SEC Filing | Trinity Capital Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


⌧	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2021


◻	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-56139

TRINITY CAPITAL INC.

(Exact name of registrant as specified in its charter)


Maryland	35-2670395
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)


1 N. 1^st Street 3^rd Floor Phoenix, Arizona	85004
(Address of principal executive offices)	(Zip Code)

(480) 374-5350

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TRIN	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ◻ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	◻	Accelerated filer	◻
Non-accelerated filer	⌧	Smaller reporting company	◻
		Emerging growth company	⌧

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Act). Yes ◻ No ⌧

As of August 4, 2021, the registrant had 26,554,664 shares of common stock ($0.001 par value per share) outstanding.

Table of Contents

TRINITY CAPITAL INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021

TABLE OF CONTENTS


		PAGE NO.
PART I	FINANCIAL INFORMATION	3
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Assets and Liabilities as of June 30, 2021 (unaudited) and December 31, 2020	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	4
	Consolidated Statements of Changes in Net Assets for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	5
	Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited)	7
	Consolidated Schedule of Investments as of June 30, 2021 (unaudited)	9
	Consolidated Schedule of Investments as of December 31, 2020	24
	Notes to Consolidated Financial Statements (unaudited)	39
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	70
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	87
Item 4.	Controls and Procedures	88
PART II	OTHER INFORMATION	90
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	90
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91
Item 3.	Defaults Upon Senior Securities	92
Item 4.	Mine Safety Disclosures	92
Item 5.	Other Information	92
Item 6.	Exhibits	93
SIGNATURES		94

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

TRINITY CAPITAL INC.

Consolidated Statements of Assets and Liabilities

(In thousands, except share and per share data)


	June 30,		December 31,
	2021		2020
	(Unaudited)
ASSETS
Investments at fair value:
Control investments (cost of $62,363 and $57,072, respectively)	$	41,938	$	48,730
Affiliate investments (cost of $13,001 and $20,653, respectively)		11,795		27,650
Non-control / Non-affiliate investments (cost of $499,191 and $420,611, respectively)		543,963		417,271
Total investments (cost of $574,555 and $498,336, respectively)		597,696		493,651
Cash and cash equivalents		19,124		44,656
Restricted cash		15,341		16,445
Interest receivable		4,065		3,468
Prepaid expenses		1,298		744
Other assets		3,923		744
Total assets	$	641,447	$	559,708

LIABILITIES
Credit Facility, net of $1,053 and $2,107, respectively, of unamortized deferred financing costs	$	68,947	$	132,893
2025 Notes, net of $4,168, and $4,697, respectively, of unamortized deferred financing costs		120,832		120,303
Convertible Notes, net of $2,786, and $3,448, respectively, of unamortized deferred financing costs and discount		47,214		46,552
Distribution payable		7,682		4,947
Security deposits		8,812		7,874
Accounts payable, accrued expenses and other liabilities		8,240		8,391
Total liabilities		261,727		320,960

Commitments and contingencies (Note 6)

NET ASSETS
Common stock, $0.001 par value per share (200,000,000 authorized, 26,491,274 and 18,321,274 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)		26		18
Paid-in capital in excess of par		369,379		263,366
Distributable earnings/(accumulated loss)		10,315		(24,636)
Total net assets		379,720		238,748
Total liabilities and net assets	$	641,447	$	559,708
NET ASSET VALUE PER SHARE	$	14.33	$	13.03

See accompanying notes to consolidated financial statements.

Table of Contents

TRINITY CAPITAL INC.

Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
INVESTMENT INCOME:
Interest income:
Control investments	$	1,266	$	832	$	2,572	$	1,627
Affiliate investments		443		604		882		733
Non-Control / Non-Affiliate investments		16,405		12,004		31,004		21,894
Total interest income		18,114		13,440		34,458		24,254
Fee income:
Non-Control / Non-Affiliate investments		1,362		407		2,337		1,841
Total fee income		1,362		407		2,337		1,841
Total investment income		19,476		13,847		36,795		26,095

EXPENSES:
Interest expense and other debt financing costs		4,425		4,281		9,041		8,539
Compensation and benefits		3,370		1,690		7,366		3,079
Professional fees		570		700		1,216		1,180
General and administrative		1,031		415		1,838		827
Total expenses		9,396		7,086		19,461		13,625

NET INVESTMENT INCOME		10,080		6,761		17,334		12,470

NET REALIZED GAIN/(LOSS) FROM INVESTMENTS:
Control investments		—		—		—		—
Affiliate investments		1,491		—		—		—
Non-Control / Non-Affiliate investments		504		(2,002)		4,590		(2,884)
Net realized gain/(loss) from investments		1,995		(2,002)		4,590		(2,884)

NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) FROM INVESTMENTS:
Control investments		(4,530)		1,342		(12,084)		(8,234)
Affiliate investments		(1,892)		(969)		(8,204)		(2,136)
Non-Control / Non-Affiliate investments		19,052		1,750		48,394		(11,799)
Net change in unrealized appreciation/(depreciation) from investments		12,630		2,123		28,106		(22,169)

NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS BEFORE FORMATION COSTS		24,705		6,882		50,030		(12,583)
Costs related to the acquisition of Trinity Capital Holdings and Legacy Funds		—		—		—		(15,586)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	24,705	$	6,882	$	50,030	$	(28,169)

NET INVESTMENT INCOME PER SHARE - BASIC AND DILUTED	$	0.38	$	0.37	$	0.69	$	0.69

NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC AND DILUTED	$	0.93	$	0.38	$	2.00	$	(1.57)

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED		26,478,747		18,074,929		25,024,925		17,959,728

See accompanying notes to consolidated financial statements.

Table of Contents

TRINITY CAPITAL INC.

Consolidated Statements of Changes in Net Assets

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended June 30, 2021:


						Distributable
						Earnings /
	Common Stock			Paid In Capital		(Accumulated		Total
	Shares	Par Value		in Excess of Par		Loss)		Net Assets
Balance as of March 31, 2021	26,415,275	$	26	$	368,245	$	(6,708)	$	361,563
Issuance of common stock pursuant to distribution reinvestment plan	75,999		—		1,134		—		1,134
Distributions to stockholders	—		—		—		(7,682)		(7,682)
Net increase/(decrease) in net assets resulting from operations:
Net investment income	—		—		—		10,080		10,080
Net realized gain/(loss) from investments	—		—		—		1,995		1,995
Net unrealized appreciation/(depreciation) from investments	—		—		—		12,630		12,630
Balance as of June 30, 2021	26,491,274	$	26	$	369,379	$	10,315	$	379,720

Three Month Ended June 30, 2020:


						Distributable
				Paid In Capital		Earnings /
	Common Stock			in Excess of		(Accumulated		Total
	Shares	Par Value		Par Value		Loss)		Net Assets
Balance as of March 31, 2020	18,049,860	$	18	$	260,120	$	(35,575)	$	224,563
Issuance of common stock, net of issuance costs	—		—		81		—		81
Issuance of common stock pursuant to distribution reinvestment plan	87,740		—		1,091		—		1,091
Distributions to stockholders	—		—		—		(3,971)		(3,971)
Net increase/(decrease) in net assets resulting from operations:
Net investment income/(loss)	—		—		—		6,761		6,761
Net realized gain/(loss) from investments	—		—		—		(2,002)		(2,002)
Net unrealized appreciation/(depreciation) from investments	—		—		—		2,123		2,123
Balance as of June 30, 2020	18,137,600	$	18	$	261,292	$	(32,664)	$	228,646

Table of Contents

Six Months Ended June 30, 2021:


						Distributable
				Paid In Capital		Earnings /
	Common Stock			in Excess of		(Accumulated		Total
	Shares	Par Value		Par Value		Loss)		Net Assets
Balance as of December 31, 2020	18,321,274	$	18	$	263,366	$	(24,636)	$	238,748
Impact of adoption of ASU 2020-06	—		—		(462)		—		(462)
Issuance of common stock in initial public offering, net of issuance costs	8,006,291		8		104,200		—		104,208
Issuance of common stock pursuant to distribution reinvestment plan	163,709		—		2,275		—		2,275
Distributions to stockholders	—		—		—		(15,079)		(15,079)
Net increase/(decrease) in net assets resulting from operations:
Net investment income/(loss)	—		—		—		17,334		17,334
Net realized gain/(loss) from investments	—		—		—		4,590		4,590
Net unrealized appreciation/(depreciation) from investments	—		—		—		28,106		28,106
Balance as of June 30, 2021	26,491,274	$	26	$	369,379	$	10,315	$	379,720

Six Months Ended June 30, 2020:


						Distributable
				Paid In Capital		Earnings /
	Common Stock			in Excess of		(Accumulated		Total
	Shares	Par Value		Par Value		Loss)		Net Assets
Balance as of December 31, 2019	10	$	—	$	—	$	(524)	$	(524)
Issuance of shares related to Formation Transaction ⁽¹⁾	9,716,517		10		145,738		—		145,748
Issuance of common stock, net of issuance costs	8,333,333		8		114,463		—		114,471
Issuance of common stock pursuant to distribution reinvestment plan	87,740		—		1,091		—		1,091
Distributions to stockholders	—		—		—		(3,971)		(3,971)
Net increase/(decrease) in net assets resulting from operations:
Net investment income/(loss)	—		—		—		12,470		12,470
Net realized gain/(loss) from investments	—		—		—		(2,884)		(2,884)
Net unrealized appreciation/(depreciation) from investments	—		—		—		(22,169)		(22,169)
Costs related to the acquisition of Trinity Capital Holdings and Legacy Funds	—		—		—		(15,586)		(15,586)
Balance as of June 30, 2020	18,137,600	$	18	$	261,292	$	(32,664)	$	228,646

(1)	See “Note 1 - Organization and Basis of Presentation”

See accompanying notes to consolidated financial statements.

Table of Contents

TRINITY CAPITAL INC.

Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended
	June 30, 2021		June 30, 2020
Cash flows provided by/(used in) operating activities:
Net increase/(decrease) in net assets resulting from operations	$	50,030	$	(28,169)
Adjustments to reconcile net increase/(decrease) in net assets resulting from operations to net cash provided by/(used in) operating activities:
Purchase of investments, net of deferred fees		(208,232)		(101,503)
Proceeds from sales and paydowns of investments		146,879		79,731
Net change in unrealized appreciation/(depreciation) from investments, net of third party participation		(27,823)		22,168
Net realized gain/(loss) from investments		(4,590)		2,884
Accretion of original issue discounts and end of term payments on investments		(10,279)		(5,049)
Costs related to the acquisition of Trinity Capital Holdings and Legacy Funds		—		15,586
Amortization of deferred financing costs		1,837		1,416
Change in operating assets and liabilities
(Increase)/Decrease in interest receivable		(597)		(2,069)
(Increase)/Decrease in prepaid expenses		(554)		(118)
(Increase)/Decrease in other assets		(2,357)		(419)
Increase/(Decrease) in security deposits		938		1,810
Increase/(Decrease) in accounts payable, accrued expenses and other liabilities		(151)		2,643
Increase/(Decrease) in due to related party		—		(1,059)
Net cash provided by/(used in) operating activities		(54,899)		(12,148)

Cash flows provided by/(used in) investing activities:
Formation Transactions of Legacy Funds, net of cash acquired ⁽¹⁾		—		(89,515)
Acquisition of Trinity Capital Holdings		—		(2,211)
Acquisition of fixed assets		(822)		(34)
Net cash provided by/(used in) investing activities		(822)		(91,760)

Cash flows provided by/(used in) financing activities
Issuance of common stock		112,088		125,000
Common stock issuance costs		(7,880)		(10,529)
Cash distributions paid		(10,069)		(2,880)
Proceeds from issuance of 2025 Notes		—		125,000
Financing costs paid related to 2025 Notes		(54)		(5,542)
Proceeds under Credit Facility		25,000		—
Repayments under Credit Facility		(90,000)		(85,000)
Financing costs paid related to credit facility		—		(3,740)
Net cash provided by/(used in) financing activities		29,085		142,309

Net increase/(decrease) in cash, cash equivalents and restricted cash		(26,636)		38,401
Cash, cash equivalents and restricted cash at beginning of period		61,101		—
Cash, cash equivalents and restricted cash at end of period	$	34,465	$	38,401


	For the Six Months Ended
	June 30, 2021		June 30, 2020
Supplemental and non-cash investing and financing activities:
Cash paid for interest	$	6,829	$	6,455
Shares issued to Trinity Capital Holdings ⁽¹⁾	$	—	$	8,000
Assumption of severance liability ⁽¹⁾	$	—	$	3,508
Shares issued to the Legacy Investors as part of the Formation Transactions ⁽¹⁾	$	—	$	137,748
Accrued but unpaid distributions	$	7,682	$	—
Value of shares issued in connection with the distribution reinvestment plan	$	2,275	$	1,091

Table of Contents

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Statements of Assets and Liabilities that sum to the total of the same such amounts on the Consolidated Statement of Cash Flows:


	June 30,		June 30
	2021		2020
Cash and cash equivalents	$	19,124	$	21,849
Restricted cash		15,341		16,552
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	34,465	$	38,401

(1)

See “Note 1 - Organization and Basis of Presentation”

See accompanying notes to consolidated financial statements.

Table of Contents

TRINITY CAPITAL INC.

Consolidated Schedule of Investments

June 30, 2021

(In thousands, except share and per share data)

(Unaudited)


Portfolio Company ⁽¹⁾	Type of Investment ⁽³⁾	Investment Date ⁽⁴⁾	Maturity Date	Interest Rate ⁽⁵⁾	Principal Amount ⁽⁶⁾		Cost		Fair Value ⁽⁷⁾
Debt Securities

Administrative and Support and Waste Management and Remediation ⁽²⁾
SeaOn Environmental, LLC	Equipment Financing	January 16, 2020	January 1, 2023	Fixed interest rate 9.0%; EOT 12.0%	$	1,636	$	1,951	$	1,947

Sub-total: Administrative and Support and Waste Management and Remediation (0.5%)*					$	1,636	$	1,951	$	1,947

Agriculture, Forestry, Fishing and Hunting ⁽²⁾
Bowery Farming, Inc.	Equipment Financing	January 16, 2020	January 1, 2023	Fixed interest rate 8.5%; EOT 8.5%	$	1,899	$	2,198	$	2,136
	Equipment Financing	January 16, 2020	February 1, 2023	Fixed interest rate 8.7%; EOT 8.5%		1,904		2,157		2,162
	Equipment Financing	January 16, 2020	May 1, 2023	Fixed interest rate 8.7%; EOT 8.5%		2,451		2,719		2,793
	Equipment Financing	December 22, 2020	January 1, 2024	Fixed interest rate 7.5%; EOT 8.5%		8,449		8,636		9,518
Total Bowery Farming, Inc.						14,703		15,710		16,609

Robotany, Inc.	Equipment Financing	January 16, 2020	January 1, 2024	Fixed interest rate 7.6%; EOT 22.0%	$	1,456	$	1,624	$	1,612

Sub-total: Agriculture, Forestry, Fishing and Hunting (4.8%)*					$	16,159	$	17,334	$	18,221

Construction ⁽²⁾
Dandelion Energy, Inc.	Equipment Financing	March 17, 2020	April 1, 2024	Fixed interest rate 9.0%; EOT 12.5%	$	397	$	419	$	422
	Equipment Financing	October 27, 2020	November 1, 2024	Fixed interest rate 9.2%; EOT 12.5%		485		506		506
	Equipment Financing ⁽¹⁴⁾	November 19, 2020	December 1, 2024	Fixed interest rate 9.1%; EOT 12.5%		485		508		509
	Equipment Financing	December 29, 2020	January 1, 2025	Fixed interest rate 9.2%; EOT 12.5%		702		724		725
	Equipment Financing ⁽¹⁴⁾	March 25, 2021	April 1, 2025	Fixed interest rate 9.1%; EOT 12.5%		1,073		1,096		1,101
Total Dandelion Energy, Inc.						3,142		3,253		3,263

Project Frog, Inc. ⁽¹⁹⁾	Secured Loan	April 30, 2020	May 1, 2023	Fixed interest rate 12.0%	$	4,128	$	4,071	$	3,763

Sub-total: Construction (1.9%)*					$	7,270	$	7,324	$	7,026

Educational Services ⁽²⁾
Medical Sales Training Holding Company	Secured Loan	March 18, 2021	April 1, 2025	Variable interest rate PRIME + 8.8% or Floor rate 12.0%; EOT 12.5% ⁽¹¹⁾	$	6,000	$	5,959	$	5,998

Yellowbrick Learning, Inc.	Secured Loan	February 1, 2021	September 1, 2025	Variable interest rate PRIME + 8.3% or Floor rate 11.5%; EOT 5.0% ⁽¹¹⁾	$	7,500	$	7,514	$	7,581

Sub-total: Educational Services (3.6%)*					$	13,500	$	13,473	$	13,579

Table of Contents

TRINITY CAPITAL INC.

Consolidated Schedule of Investments

June 30, 2021

(In thousands, except share and per share data)

(Unaudited)


Portfolio Company ⁽¹⁾	Type of Investment ⁽³⁾	Investment Date ⁽⁴⁾	Maturity Date	Interest Rate ⁽⁵⁾	Principal Amount ⁽⁶⁾		Cost		Fair Value ⁽⁷⁾

Debt Securities, Continued

Finance and Insurance ⁽²⁾
DailyPay, Inc.	Secured Loan	September 30, 2020	November 1, 2024	Variable interest rate PRIME + 7.0% or Floor rate 12.0%; EOT 6.0% ⁽¹¹⁾	$	20,000	$	20,055	$	20,294
	Secured Loan	December 30, 2020	January 1, 2025	Variable interest rate PRIME + 7.0% or Floor rate 12.0%; EOT 6.0% ⁽¹¹⁾		5,000		5,006		5,046
Total DailyPay, Inc.						25,000		25,061		25,340

Petal Card, Inc.	Secured Loan	January 16, 2020	December 1, 2023	Fixed interest rate 11.0%; EOT 3.0%	$	10,000	$	10,078	$	10,004
	Secured Loan ⁽¹⁶⁾	January 28, 2021	January 1, 2024	Variable interest rate PRIME + 7.3% or Floor rate 11.5% ⁽¹¹⁾		3,052		4,973		5,229
						13,052		15,051		15,233

Sub-total: Finance and Insurance (10.7%)*					$	38,052	$	40,112	$	40,573

Health Care and Social Assistance ⁽²⁾
Lark Technologies, Inc.	Secured Loan	September 30, 2020	April 1, 2025	Variable interest rate PRIME + 8.3% or Floor rate 11.5%; EOT 4.0% ⁽¹¹⁾	$	5,000	$	4,871	$	4,932
	Secured Loan	June 30, 2021	January 1, 2026	Variable interest rate PRIME + 8.3% or Floor rate 11.5%; EOT 4.0% ⁽¹¹⁾		5,000		4,743		4,742
Total Lark Technologies, Inc.						10,000		9,614		9,674

WorkWell Prevention & Care Inc.	Secured Loan	January 16, 2020	March 1, 2024	Fixed interest rate 8.0%; EOT 10.0%	$	3,370	$	3,632	$	3,597
	Secured Loan	January 16, 2020	March 1, 2024	Fixed interest rate 8.0%		700		726		692
Total WorkWell Prevention & Care Inc. ⁽¹⁹⁾						4,070		4,358		4,289

Sub-total: Health Care and Social Assistance (3.7%)*					$	14,070	$	13,972	$	13,963

Information ⁽²⁾
Firefly Systems, Inc.	Equipment Financing	January 29, 2020	February 1, 2023	Fixed interest rate 9.0%; EOT 10.0%	$	3,065	$	3,370	$	3,336
	Equipment Financing	August 28, 2020	September 1, 2023	Fixed interest rate 9.0%; EOT 10.0%		2,663		2,852		2,842
	Equipment Financing	September 18, 2020	October 1, 2023	Fixed interest rate 9.0%; EOT 10.0%		323		344		342
Total Firefly Systems, Inc.						6,051		6,566		6,520

Gobiquity, Inc.	Equipment Financing	January 16, 2020	April 1, 2022	Fixed interest rate 7.5%; EOT 20.0%	$	181	$	301	$	296

Rigetti & Co, Inc.	Secured Loan	March 10, 2021	April 1, 2025	Variable interest rate PRIME + 7.5% or Floor rate 11.0%; EOT 2.8% ⁽¹¹⁾	$	12,000	$	11,784	$	11,888
	Secured Loan	May 18, 2021	June 1, 2025	Variable interest rate PRIME + 7.5% or Floor rate 11.0%; EOT 2.8% ⁽¹¹⁾