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 September 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 November 3, 2021, the registrant had 27,202,146 shares of common stock ($0.001 par value per share) outstanding.

Table of Contents

TRINITY CAPITAL INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 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 September 30, 2021 (unaudited) and December 31, 2020	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	4
	Consolidated Statements of Changes in Net Assets for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	5
	Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	7
	Consolidated Schedule of Investments as of September 30, 2021 (unaudited)	9
	Consolidated Schedule of Investments as of December 31, 2020	25
	Notes to Consolidated Financial Statements (unaudited)	40
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	75
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	94
Item 4.	Controls and Procedures	96
PART II	OTHER INFORMATION	97
Item 1.	Legal Proceedings	97
Item 1A.	Risk Factors	97
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	99
Item 3.	Defaults Upon Senior Securities	99
Item 4.	Mine Safety Disclosures	99
Item 5.	Other Information	99
Item 6.	Exhibits	100
SIGNATURES		102

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)


	September 30,		December 31,
	2021		2020
	(Unaudited)
ASSETS
Investments at fair value:
Control investments (cost of $37,934 and $57,072, respectively)	$	30,672	$	48,730
Affiliate investments (cost of $41,475 and $20,653, respectively)		34,309		27,650
Non-control / Non-affiliate investments (cost of $559,305 and $420,611, respectively)		612,265		417,271
Total investments (cost of $638,714 and $498,336, respectively)		677,246		493,651
Cash and cash equivalents		25,313		44,656
Restricted cash		15,000		16,445
Interest receivable		4,481		3,468
Prepaid expenses		1,025		744
Other assets		4,342		744
Total assets	$	727,407	$	559,708

LIABILITIES
2026 Notes, net of $2,564, and $0, respectively, of unamortized deferred financing costs	$	122,436	$	—
2025 Notes, net of $3,902, and $4,697, respectively, of unamortized deferred financing costs		121,098		120,303
Convertible Notes, net of $2,650, and $3,448, respectively, of unamortized deferred financing costs and discount		47,350		46,552
Credit Facility, net of $526 and $2,107, respectively, of unamortized deferred financing costs		9,474		132,893
Distribution payable		8,959		4,947
Security deposits		7,705		7,874
Accounts payable, accrued expenses and other liabilities		11,379		8,391
Total liabilities		328,401		320,960

Commitments and contingencies (Note 6)

NET ASSETS
Common stock, $0.001 par value per share (200,000,000 authorized, 27,148,096 and 18,321,274 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)		27		18
Paid-in capital in excess of par		370,442		263,366
Distributable earnings/(accumulated loss)		28,537		(24,636)
Total net assets		399,006		238,748
Total liabilities and net assets	$	727,407	$	559,708
NET ASSET VALUE PER SHARE	$	14.70	$	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				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
INVESTMENT INCOME:
Interest income:
Control investments	$	1,288	$	1,045	$	3,860	$	2,617
Affiliate investments		273		144		1,155		876
Non-Control / Non-Affiliate investments		19,098		11,372		50,103		33,322
Total interest income		20,659		12,561		55,118		36,815
Fee income:
Non-Control / Non-Affiliate investments		1,131		965		3,468		2,808
Total fee income		1,131		965		3,468		2,808
Total investment income		21,790		13,526		58,586		39,623

EXPENSES:
Interest expense and other debt financing costs		5,112		3,893		14,153		12,433
Compensation and benefits		3,677		2,904		11,043		5,983
Professional fees		762		733		1,979		1,913
General and administrative		1,116		381		2,955		1,209
Total expenses		10,667		7,911		30,130		21,538

NET INVESTMENT INCOME		11,123		5,615		28,456		18,085

NET REALIZED GAIN/(LOSS) FROM INVESTMENTS:
Control investments		(2,725)		—		(2,725)		—
Affiliate investments		—		—		1,491		—
Non-Control / Non-Affiliate investments		3,391		(1,490)		6,490		(4,374)
Net realized gain/(loss) from investments		666		(1,490)		5,256		(4,374)

NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) FROM INVESTMENTS:
Control investments		13,172		818		1,088		(7,350)
Affiliate investments		(5,960)		2,605		(14,165)		471
Non-Control / Non-Affiliate investments		8,180		4,786		56,575		(7,081)
Net change in unrealized appreciation/(depreciation) from investments		15,392		8,209		43,498		(13,960)

NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS BEFORE FORMATION COSTS		27,181		12,334		77,210		(249)
Costs related to the acquisition of Trinity Capital Holdings and Legacy Funds		—		—		—		(15,586)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	27,181	$	12,334	$	77,210	$	(15,835)

NET INVESTMENT INCOME PER SHARE - BASIC	$	0.42	$	0.31	$	1.11	$	1.00
NET INVESTMENT INCOME PER SHARE - DILUTED	$	0.40		0.31	$	1.08	$	1.00

NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC	$	1.02	$	0.68	$	3.02	$	(0.88)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - DILUTED	$	0.94	$	0.68	$	2.77	$	(0.88)

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC		26,641,084		18,166,491		25,569,565		18,033,173
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED		29,974,419		18,166,491		28,902,900		18,033,173

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 September 30, 2021:


						Distributable
						Earnings /
	Common Stock			Paid In Capital		(Accumulated		Total
	Shares	Par Value		in Excess of Par		Loss)		Net Assets
Balance as of June 30, 2021	26,491,274	$	26	$	369,379	$	10,315	$	379,720
Issuance of common stock pursuant to distribution reinvestment plan	63,390		—		915		—		915
Stock based compensation	—		—		149		—		149
Issuance of restricted stock	593,432		1		(1)		—		—
Distributions to stockholders	—		—		—		(8,959)		(8,959)
Net increase/(decrease) in net assets resulting from operations:
Net investment income	—		—		—		11,123		11,123
Net realized gain/(loss) from investments	—		—		—		666		666
Net unrealized appreciation/(depreciation) from investments	—		—		—		15,392		15,392
Balance as of September 30, 2021	27,148,096	$	27	$	370,442	$	28,537	$	399,006

Three Months Ended September 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 June 30, 2020	18,137,600	$	18	$	261,292	$	(32,664)	$	228,646
Issuance of common stock pursuant to distribution reinvestment plan	98,443		—		1,242		—		1,242
Distributions to stockholders	—		—		—		(4,897)		(4,897)
Net increase/(decrease) in net assets resulting from operations:
Net investment income	—		—		—		5,615		5,615
Net realized gain/(loss) from investments	—		—		—		(1,490)		(1,490)
Net unrealized appreciation/(depreciation) from investments	—		—		—		8,209		8,209
Balance as of September 30, 2020	18,236,043	$	18	$	262,534	$	(25,227)	$	237,325

Table of Contents

Nine Months Ended September 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	227,099		—		3,190		—		3,190
Stock based compensation	—		—		149		—		149
Issuance of restricted stock	593,432		1		(1)		—		—
Distributions to stockholders	—		—		—		(24,037)		(24,037)
Net increase/(decrease) in net assets resulting from operations:
Net investment income	—		—		—		28,456		28,456
Net realized gain/(loss) from investments	—		—		—		5,256		5,256
Net unrealized appreciation/(depreciation) from investments	—		—		—		43,498		43,498
Balance as of September 30, 2021	27,148,096	$	27	$	370,442	$	28,537	$	399,006

Nine Months Ended September 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	186,183		—		2,333		—		2,333
Distributions to stockholders	—		—		—		(8,868)		(8,868)
Net increase/(decrease) in net assets resulting from operations:
Net investment income	—		—		—		18,085		18,085
Net realized gain/(loss) from investments	—		—		—		(4,374)		(4,374)
Net unrealized appreciation/(depreciation) from investments	—		—		—		(13,960)		(13,960)
Costs related to the acquisition of Trinity Capital Holdings and Legacy Funds	—		—		—		(15,586)		(15,586)
Balance as of September 30, 2020	18,236,043	$	18	$	262,534	$	(25,227)	$	237,325

(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)


	Nine Months Ended
	September 30, 2021		September 30, 2020
Cash flows provided by/(used in) operating activities:
Net increase/(decrease) in net assets resulting from operations	$	77,210	$	(15,835)
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		(358,450)		(137,505)
Proceeds from sales and paydowns of investments		240,132		118,644
Net change in unrealized appreciation/(depreciation) from investments, net of third party participation		(43,215)		13,960
Net realized gain/(loss) from investments		(5,256)		4,374
Accretion of original issue discounts and end of term payments on investments		(16,807)		(7,810)
Costs related to the acquisition of Trinity Capital Holdings and Legacy Funds		—		15,586
Amortization of deferred financing costs		2,850		2,182
Share-based compensation		149
Change in operating assets and liabilities
(Increase)/Decrease in interest receivable		(1,013)		(2,045)
(Increase)/Decrease in prepaid expenses		(281)		(511)
(Increase)/Decrease in other assets		(2,441)		(217)
Increase/(Decrease) in security deposits		(169)		2,811
Increase/(Decrease) in accounts payable, accrued expenses and other liabilities		2,991		3,522
Increase/(Decrease) in due to related party		—		(1,058)
Net cash provided by/(used in) operating activities		(104,300)		(3,902)

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		(1,157)		(61)
Net cash provided by/(used in) investing activities		(1,157)		(91,787)

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		(16,835)		(6,535)
Proceeds from issuance of 2025 Notes		—		125,000
Financing costs paid related to 2025 Notes		(85)		(5,610)
Proceeds from issuance of 2026 Notes		125,000		—
Financing costs paid related to 2026 Notes		(2,619)		—
Proceeds under Credit Facility		71,000		(85,000)
Repayments under Credit Facility		(196,000)		10,000
Financing costs paid related to credit facility		—		(3,983)
Net cash provided by/(used in) financing activities		84,669		148,343

Net increase/(decrease) in cash, cash equivalents and restricted cash		(20,788)		52,654
Cash, cash equivalents and restricted cash at beginning of period		61,101		—
Cash, cash equivalents and restricted cash at end of period	$	40,313	$	52,654


	For the Nine Months Ended
	September 30, 2021		September 30, 2020
Supplemental and non-cash investing and financing activities:
Cash paid for interest	$	9,618	$	9,592
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	$	8,959	$	—
Value of shares issued in connection with the distribution reinvestment plan	$	3,190	$	2,333
Non-cash settlement of investments	$	5,065	$	731

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:


	September 30,		September 30,
	2021		2020
Cash and cash equivalents	$	25,313	$	36,323
Restricted cash		15,000		16,331
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	40,313	$	52,654

(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

September 30, 2021

(In thousands, except share and per share data)

(Unaudited)


Portfolio Company ⁽¹⁾	Type of Investment ⁽²⁾	Investment Date ⁽³⁾	Maturity Date	Interest Rate ⁽⁴⁾	Principal Amount ⁽⁵⁾		Cost		Fair Value ⁽⁶⁾
Debt Securities

Administrative and Support and Waste Management and Remediation ⁽⁷⁾
SeaOn Environmental, LLC	Equipment Financing	January 16, 2020	January 1, 2023	Fixed interest rate 9.0%; EOT 12.0%	$	1,378	$	1,726	$	1,715

Gabi Personal Insurance Agency, Inc.	Secured Loan⁽¹⁴⁾	August 6, 2021	September 1, 2025	Variable interest rate Prime + 3.3% or Floor rate 11.8%; EOT 5.5% ⁽⁸⁾	$	5,000	$	4,924	$	5,275


Sub-total: Administrative and Support and Waste Management and Remediation (0.5%)*					$	6,378	$	6,650	$	6,990

Agriculture, Forestry, Fishing and Hunting ⁽⁷⁾
Bowery Farming, Inc.	Secured Loan⁽¹⁴⁾	September 10, 2021	January 1, 2026	Variable interest rate LIBOR + 11.0% or Floor rate 10.1% ⁽⁸⁾	$	10,000	$	9,197	$	9,197

Robotany, Inc.	Equipment Financing	January 16, 2020	January 1, 2024	Fixed interest rate 7.6%; EOT 22.0%	$	1,322	$	1,545	$	1,593

Sub-total: Agriculture, Forestry, Fishing and Hunting (4.8%)*					$	11,322	$	10,742	$	10,790

Construction ⁽⁷⁾
Dandelion Energy, Inc.	Equipment Financing	March 17, 2020	April 1, 2024	Fixed interest rate 9.0%; EOT 12.5%	$	365	$	394	$	395
	Equipment Financing	October 27, 2020	November 1, 2024	Fixed interest rate 9.2%; EOT 12.5%		453		481		480
	Equipment Financing ⁽¹⁹⁾	November 19, 2020	December 1, 2024	Fixed interest rate 9.1%; EOT 12.5%		447		479		478
	Equipment Financing	December 29, 2020	January 1, 2025	Fixed interest rate 9.2%; EOT 12.5%		659		692		690
	Equipment Financing⁽¹⁹⁾	March 25, 2021	April 1, 2025	Fixed interest rate 9.1%; EOT 12.5%		994		1,037		1,037
Total Dandelion Energy, Inc.						2,918		3,083		3,080

Project Frog, Inc. ⁽²¹⁾	Secured Loan	April 30, 2020	December 1, 2023	Fixed interest rate 12.0%	$	4,128	$	4,063	$	3,757

Sub-total: Construction (1.9%)*					$	7,046	$	7,146	$	6,837

Educational Services ⁽⁷⁾
Medical Sales Training Holding Company	Secured Loan	March 18, 2021	April 1, 2025	Variable interest rate Prime + 3.3% or Floor rate 12.0%; EOT 5.0% ⁽⁸⁾	$	6,000	$	5,993	$	6,026
	Secured Loan	July 21, 2021	August 1, 2025	Variable interest rate Prime + 3.3% or Floor rate 12.0%; EOT 5.0% ⁽⁸⁾		2,000		1,983		1,983
Total Medical Sales Training Holding Company						8,000		7,976		8,009

Yellowbrick Learning, Inc.	Secured Loan	February 1, 2021	September 1, 2025	Variable interest rate Prime + 3.3% or Floor rate 11.5%; EOT 5.0% ⁽⁸⁾	$	7,500	$	7,546	$	7,546
	Secured Loan	August 10, 2021	March 1, 2026	Variable interest rate Prime + 3.3% or Floor rate 11.5%; EOT 5.0% ⁽⁸⁾		2,500		2,493		2,493
Total Yellowbrick Learning, Inc.						10,000		10,039		10,039

Sub-total: Educational Services (3.6%)*					$	18,000	$	18,015	$	18,048

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TRINITY CAPITAL INC.

Consolidated Schedule of Investments

September 30, 2021

(In thousands, except share and per share data)

(Unaudited)


Portfolio Company ⁽¹⁾	Type of Investment ⁽²⁾	Investment Date ⁽³⁾	Maturity Date	Interest Rate ⁽⁴⁾	Principal Amount ⁽⁵⁾		Cost		Fair Value ⁽⁶⁾

Debt Securities, Continued

Finance and Insurance ⁽⁷⁾
DailyPay, Inc.	Secured Loan	September 30, 2020	November 1, 2024	Variable interest rate Prime + 5.0% or Floor rate 12.0%; EOT 6.0% ⁽⁸⁾	$	20,000	$	20,195	$	20,682
	Secured Loan	December 30, 2020	January 1, 2025	Variable interest rate Prime + 5.0% or Floor rate 12.0%; EOT 6.0% ⁽⁸⁾		5,000		5,041		5,149
Total DailyPay, Inc.						25,000		25,236		25,831

Petal Card, Inc.	Secured Loan	January 16, 2020	October 1, 2024	Variable interest rate Prime + 3.5% or Floor rate 11.0%; EOT 3.0% ⁽⁸⁾	$	10,000	$	10,112	$	10,040
	Secured Loan ^(12)(14)	January 28, 2021	January 1, 2024	Variable interest rate Prime + 4.3% or Floor rate 11.5% ⁽⁸⁾		8,235		9,214		9,603
	Secured Loan	August 6, 2021	October 1, 2024	Variable interest rate Prime + 11.0% or Floor rate 11.0%; EOT 3.0% ⁽⁸⁾		7,000		6,798		6,800
						25,235		26,124		26,443

Sub-total: Finance and Insurance (10.7%)*					$	50,235	$	51,360	$	52,274

Health Care and Social Assistance ⁽⁷⁾
FemTec Health, Inc.	Secured Loan	July 23, 2021	February 1, 2026	Fixed interest rate 11.0%; EOT 7.5%	$	10,000	$	10,517	$	10,127
	Secured Loan	July 23, 2021	September 1, 2022	Fixed interest rate 11.0%; EOT 0.0%		2,151		2,151		2,171
	Secured Loan	September 29, 2021	April 1, 2026	Fixed interest rate 11.0%; EOT 7.5%		3,000		3,000		3,000
Total FemTec Health, Inc. ⁽²¹⁾						15,151		15,668		15,298

Lark Technologies, Inc.	Secured Loan	September 30, 2020	April 1, 2025	Variable interest rate Prime + 3.3% or Floor rate 11.5%; EOT 4.0% ⁽⁸⁾	$	5,000	$	4,905	$	4,959
	Secured Loan	June 30, 2021	January 1, 2026	Variable interest rate Prime + 3.3% or Floor rate 11.5%; EOT 4.0% ⁽⁸⁾		5,000		4,780		4,819
Total Lark Technologies, Inc.						10,000		9,685		9,778