As filed with the Securities and Exchange Commission on June 24, 2024

Securities Act File No. 333-       

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________________________

 

FORM N-2
___________________________

 

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 

Pre-Effective Amendment No.

Post-Effective Amendment No.

___________________________

 

Trinity Capital Inc.
(Exact Name of Registrant as Specified in Charter)

___________________________

 

1 N. 1st Street
Suite 302
Phoenix, Arizona 85004
(Address of Principal Executive Offices)

(480) 374-5350
(Registrant’s Telephone Number, including Area Code)

___________________________

 

Kyle Brown
c/o Trinity Capital Inc.
1 N. 1st Street
Suite 302
Phoenix, Arizona 85004
(Name and Address of Agent for Service)

___________________________

 

WITH COPIES TO:

 

Harry S. Pangas, Esq.
Darius I. Ravangard, Esq.
Dechert LLP
1900 K Street, N.W.
Washington, D.C. 20006
Tel: (202) 261-3300
Fax: (202) 261-3333

___________________________

 

Approximate date of commencement of proposed public offering: As soon as practicable after the effective date of this Registration Statement.

 

Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans.

 

Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933 (“Securities Act”), other than securities offered in connection with a dividend reinvestment plan.

 

Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto.

 

Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act.

 

Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act.

 

It is proposed that this filing will become effective (check appropriate box):

 

when declared effective pursuant to Section 8(c) of the Securities Act.

 

If appropriate, check the following box:

 

This [post-effective] amendment designates a new effective date for a previously filed [post-effective amendment] [registration statement].

 

This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is.

 

This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is.

 

This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is.

 

Check each box that appropriately characterizes the Registrant:

 

Registered Closed-End Fund (closed-end company that is registered under the Investment Company Act of 1940 (“Investment Company Act”)).

 

Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act).

 

Interval Fund (Registered Closed-End Fund or a Business Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act).

 

A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).

 

Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act).

 

Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”).

 

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 7(a)(2)(B) of Securities Act.

 

New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing).

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JUNE 24, 2024

 

PRELIMINARY PROSPECTUS

 

 

 

TRINITY CAPITAL INC.

 

Up to $50,000,000 in Aggregate Principal Amount of
6.00% Convertible Notes due 2025
and
Shares of Common Stock Issuable Upon Conversion Thereof
by the Selling Securityholders

 

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. 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 are an internally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We have elected to be treated, and intend to qualify annually, as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes. As a BDC and a RIC, we are required to comply with certain regulatory requirements. See “Regulation” and “Certain U.S. Federal Income Tax Considerations.”

 

Our investment objective is to generate current income and, to a lesser extent, capital appreciation through our investments. 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 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. Our loans and equipment financings generally range from $5 million to $50 million. 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. The debt in which we invest typically is not rated by any rating agency, but if these instruments were rated, they would likely receive a rating of below investment grade (that is, below BBB- or Baa3), which is often referred to as “high yield” or “junk.”

 

 

 

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”). As a result, we are subject to reduced public company reporting requirements and intend to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act.

 

Our common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “TRIN.” On June 20, 2024, the last reported sales price of our common stock on Nasdaq was $14.98 per share. The net asset value per share of our common stock at March 31, 2024 (the last date prior to the date of this prospectus for which we reported net asset value) was $12.88.

 

Our 6.00% Convertible Notes due 2025 (the “Convertible Notes”) have no history of public trading and we do not intend to list the Convertible Notes on any national securities exchange.

 

This prospectus relates to the resale from time to time of (i) up to $50,000,000 in aggregate principal amount the Convertible Notes and (ii) shares our common stock, par value $0.001 per share, issuable upon the conversion of the Convertible Notes, from time to time, by the selling securityholders identified in this prospectus or any accompanying prospectus supplement, if any (the “Selling Securityholders”). This prospectus also relates to the issuance and sale of shares of our common stock issued upon the conversion of the Convertible Notes by subsequent purchasers of the Convertible Notes. This prospectus does not necessarily mean that the Selling Securityholders will offer or sell any or all of the Convertible Notes or shares of our common stock issuable upon conversion of the Convertible Notes. We cannot predict when or in what amounts, if any, the Selling Securityholders may sell the Convertible Notes or shares of our common stock issuable upon conversion of the Convertible Notes offered by this prospectus. The prices at which the Selling Securityholders may sell the Convertible Notes or shares of our common stock issuable upon conversion of the Convertible Notes will be determined by the prevailing market price for the Convertible Notes or shares of our common stock issuable upon conversion of the Convertible Notes, or in negotiated transactions. We are filing the registration statement, of which this prospectus forms a part, pursuant to a registration rights agreement, dated as of December 11, 2020, we entered into for the benefit of the Selling Securityholders. We will not receive any of the proceeds from the resale of the Convertible Notes or shares of our common stock issuable upon conversion of the Convertible Notes.

 

The Convertible Notes were issued pursuant to a Base Indenture, dated as of January 16, 2020, between us and U.S. Bank National Association, as trustee (together with its successor in interest, U.S. Bank Trust Company, National Association, the “Trustee”), and a Second Supplemental Indenture, dated as of December 11, 2020, between us and the Trustee. The Convertible Notes mature on December 11, 2025, unless earlier converted or repurchased. The Convertible Notes bear interest at a rate of 6.00% per year, subject to additional interest upon certain events, payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2021. If an investment grade rating is not maintained with respect to the Convertible Notes, additional interest of 0.75% per annum will accrue on the Convertible Notes until such time as the Convertible Notes receive an investment grade rating of “BBB-” (or its equivalent) or better. A credit rating is not a recommendation to buy, sell or hold securities, should be evaluated independently from similar ratings of other securities or companies, and may be subject to revision or withdrawal at any time. There can be no assurance that a credit rating will remain for any given period of time.

 

Holders may convert their Convertible Notes, at their option, at any time on or prior to the close of business on the business day immediately preceding the maturity date. The conversion rate was initially 66.6667 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). Effective immediately after the close of business on March 28, 2024, the conversion rate changed to 78.0543 shares of the Company’s common stock, per $1,000 principal amount of the Convertible Notes (equivalent to a conversion price of approximately $12.81 per share of common stock) as a result of a certain cash dividend of the Company. The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, we will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event in certain circumstances. Upon conversion of the Convertible Notes, we will pay or deliver, as the case may be, cash, shares of our common stock, par value $0.001 per share, or a combination of cash and shares of our common stock, at our election, per $1,000 principal amount of the Convertible Notes, equal to the conversion rate, as described in this prospectus.

 

 

 

 

At our option, we may cause the holders to convert all or a portion of the then outstanding principal amount of the Convertible Notes plus accrued but unpaid interest, but excluding the date of such conversion, at any time on or prior to the close of business on the business day immediately preceding the maturity date, if the closing sale price of our common stock on a national securities exchange, including Nasdaq, for any 30 consecutive trading days exceeds 120% of the conversion price, as may be adjusted. Upon such conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, per $1,000 principal amount of the Convertible Notes, equal to the conversion rate, and a forced conversion make-whole payment, if any, in cash, as described in this prospectus.

 

If we undergo a fundamental change (as defined herein), holders may require us to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

 

The Convertible Notes are our direct senior unsecured obligation and rank pari passu, or equal in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by us. No sinking fund is provided for the Convertible Notes. See “Description of the Convertible Notes.” As of March 31, 2024, on a consolidated basis, we had approximately $737.5 million of indebtedness outstanding, $190.0 million of which was secured indebtedness of our wholly-owned subsidiary, TrinCap Funding, LLC, and $547.5 million of which was unsecured indebtedness, which amount includes the Convertible Notes.

 

Investing in the Convertible Notes and our common stock involves a high degree of risk, including credit risk and the risk of the use of leverage, and is highly speculative. Before buying any Convertible Notes or shares of our common stock, you should read the discussion of the material risks of investing in our securities in “Risk Factors” beginning on page 20 of this prospectus and any risk factors included in any accompanying prospectus supplement, if any.

 

This prospectus and any accompanying prospectus supplement, if any, contains important information you should know before investing in our securities. Please read this prospectus, any accompanying prospectus supplement and the documents incorporated by reference herein and therein before investing and keep it for future reference. We also file periodic and current reports, proxy statements and other information about us with the U.S. Securities and Exchange Commission (the “SEC”). This information is available free of charge by contacting us at 1 N. 1st Street, Suite 302, Phoenix, Arizona 85004, calling us at (480) 374-5350 or visiting our corporate website located at www.trinitycap.com. Information on our website is not incorporated into or a part of this prospectus and any accompanying prospectus supplement, if any. The SEC also maintains a website at www.sec.gov that contains this information.

 

THE CONVERTIBLE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is                              , 2024.

 

 

 

 

TABLE OF CONTENTS

 

  Page
PROSPECTUS SUMMARY 1
SPECIFIC TERMS OF THE CONVERTIBLE NOTES AND THE OFFERING 8
FEES AND EXPENSES 16
FINANCIAL HIGHLIGHTS 18
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS 19
RISK FACTORS 20
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 28
USE OF PROCEEDS 29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 30
BUSINESS 31
SENIOR SECURITIES 32
PORTFOLIO COMPANIES 33
MANAGEMENT 78
EXECUTIVE COMPENSATION 79
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS 80
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS 81
DETERMINATION OF NET ASSET VALUE 82
DISTRIBUTION REINVESTMENT PLAN 83
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS 84
CERTAIN MATERIAL ERISA AND OTHER CONSIDERATIONS 95
DESCRIPTION OF THE CONVERTIBLE NOTES 98
DESCRIPTION OF OUR CAPITAL STOCK 125
REGULATION 135
SECURITIES ELIGIBLE FOR FUTURE SALE 136
SELLING SECURITYHOLDERS 138
PLAN OF DISTRIBUTION 140
CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR 143
BROKERAGE ALLOCATION AND OTHER PRACTICES 143
LEGAL MATTERS 143
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 143
AVAILABLE INFORMATION 143
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 144

 

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ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we filed with the SEC using the “shelf” registration process. Under the shelf registration process, which constitutes a delayed offering in reliance on Rule 415 under the Securities Act, the Selling Securityholders may offer and sell, from time to time, up to $50,000,000 in aggregate principal amount of the Convertible Notes or the shares of our common stock issuable upon conversion of the Convertible Notes. We cannot predict when or in what amounts, if any, the Selling Securityholders may sell the Convertible Notes or the shares of our common stock issuable upon conversion of the Convertible Notes. The prices at which the Selling Securityholders may sell the Convertible Notes or the shares of our common stock issuable upon conversion of the Convertible Notes will be determined by the prevailing market price for the Convertible Notes or the shares of our common stock issuable upon conversion of the Convertible Notes, or in negotiated transactions. This prospectus, any accompanying prospectus supplement and the documents we incorporate by reference into this prospectus provide you with a general description of the Convertible Notes and the shares of our common stock issuable upon conversion of the Convertible Notes that the Selling Securityholders may offer and sell, from time to time. We may provide a prospectus supplement that will contain specific information about the terms of the offering. A prospectus supplement may also add, update or change information contained in this prospectus. You should carefully read this prospectus, any accompanying prospectus supplement, any free writing prospectus and the documents incorporated by reference in this prospectus and any accompanying prospectus supplement before making an investment decision.

 

This prospectus may contain estimates and information concerning our industry, including market size and growth rates of the markets in which we participate, that are based on industry publications and other third-party reports. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Neither we nor the Selling Securityholders have independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described or referenced in the section titled “Risk Factors,” that could cause results to differ materially from those expressed in these publications and reports.

 

This prospectus includes summaries of certain provisions contained in some of the documents described in this prospectus, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or incorporated by reference, or will be filed or incorporated by reference, as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described in the section titled “Available Information.”

 

You should rely only on the information included or incorporated by reference in this prospectus, any prospectus supplement or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. We and the Selling Securityholders have not authorized any other person to provide you with different information or to make representations as to matters not stated in this prospectus, in any accompanying prospectus supplement or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any accompanying prospectus supplement and any free writing prospectus prepared by us or on our behalf or to which we have referred you do not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. You should not assume that the information included or incorporated by reference in this prospectus, in any accompanying prospectus supplement or in any such free writing prospectus is accurate as of any date other than their respective dates. Our financial condition, results of operations and prospects may have changed since any such date. To the extent required by law, we will amend or supplement the information contained or incorporated by reference in this prospectus and any accompanying prospectus supplement to reflect any material changes to such information subsequent to the date of the prospectus and any accompanying prospectus supplement and prior to the completion of any offering pursuant to the prospectus and any accompanying prospectus supplement.

 

ii

 

 

PROSPECTUS SUMMARY

 

This summary highlights some of the information included elsewhere in this prospectus or incorporated by reference. It is not complete and may not contain all of the information that you may want to consider before investing in our securities. You should carefully read this entire prospectus, any accompanying prospectus supplement and any document incorporated by reference before investing in our securities.

 

Throughout this prospectus, except where the context suggests otherwise:

 

the terms “we,” “us,” “our,” “Trinity,” and “Company” refer, collectively, to the Legacy Funds (as defined below) and their respective subsidiaries, general partners, managers and managing members, as applicable prior to the consummation of the Formation Transactions (as defined below) and Trinity Capital Inc. after the consummation of the Formation Transactions; and

 

“Legacy Funds” refers collectively to Trinity Capital Investment, LLC, Trinity Capital Fund II, L.P. (“Fund II”), Trinity Capital Fund III, L.P. (“Fund III”), Trinity Capital Fund IV, L.P. (“Fund IV”) and Trinity Sidecar Income Fund, L.P. and their respective subsidiaries, general partners, managers and managing members, as applicable.

 

Trinity Capital Inc.

 

Overview

 

Trinity Capital Inc., a Maryland corporation, 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. 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. 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. The warrants entitle us to purchase preferred or common ownership shares of a portfolio company, and we typically target the amount of such warrants to scale in proportion to the amount of the debt or equipment financing. Contingent exit fees are cash fees payable upon the consummation of certain trigger events, such as a successful change of control or initial public offering of the portfolio company. In addition, we may obtain rights to purchase additional shares of our portfolio companies in subsequent equity financing rounds.

 

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. Subject to the requirements of the Investment Company Act of 1940, as amended (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. The debt in which we invest typically is not rated by any rating agency, but if these instruments were rated, they would likely receive a rating of below investment grade (that is, below BBB- or Baa3), which is often referred to as “high yield” or “junk.”

 

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 believe a lack of profitability often limits these companies’ ability to access traditional bank financing and our in-house engineering and operations experience allows us to better understand this risk and earn what we believe to be higher overall returns and better risk-adjusted returns than those associated with traditional bank loans.

 

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-stage companies. We seek to structure our loans and equipment financings such that amortization of the amount invested quickly reduces our risk exposure. Leveraging the experience of our investment professionals, we seek to target companies at their growth-stage of development and to identify financing opportunities ignored by the traditional direct lending community.

 

1

 

 

As of March 31, 2024, our investment portfolio had an aggregate fair value of approximately $1,363.9 million and was comprised of approximately $1,010.8 million in secured loans, $277.6 million in equipment financings, and $75.5 million in equity and warrants, across 128 portfolio companies. See “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

 

In December 2020, we issued $50 million in aggregate principal amount of our 6.00% Convertible Notes due 2025 (the “Convertible Notes”), at an original issuance price of 97.376% of the aggregate principal thereof, in reliance upon the available exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). This offering relates to the resale from time to time of (i) up to $50,000,000 in aggregate principal amount the Convertible Notes and (ii) shares our common stock, par value $0.001 per share, issuable upon the conversion of the Convertible Notes, from time to time, by the selling securityholders identified in this prospectus or any accompanying prospectus supplement, if any (the “Selling Securityholders”). This prospectus also relates to the issuance and sale of shares of our common stock issued upon the conversion of the Convertible Notes by subsequent purchasers of the Convertible Notes. We will not receive any of the proceeds from the resale of the Convertible Notes and the shares of our common stock issuable upon conversion of the Convertible Notes. See “Plan of Distribution” and “Selling Securityholders.”

 

We are an internally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the 1940 Act. We have elected to be treated, and intend to qualify annually, as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes. As a BDC and a RIC, we are required to comply with certain regulatory requirements. See “Regulation” and “Certain U.S. Federal Income Tax Considerations.” For example, as a BDC, at least 70% of our assets must be assets of the type listed in Section 55(a) of the 1940 Act, as described herein.

 

Our History

 

On January 16, 2020, through a series of transactions (the “Formation Transactions”), we acquired the Legacy Funds, including their respective investment portfolios (collectively, the “Legacy Portfolio”), and Trinity Capital Holdings, LLC, a holding company whose subsidiaries managed and/or had the right to receive fees from certain of the Legacy Funds (“Trinity Capital Holdings”).

 

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. Our shares of common stock began trading on the Nasdaq Global Select Market (“Nasdaq”) on January 29, 2021 under the symbol “TRIN.”

 

On December 5, 2022, we 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 us. To achieve these goals, we have agreed to offer the JV the opportunity to purchase up to 40% in dollar amount, but not less than 25% in dollar amount, of the entire amount of each secured loan and equipment financing advance originated by us during the period commencing on September 1, 2022 and ending on June 5, 2026.

 

For additional information regarding our history and the Formation Transactions, see “Business.”

 

Borrowings

 

Through our wholly owned subsidiary, TrinCap Funding, LLC (“TCF”), we are a party to a credit agreement (as amended, the “KeyBank Credit Agreement”) with KeyBank, National Association (“KeyBank”). The KeyBank Credit Agreement matures on October 27, 2026, unless extended, and includes a commitment of $350.0 million from KeyBank and other banks and allows us, through TCF, to borrow up to $400.0 million. Borrowings under the KeyBank Credit Agreement bear interest at a rate equal to Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus, as of March 31, 2024, 2.85%, subject to the number of eligible loans in the collateral pool. As of March 31, 2024, approximately $190.0 million was outstanding under the KeyBank Credit Agreement. See “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

2

 

 

In January 2020, we issued $125 million in aggregate principal amount of our 7.00% Notes due 2025 (the “January 2025 Notes”) in reliance upon the available exemptions from the registration requirements of the Securities Act (the “144A Note Offering”). The January 2025 Notes were issued pursuant to an Indenture, dated as of January 16, 2020 (the “Base Indenture”), between us and the Trustee, and a First Supplemental Indenture, dated as of January 16, 2020 (the “First Supplemental Indenture” and, together with the Base Indenture, the “2025 Notes Indenture”), between us and the Trustee. In July 2022, we issued $57.5 million in aggregate principal amount of the 7.00% Notes due 2025 in an additional issuance of such 7.00% Notes due 2025 (the “July 2025 Notes” and together with the January 2025 Notes, the “2025 Notes”). The July 2025 Notes are treated as a single series with the January 2025 Notes under the First Supplemental Indenture and have the same terms as the January 2025 Notes (other than issue date and issue price). The 2025 Notes have the same CUSIP number and are fungible and rank equally.

 

On May 17, 2024, the Company redeemed $30.0 million in aggregate principal amount of outstanding 2025 Notes at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon.

 

As of March 31, 2024, the outstanding aggregate principal amount of the 2025 Notes is $182.5 million. The 2025 Notes mature on January 16, 2025 (the “2025 Notes Maturity Date”), unless repurchased or redeemed in accordance with their terms prior to such date, and bear interest at a rate of 7.00% per year payable quarterly on March 15, June 15, September 15 and December 15 of each year, commencing on March 15, 2020. In connection with the additional issuance of the July 2025 Notes, the 2025 Notes began trading on Nasdaq under the symbol “TRINL” on July 29, 2022. See “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Securities Eligible for Future Sale.”

 

In December 2020, we issued $50 million in aggregate principal amount of the Convertible Notes, at an original issuance price of 97.376% of the aggregate principal thereof, in reliance upon the available exemptions from the registration requirements of the Securities Act (the “Convertible Notes Offering”). The Convertible Notes were issued pursuant to the Base Indenture and a Second Supplemental Indenture, dated as of December 11, 2020, between us and the Trustee (the “Second Supplemental Indenture” and, together with the Base Indenture, the “Convertible Notes Indenture”). The Convertible Notes mature on December 11, 2025 (the “Convertible Notes Maturity Date”), unless earlier converted or repurchased in accordance with their terms prior to such date. The Convertible Notes bear interest at a rate of 6.00% per year, subject to additional interest of 0.75% per annum if we do not maintain an investment grade rating with respect to the Convertible Notes, payable semiannually on May 1 and November 1 of each year, commencing on May 1, 2021. Holders may convert their Convertible Notes, at their option, at any time on or prior to the close of business on the business day immediately preceding the Convertible Notes Maturity Date. The conversion rate was initially 66.6667 shares of our common stock, per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). Effective immediately after the close of business on March 28, 2024, the conversion rate changed to 78.0543 shares of our common stock, per $1,000 principal amount of the Convertible Notes (equivalent to a conversion price of approximately $12.81 per share of common stock) as a result of certain cash dividends of the Company. The net asset value per share of our common stock at March 31, 2024 (the last date prior to the date of this prospectus for which we reported net asset value) was $12.88. The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. Upon conversion of the Convertible Notes, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election, per $1,000 principal amount of the Convertible Notes, equal to the then existing conversion rate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Securities Eligible for Future Sale,” as well as our Current Report on Form 8-K filed with the SEC on March 28, 2024 announcing the adjustment of the conversion rate of the Convertible Notes.

 

In August 2021, we issued $125 million in aggregate principal amount of our 4.375% Notes due 2026 (the “August 2026 Notes”). The August 2026 Notes were issued pursuant to the Base Indenture and a Third Supplemental Indenture, dated as of August 24, 2021 (together with the Base Indenture, the “August 2026 Notes Indenture”), between us and the Trustee. The August 2026 Notes mature on August 24, 2026, unless repurchased or redeemed in accordance with their terms prior to such date, and bear interest at a rate of 4.375% per year payable semiannually on February 15 and August 15 of each year, commencing on February 15, 2022. See “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

In December 2021, we issued $75 million in aggregate principal amount of our 4.25% Notes due 2026 (the “December 2026 Notes”). The December 2026 Notes were issued pursuant to the Base Indenture and a Fourth Supplemental Indenture, dated as of December 10, 2021 (together with the Base Indenture, the “December 2026 Notes Indenture”), between us and the Trustee. The December 2026 Notes mature on December 15, 2026, unless repurchased or redeemed in accordance with their terms prior to such date, and bear interest at a rate of 4.25% per year payable semiannually on June 15 and December 15 of each year, commencing on June 15, 2022. See “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

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In March 2024, we issued $115 million in aggregate principal amount of our 7.875% Notes due 2029 (the “March 2029 Notes”). The March 2029 Notes were issued pursuant to the Base Indenture and a Fifth Supplemental Indenture, dated as of March 28, 2024, between us and the Trustee (the “March 2029 Notes Indenture”). The March 2029 Notes mature on March 30, 2029, unless repurchased or redeemed in accordance with their terms prior to such date, and bear interest at a rate of 7.875% per year payable on March 30, June 30, September 30 and December 30 of each year, commencing on June 30, 2024. See “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

We currently borrow and may continue to borrow money from time to time if immediately after such borrowing, the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, is at least 150%. This means that generally, we can borrow up to $2 for every $1 of investor equity. As of March 31, 2024, our asset coverage ratio was approximately 184.9%.

 

Our Business and Structure

 

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. 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. 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. The warrants entitle us to purchase preferred or common ownership shares of a portfolio company, and we typically target the amount of such warrants to scale in proportion to the amount of the debt or equipment financing. Contingent exit fees are cash fees payable upon the consummation of certain trigger events, such as a successful change of control or initial public offering of the portfolio company. In addition, we may obtain rights to purchase additional shares of our portfolio companies in subsequent equity financing rounds.

 

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. These companies typically are private companies that have begun to have success selling their products to the market and need additional capital to expand their operations and sales. Despite often achieving growing revenues, these types of companies typically have limited financing options to fund their growth. Equity, being dilutive in nature, is generally the most expensive form of capital available, while traditional bank financing is rarely available, given the lifecycle stage of these companies. Financing from us bridges this financing gap, providing companies with growth capital, which may result in improved profitability, less dilution for all equity investors, and increased enterprise value. 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 have initial interest-only periods of up to 24 months, and our equipment financings generally begin amortizing immediately. Our loans and equipment financings generally have a total term of up to 60 months. These investments are typically secured by a blanket first position lien, a specific asset lien on mission-critical assets and/or a blanket second position lien. We may also make a limited number of direct equity and equity-related investments in conjunction with our debt investments. 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. A loan or equipment financing may be structured to tie the amortization of the loan or equipment financing to the portfolio company’s projected cash balances while cash is still available for operations. As such, the loan or equipment financing may have a reduced risk of default. We believe that the amortizing nature of our investments will mitigate risk and significantly reduce the risk of our investments over a relatively short period. We focus on protecting and recovering principal in each investment and structure our investments to provide downside protection.

 

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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-stage companies. We seek to structure our loans and equipment financings such that amortization of the amount invested quickly reduces our risk exposure. 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.

 

Certain of the loans in which we invest have financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance. However, we have invested in and may in the future invest in or obtain significant exposure to “covenant-lite” loans, which generally are loans that do not have a complete set of financial maintenance covenants. Generally, covenant-lite loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, because we invest in and have exposure to covenant-lite loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.

 

Management Team

 

We are an internally managed BDC employing 73 dedicated professionals as of March 31, 2024, including 47 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.

 

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, and we believe is well positioned to take advantage of the potential investment opportunities available in the marketplace.

 

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. 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. 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.

 

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. The Investment Committee approves proposed investments by majority consent in accordance with investment guidelines and procedures established by the Investment Committee. See “Management” and “Executive Compensation” for additional information regarding these individuals.

 

The members of the Investment Committee have worked together in predecessor investment funds, including the Legacy Funds, and bring decades of combined experience investing in venture debt and venture capital and managing venture-backed start-ups and other public and private entities. As a result, the members of the Investment Committee have strong backgrounds in venture capital, private equity, investing, finance, operations, management and intellectual property, and have developed a strong working knowledge in these areas and a broad network of contacts. Combined, as of March 31, 2024, the members of the Investment Committee had over 75 years in aggregate of operating experience in various public and private companies, many of them venture-funded. As a group, they have managed through all aspects of the venture capital lifecycle, including participating in change of control transactions with venture-backed companies that they founded and/or served.

 

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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. 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.

 

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.

 

A dedicated staff of professionals covering credit origination and underwriting, as well as portfolio management functions.

 

A proprietary credit rating system and regimented process for evaluating and underwriting prospective portfolio companies.

 

Scalable software platforms developed during the term of operations of the Legacy Funds, which support our underwriting processes and loan monitoring functions.

 

For additional information regarding our potential competitive advantages, see “Business.”

 

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. 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.

 

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. 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. In addition, the balance sheets of many of these companies often include a disproportionately large amount of intellectual property assets, which can be difficult to value. Finally, the speed of innovation in technology and rapid shifts in consumer demand and market share add to the difficulty in evaluating these companies. 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. 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.

 

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Unfulfilled Demand for Loans and Equipment Financings to 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-stage companies. We believe that the level of demand for loans and equipment financings is a function of the level of annual venture equity investment activity and can be as much as 20% to 30% of such investment activity. We believe this market is largely served by a handful of venture banks, with whom our products generally do not compete, and a relative few term lenders and lessors. 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. Our senior management team has seen a significant increase in the number of potential investment opportunities over the last ten years.

 

Debt Investments with Warrants Complement Equity Financing from Venture Capital and Private Equity Funds. 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 our debt investments, including loans and equipment financings, will provide access to growth capital that otherwise may only be available through incremental equity investments by new or existing equity investors. As such, we intend to provide portfolio companies and their financial sponsors with an opportunity to diversify their capital sources. 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. 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.

 

For additional information regarding our market opportunity, see “Business.”

 

Investment Philosophy, Strategy and Process

 

We lend money in the form of term loans and equipment financings and, to a lesser extent, working capital loans to growth-stage 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.

 

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 believe a lack of profitability often limits these companies’ ability to access traditional bank financing and our in-house engineering and operations experience allows us to better understand this risk and earn what we believe to be higher overall returns and better risk-adjusted returns than those associated with traditional bank loans. 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.

 

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 believe good candidates for loans and equipment financings appear in all business sectors. 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. We believe in diversification and do not intend to specialize in any one sector. 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. See “Business” for additional details.

 

Recent Developments

 

On May 17, 2024, we redeemed $30.0 million in aggregate principal amount of the $182.5 million in aggregate principal amount of outstanding 2025 Notes at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon.

 

Corporate Information

 

Our principal executive offices are located at 1 N. 1st Street, Suite 302, Phoenix, Arizona 85004 and our telephone number is (480) 374-5350. Our corporate website is located at www.trinitycap.com. Information on our website is not incorporated into or a part of this prospectus.

 

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SPECIFIC TERMS OF THE CONVERTIBLE NOTES AND THE OFFERING

 

This section outlines certain legal and financial terms of the Convertible Notes. You should read this section together with the more detailed description of (i) the Convertible Notes under the heading “Description of the Convertible Notes” and (ii) our common stock under the heading “Description of Our Capital Stock” in this prospectus, together with any accompanying prospectus supplement and any documents incorporated by reference before investing in the Convertible Notes and the shares of our common stock issuable upon conversion thereof. Capitalized terms used in this prospectus and not otherwise defined shall have the meanings ascribed to them in the Convertible Notes Indenture.

 

Issuer Trinity Capital Inc.
   
Title of the securities

6.00% Convertible Notes due 2025

 

Common stock, par value $0.001 per share

   
Amount of securities being
offered by the Selling Securityholders

Up to $50,000,000 in aggregate principal amount of the Convertible Notes.

 

Up to 3,902,715 shares of common stock, which represents the number of shares issuable upon conversion of the Convertible Notes at the conversion rate of 78.0543 shares per $1,000 principal amount of the Convertible Notes pursuant to the Convertible Notes Indenture. See “— Conversion Rights” below.

 

The Convertible Notes were issued by us in the Convertible Notes Offering at an original issuance price of 97.376% of the aggregate principal thereof. The Convertible Notes and the shares of our common stock issuable upon conversion thereof are being registered for resale by the Selling Securityholders pursuant to the registration rights agreement, dated December 11, 2020 (the “Convertible Notes Registration Rights Agreement”), that we entered into for the benefit of the holders of the Convertible Notes concurrently with the closing of the Convertible Notes Offering. See “Selling Securityholders” and “Plan of Distribution.”

 

This prospectus does not necessarily mean that the Selling Securityholders will offer or sell any or all of the Convertible Notes or the shares of our common stock issuable upon conversion thereof. We cannot predict when or in what amounts, if any, the Selling Securityholders may sell the Convertible Notes or the shares of our common stock issuable upon conversion thereof being offered by this prospectus. The prices at which the Selling Securityholders may sell the Convertible Notes and the shares of our common stock issuable upon conversion thereof will be determined by the prevailing market price for such securities or in negotiated transactions.

   
Principal payable at maturity

100% of the aggregate principal amount outstanding; the principal amount of each Convertible Note will be payable on its stated maturity date at the corporate trust office of the trustee, paying agent, and security registrar for the Convertible Notes or at such other office as we may designate.

   
Type of note Fixed rate unsecured convertible senior note

 

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Interest rate

6.00% per year, subject to additional interest upon certain events. If an investment grade rating is not maintained with respect to the Convertible Notes, additional interest of 0.75% per annum will accrue on the Convertible Notes until such time as the Convertible Notes receive an investment grade rating of “BBB-” (or its equivalent) or better. A credit rating is not a recommendation to buy, sell or hold securities, should be evaluated independently from similar ratings of other securities or companies, and may be subject to revision or withdrawal at any time. There can be no assurance that a credit rating will remain for any given period of time. See “Description of the Convertible Notes.”

 

Day count basis 360-day year of twelve 30-day months
   
Original issue date December 11, 2020
   
Stated maturity date December 11, 2025, unless earlier repurchased or converted
   

Date interest started accruing

December 11, 2020

   
Interest payment dates Semiannually in arrears on May 1 and November 1 of each year, commencing May 1, 2021. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.
   

Interest periods

 

The initial interest period is the period from and including December 11, 2020, to, but excluding, the initial interest payment date, and the subsequent interest periods are the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.
   
Regular record dates for interest Every April 15 and October 15, commencing April 15, 2021.
   
Specified currency U.S. Dollars
   

Place of payment

 

The City of New York and/or such other places that may be specified in the Convertible Notes Indenture or a notice to holders of the Convertible Notes.

   
Business day

Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in the City of New York or another place of payment are authorized or obligated by law or executive order to close.

   

Denominations

We issued the Convertible Notes in denominations of $1,000.

 

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Conversion Rights

Holders may convert their Convertible Notes, at their option, at any time on or prior to the close of business on the business day immediately preceding the Convertible Notes Maturity Date, in multiples of $1,000 principal amount.

 

The conversion rate for the Convertible Notes was initially 66.6667 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). Effective immediately after the close of business on March 28, 2024, the conversion rate changed to 78.0543 shares of the Company’s common stock, per $1,000 principal amount of the Convertible Notes (equivalent to a conversion price of approximately $12.81 per share of common stock) as a result of a certain cash dividend of the Company. The net asset value per share of our common stock at March 31, 2024 (the last date prior to the date of this prospectus for which we reported net asset value) was $12.88. The conversion rate is subject to adjustment in some events, including, but not limited to, the declaration of any dividends, but will not be adjusted for any accrued and unpaid interest, as described under “Description of the Convertible Notes — Conversion of Convertible Notes — Conversion Rate Adjustments.” In addition, following certain corporate events that occur prior to the Convertible Notes Maturity Date, we will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event in certain circumstances, as described under “Description of the Convertible Notes — Adjustment to Conversion Rate upon Conversion upon a Make-Whole Adjustment Event.”

 

Upon conversion of the Convertible Notes, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election, for each $1,000 principal amount of Convertible Notes converted, equal to the conversion rate (together with a cash payment in lieu of delivering any fractional share) on the second business day immediately following the relevant conversion date.

 

Holders will not receive any additional cash payment or additional shares of our common stock representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited circumstances. Instead, interest will be deemed to be paid by the payment of cash or delivery to a holder of shares of our common stock, as applicable, together with a cash payment for any fractional shares, upon conversion of a Note. See “Description of the Convertible Notes — Conversion of Convertible Notes — General.”

 

Forced Conversion At our option, we may cause the holders to convert all or a portion of the then outstanding principal amount of the Convertible Notes plus accrued but unpaid interest to, but excluding, the date of such conversion, at any time on or prior to the close of business on the business day immediately preceding the Convertible Notes Maturity Date, if the closing sale price of our common stock on a national securities exchange, including Nasdaq, for any 30 consecutive trading days exceeds 120% of the conversion price, as may be adjusted. Upon such conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, per $1,000 principal amount of the Convertible Notes, equal to the conversion rate, and a forced conversion make-whole payment, if any, in cash, as described in this prospectus. See “Description of the Convertible Notes — Forced Conversion.”

 

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Ranking of Convertible Notes The Convertible Notes are our direct senior unsecured obligations and rank:

 

  pari passu with our other outstanding and future unsecured unsubordinated indebtedness, including, without limitations, $182.5  million in aggregate principal amount of the 2025 Notes outstanding as of March 31, 2024, $125.0 million in aggregate principal amount of the August 2026 Notes outstanding as of March 31, 2024, $75.0 million in aggregate principal amount of the December 2026 Notes outstanding as of March 31, 2024, and $115.0 million in aggregate principal amount of the March 2029 Notes outstanding as of March 31, 2024;
   
  senior to any of our future indebtedness that expressly provides it is subordinated to the Convertible Notes;
   
  effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured in respect of which we subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness; and
   
  structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including, without limitation, borrowings under the KeyBank Credit Agreement, of which approximately $190.0 million was outstanding as of March 31, 2024 and is secured by the assets of our wholly-owned subsidiary, TCF.

 

  As of March 31, 2024, our asset coverage ratio was approximately 184.9%. We target a leverage range of between 1.15x to 1.35x.
   
  As of March 31, 2024, on a consolidated basis, we had approximately $737.5 million of total indebtedness outstanding, $190.0 million of which was secured indebtedness under the KeyBank Credit Agreement and $547.5 million of which was unsecured indebtedness. Such unsecured indebtedness reflects the aggregate principal amount of 2025 Notes, August 2026 Notes, December 2026 Notes, March 2029 Notes, and Convertible Notes outstanding.
   
  Through our wholly owned subsidiary, TCF, we have a borrowing capacity of up to $400 million, with committed availability of $350 million, under the KeyBank Credit Agreement with $160.0 million of capacity remaining as of March 31, 2024, and borrowings thereunder generally bear interest at a rate of Adjusted Term SOFR plus, as of March 31, 2024, 2.85%.

 

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Limitation on Beneficial Ownership Notwithstanding the foregoing, no holder of the Convertible Notes will be entitled to receive shares of our common stock upon conversion of the Convertible Notes to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time (the “limitation”). Any purported delivery of shares of our common stock upon conversion of the Convertible Notes shall be void and have no effect to the extent (but only to the extent) that such delivery would result in the converting holder becoming the beneficial owner of more than 5.0% of the shares of our common stock outstanding at such time. If any delivery of shares of our common stock owed to a holder upon conversion of Convertible Notes is not made, in whole or in part, as a result of the limitation, our obligation to make such delivery shall not be extinguished and we shall deliver such shares of our common stock as promptly as practicable after any such converting holder gives notice to us that such delivery would not result in it being the beneficial owner of more than 5.0% of the shares of our common stock outstanding at such time. The limitation shall no longer apply following the effective date of any fundamental change, as defined in “Description of the Convertible Notes — Purchase of Convertible Notes at Your Option upon a Fundamental Change.”
   
Fundamental Change Holders of the Convertible Notes may require us to purchase for cash all or any portion of their Convertible Notes upon the occurrence of a fundamental change at the fundamental change purchase price equal to 100% of the principal amount of the Convertible Notes being purchased, plus accrued and unpaid interest to, but excluding, the fundamental change purchase date. For the definition of “fundamental change” and related information, see “Description of the Convertible Notes — Purchase of Convertible Notes at Your Option upon a Fundamental Change.”

 

Sinking fund The Convertible Notes are not subject to any sinking fund. A sinking fund is a reserve fund accumulated over a period of time for the retirement of debt.

 

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Other covenants In addition to any covenants described elsewhere in this prospectus, the following covenants apply to the Convertible Notes:

 

  We agree that for the period of time during which the Convertible Notes are outstanding, we will not violate Section 18(a)(1)(A) 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, whether or not we continue to be subject to such provisions of the 1940 Act. As of the date of this prospectus, 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.
   
  We agree that, for the period of time during which the Convertible 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. As of this prospectus, these provisions generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage were below 150% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution, or purchase. Under the 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. Furthermore, the covenant will permit us to continue paying dividends or distributions and the restrictions will not apply unless and until such time as our asset coverage (as defined in the 1940 Act, except to the extent modified by this covenant) has not been in compliance with the minimum asset coverage required by 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 for more than six consecutive months. For the purposes of determining “asset coverage” as used above, any and all indebtedness of the Company, including any outstanding borrowings under the KeyBank Credit Agreement and any successor or additional credit facility, will be deemed a senior security of us.
   
  If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the U.S. Securities and Exchange Commission (the “SEC”), we agree to furnish to holders of the Convertible Notes and the trustee, for the period of time during which the Convertible Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles, or GAAP.
   
  We have agreed to use our commercially reasonably efforts to maintain a rating on the Convertible Notes at all times.

 

13

 

 

Events of default Holders of the Convertible Notes will have certain rights if an event of default occurs with respect to the Convertible Notes and is not cured. In addition to any events of default set forth in the Convertible Notes Indenture, the following shall be events of default:

 

  We do not pay the principal of any Convertible Note when due and payable at maturity;
   
  We do not pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, upon the conversion of any Convertible Note;
   
  We do not pay interest on any Convertible Note when due and payable, and such default is not cured within 30 days of its due date;
   
  We remain in breach of any other covenant in respect of the Convertible Notes for 60 days after we receive a written notice of default stating we are in breach (the notice must be sent by either the trustee or holders of at least 25% of the principal amount of the outstanding Convertible Notes);
   
  We file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur and remain undischarged or unstayed for a period of 60 days;
   
  Pursuant to Section 18(a)(1)(C)(ii) and Section 61 of the 1940 Act, on the last business day of each of twenty four consecutive calendar months, any class of securities will have an asset coverage (as such term is used in the 1940 Act and the rules and regulations promulgated thereunder) of less than 100% giving effect to any exemptive relief granted to us by the SEC; or
   
  Upon the occurrence of a payment default or acceleration on any indebtedness for borrowed money (other than non-recourse indebtedness) of us or any subsidiary of us (if the aggregate principal amount of such indebtedness and such default or acceleration is not cured within 120 days of its due date), when taken together with the aggregate principal amount of any other indebtedness for borrowed money of us or any subsidiary of us as to which a payment default or an acceleration shall have occurred and shall be continuing (and such default or acceleration is not cured within 120 days of its due date), aggregates $10.0 million or more at any time.

 

  See “Description of the Convertible Notes — Events of Default” for additional information.

 

14

 

 

Absence of a public market
for the Convertible Notes
There is currently no active public trading market for the Convertible Notes. Accordingly, we cannot assure you as to the development or liquidity of any market for the Convertible Notes. We do not intend to apply for a listing of the Convertible Notes on any securities exchange or any automated dealer quotation system.
   
Common stock symbol on
the Nasdaq Global Select Market
Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) and trades under the symbol “TRIN”. On June 20, 2024, the last reported closing sales price of our common stock on Nasdaq was $14.98 per share.
   
Common stock outstanding As of June 20, 2024, 51,509,118 shares of our common stock are outstanding.
   
Further issuances We will have the ability to issue additional debt securities under the Base Indenture with terms different from the Convertible Notes and, without the consent of the holders of the Convertible Notes, to reopen the Convertible Notes and issue additional Convertible Notes under the Convertible Notes Indenture. If we issue additional debt securities, these additional debt securities could have a lien or other security interest greater than that accorded to the holders of the Convertible Notes, which are unsecured.
   
Use of proceeds All of the Convertible Notes and the shares of our common stock issuable upon conversion thereof being offered by the Selling Securityholders pursuant to this prospectus and any accompanying prospectus supplement will be sold by the Selling Securityholders for their own account. We will not receive any of the proceeds from the resale of the Convertible Notes and the shares of our common stock issuable upon conversion thereof by the Selling Securityholders.
   
Certain U.S. Federal
Income Tax Considerations
For the U.S. federal income tax consequences of the holding, disposition and conversion of the Convertible Notes, and the holding and disposition of shares of our common stock, see “Certain Material U.S. Federal Income Tax Considerations.”
   
Form of Convertible Notes;
Book-Entry Form
The Convertible Notes are represented by a global security that has been deposited and registered in the name of The Depository Trust Company (“DTC”) or its nominee. This means that, except in limited circumstances, you will not receive certificates for the Convertible Notes. Beneficial interest in the Convertible Notes are represented through book entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interest in the Convertible Notes through either DTC, if they are a participant, or indirectly through organizations that are participants in DTC.
   
Trustee, paying
agent, and
conversion agent
U.S. Bank Trust Company, National Association (formerly U.S. Bank National Association)
   
Governing law The Convertible Notes and the Convertible Notes Indenture are governed by and construed in accordance with the laws of the State of New York.

 

Global clearance and
settlement procedures
Interests in the Convertible Notes trade in DTC’s Same Day Funds Settlement System, and any permitted secondary market trading activity in such Convertible Notes will, therefore, be required by DTC to be settled in immediately available funds. None of the Company, the trustee or the paying agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

 

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FEES AND EXPENSES

 

The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The expenses shown in the table under “Annual expenses” are based on estimated amounts for our current fiscal year. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us” or “the Company” or that “we” will pay fees or expenses, you will indirectly bear these fees or expenses as an investor in the Company.

 

Stockholder transaction expenses:      
Sales load (as a percentage of offering price)       (1)
Offering expenses (as a percentage of offering price)       (2)
Distribution reinvestment plan expenses   $ 15.00 (3)
Total stockholder transaction expenses (as a percentage of offering price)     (2)
Annual expenses (as a percentage of net assets attributable to common stock):        
Operating expenses     8.40 %(4)
Interest payments on borrowed funds     8.82 %(5)
Acquired fund fees and expenses     0.07 %(6)
Total annual expenses     17.29 %(7)

 

(1) In the event that the Convertible Notes and/or the shares of common stock issuable upon conversion thereof to which this prospectus relates are sold to or through underwriters, a corresponding prospectus will disclose the applicable sales load.

 

(2) Pursuant to the Convertible Notes Registration Rights Agreement, we will pay the fees and expenses incurred in this offering and in disposing of the Convertible Notes and the shares of common stock issuable upon conversion thereof, including all registration and filing fees, any other regulatory fees, printing and delivery expenses, listing fees and expenses, fees and expenses of counsel, independent certified public accountants, and any special experts retained by us, and reasonable and documented fees and expenses of counsel to the Selling Securityholders in an amount not to exceed $75,000. The Selling Securityholders will be responsible for (i) all brokers’ and underwriters’ discounts and commissions, transfer taxes, and transfer fees relating to the sale or disposition of the Convertible Notes and the shares of common stock issuable upon conversion thereof, and (ii) the fees and expenses of any counsel to the Selling Securityholders exceeding $75,000. The prospectus supplement, if any, corresponding to each offering will disclose the applicable offering expenses and total stockholder transaction expenses.

 

(3) The expenses of our distribution reinvestment plan are included in “Operating expenses.” The plan administrator’s fees will be paid by us. There will be no brokerage charges or other charges to stockholders who participate in our distribution reinvestment plan except that, if a participant elects by written notice to the plan administrator prior to termination of the participant’s account to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a $0.12 per share brokerage commission from the proceeds. For additional information, see “Distribution Reinvestment Plan.”

 

(4) Operating expenses represent the estimated annual operating expenses of the Company and its consolidated subsidiaries based on annualized operating expenses estimated for the current fiscal year, which considers the actual expenses for the quarter ended March 31, 2024. We do not have an investment adviser and are internally managed by our executive officers under the supervision of the Board. As a result, we do not pay investment advisory fees, but instead we pay the operating costs associated with employing investment management professionals including, without limitation, compensation expenses related to salaries, discretionary bonuses and grants of options and restricted stock, if any.

 

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Operating expenses include the fees and expenses incident to (i) our amended and restated registration rights agreement, dated December 15, 2020, related to certain shares of our common stock (the “Common Stock Registration Rights Agreement”), (ii) our registration rights agreement, dated January 16, 2020, related to the 2025 Notes (the “2025 Notes Registration Rights Agreement”), including the 2025 Notes registered for resale pursuant to such agreement, and (iii) the Convertible Notes and/or shares of common stock issued upon the conversion of such notes registered for resale pursuant to the registration statement of which this prospectus is a part, in accordance with the Convertible Notes Registration Rights Agreement. With respect to our obligations under such agreements, we estimate that we will incur an aggregate of approximately $450,000 of such fees and expenses.

 

(5) Interest payments on borrowed funds represents an estimate of our annualized interest expense incurred based on current borrowings outstanding under the KeyBank Credit Facility, the 2025 Notes, the Convertible Notes, the August 2026 Notes, the December 2026 Notes and the March 2029 Notes. The assumed weighted average interest rate on our total debt outstanding was 7.49%. Assumes we had $190.0 million outstanding under the Keybank Credit Facility, $182.5 million in aggregate principal amount of the 2025 Notes outstanding, $50.0 million in aggregate principal amount of the Convertible Notes, $125.0 million in aggregate principal amount of the August 2026 Notes, $75.0 million in aggregate principal amount of the December 2026 Notes and $115.0 million in aggregate principal amount of the March 2029 Notes. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. We may also issue additional debt securities or preferred stock, subject to our compliance with applicable requirements under the 1940 Act.

 

(6) Acquired fund fees and expenses represent the estimated indirect expense incurred due to investments in other investment companies and private funds.

 

(7) The holders of shares of our common stock indirectly bear the cost associated with our annual expenses.

 

Example

 

The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have no additional leverage and that our annual operating expenses would remain at the levels set forth in the table above. The stockholder transaction expenses described above are included in the following example.

 

   1 year   3 years   5 years   10 years 
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return from realized capital gains  $162   $429   $635   $965 

 

The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, if our Board authorizes and we declare a cash dividend, participants in our distribution reinvestment plan who have not otherwise elected to receive cash will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the dividend. See “Distribution Reinvestment Plan” for additional information regarding our distribution reinvestment plan.

 

This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

 

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FINANCIAL HIGHLIGHTS

 

Information regarding our financial highlights is incorporated by reference herein from our most recent Annual Report on Form 10-K and our most recent Quarterly Report on Form 10-Q.

 

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

 

Information regarding our price range of common stock and distributions is incorporated by reference herein from our most recent Annual Report on Form 10-K and our most recent Quarterly Report on Form 10-Q.

 

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RISK FACTORS

 

Investing in our securities involves a number of significant risks. Before you invest in our securities, you should be aware of various risks associated with the investment, including those described in this prospectus, any accompanying prospectus supplement, “Part I, Item IA. Risk Factors” in our most recent Annual Report on Form 10-K, which is incorporated by reference herein in their entirety, “Part II, Item 1A. Risk Factors” in our most recent Quarterly Report on Form 10-Q, which is incorporated by reference herein in their entirety, and any document incorporated by reference herein. You should carefully consider these risk factors, together with all of the other information included in this prospectus and any accompanying prospectus supplement before you decide whether to make an investment in our securities. The risks set out in this prospectus, any accompanying prospectus supplement, “Part I, Item IA. Risk Factors” in our most recent Annual Report on Form 10-K, “Part II, Item 1A. Risk Factors” in our most recent Quarterly Report on Form 10-Q, and any document incorporated by reference herein are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, you may lose all or part of your investment.

 

Risks Related to the Convertible Notes

 

The Convertible Notes are unsecured and therefore are effectively subordinated to any secured indebtedness currently outstanding or that may be incurred in the future and rank pari passu with, or equal to, all outstanding and future unsecured unsubordinated indebtedness issued by us and our general liabilities.

 

The Convertible Notes are not secured by any of our assets or any of the assets of any of our subsidiaries. As a result, the Convertible Notes are effectively subordinated to any outstanding secured indebtedness as of the date of this prospectus (including the KeyBank Credit Agreement) or that we or our subsidiaries may incur in the future (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our secured indebtedness or 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 Convertible Notes. As of March 31, 2024, through of our wholly owned subsidiary, TCF, we had approximately $190.0 million of borrowings outstanding under the KeyBank Credit Agreement. The indebtedness under the KeyBank Credit Agreement is effectively senior to the Convertible Notes to the extent of the value of the assets securing such indebtedness. In addition, as of March 31, 2024, we had $182.5 million in aggregate principal amount of the 2025 Notes outstanding, $125.0 million in aggregate principal amount of the August 2026 Notes outstanding, $75.0 million in aggregate principal amount of the December 2026 Notes outstanding, and $115.0 million in aggregate principal amount of the March 2029 Notes outstanding, each of which rank pari passu with the Convertible Notes.

 

The Convertible Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

 

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 Convertible Notes, and the Convertible Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future. Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of the Convertible Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such entities (and therefore the claims of our creditors, including holders of the Convertible Notes) with respect to the assets of such entities. Even if we are recognized as a creditor of one or more of these entities, our claims would still be effectively subordinated to any security interests in the assets of any such entity and to any indebtedness or other liabilities of any such entity senior to our claims. Consequently, the Convertible Notes are structurally subordinated to all indebtedness and other liabilities, including trade payables, of any of our existing or future subsidiaries. Certain of these entities serve as guarantors under the KeyBank Credit Agreement, and in the future our subsidiaries may incur substantial additional indebtedness, all of which is and would be structurally senior to the Convertible Notes.

 

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The Convertible Notes Indenture contains limited protection for holders of the Convertible Notes.

 

The Convertible Notes Indenture offers limited protection to holders of the Convertible Notes. The terms of the Convertible Notes Indenture 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 a material adverse impact on the holders’ investment in the Convertible Notes. In particular, the terms of the Convertible Notes Indenture and the Convertible Notes will 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 equal in right of payment to the Convertible Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Convertible Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Convertible Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in those entities and therefore rank structurally senior to the Convertible Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) 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, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in each case, to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150%;

 

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 Convertible Notes;

 

sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

 

enter into transactions with affiliates;

 

create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

 

make investments; or

 

create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

 

Furthermore, the terms of the Convertible Notes Indenture and the Convertible Notes do not protect holders of the Convertible Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

 

Our ability to recapitalize, incur additional debt (including additional debt that matures prior to the maturity of the Convertible Notes), and take a number of other actions that are not limited by the terms of the Convertible Notes may have important consequences for holders of the Convertible Notes, including making it more difficult for us to satisfy our obligations with respect to the Convertible Notes or negatively affecting the trading value of the Convertible Notes.

 

Other debt we issue or incur in the future could contain more protections for its holders than the Convertible Notes Indenture and the Convertible Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for, trading levels, and prices of the Convertible Notes.

 

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Convertible 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 Convertible Notes and substantially decrease the market value of the Convertible Notes.

 

21

 

 

If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our current indebtedness or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.

 

If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders or holders under the agreements governing our indebtedness, or other indebtedness that we may incur in the future, to avoid being in default. If we breach our covenants under the agreements governing our indebtedness and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation.

 

If we are unable to repay debt, lenders having secured obligations, including KeyBank under the KeyBank Credit Agreement, could proceed against the collateral securing the debt. Because the Convertible Notes Indenture will have, and any future debt will likely have, customary cross-default provisions, if the indebtedness thereunder, hereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. See “Description of the Convertible Notes.”

 

We may not have, or have the ability to raise, the funds necessary to purchase the Convertible Notes as required upon a fundamental change, and our future debt may contain limitations on our ability to deliver shares of our common stock upon conversion or purchase of the Convertible Notes.

 

Holders of the Convertible Notes will have the right to require us to purchase their Convertible Notes for cash upon the occurrence of a fundamental change at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any. As defined in the Convertible Notes Indenture, a fundamental change means the occurrence of either a change in control or the termination of trading of our common stock on any national securities exchange. We may not have enough available cash or be able to obtain financing at the time we are required to make purchases of Convertible Notes surrendered therefor. In addition, our ability to purchase the Convertible Notes or to deliver shares of our common stock upon conversions of the Convertible Notes may be limited by law, by regulatory authority or by agreements governing our indebtedness. Our failure to purchase Convertible Notes at a time when the purchase is required by the Convertible Notes Indenture or deliver any shares of our common stock upon future conversions of the Convertible Notes as required by the Convertible Notes Indenture would constitute a default under the Convertible Notes Indenture. A default under the Convertible Notes Indenture or the fundamental change itself could also lead to a default under the KeyBank Credit Agreement and/or the 2025 Notes Indenture, August 2026 Notes Indenture, December 2026 Notes Indenture, and the March 2029 Notes Indenture. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the Convertible Notes.

 

The conversion rate of the Convertible Notes may not be adjusted for all dilutive events.

 

The conversion rate of the Convertible Notes is subject to adjustment upon certain events, including the issuance of certain stock dividends on our common stock, certain issuance of rights or warrants subdivisions, combinations, certain distributions of capital stock, indebtedness or assets, certain cash dividends and certain issuer tender or exchange offers, as described under “Description of the Convertible Notes - Conversion Rights - Conversion Rate Adjustments.” However, the conversion rate will not be adjusted for other events, such as a third-party tender or exchange offer or an issuance of common stock for cash, that may adversely affect the trading price of the Convertible Notes or the common stock. An event that adversely affects the value of the Convertible Notes may occur, and that event may not result in an adjustment to the conversion rate.

 

If we issue shares of our common stock upon conversion of some or all of the Convertible Notes, our stockholders, including holders that received shares of our common stock upon conversion of their Convertible Notes, may experience dilution.

 

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The forced conversion provision may materially adversely affect the holders’ return on the Convertible Notes.

 

At our option, we may cause the holders to convert all or a portion of the then outstanding principal amount of the Convertible Notes plus accrued but unpaid interest to, but excluding the date of such conversion, at any time on or prior to the close of business on the business day immediately preceding the maturity date, if the closing sale price of our common stock for any 30 consecutive trading days exceeds 120% of the conversion price, as may be adjusted. Upon such conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, per $1,000 principal amount of the Convertible Notes, equal to the conversion rate, and a forced conversion make-whole payment, if any, in cash, as described Convertible Notes Indenture. In this circumstance, the holders may not be able to reinvest the proceeds therefrom in a comparable security at an effective interest rate as high as that of the Convertible Notes.

 

There is currently no active public trading market for the Convertible Notes; as a result, a holder may not be able to resell their Convertible Notes.

 

There currently is no active public trading market for the Convertible Notes. We do not currently intend to apply for listing of the Convertible Notes on any securities exchange or for quotation of any such notes on any automated dealer quotation system. If no active trading market develops, a holder may not be able to resell their Convertible Notes at their fair market value or at all. If any Convertible Notes are traded after their initial issuance, they 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. If a market is made for any Convertible Notes, any such market-making may be discontinued at any time. In addition, any market-making activity, if any, will be subject to limits imposed by law. Accordingly, we can provide no assurance that a liquid trading market, if any, will develop for the Convertible Notes, that a holder will be able to sell any of such notes at a particular time, or that the price a holder may receive when it sells any Convertible Notes will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Convertible Notes may be harmed. Accordingly, a holder may be required to bear the financial risk of an investment in the Convertible Notes for an indefinite period of time.

 

The accounting for convertible debt securities is subject to uncertainty.

 

The accounting for convertible debt securities is subject to frequent scrutiny by the accounting regulatory bodies and is subject to change. We cannot predict if or when any such change could be made and any such change could have an adverse impact on our reported or future financial results. Any such impacts could adversely affect the market price of our common stock and in turn negatively impact the trading price of the Convertible Notes.

 

The market value of our common stock and of the Convertible Notes may fluctuate significantly, and this may make it difficult for holders to resell the Convertible Notes or common stock issued upon conversion of the Convertible Notes when holders want or at prices holders find attractive.

 

There is currently no public market for the Convertible Notes and there can be no assurance that a market for the Convertible Notes will develop or be maintained. In addition, the market value and liquidity of the market for our common stock or the Convertible Notes, if any, 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, because the Convertible Notes are convertible into our common stock, volatility or depressed prices for our common stock could have a similar effect on the trading price of the Convertible Notes. These factors include:

 

changes in the value of our portfolio of investments and derivative instruments as a result of changes in market factors, such as interest rate shifts, and also portfolio specific performance, such as portfolio company defaults, among other reasons;

 

changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;

 

loss of RIC or BDC status;

 

distributions that exceed our net investment income and net income as reported according to GAAP;

 

changes in earnings or variations in operating results;

 

changes in accounting guidelines governing valuation of our investments;

 

any shortfall in revenue or net income or any increase in losses from levels expected by investors;

 

departure of key personnel;

 

general economic trends and other external factors; and

 

loss of a major funding source.

 

23

 

 

The registration statement of which this prospectus is a part has been filed with the SEC pursuant to the Convertible Notes Registration Rights Agreement for the benefit of the purchasers of the Convertible Notes and the shares of our common stock issuable upon conversion of the Convertible Notes. If this resale registration statement is not declared effective, holders of the Convertible Notes and such shares may not offer or sell the Convertible Notes and such shares except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws or pursuant to an effective registration statement. The SEC, however, has broad discretion to determine whether any registration statement will be declared effective and may delay or deny the effectiveness of any such resale registration statement filed by us for a variety of reasons. Our ability to have declared effective by the SEC this registration statement pertaining to the resale of the Convertible Notes and/or any shares of common stock to be issued upon conversion of the Convertible Notes on a timely basis will depend upon our ability to resolve any issues that may be raised by the SEC. No assurance can be given as to when this resale registration statement with respect to the Convertible Notes and/or any shares of common stock to be issued upon conversion of the Convertible Notes will become effective. Failure to have this resale registration statement become effective could adversely affect the liquidity and price of the Convertible Notes and/or any shares of common stock issued upon conversion of the Convertible Notes, as applicable.

 

Future sales of our common stock in the public market or the issuance of securities senior to our common stock could adversely affect the trading price of our common stock and the value of the Convertible Notes and our ability to raise funds in new stock offerings.

 

Future sales of substantial amounts of our common stock or equity-related securities in the public market, or the perception that such sales could occur, could adversely affect the prevailing market value of our common stock and the value of the Convertible Notes and could impair our ability to raise capital through future offerings of our securities, should we decide to offer them. No prediction can be made as to the effect that future sales of shares of common stock, or the availability of shares of common stock for future sale, will have on the trading price of our common stock or the value of the Convertible Notes.

 

In addition, if we raise additional funds by issuing common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time, including the potential ownership percentage of holders that may receive shares of our common stock upon conversion of their Convertible Notes, may decrease and they may experience dilution. Stockholders, including holders that received shares of our common stock upon conversion of their Convertible Notes, may also experience dilution upon the conversion of some or all of the Convertible Notes into shares of our common stock. The existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could depress the market price for our common stock.

 

Holders of the Convertible Notes will not be entitled to any rights with respect to our common stock, but will be subject to all changes made with respect to our common stock.

 

Holders of the Convertible Notes will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights or rights to receive any dividends or other distributions on our common stock), but will be subject to all changes affecting our common stock. Holders will only be entitled to rights in respect of our common stock if and when we deliver shares of our common stock upon conversion for their Convertible Notes and, to a limited extent, under the conversion rate adjustments applicable to the Convertible Notes. For example, in the event that an amendment is proposed to our charter or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to a holder’s conversion of Convertible Notes, the holder will not be entitled to vote on the amendment, although the holder will nevertheless be subject to any changes in the powers, preferences or rights of our common stock that result from such amendment.

 

Upon conversion of the Convertible Notes, holders may receive less valuable consideration than expected because the market value or net asset value per share of our common stock may decline after holders exercise their conversion right but before we settle our conversion obligation.

 

Under the Convertible Notes, a converting holder may be exposed to fluctuations in the market value or net asset value per share of our common stock during the period from the date such holder surrenders its Convertible Notes for conversion until the date we settle our conversion obligation.

 

24

 

 

Because we may satisfy our conversion obligation solely in shares of our common stock upon conversion of the Convertible Notes, under such circumstances we will deliver shares of our common stock, together with cash for any fractional share, on the second business day following the relevant conversion date. Accordingly, if the market value or net asset value per share of our common stock decreases during this period, the market value of the shares of our common stock that holders receive will be adversely affected and would be less than the conversion value of the Convertible Notes on the conversion date.

 

The adjustment to the conversion rate for Convertible Notes converted in connection with a make-whole adjustment event may not adequately compensate holders for any lost value of their Convertible Notes as a result of such transaction.

 

Following a make-whole adjustment event, if a holder elects to convert its Convertible Notes in connection with such corporate transaction, we will increase the conversion rate by an additional number of shares of our common stock upon conversion in certain circumstances. As defined in the Convertible Notes Indenture, a make-whole adjustment event means any change of control and any termination of trading of our common stock on any national securities exchange. The increase in the conversion rate will be determined based on the date on which the make-whole adjustment event occurs or becomes effective and the price paid (or deemed to be paid) per share of our common stock in the make-whole adjustment event, as described in the Convertible Notes Indenture. The adjustment to the conversion rate for Convertible Notes converted in connection with a make-whole adjustment event may not adequately compensate holders for any lost value of their Convertible Notes as a result of such transaction. In addition, if the price paid (or deemed to be paid) per share of our common stock in the make-whole adjustment event is greater than $20.00 per share or less than $13.01 per share (in each case, subject to adjustment), no increase in the conversion rate will be made. Moreover, in no event will the conversion rate per $1,000 principal amount of Convertible Notes exceed the maximum conversion rate described further in the Convertible Notes Indenture, which is subject to adjustment as described in such section.

 

Our obligation to increase the conversion rate upon the occurrence of a make-whole adjustment event could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness of economic remedies.

 

Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to purchase the Convertible Notes.

 

Upon the occurrence of a fundamental change, holders have the right to require us to purchase their Convertible Notes. However, the fundamental change provisions will not afford protection to holders in the event of other transactions that could adversely affect the Convertible Notes. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change requiring us to repurchase the Convertible Notes. In addition, holders may not be entitled to require us to purchase their Convertible Notes upon a fundamental change in certain circumstances involving a significant change in the composition of our Board, or in connection with a proxy contest where our Board does not endorse a dissident slate of directors but approves them for purposes of the definition of “continuing directors” as set forth in the Convertible Notes Indenture. In the event of any such transaction, the holders would not have the right to require us to purchase their Convertible Notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders.

 

Provisions of the Convertible Notes could discourage an acquisition of us by a third party.

 

Certain provisions of the Convertible Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the Convertible Notes will have the right, at their option, to require us to purchase for cash all of their Convertible Notes or any portion of the principal amount of such Convertible Notes in integral multiples of $1,000. We may also be required to increase the conversion rate in the event of certain transactions constituting a make-whole adjustment event. These provisions could discourage an acquisition of us by a third party.

 

A downgrade, suspension or withdrawal of the rating assigned by a rating agency to us and/or the Convertible Notes, if any, could cause the market value of the Convertible Notes to decline significantly.

 

Any credit ratings assigned to us and/or the Convertible Notes are an assessment by rating agencies of our ability to pay our obligations. Consequently, real or anticipated changes to any such credit ratings will generally affect the market value of 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 market value of the Convertible Notes.

 

If an investment grade rating is not maintained with respect to the Convertible Notes, additional interest of 0.75% per annum will accrue on the Convertible Notes until such time as the Convertible Notes have received an investment grade rating of “BBB-” (or its equivalent) or better. An explanation of the significance of a credit rating may be obtained from the rating agency. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate. A credit rating should be evaluated independently from similar ratings of other securities or companies. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. There can be no assurance that a credit rating will remain for any given period of time.

 

25

 

 

 

Conversions of the Convertible Notes will dilute the ownership interest of our existing stockholders, including holders who had previously converted their Convertible Notes, if shares of our common stock are issued upon conversions of the Convertible Notes.

 

The conversion of some or all of the Convertible Notes into shares of our common stock will dilute the ownership interests of our existing stockholders. Any sales of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could depress the market price of our common stock.

 

If the Convertible feature of the Convertible Notes is deemed to be greater than incidental and investment in the Convertible Notes by Benefit Plan Investors is “significant” within the Plan Asset Regulation, we could be subject to ERISA fiduciary duties and other provisions of ERISA.

 

Under certain circumstances, our underling assets could be treated as “plan assets” of employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or section 4975 of the Code (“Benefit Plan Investors”). This could occur if the convertibility feature of the Convertible Notes were to be treated as greater than “incidental,” and, as such, the Convertible Notes were deemed to be equity under the ERISA’s plan asset regulation (DOL Reg. section 2510.3-101 as modified by Section 3(42) of ERISA, the “Plan Asset Regulation”). If investment by Benefit Plan Investors in the Convertible Notes is “significant” and the Convertible Notes were deemed equity interests, in each case under the Plan Asset Regulation and an exception to the Plan Asset Regulation did not apply, we and our management would be subject to ERISA fiduciary duties and certain transactions we might enter into, or may have entered into, in the ordinary course of our business might constitute non-exempt “prohibited transactions” under section 406 of ERISA or section 4975 of the Code and might have to be rescinded at significant cost to us.

 

If the Convertible Notes are issued with original issue discount and a bankruptcy petition were filed by or against us, holders of the Convertible Notes may receive a lesser amount for their claim than they would have been entitled to receive under the Convertible Notes Indenture.

 

If the Convertible Notes are issued with original issue discount and a bankruptcy petition were filed by or against us under the United States Bankruptcy Code after the issuance of the Convertible Notes, the claim by any holder of the Convertible Notes for the principal amount of the Convertible Notes may be limited to an amount equal to the sum of: the original issue price for the Convertible Notes and that portion of any original issue discount that does not constitute “unmatured interest” for purposes of the United States Bankruptcy Code.

 

Any original issue discount that was not amortized as of the date of the bankruptcy filing would constitute unmatured interest. Accordingly, holders of the Convertible Notes under these circumstances may receive a lesser amount than they would be entitled to under the terms of the Convertible Notes Indenture, even if sufficient funds are available.

 

26

 

 

Holders may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the Convertible Notes, even though the holders did not receive a corresponding cash distribution.

 

The conversion rate of the Convertible Notes is subject to adjustment in certain circumstances, including the payment of cash dividends. If the conversion rate is adjusted as a result of a distribution that is taxable to our common stockholders, such as a cash dividend, a holder may be deemed to have received a dividend subject to U.S. federal income tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases a holder’s proportionate interest in us could be treated as a deemed taxable dividend to the holder. If a make-whole adjustment event occurs on or prior to the business day immediately preceding the stated maturity date of the Convertible Notes, under some circumstances, we will increase the conversion rate for the Convertible Notes converted in connection with the make-whole adjustment event. Such increase may also be treated as a distribution subject to U.S. federal income tax as a dividend. In addition, if a holder is a non-U.S. holder, such holder may be subject to U.S. federal withholding tax in connection with such a deemed distribution. If withholding tax is paid on a holder’s behalf as a result of an adjustment to the conversion rate of the Convertible Notes, the withholding agent may offset such payments against payments of cash and common stock on the Convertible Notes. Holders are urged to consult their tax advisor with respect to the U.S. federal income tax consequences resulting from an adjustment to the conversion rate of the Convertible Notes.

 

Because the Convertible Notes will initially be held in book-entry form, holders must rely on DTC’s procedures to receive communications relating to the Convertible Notes and exercise their rights and remedies.

 

We will initially issue the Convertible Notes in the form of one or more global notes registered in the name of Cede & Co., as nominee of DTC. Beneficial interests in global notes will be shown on, and transfers of global notes will be effected only through, the records maintained by DTC. Except in limited circumstances, we will not issue certificated Convertible Notes. Accordingly, if a holder owns a beneficial interest in a global note, then the holder will not be considered an owner or holder of the Convertible Notes. Instead, DTC or its nominee will be the sole holder of the Convertible Notes. Unlike persons who have certificated Convertible Notes registered in their names, owners of beneficial interests in global notes will not have the direct right to act on our solicitations for consents or requests for waivers or other actions from holders. Instead, those beneficial owners will be permitted to act only to the extent that they have received appropriate proxies to do so from DTC or, if applicable, a DTC participant. The applicable procedures for the granting of these proxies may not be sufficient to enable owners of beneficial interests in global notes to vote on any requested actions on a timely basis. In addition, notices and other communications relating to the Convertible Notes will be sent to DTC. We expect DTC to forward any such communications to DTC participants, which in turn would forward such communications to indirect DTC participants. But we can make no assurances that holders timely receive any such communications.

 

27

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus, any accompanying prospectus supplement, and any documents we may incorporate by reference herein contain forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described or referenced under the section entitled “Risk Factors” and elsewhere in this prospectus, any accompanying prospectus supplement, and any documents we may incorporate by reference herein, including the following factors, among others:

 

our limited operating history as a BDC;

 

our future operating results;

 

our dependence upon our management team and key investment professionals;

 

our ability to manage our business and future growth;

 

risks related to investments in growth-stage companies, other venture capital-backed companies and generally U.S. companies;

 

the ability of our portfolio companies to achieve their objectives;

 

the use of leverage;

 

risks related to the uncertainty of the value of our portfolio investments;

 

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;

 

uncertainty surrounding the financial and/or political stability of the United States, the United Kingdom, the European Union, China and other countries;

 

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

risks related to changes in interest rates, our expenses and other general economic conditions and the effect on our net investment income;

 

the effect of changes in tax laws and regulations and interpretations thereof;

 

the impact on our business of new or amended legislation or regulations;

 

risks related to market volatility, including general price and volume fluctuations in stock markets;

 

our ability to make distributions; and

 

our ability to maintain our status as a BDC under the 1940 Act and qualify annually for tax treatment as a RIC under the Code.

 

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus, any accompanying prospectus supplement, if any, and any documents we may incorporate by reference herein. Further, any forward-looking statement speaks only as of the date on which it is made in this prospectus, any accompanying prospectus supplement, and any documents we may incorporate by reference herein, and we undertake no obligation to update any forward- looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Because we are an investment company, the forward-looking statements and projections contained in this prospectus, any accompanying prospectus supplement, and any documents we may incorporate by reference herein are excluded from the safe harbor protection provided by Section 27A(b)(2)(B) of the Securities Act and Section 21E of the Exchange Act (the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995).

 

28

 

 

USE OF PROCEEDS

 

All of the Convertible Notes and the shares of our common stock issuable upon conversion thereof being offered by the Selling Securityholders pursuant to this prospectus and any accompanying prospectus supplement will be sold by the Selling Securityholders for their own account. We will not receive any of the proceeds from the resales by the Selling Securityholders of the Convertible Notes and the shares of our common stock issuable upon conversion of the Convertible Notes.

 

Pursuant to the Convertible Notes Registration Rights Agreement, we will pay the fees and expenses incurred in this offering and in disposing of the Convertible Notes and the shares of our common stock issuable upon conversion thereof by the Selling Securityholders, including all registration and filing fees, any other regulatory fees, printing and delivery expenses, listing fees and expenses, fees and expenses of counsel, independent certified public accountants, and any special experts retained by us, and reasonable and documented fees and expenses of counsel to the Selling Securityholders in an amount not to exceed $75,000. The Selling Securityholders will be responsible for (i) all brokers’ and underwriters’ discounts and commissions, transfer taxes and transfer fees relating to the sale or disposition of the Convertible Notes and the shares of our common stock issuable upon conversion thereof, and (ii) the fees and expenses of any counsel to the Selling Securityholders exceeding $75,000.

 

29

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

 

The information contained in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our most recent Annual Report on Form 10-K and in “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our most recent Quarterly Report on Form 10-Q are incorporated by reference herein and should be read in conjunction with, and are qualified by reference to, our financial statements and notes thereto included in such Annual Report on Form 10-K and such Quarterly Report on Form 10-Q, as applicable.

 

30

 

 

BUSINESS

 

The information contained in “Part I, Item 1. Business,” “Part I, Item 2. Properties” and “Part I, Item 3. Legal Proceedings” of our most recent Annual Report on Form 10-K, and in “Part II, Item 1. Legal Proceedings” of our most recent Quarterly Report on Form 10-Q are incorporated herein by reference.

 

31

 

 

SENIOR SECURITIES

 

The information contained under the caption “Item 8. Consolidated Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 11 – Senior Securities” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 is incorporated by reference herein.

 

32

 

 

PORTFOLIO COMPANIES

 

The following tables set forth certain information regarding each of the portfolio companies in which we had a loan, equipment financing, equity or equity-related investment as of March 31, 2024. We will offer to make available significant managerial assistance to our portfolio companies. We may receive rights to observe the meetings of our portfolio companies’ board of directors. Other than these investments, our only relationships with our portfolio companies will be the managerial assistance we may separately provide to our portfolio companies, which services will be ancillary to our investments.

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
3DEO, Inc.  Industrials                             
24225 Granier St.
Torrance, CA 90505
     Equipment Financing  March 1, 2025  Fixed interest rate 9.1%; EOT 9.0%   1,335    n/a    n/a    1,645    1,515 
     Equipment Financing  May 1, 2025  Fixed interest rate 9.0%; EOT 9.0%   720    n/a    n/a    851    789 
      Warrant  February 23, 2032  Common Stock; Strike Price $1.81   n/a    37,218    n/a    94    - 
Total 3DEO, Inc.               2,055              2,590    2,304 
                                      
3Q GoFor Holdings, LP  Supply Chain Technology                                  
1209 Orange St.
Wilmington, DE 19801
     Equity  n/a  Preferred (17)   n/a    -    n/a    500    - 
     Equity  n/a  Preferred (17)   n/a    -    n/a    500    - 
Total 3Q GoFor Holdings, LP(21)                              1,000    - 
                                      
Aledia, Inc.  Industrials                                  
10 Rue des Méridiens
38130 Echirolles, France
     Equipment Financing  April 1, 2025  Fixed interest rate 9.0%; EOT 7.0%   6,583    n/a    n/a    7,703    7,577 
     Equipment Financing  July 1, 2025  Fixed interest rate 9.7%; EOT 7.0%   527    n/a    n/a    593    585 
      Equipment Financing  September 1, 2025  Fixed interest rate 10.7%; EOT 7.0%   774    n/a    n/a    855    846 
      Equipment Financing  October 1, 2025  Fixed interest rate 12.0%; EOT 7.0%   1,302    n/a    n/a    1,424    1,415 
      Warrant  March 31, 2032  Preferred Series D-3(17); Strike Price $149.01   n/a    11,771    n/a    130    444 
Total Aledia, Inc.(10)               9,186              10,705    10,867 
                                      
All Seated, Inc.  SaaS                                  
311 California St., Ste 610
San Francisco, CA 94104
     Warrant  February 28, 2032  Common Stock; Strike Price $15.72   n/a    5,101    n/a    20    - 

 

33

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
All.Space Networks Limited (10)    Space Technology                             
Thames Valley Park Drive
Reading, Berkshire RG6 1RB
    Secured Loan(14)   September 1, 2027  Variable interest rate Prime + 7.0% or Floor rate 11.5%; EOT 2.5% (8)   9,060    -    n/a    9,112    8,910 
     Warrant   August 22, 2032  Common Stock; Strike Price $21.79   n/a    71,203    n/a    113    73 
Total All.Space Networks Limited(10)                 9,060              9,225    8,983 
                                      
Ambient Photronics, Inc.  Artificial Intelligence & Automation                                  
100 Enterprise Way, Ste. C205
Scotts Valley, CA 95066
     Secured Loan(14)   July 1, 2025  Variable interest rate Prime + 6.0% or Floor rate 9.5%; EOT 4.0% (8)   2,006    -    n/a    2,145    2,160 
     Secured Loan(14)   May 1, 2025  Variable interest rate Prime + 6.0% or Floor rate 9.5%; EOT 4.0% (8)   2,210    -    n/a    2,352    2,234 
      Secured Loan(14)   June 1, 2025  Variable interest rate Prime + 6.0% or Floor rate 9.5%; EOT 4.0% (8)   375    -    n/a    396    379 
      Warrant   July 27, 2032  Common Stock; Strike Price $0.55   n/a    159,760    n/a    48    195 
Total Ambient Photronics, Inc.               4,591              4,941    4,968 
                                      
Applied Digital Corporation  Artificial Intelligence & Automation                                  
3811 Turtle Creek Blvd. Ste. 2100
Dallas, TX 75219
     Equipment Financing(14)   October 1, 2025  Variable interest rate 0 + 0.0% or Floor rate 0.0%; EOT 0.0% -   12,467    -    n/a    12,465    12,465 
     Equipment Financing(14)   March 1, 2026  Fixed interest rate 19.0%; EOT 0.0%   21,287    -    n/a    21,286    21,286 
Total Applied Digital Corporation               33,754              33,751    33,751 
                                      
Astranis Space Technologies Corp.  Space Technology                                  
420 Bryant St.
San Francisco, CA 94107
     Equipment Financing(9)  November 1, 2026  Fixed interest rate 12.1%; EOT 5.0%   11,614    -    n/a    11,903    12,310 
     Equity(9)  n/a  Series C Prime Preferred(17)   -    13,685    n/a    300    135 
      Equity(9)  n/a  Preferred Series D(17)   -    64,223    n/a    600    607 
      Warrant(9)  April 13, 2033  Common Stock; Strike Price $7.89   -    96,847    n/a    93    334 
Total Astranis Space Technologies Corp.               11,614              12,896    13,386 

 

34

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
Athletic Brewing Company, LLC  Food and Agriculture Technologies                             
350 Long Beach Blvd.
Stratford, CT 06615
     Equipment Financing  September 1, 2026  Fixed interest rate 11.1%; EOT 7.0%   19,866    n/a    n/a    20,611    20,040 
     Equipment Financing  September 1, 2026  Fixed interest rate 11.2%; EOT 7.0%   4,962    n/a    n/a    5,134    5,002 
      Equipment Financing(9)  January 1, 2028  Fixed interest rate 11.2%; EOT 8.0%   5,675    -    n/a    5,721    6,019 
      Warrant  October 28, 2032  Preferred Class B(17); Strike Price $140.21   n/a    3,741    n/a    287    308 
Total Athletic Brewing Company, LLC               30,503              31,753    31,369 
                                      
Axiom Space, Inc.  Space Technology                                  
1290 Hercules Ave, First Floor
Houston, TX 77058
     Equity  n/a  Preferred Series C(17)   n/a    3,624    n/a    521    567 
     Secured Loan  June 1, 2026  Variable interest rate Prime + 6.0% or Floor rate 9.3%; EOT 2.5% (8)   22,500    n/a    n/a    22,999    23,083 
      Warrant  May 28, 2031  Common Stock; Strike Price $340.11   n/a    882    n/a    39    6 
      Warrant  May 28, 2031  Common Stock; Strike Price $169.24   n/a    1,773    n/a    121    40 
Total Axiom Space, Inc.               22,500              23,680    23,696 
                                      
BackBlaze, Inc.  SaaS                                  
500 Ben Franklin Ct.
San Mateo, CA 94001
     Equipment Financing  May 1, 2024  Fixed interest rate 7.3%; EOT 11.5%   35    n/a    n/a    204    237 
     Equipment Financing  August 1, 2024  Fixed interest rate 7.4%; EOT 11.5%   140    n/a    n/a    309    303 
      Equipment Financing  October 1, 2024  Fixed interest rate 7.2%; EOT 11.5%   36    n/a    n/a    64    63 
      Equipment Financing  April 1, 2025  Fixed interest rate 7.5%; EOT 11.5%   771    n/a    n/a    1,072    1,040 
Total BackBlaze, Inc.               982              1,649    1,643 

 

35

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
BaubleBar, Inc.  Consumer Products & Services                             
1115 Broadway, 5th Floor
New York, NY 10010
    Warrant  April 20, 2028  Preferred Series C(17); Strike Price $1.96   n/a    60,000    n/a    72    6 
     Warrant  March 29, 2027  Preferred Series C(17); Strike Price $1.96   n/a    531,806    n/a    639    48 
Total BaubleBar, Inc.               -              711    54 
                                      
Bestow, Inc.  Finance and Insurance                                  
2700 Commerce St, Ste. 1000
Dallas, TX 75226
     Secured Loan  May 1, 2027  Variable interest rate Prime + 6.5% or Floor rate 10.0%; EOT 1.5% (8)   25,000    n/a    n/a    25,156    25,062 
     Secured Loan  June 1, 2027  Variable interest rate Prime + 6.5% or Floor rate 10.0%; EOT 1.5% (8)   15,000    n/a    n/a    15,088    15,125 
Total Bestow, Inc.               40,000              40,244    40,187 

 

36

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
BetterLeap, Inc.  Human Resource Technology                            
55 Francisco St., Ste 800
San Francisco, CA 94133
     Warrant  April 20, 2032  Common Stock; Strike Price $2.26152   n/a    88,435    n/a    38    34 
                                     
BlueGround US, Inc.  Real Estate Technology                                  
106 W 32nd St.
New York, NY 10001
     Equipment Financing  January 1, 2026  Fixed interest rate 9.6%; EOT 8.0%   2,405    n/a    n/a    2,639    2,624 
     Equipment Financing  February 1, 2026  Fixed interest rate 11.1%; EOT 8.0%   3,474    n/a    n/a    3,782    3,788 
      Equipment Financing  March 1, 2026  Fixed interest rate 11.6%; EOT 8.0%   2,798    n/a    n/a    3,027    3,055 
      Equipment Financing  April 1, 2026  Fixed interest rate 11.9%; EOT 8.0%   3,454    n/a    n/a    3,714    3,777 
      Equipment Financing  May 1, 2026  Fixed interest rate 12.6%; EOT 8.0%   2,922    n/a    n/a    3,124    3,181 
      Equipment Financing  June 1, 2026  Fixed interest rate 12.7%; EOT 8.0%   1,948    n/a    n/a    2,072    2,131 
Total BlueGround US, Inc.               17,001              18,358    18,556 
                                      
BoardRE, Inc.  Real Estate Technology                                  
280 Detroit St.
Denver, Colorado 80206
     Secured Loan  June 1, 2026  Variable interest rate Prime + 8.3% or Floor rate 11.5%; EOT 4.5% (8)   5,000    n/a    n/a    5,232    4,548 
                                     
Bolb, Inc.  Green Technology                                  
52 Wright Brothers Ave
Livermore, CA 94551
     Equipment Financing  November 1, 2024  Fixed interest rate 10.3%; EOT 6.0%   374    n/a    n/a    475    466 
     Warrant  October 12, 2031  Common Stock; Strike Price $0.07   n/a    181,784    n/a    36    9 
Total Bolb, Inc.               374              511    475 

 

37

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
Boosted eCommerce, Inc.  Consumer Products & Services                            
9903 Santa Monica Blvd., Ste 605
Beverly Hills, CA 90212
     Warrant  December 14, 2030  Preferred Series A-1(17); Strike Price $0.8446   n/a    759,263    n/a    259    54 
                                     
Bowery Farming, Inc.  Food and Agriculture Technologies                                  
36 W 20th St, 9th Floor
New York, NY 10011
     Secured Loan(14)(18)  September 10, 2026  Variable interest rate SOFR 30 Day Forward + 10.0% or Floor rate 1.0%(8)(15)   8,660    -    n/a    7,947    3,810 
     Warrant  June 10, 2029  Common Stock; Strike Price $5.08   n/a    68,863    n/a    410    - 
      Warrant  December 22, 2030  Common Stock; Strike Price $6.24   n/a    29,925    n/a    160    1 
      Warrant  September 10, 2028  Common Stock; Strike Price $0.01   n/a    21,577    n/a    617    - 
      Warrant  December 29, 2030  Common Stock; Strike Price $0.01   n/a    114,725    n/a    29    1 
Total Bowery Farming, Inc.                8,660              9,163    3,812 
                                      
Cart.com, Inc.  SaaS                                  
1334 Brittmoore Rd., Ste. 225
Houston, TX 77043
     Secured Loan(9)(14)  47058  Variable interest rate Prime + 4.0% or Floor rate 12.5%; EOT 0.0% (8)   18,000    -    n/a    17,484    18,249 
     Warrant(9)  48900  Common Stock; Strike Price $15.87   -    30,666    n/a    441    539 
Total Cart.com, Inc.               18,000              17,925    18,788 
                                      
Cherry Technologies, Inc.  Finance and Insurance                                  
2261 Market St., Suite 4869
San Francisco, CA 94114
     Secured Loan(14)  47209  Variable interest rate PRIME + 4.5% or Floor rate 12.0%+PIK Fixed Interest Rate 1.0%; EOT 2.0%(8)(15)   20,000    -    n/a    19,803    19,803 

 

38

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
Cleanspark, Inc.(10)  Digital Assets Technology and Services                          
2370 Corporate Circle Ste.160
Henderson, NV 89074
     Equipment Financing  May 1, 2025  Fixed interest rate 10.3%; EOT 5.0%   7,891    n/a    n/a    8,748    8,578 
                                     
Commonwealth Fusion Systems, LLC  Green Technology                                  
148 Sidney St.
Cambridge, MA 02139
     Equipment Financing  October 1, 2024  Fixed interest rate 9.5%; EOT 8.5%   437    n/a    n/a    631    621 
     Equipment Financing  November 1, 2024  Fixed interest rate 9.7%; EOT 8.5%   147    n/a    n/a    203    199 
      Equipment Financing(9)(14)  July 1, 2030  Fixed interest rate 13.0%; EOT 10.0%   5,052    -    n/a    5,107    5,323 
Total Commonwealth Fusion Systems, LLC               5,636              5,941    6,143 
                                      
Convergent Dental, Inc.  Medical Devices                                  
140 Kendrick St., Ste C110
Needham, MA 02494
     Secured Loan(9)  May 1, 2027  Variable interest rate Prime + 5.8% or Floor rate 13.5%; EOT 4.0% (8)   12,000    -    n/a    11,803    11,964 
     Secured Loan(9)  May 1, 2027  Variable interest rate Prime + 5.8% or Floor rate 13.5%; EOT 5.5% (8)   6,000    -    n/a    5,843    5,843 
      Warrant(9)  April 21, 2033  Preferred Series D(17); Strike Price $1.61   -    446,982    n/a    492    277 
Total Convergent Dental, Inc.               18,000              18,138    18,084 
                                      
Core Scientific, Inc.  Digital Assets Technology and Services                                  
2800 Northup Way, #220
Bellevue, WA 98004
     Equity(7)  n/a  Common Stock   -    3,494,967    n/a    17,546    12,372 

 

39

 

 

Portfolio Company (1)  Industry (2)  Type of
Investment (3)
  Maturity
Date
  Interest
Rate (4)
  Principal
Amount (5)
   Number of
Shares or
Units
   Percentage of Class
Held on a
Fully
Diluted
Basis
   Cost   Fair
Value(6)
 
Cpacket Networks, Inc.                              
480 N McCarthy Blvd, Suite 100
Milpitas, CA 95035
     Secured Loan  February 1, 2029  Variable interest rate PRIME + 4.8% or Floor rate 13.3%+PIK Fixed Interest Rate 1.3%; EOT 3.0%(8)(15)   27,031    n/a    n/a    26,611    26,611 
     Warrant  January 29, 2034  Preferred Class B Common(17); Strike Price $0.36    n/a     665,821    n/a    221    190 
Total Cpacket Networks, Inc.               27,031              26,832    26,801 
                                      
Crowdtap, Inc.  SaaS                                  
625 Broadway, 5th Floor
New York, NY 10012
     Warrant  December 16, 2025  Preferred Series B(17); Strike Price $1.09    n/a     442,233    n/a    42    731 
     Warrant  December 11, 2027  Preferred Series B(17); Strike Price $1.09    n/a     100,000    n/a    9    165 
Total Crowdtap, Inc.               -              51    896 
                                      
Crusoe Energy Systems LLC  Green Technology