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Financial report summary
?Risks
- We have a limited operating history as a BDC.
- Deterioration in the economy and financial markets increases the likelihood of adverse effects on our financial position and results of operations. Such economic adversity could impair our portfolio companies’ financial positions and operating results and affect the industries in which we invest, which could, in turn, harm our operating results.
- A failure on our part to maintain our status as a BDC may significantly reduce our operating flexibility.
- We are dependent upon our executive officers, our Adviser’s senior investment team and, in particular, Mr. Labe and Mr. Srivastava, for our success and upon our Adviser’s access to such individuals pursuant to the Staffing Agreement. If our Adviser were to lose such access, our ability to achieve our investment objective could be significantly harmed.
- Our business model depends, in part, upon TPC’s relationships with a select group of leading venture capital investors. Any inability of TPC to maintain or develop these relationships, or the failure of these relationships to result in referrals of investment opportunities for us, could have a material adverse effect on our business.
- Our success depends on the ability of TPC and our Adviser to attract and retain qualified personnel in a competitive environment.
- We may not replicate the historical results achieved by TPC or members of its senior investment team.
- Investors may default on capital drawdowns.
- The nature of our approach to our business may lead to volatility and variability from period to period with respect to new originations. Our financial condition and results of operations depend upon our ability to effectively manage credit, deploy capital and grow our business.
- We operate in a highly competitive market for investment opportunities, and we may not be able to compete effectively.
- We will be subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification for tax treatment as a RIC under Subchapter M of the Code.
- We may need to raise additional capital to grow. If additional capital is not available or not available on favorable terms, our ability to grow will be impaired.
- We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
- You may not receive distributions or our distributions may not grow over time.
- Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.
- Incurring additional leverage could increase the risk of investing in the Company. The use of leverage may increase the likelihood of our defaulting on our obligations.
- We finance certain of our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and increases the risk of investing in us.
- We may default under the Credit Facility, the agreement governing our outstanding unsecured notes or any future indebtedness or be unable to amend, repay or refinance any such facility or financing arrangement on commercially reasonable terms, or at all, which could have a material adverse effect on our financial condition, results of operations and cash flows.
- We are exposed to risks associated with changes in interest rates, which may affect our cost of capital and net investment income. In addition, if the Credit Facility or similar financing arrangement were to become unavailable, it could have a material adverse effect on our business, financial condition and results of operations.
- Provisions in our current debt obligations or any future indebtedness may limit our discretion in operating our business.
- Adverse developments in the credit markets may impair our ability to enter into any other future borrowing facility.
- If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy.
- Our investment portfolio is recorded at fair value, with our Board having final responsibility for overseeing, reviewing and approving, in good faith, such fair value and, as a result, there is uncertainty as to the value of our portfolio investments, which may impact our net asset value.
- We are an emerging growth company under the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make an investment in shares of our common stock less attractive to investors.
- We are obligated to maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or our internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our securities.
- Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
- Our Adviser or our Administrator can resign upon 60 days’ notice and we may not be able to find a suitable replacement within that time, or at all, resulting in a disruption to our operations that could materially and adversely affect our financial condition, results of operations and cash flows.
- The failure in cyber security systems, as well as the occurrence of events unanticipated in our Adviser’s disaster recovery systems and management continuity planning or a support failure from external providers during a disaster could impair our ability to conduct business effectively.
- If we are unable to manage our growth, our results of operations could suffer.
- We, the Adviser, and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry or venture banking ecosystem, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
- Our ability to enter into transactions with our affiliates and to make investments in venture capital-backed companies along with our affiliates is restricted by the 1940 Act which may limit the scope of investment opportunities available to us.
- Our Adviser may be subject to conflicts of interest with respect to taking actions regarding investments in which TPC or its affiliates may also have an interest.
- Our incentive fee may induce our Adviser to pursue speculative investments and to use leverage when it may be unwise to do so.
- We may pay our Adviser an incentive fee on certain investments that include a deferred interest feature.
- The valuation process for certain of our investments may create a conflict of interest.
- There are conflicts related to our other arrangements with TPC and our Administrator.
- The Advisory Agreement was not negotiated at arm’s length and may not be as favorable to us as if it had been negotiated with an unaffiliated third party.
- Our Adviser’s liability is limited under the Advisory Agreement and we have agreed to indemnify our Adviser against certain liabilities, which may lead our Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
- Our investments are concentrated in technology and other high growth industries, some of which are subject to extensive government regulation, which exposes us to the risk of significant loss if any of these industry sectors experiences a downturn.
- Our portfolio may lack diversification among portfolio companies which may subject us to a risk of significant loss if one or more of these companies default on their obligations under any of their debt instruments.
- Our financial condition, results of operations and cash flows would be negatively affected if a significant portfolio investment fails to perform as expected.
- Our investment strategy includes a primary focus on venture capital-backed 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, and below investment grade ratings, which could cause you to lose all or part of your investment in us.
- Our investments in early stage companies will involve significant and heightened risks compared to investments in more established companies.
- Publicly traded securities involve significant risks that differ from those associated with non-traded securities.
- Our investments in the technology industry involve significant risks, including highly volatile markets.
- Some of our portfolio companies may need additional capital, which may not be readily available.
- Our existing and/or future portfolio companies may not draw on any of our unfunded obligations or may draw our outstanding unfunded obligations at a time when our capital is not readily available.
- Unlike traditional lenders, we offer a flexible payment and covenant structure to our portfolio companies and may choose not to take advantage of certain opportunities due to our long-term investment philosophy to develop and maintain deep and longstanding relationships with TPC’s select group of leading venture capital investors, borrowers and entrepreneurs and to preserve our reputation.
- If our portfolio companies are unable to protect their intellectual property rights, our business and prospects could be harmed. If our portfolio companies are required to devote significant resources to protecting their intellectual property rights, then the value of our investment could be reduced.
- If our portfolio companies are unable to commercialize their technologies, products, business concepts or services, the returns on our investments could be adversely affected.
- Our relationship with certain portfolio companies may expose us to our portfolio companies’ trade secrets and confidential information which may require us to be parties to non-disclosure agreements and restrict us from engaging in certain transactions.
- Our financial condition, results of operations and cash flows could be negatively affected if we are unable to recover our principal investment as a result of a negative pledge or lack of a security interest on the intellectual property of our venture capital-backed companies.
- If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses.
- Our portfolio companies may have limited operating histories and financial resources.
- The financial projections of our portfolio companies could prove inaccurate.
- We make debt investments in venture capital-backed companies that generally do not have sufficient cash resources to repay our loan in full at the time of its origination.
- There may be circumstances when our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- The lack of liquidity in our investments may materially and adversely affect our ability to meet our investment objectives.
- Any unrealized losses we experience on our investment portfolio may be an indication of future realized losses, which could reduce our funds available for distribution and could have a material adverse effect on our ability to service our outstanding borrowings.
- Our stockholders do not have any input in our Adviser’s investment decisions.
- Because we generally do not hold controlling equity interests in our portfolio companies, we are not able to exercise control over our portfolio companies or prevent decisions by management that could decrease the value of our investment.
- We may suffer a loss if a portfolio company defaults on a loan, including the entire or partial loss of the accrued PIK interest, the end-of-term payment and/or OID, such as warrant investments and facility fees due to us. To the extent we invest in OID instruments, including PIK loans, zero coupon bonds, and debt securities with attached warrants, you will be exposed to certain risks associated with such investments.
- Prepayments of our loans could have a material adverse impact on our results of operations and our ability to make stockholder distributions, increase the risk of violating 1940 Act provisions applicable to BDCs and breaching covenants under our borrowing arrangements, and could result in a decline in the value of our shares.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- The disposition of our investments may result in contingent liabilities.
- Our equity related investments are highly speculative, and we may not realize gains from these investments.
- Investments in secured loans to companies with foreign operations and/or investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
- We may expose ourselves to risks resulting from our use of hedging transactions.
- Our failure to make protective or follow-on investments in our portfolio companies could impair the value of our portfolio.
- The effect of global climate change may impact the operations of our portfolio companies.
- We may pursue less vigorous enforcement of the terms of the acquisition agreement with TPC regarding the Initial Portfolio transaction because of our dependence on our Adviser.
- TPC and our Adviser exercised significant influence with respect to the terms of our Initial Portfolio, including the selection of the investments included therein.
- Shares of our common stock are not listed on an exchange or quoted through a quotation system and will not be listed for the foreseeable future, if ever, and there may be no future Advanced Liquidity Event. Therefore, our stockholders will have limited liquidity.
- We may choose to pay dividends in our common stock, in which case you may be required to pay tax in excess of the cash you receive.
- Investing in our common stock may involve an above average degree of risk.
- If we fail to pay dividends on our Series A Preferred Stock for two years, the holders of our Series A Preferred Stock will be entitled to elect a majority of our directors.
- A downgrade, suspension or withdrawal of the credit rating, if any, assigned by a rating agency to us or any of our outstanding securities, or change in the debt markets could cause the liquidity or value of our securities to decline significantly.
- 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.
- Events outside of our control, including relating to public health crises, supply-chain disruptions, geopolitical conflicts, including acts of war, and inflation, could negatively affect our portfolio companies’ and our results of operations and financial condition, as well as the amount or frequency of our distributions to stockholders.
- A lack of IPO or merger and acquisition opportunities may cause companies to stay in our portfolio longer, leading to lower returns, unrealized depreciation, or realized losses.
- We are currently operating in a period of capital markets disruption and economic uncertainty.
- We may experience fluctuations in our quarterly operating results.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- Worldwide economic conditions, economic recessions or downturns, as well as political and economic conditions, could impair our venture capital-backed companies and harm our operating results.
- Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us.
- Inflation has adversely affected and may continue to adversely affect the business, results of operations and financial condition of our portfolio companies.
Management Discussion
- An important measure of our financial performance is net increase (decrease) in net assets resulting from operations, which includes net investment income (loss), net realized gains (losses) and net unrealized gains (losses). Net investment income (loss) is the difference between our income from interest, dividends, fees and other investment income and our operating expenses, including interest on borrowed funds. Net realized gains (losses) on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost. Net unrealized gains (losses) on investments is the net change in the fair value of our investment portfolio.
- For the three months ended June 30, 2024 and 2023, our net increase in net assets resulting from operations was $4.7 million and net decrease in net assets from operations was $8.3 million, respectively, which was comprised of $9.7 million and $11.0 million, respectively, of net investment income and $5.0 million and $19.3 million of net realized and unrealized losses, respectively. On a per common share basis for the three months ended June 30, 2024 and 2023, net investment income was $0.41 and $0.54, respectively, and our net increase in net assets from operations was $0.20 and net decrease in net assets from operations was $0.41, respectively.
- For the six months ended June 30, 2024 and 2023, our net increase in net assets resulting from operations was $8.4 million and our net decrease in net assets resulting from operations was $1.7 million, respectively, which was comprised of $19.3 million and $22.3 million, respectively, of net investment income and $10.9 million and $24.0 million of net realized and unrealized losses, respectively. On a per common share basis for the six months ended June 30, 2024 and 2023, net investment income was $0.81 and $1.10, respectively, and our net increase in net assets from operations was $0.35 and net decrease in net assets from operations was $0.08, respectively.