SuRo Capital(SSSS) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements for Q1 2023, detailing assets, liabilities, operations, cash flows, and investments Condensed Consolidated Statements of Assets and Liabilities Outlines the company's financial position, showing total assets, liabilities, and net assets, with an increased Net Asset Value per share Condensed Consolidated Statements of Assets and Liabilities | Metric | March 31, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | Total Portfolio Investments | $165,088,040 | $157,188,578 | | Total Investments | $241,074,952 | $242,245,395 | | Total Assets | $291,096,643 | $284,412,858 | | Total Liabilities | $76,053,574 | $74,392,156 | | Net Assets | $215,043,069 | $210,020,702 | | Net Asset Value Per Share | $7.59 | $7.39 | Condensed Consolidated Statements of Operations Presents the company's operational results for Q1 2023, highlighting a decrease in net change in net assets from operations compared to the prior year Condensed Consolidated Statements of Operations (Three Months Ended March 31) | Metric | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Total Investment Income | $1,299,082 | $583,100 | | Total Operating Expenses | $5,520,847 | $4,807,805 | | Net Investment Loss | $(4,221,765) | $(4,224,705) | | Net Realized Gain on Investments | $189,343 | $3,096,275 | | Net Change in Unrealized Appreciation of Investments | $8,648,931 | $21,584,885 | | Net Change in Net Assets Resulting from Operations | $4,616,509 | $20,456,455 | | Net Change in Net Assets per Common Share (Basic & Diluted) | $0.16 | $0.66 | Condensed Consolidated Statements of Changes in Net Assets Details the changes in net assets for Q1 2023, reflecting contributions from operations and capital transactions - The total change in net assets for Q1 2023 was $5,022,367, increasing from $210,020,702 at the beginning of the year to $215,043,069 at the end of the period[16] - No dividends were declared in Q1 2023, compared to $3.4 million in dividends declared in Q1 2022[16] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows for Q1 2023, showing a positive net cash flow from operating activities and an increased cash balance Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net Cash Provided by/(Used in) Operating Activities | $8,103,901 | $(1,385,827) | | Net Cash Used in Financing Activities | $(107,823) | $(24,212,110) | | Total Increase/(Decrease) in Cash Balance | $7,996,078 | $(25,597,937) | | Cash Balance at End of Period | $48,113,676 | $172,839,141 | Condensed Consolidated Schedule of Investments Provides a detailed breakdown of the investment portfolio as of March 31, 2023, including top holdings and total fair value Top 5 Portfolio Investments by Fair Value (as of March 31, 2023) | Portfolio Company | Fair Value ($) | % of Net Assets (%) | | :--- | :--- | :--- | | Learneo, Inc. | $50,797,393 | 23.62% | | Colombier Sponsor LLC | $14,794,714 | 6.88% | | Blink Health, Inc. | $11,692,829 | 5.44% | | StormWind, LLC | $9,379,607 | 4.36% | | Locus Robotics Corp. | $10,000,005 | 4.65% | Investment Portfolio Summary | Category | Cost ($) | Fair Value ($) | | :--- | :--- | :--- | | Total Portfolio Investments | $215,352,994 | $165,088,040 | | U.S. Treasury Bills | $75,497,157 | $75,986,912 | | TOTAL INVESTMENTS | $290,850,151 | $241,074,952 | Notes to Condensed Consolidated Financial Statements Offers detailed explanations of accounting policies, fair value measurements, and significant financial activities, including subsequent events - The company is an internally-managed, non-diversified closed-end management investment company regulated as a BDC and qualifying as a RIC for tax purposes, with an objective to maximize total return, primarily through capital gains from equity investments in venture-capital-backed emerging companies[41][44] - The majority of the company's investments are classified as Level 3, valued using significant unobservable inputs, requiring a high degree of judgment and uncertainty in determining fair value[56] - As of March 31, 2023, the company had a share repurchase program with approximately $16.4 million remaining authorization, extended until October 31, 2023[138][140] - Subsequent to quarter-end, the company commenced a Modified Dutch Auction Tender Offer to repurchase up to 3,000,000 shares, which was completed in April 2023[197] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, portfolio activity, and liquidity, noting decreased net assets from operations due to lower unrealized gains Portfolio and Investment Activity Details investment funding and exits during Q1 2023, including new investments in Orchard Technologies and True Global Ventures, and proceeds from sales Investment Funding (Q1 2023) | Portfolio Company | Investment Type | Gross Payments ($) | | :--- | :--- | :--- | | Orchard Technologies, Inc. | Preferred shares, Series 1 | $2,000,000 | | True Global Ventures 4 Plus Pte Ltd | Limited Partner Fund Investment | $1,330,000 | | Total | | $3,330,000 | Investment Exits/Proceeds (Q1 2023) | Portfolio Company | Net Proceeds ($) | Realized Gain/(Loss) ($) | | :--- | :--- | :--- | | Rent the Runway, Inc. | $241,456 | $(961,837) | | NewLake Capital Partners, Inc. | $2,293,102 | $(186,748) | | True Global Ventures 4 Plus Pte Ltd | $1,330,000 | $1,330,000 | | Total (including others) | $4,190,159 | $80,949 | Results of Operations Analyzes the company's operational results for Q1 2023, focusing on investment income, operating expenses, and changes in unrealized appreciation - Investment income increased to $1.3 million in Q1 2023 from $0.6 million in Q1 2022, mainly due to interest income from U.S. Treasury Bills[230] - Operating expenses increased to $5.5 million in Q1 2023 from $4.8 million in Q1 2022, primarily due to higher compensation expense and income tax expense[231] - The net change in unrealized appreciation was $8.6 million in Q1 2023, a significant decrease from $21.6 million in Q1 2022 The largest contributor to unrealized appreciation in Q1 2023 was a $12.1 million gain from Colombier Sponsor LLC[234][235] Liquidity and Capital Resources Assesses the company's liquidity position and capital resources, detailing cash reserves, liquid securities, and contractual obligations Cash Reserves and Liquid Securities (as of March 31, 2023) | Category | Amount ($) | | :--- | :--- | | Cash | $48,113,676 | | U.S. Treasury bills | $75,986,912 | | Unrestricted public securities | $11,534,888 | | Total | $135,635,476 | - The company has $75.0 million in aggregate principal of 6.00% Notes due 2026, which mature on December 30, 2026[248][256] - As of March 31, 2023, approximately $98.8 million remained available for sale under the company's At-the-Market (ATM) offering program[254] Item 3. Quantitative and Qualitative Disclosures About Market Risk Identifies primary market risks, including valuation risk from illiquid private investments and interest rate risk on fixed-rate borrowings - The company's investments are primarily in illiquid, private growth companies, leading to significant valuation risk as fair values are determined in good faith by the Board and may differ materially from values in a ready market[270][271] - As of March 31, 2023, all of the company's debt investments and outstanding borrowings carried fixed interest rates, minimizing direct interest rate risk[273] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[274] - No material changes to the internal control over financial reporting occurred during the quarter ended March 31, 2023[275] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings, nor is it aware of any threatened actions - As of the filing date, SuRo Capital is not a party to any material legal proceedings[277] Item 1A. Risk Factors Updates risk factors, noting no material changes except for a new risk factor concerning the impact of bank failures on portfolio companies - A new risk factor has been added concerning the potential impact of bank failures on portfolio companies The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in March and May 2023 are cited as examples that could inhibit portfolio companies' access to capital and adversely affect their operations, thereby indirectly impacting SuRo Capital's performance[279] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered equity sales or share repurchases during Q1 2023, with $16.4 million remaining for future repurchases - No shares were repurchased during the three months ended March 31, 2023[281] - As of March 31, 2023, the remaining authorized amount for share repurchases under the existing repurchase program was approximately $16.4 million[281][285] Item 3. Defaults Upon Senior Securities The company reported no defaults on its senior securities during the period - None[282] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[283] Item 5. Other Information This item is not applicable to the company - Not applicable[284] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, and a new custody agreement - A new Custody Agreement with Western Alliance Trust Company, N.A., dated April 19, 2023, was filed as an exhibit[286]