching certain milestones before the debt commitment becomes available.
The Company’s commitments and contingencies consist primarily of unfunded commitments to extend credit in the form of loans to the Company’s portfolio companies. A portion of these unfunded contractual commitments as of December 31, 2024 and December 31, 2023 are dependent upon the portfolio company reaching certain milestones before the debt commitment becomes available.
During the year ended December 31, 2022, we experienced a net decrease in cash and cash equivalents in the amount of $36.1 million, which is the net result of $235.7 million of cash used in operating activities and $0.2 million of cash used in investing activities partially offset by $199.8 million of cash provided by financing activities.
For the year ended December 31, 2024, we experienced a net increase in cash and cash equivalents in the amount of $4.9 million, which is the net result of $322.2 million of cash provided by financing activities partially offset by $316.9 million of cash used in operating activities and $0.4 million of cash used in investing activities.
Our History Trinity Capital Inc. was incorporated under the general corporation laws of the State of Maryland on August 12, 2019 and commenced operations on January 16, 2020. Prior to January 16, 2020, we had no operations, except for matters relating to our formation and organization as a BDC.
Our History Trinity Capital Inc. was incorporated under the general corporation laws of the State of Maryland on August 12, 2019 and commenced operations on January 16, 2020.
Our critical accounting estimates, including those relating to valuation of investments and income recognition, are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 1A.
Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially. Our critical accounting estimates, including those relating to valuation of investments and income recognition, are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 1A.
A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments are shown in the following table as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 Fair Fair Type Cost Value Cost Value Secured Loans 69.7 % 69.5 % 71.7 % 73.3 % Equipment Financing 25.5 % 26.4 % 23.1 % 22.5 % Warrants 2.3 % 2.6 % 1.8 % 2.9 % Equity 2.5 % 1.5 % 3.4 % 1.3 % Total 100.0 % 100.0 % 100.0 % 100.0 % The following table shows the composition of our investment portfolio by geographic region at cost and fair value as a percentage of total investments as of December 31, 2023 and December 31, 2022.
As of December 31, 2023, our investment portfolio had an aggregate fair value of approximately $1,275.2 million and was comprised of approximately $885.3 million in secured loans, $336.8 million in equipment financings, and $53.1 million in equity and warrants, across 120 portfolio companies. 78 Table of Contents A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments are shown in the following table as of December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 Type Cost Fair Value Cost Fair Value Secured Loans 75.1 % 74.5 % 69.7 % 69.5 % Equipment Financings 18.1 % 18.3 % 25.5 % 26.4 % Equity 4.5 % 4.2 % 2.5 % 1.5 % Warrants 2.3 % 3.0 % 2.3 % 2.6 % Total 100.0 % 100.0 % 100.0 % 100.0 % The following table shows the composition of our investment portfolio by geographic region at cost and fair value as a percentage of total investments as of December 31, 2024 and December 31, 2023.
Risk Factors.” Please refer to “Note 2 - Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included with this Annual Report on Form 10-K for a discussion of our significant accounting policies.
Risk Factors.” Please refer to “Note 2 — Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of our significant accounting policies. 76 Table of Contents Valuation of Investments The most significant estimate inherent in the preparation of the Company’s consolidated financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded.
The Company values its investments at fair value as determined in good faith by the Company’s Board in accordance with the provisions of ASC 820 and the 1940 Act. The SEC adopted Rule 2a-5 under the 1940 Act ("Rule 2a-5"), which establishes a framework for determining fair value in good faith for purposes of the 1940 Act.
The Company values its investments at fair value as determined in good faith by the Company’s Board of Directors (the “Board”) in accordance with the provisions of ASC 820 and the 1940 Act.
December 31, 2023 December 31, 2022 Fair Fair Geographic Region Cost Value Cost Value United States West (2) 35.5 % 36.5 % 37.1 % 38.0 % Northeast (2) 29.8 % 29.9 % 28.2 % 29.1 % South 12.8 % 13.5 % 8.9 % 7.2 % Mountain 9.0 % 8.7 % 10.7 % 11.2 % Midwest 4.9 % 4.5 % 5.1 % 4.6 % Southeast (2) 3.3 % 3.3 % 2.9 % 2.6 % Senior Credit Corp 2022 LLC (1) 0.8 % 0.9 % — — International: Western Europe 1.7 % 1.8 % 2.6 % 2.7 % Canada 2.2 % 0.9 % 4.5 % 4.6 % Total 100.0 % 100.0 % 100.0 % 100.0 % 75 Table of Contents (1) Senior Credit Corp 2022 LLC is a joint venture between the Company and the JV Partner.
December 31, 2024 December 31, 2023 Geographic Region Cost Fair Value Cost Fair Value United States West 30.7 % 31.5 % 35.5 % 36.5 % Northeast 28.1 % 27.6 % 29.8 % 29.9 % Mountain 10.9 % 10.5 % 9.0 % 8.7 % Southeast 10.5 % 10.4 % 3.3 % 3.3 % South 9.2 % 9.5 % 12.8 % 13.5 % Midwest 5.9 % 5.6 % 4.9 % 4.5 % Multi-Sector Holdings (1) 1.6 % 1.9 % 0.8 % 0.9 % International: Western Europe 2.4 % 2.4 % 1.7 % 1.8 % Canada 0.7 % 0.6 % 2.2 % 0.9 % Total 100.0 % 100.0 % 100.0 % 100.0 % (1) Multi-Sector Holdings consist of the Company's investments in Senior Credit Corp 2022 LLC, Trinity Capital Adviser LLC and EPT 16 LLC.
As of December 31, 2022, our investment portfolio had an aggregate fair value of approximately $1,094.4 million and was comprised of approximately $802.9 million in secured loans, $246.0 million in equipment financings, and $45.5 million in equity and warrants, across 116 portfolio companies.
Portfolio Composition and Investment Activity Portfolio Composition As of December 31, 2024, our investment portfolio had an aggregate fair value of approximately $1,725.6 million and was comprised of approximately $1,286.7 million in secured loans, $315.5 million in equipment financings, and $123.4 million in equity and warrants, across 151 portfolio companies.
As adopted, Rule 2a-5 permits boards of directors to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. The SEC also adopted Rule 31a-4 under the 1940 Act (“Rule 31a-4”), which provides the recordkeeping requirements associated with fair value determinations.
The SEC adopted Rule 2a-5 under the 1940 Act (“Rule 2a-5”), which establishes a framework for determining fair value in good faith for purposes of the 1940 Act. As adopted, Rule 2a-5 permits boards of directors to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions.
Net Investment Income Net investment income totaled approximately $89.9 million and $71.6 million for the years ended December 31, 2023 and 2022, respectively. The increase in net investment income for the year ended December 31, 2023 resulted from an increase in total investment income as compared to total expenses, including excise tax expense.
The increase in net investment income for the year ended December 31, 2024 resulted from an increase in total investment income as compared to total expenses, including excise tax expense. For the year ended December 31, 2024, we recognized approximately $237.7 million in total investment income as compared to approximately $121.8 million in total expenses including excise tax expense.
On January 16, 2020, through the Formation Transactions, we acquired the Legacy Funds and all of their respective assets, including the Legacy Portfolio, as well as Trinity Capital Holdings, a holding company whose 72 Table of Contents subsidiaries managed and/or had the right to receive fees from certain of the Legacy Funds.
(collectively, the “Legacy Funds”) and all of their respective assets, including their respective investment portfolios (the “Legacy Portfolio”), as well as Trinity Capital Holdings, LLC, a holding company whose subsidiaries managed and/or had the right to receive fees from certain of the Legacy Funds.
This entity invests in secured loans and equipment financings to growth-stage companies that have been originated by the Company. The portfolio companies held by the JV represent a diverse set of geographical classifications, which are similar to those in which the Company invests directly. See “Note 1 – Organization and Basis of Presentation” for further discussion.
These entities invest or manage investments in secured loans and equipment financings to growth-oriented companies that have been originated by the Company. The portfolio companies held by the Multi-Sector Holdings represent a diverse set of geographical classifications, which are similar to those in which the Company invests directly.
This entity invests in secured loans and equipment financings to growth-stage companies that have been originated by the Company. The portfolio companies held by the JV represent a diverse set of industry classifications, which are similar to those in which the Company invests directly. See “Note 1 – Organization and Basis of Presentation” for further discussion.
These entities invest or manage investments in secured loans and equipment financings to growth-oriented companies that have been originated by the Company. The portfolio companies held by the Multi-Sector Holdings represent a diverse set of industry classifications, which are similar to those in which the Company invests directly.
The increase in employee compensation expenses for the year ended December 31, 2023 relates primarily to the increased variable compensation related to higher headcount and stock-based compensation. As of December 31, 2023 and 2022, the Company had 68 and 57 employees, respectively.
Employee Compensation and Benefits Employee compensation and benefits totaled approximately $43.5 million and $33.1 million for the years ended December 31, 2024 and 2023, respectively. The increase in employee compensation expenses for the year ended December 31, 2024 relates primarily to the increased variable compensation related to higher headcount and stock-based compensation.
Contractual Obligations A summary of our contractual payment obligations as of December 31, 2023, is as follows: Payments Due by Period Less than 1 year 1 - 3 years 4 - 5 years After 5 years Total KeyBank Credit Facility $ — $ 213,000 $ — $ — $ 213,000 2025 Notes — 182,500 — — 182,500 Convertible Notes — 50,000 — — 50,000 August 2026 Notes — 125,000 — — 125,000 December 2026 Notes — 75,000 — — 75,000 Operating Leases — 2,929 1,924 2,421 7,274 Total Contractual Obligations $ — $ 648,429 $ 1,924 $ 2,421 $ 652,774 Distributions We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution.
As such, the Company has not accrued any liability in connection with such indemnifications. 87 Table of Contents Contractual Obligations A summary of our contractual payment obligations as of December 31, 2024, is as follows: Payments Due by Period Less than 1 year 1 - 3 years 4 - 5 years After 5 years Total KeyBank Credit Facility $ — $ — $ 113,000 $ — $ 113,000 2025 Notes 152,500 — — — 152,500 Convertible Notes — 50,000 — — 50,000 August 2026 Notes — 125,000 — — 125,000 December 2026 Notes — 75,000 — — 75,000 March 2029 Notes — — 115,000 — 115,000 September 2029 Notes — — 115,000 — 115,000 Series A Notes — 55,500 87,000 — 142,500 Operating Leases — 3,343 2,131 1,565 7,039 Total Contractual Obligations $ 152,500 $ 308,843 $ 432,131 $ 1,565 $ 895,039 Distributions We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution.
Fiscal Year Ended December 31, 2021 A discussion of our results of operations for the fiscal year ended December 31, 2021 is available in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 2, 2023 and is available on the SEC’s EDGAR database. 81 Table of Contents Financial Condition, Liquidity and Capital Resources Our liquidity and capital resources are generated primarily from the net proceeds of offerings of our securities, including the 2025 Notes offering, the Convertible Notes offering, the August 2026 Notes offering and the December 2026 Notes offering, borrowings under the KeyBank Credit Facility, and cash flows from our operations, including investment sales and repayments, as well as income earned on investments and cash equivalents.
Financial Condition, Liquidity and Capital Resources Our liquidity and capital resources are generated primarily from the net proceeds of offerings of our securities, including our “at-the-market” offering, the 2025 Notes offering, the Convertible Notes offering, the August 2026 Notes offering, the December 2026 Notes offering, the March 2029 Notes offering, the September 2029 Notes offering and the Series A Notes offering and borrowings under the KeyBank Credit Facility, each of which were outstanding as of December 31, 2024, as well as cash flows from our operations, including investment sales and repayments and income earned on investments and cash equivalents.
When a portfolio company pre-pays their indebtedness prior to the scheduled maturity date, the acceleration of the unaccreted OID and EOT is recognized as interest income. Income related to application or origination payments, including facility commitment fees, net of related expenses and generally collected in advance, are accreted into interest income over the contractual life of the loan.
EOT payments to be paid at the termination of the debt agreement are accreted into interest income over the contractual life of the debt based on the effective yield method. When a portfolio company pre-pays their indebtedness prior to the scheduled maturity date, the acceleration of the unaccreted OID and EOT is recognized as interest income.
Critical Accounting Estimates and Policies The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially.
Critical Accounting Estimates and Policies The preparation of our financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
The increase in interest expense for the year ended December 31, 2023 was primarily due to increased borrowings and increased interest rate under our credit facility with KeyBank, National Association (the “KeyBank Credit Facility”). Employee Compensation and Benefits Employee compensation and benefits totaled approximately $33.1 million and $27.2 million for the years ended December 31, 2023 and 2022, respectively.
The increase in interest expense for the year ended December 31, 2024 was primarily due to the issuance of the March 2029 Notes, September 2029 Notes, Series A Notes and to increased borrowings base rate under our credit facility with KeyBank, National Association (the “KeyBank Credit Facility”).
Refer to “Note 12 – Related Party Transactions” included in the notes to our consolidated financial statements appearing elsewhere in this report for additional information.
See “Note 12 – Related Party Transactions” in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.
Dividend income is recorded when dividends are declared by the portfolio company or at such other time that an obligation exists for the portfolio company to make a distribution. The Company recorded $0.6 million in dividend income during the year ended December 31, 2023 and no dividend income was recorded during the year ended December 31, 2022.
The Company records dividend income on an accrual basis to the extent amounts are expected to be collected. Dividend income is recorded when dividends are declared by the portfolio company or at such other time that an obligation exists for the portfolio company to make a distribution.
As of both December 31, 2023 and December 31, 2022, the debt, including loans and equipment financings, in our portfolio had a weighted average time to maturity of approximately 3.2 years. Additional information regarding our portfolio is set forth in the Consolidated Schedule of Investments and the related notes thereto included with this Annual Report on Form 10-K.
As of both December 31, 2024 and December 31, 2023, the debt, including loans and equipment financings, in our portfolio had a weighted average time to maturity of approximately 3.2 years and 3.2 years, respectively.
Commitments and Off-Balance Sheet Arrangements The Company has entered into a capital commitment with the JV to fund capital contributions through June 2026 in the amount of $21.4 million, of which $10.4 million and $21.4 was unfunded as of December 31, 2023 and 82 Table of Contents December 31, 2022, respectively.
As of December 31, 2023, our asset coverage ratio was approximately 194.7% and our asset coverage ratio per unit was approximately $1,947. Commitments and Off-Balance Sheet Arrangements The Company has entered into a capital commitment with the JV and EPT 16 in the amount of $21.4 million and $10.0 million, respectively.
Cash held in demand deposit accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit and therefore is subject to credit risk. All of the Company’s cash deposits are held at large established high credit quality financial institutions, and management believes that the risk of loss associated with any uninsured balances is remote.
Cash held in demand deposit accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit and therefore is subject to credit risk.
Interest Expense and Other Debt Financing Costs Our interest expense and other debt financing costs are primarily comprised of interest and fees related to our secured borrowings, the 7.00% Notes due 2025 (the “2025 Notes”), the 4.375% Notes due 2026 (the “August 2026 Notes”), the 4.25% Notes due 2026 (the “December 2026 Notes”), and the 6.00% Convertible Notes due 2025 (the “Convertible Notes”).
The increase in our operating expenses for the year ended December 31, 2024 is discussed with respect to each component of such expenses below. 83 Table of Contents Interest Expense and Other Debt Financing Costs Our interest expense and other debt financing costs are primarily comprised of interest and fees related to our secured borrowings, the 7.00% Notes due 2025 (the “2025 Notes”), the 4.375% Notes due 2026 (the “August 2026 Notes”), the 4.25% Notes due 2026 (the “December 2026 Notes”), the 7.875% Notes due March 2029 (the “March 2029 Notes”), the 7.875% Notes due September 2029 (the “September 2029 Notes”), the 7.54% Notes due 2027 (the “Series A 2027 Notes”), the 7.60% Notes due 2028 (the “Series A 2028 Notes”), the 7.66% Notes due 2029 (the “Series A 2029 Notes” and together with the Series A 2027 Notes and Series A 2028 Notes, the “Series A Notes”), and the 6.00% Convertible Notes due 2025 (the “Convertible Notes”).
During the year ended December 31, 2022, we received an aggregate of $336.6 million in proceeds from repayments and sales of our investments, including proceeds of approximately $149.8 million from early repayments on our debt investments.
During the year ended December 31, 2024, we received an aggregate of $807.9 million in proceeds from repayments and sales of our investments, including proceeds of approximately $313.2 million from early repayments on our debt investments, $45.7 million from warrant and equity exits, $207.3 million from scheduled/amortizing debt payments and $241.7 million from investments sold primarily to Multi-Sector Holdings.
The Company did not have any other off-balance sheet financings or liabilities as of December 31, 2023 and December 31, 2022, respectively. The Company’s commitments and contingencies consist primarily of unfunded commitments to extend credit in the form of loans to the Company’s portfolio companies.
As of December 31, 2023 unfunded commitments was $10.4 million for the JV and there were no unfunded commitments for EPT 16. The Company did not have any other off-balance sheet financings or liabilities as of December 31, 2024 and December 31, 2023.
As of December 31, 2023 and December 31, 2022, we had approximately $137.0 million and $162.5 million, respectively, of available borrowings under the KeyBank Credit Facility, subject to its terms and regulatory requirements.
All of the Company’s cash deposits are held at large established high credit quality financial institutions, and management believes that the risk of loss associated with any uninsured balances is remote. 86 Table of Contents As of December 2024 and December 31, 2023, we had approximately $487.0 million and $137.0 million, respectively, of available borrowings under the KeyBank Credit Facility, subject to its terms and regulatory requirements.
Concentrations of Credit Risk Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount.
Additional information regarding our portfolio is set forth in the Consolidated Schedule of Investments and the related notes thereto included with this Annual Report on Form 10-K. Concentrations of Credit Risk Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount.
The Company recognizes nonrecurring fees and additional OID and EOT received in consideration for contract modifications commencing in the quarter relating to the specific modification. 74 Table of Contents The Company records dividend income on an accrual basis to the extent amounts are expected to be collected.
Income related to application or origination payments, including facility commitment fees, net of related expenses and generally collected in advance, are accreted into interest income over the contractual life of the loan. The Company recognizes nonrecurring fees and additional OID and EOT received in consideration for contract modifications commencing in the quarter relating to the specific modification.
Excise Taxes Our excise taxes totaled approximately $2.6 million and $2.4 million for the years ended December 31, 2023 and 2022, respectively. The increase in excise taxes was primarily due to an increase in estimated undistributed taxable income in 2023.
Excise Taxes Our excise taxes totaled approximately $2.7 million and $2.6 million for the years ended December 31, 2024 and 2023, respectively. 84 Table of Contents Net Investment Income Net investment income totaled approximately $115.8 million and $89.9 million for the years ended December 31, 2024 and 2023, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on our Consolidated Statements of Operations as of December 31, 2023, the following table shows the annualized impact on net income of hypothetical base rate changes in the Prime rate on our debt investments (considering interest rate floors for floating-rate instruments) and the hypothetical base rate changes in the SOFR on our KeyBank Credit Facility, assuming that there are no changes in our investment and borrowing structure (in thousands): Interest Interest Net Income Expense Income/(Loss) Up 300 basis points $ 25,469 $ 6,390 $ 19,079 Up 200 basis points $ 17,259 $ 4,260 $ 12,999 Up 100 basis points $ 9,188 $ 2,130 $ 7,058 Down 100 basis points $ (6,898 ) $ (2,130 ) $ (4,768 ) Down 200 basis points $ (12,700 ) $ (4,260 ) $ (8,440 ) Down 300 basis points $ (18,274 ) $ (6,390 ) $ (11,884 ) 85 Table of Contents Currency Risk Any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates.
Biggest changeBased on our Consolidated Statements of Operations as of December 31, 2024, the following table shows the annualized impact on net income of hypothetical base rate changes in the Prime Rate on our debt investments (considering interest rate floors for floating-rate instruments) and the hypothetical base rate changes in the SOFR on our KeyBank Credit Facility, assuming that there are no changes in our investment and borrowing structure (in thousands): Interest Interest Net Income Expense Income/(Loss) Up 300 basis points $ 36,705 $ 3,390 $ 33,315 Up 200 basis points 24,469 2,260 22,209 Up 100 basis points 12,235 1,130 11,105 Down 100 basis points (4,617 ) (1,130 ) (3,487 ) Down 200 basis points (8,951 ) (2,260 ) (6,691 ) Down 300 basis points (10,510 ) (3,390 ) (7,120 ) Currency Risk Any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates.
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. We may also borrow funds in local currency as a way to hedge our non-U.S. denominated investments. 86 Table of Contents
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. We may also borrow funds in local currency as a way to hedge our non-U.S. denominated investments. 91 Table of Contents
Our exposure to currency risk related to these debt investments is minimal as payments from such portfolio companies are received in U.S. dollars. No other investments as of December 31, 2023 were subject to currency risk. Hedging We do not currently engage in any hedging activities.
Our exposure to currency risk related to these debt investments is minimal as payments from such portfolio companies are received in U.S. dollars. No other investments as of December 31, 2024 were subject to currency risk. Hedging We do not currently engage in any hedging activities.
In addition, borrowings under the KeyBank Credit Facility are subject to floating interest rates based on SOFR, generally bearing interest at a rate of the Adjusted Term SOFR Reference Rate plus 3.25%, subject to the number of eligible debt investments in the collateral pool.
In addition, borrowings under the KeyBank Credit Facility are subject to floating interest rates based on SOFR, generally bearing interest at a rate of the Adjusted Term SOFR Reference Rate plus 2.85% to 3.25%, subject to the number of eligible debt investments in the collateral pool.
In accordance with Rule 2a-5, our Board periodically assesses and manages material risks associated with the determination of the fair value of our investments. Interest Rate Risk Interest rate sensitivity and risk refer to the change in earnings that may result from changes in the level of interest rates.
In accordance with Rule 2a-5, our Board periodically assesses and manages material risks associated with the determination of the fair value of our investments. 90 Table of Contents Interest Rate Risk Interest rate sensitivity and risk refer to the change in earnings that may result from changes in the level of interest 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. As of December 31, 2023, we had four foreign domiciled portfolio companies.
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. As of December 31, 2024, we had five foreign domiciled portfolio companies.
As of December 31, 2023, approximately 69.0% of our debt investments based on outstanding principal balance represented floating-rate investments based on Prime or SOFR, and approximately 31.0% of our debt investments based on outstanding principal balance represented fixed rate investments.
Prime Rate (“Prime”) or SOFR, and approximately 22.9% of our debt investments based on outstanding principal balance represented fixed rate investments.
Inflation is likely to continue in the near to medium-term, particularly in the United States and Europe, with the possibility that monetary policy may tighten in response. Persistent inflationary pressures could affect our portfolio companies’ profit margins.
Inflation is likely to continue in the near to medium-term, particularly in the United States and Europe, with the possibility that monetary policy may tighten in response. Persistent inflationary pressures could affect our portfolio companies’ profit margins. As of December 31, 2024, approximately 77.1% of our debt investments based on outstanding principal balance represented floating-rate investments based on U.S.

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