Document
TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2020
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 814-00852
__________________________
SuRo Capital Corp.
(Exact name of registrant as specified in its charter)
____________________________
Maryland27-4443543
(State of incorporation)(I.R.S. Employer Identification No.)
One Sansome Street, Suite 730, San Francisco, CA94104
(Address of principal executive offices)(Zip Code)
(650) 235-4769
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareSSSSNasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x

The issuer had 19,914,023 shares of common stock, $0.01 par value per share, outstanding as of November 6, 2020.




TABLE OF CONTENTS

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SURO CAPITAL CORP.

TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION

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PART I

FINANCIAL INFORMATION

Item 1.     Condensed Consolidated Financial Statements

SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
September 30, 2020December 31, 2019
ASSETS
Investments at fair value:
Non-controlled/non-affiliate investments (cost of $99,438,709 and $90,567,041, respectively)$186,045,176 $152,866,112 
Non-controlled/affiliate investments (cost of $52,857,243 and $52,857,243, respectively)28,440,826 37,944,268 
Controlled investments (cost of $7,161,412 and $7,161,412, respectively)960,198 775,198 
Total Portfolio Investments
215,446,200 191,585,578 
Investments in U.S. Treasury bills (cost of $149,999,917 and $49,996,667, respectively)150,000,000 50,000,000 
Total Investments (cost of $309,457,281 and $200,582,363, respectively)365,446,200 241,585,578 
Cash60,595,499 44,861,263 
Proceeds receivable4,094,909 — 
Escrow proceeds receivable116,679 265,303 
Interest and dividends receivable422,004 84,630 
Deferred financing costs296,198 11,382 
Prepaid expenses and other assets(1)
1,161,669 1,755,933 
Total Assets432,133,158 288,564,089 
LIABILITIES
Accounts payable and accrued expenses(1)
2,754,423 1,143,923 
Payable to executive officers— 1,369,873 
Accrued interest payable— 475,000 
Dividends payable5,074,591 2,107,709 
Payable for securities purchased134,249,917 44,746,660 
Income tax payable35,850 — 
4.75% Convertible Senior Notes due March 28, 2023(2)
37,305,608 38,803,635 
Total Liabilities179,420,389 88,646,800 
Commitments and contingencies (Notes 7 and 10)
Net Assets$252,712,769 $199,917,289 
NET ASSETS
Common stock, par value $0.01 per share (100,000,000 authorized; 20,284,811 and 17,564,244 issued and outstanding, respectively)$202,848 $175,642 
Paid-in capital in excess of par225,047,913 178,550,374 
Unearned deferred compensation(200,000)— 
Accumulated net investment loss(35,939,194)(25,679,362)
Accumulated net realized gain on investments, net of distributions7,612,281 5,867,417 
Accumulated net unrealized appreciation/(depreciation) of investments55,988,921 41,003,218 
Net Assets$252,712,769 $199,917,289 
Net Asset Value Per Share$12.46 $11.38 
See accompanying notes to condensed consolidated financial statements.
__________________________________________________
(1)    This balance includes a right of use asset and corresponding operating lease liability, respectively. Refer to "Note 7—Commitments and Contingencies—Operating Leases and Related Deposits" for more detail.
(2)    As of September 30, 2020 and December 31, 2019, the 4.75% Convertible Senior Notes due March 28, 2023 had a face value of $38,220,000 and $40,000,000, respectively. Refer to “Note 10—Debt Capital Activities” for a reconciliation of the carrying value to the face value.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
INVESTMENT INCOME
Non-controlled/non-affiliate investments:
Interest income$284,357 $298,515 $500,568 $635,187 
Dividend income— — 50,000 — 
Non-controlled/affiliate investments:
Interest income/(reversal of interest income accrual)— 81,711 (29,184)201,304 
Dividend income123,750 — 180,000 — 
Controlled investments:
Interest income— — — 58,937 
Dividend income— — 200,000 200,000 
Total Investment Income408,107 380,226 901,384 1,095,428 
OPERATING EXPENSES
Management fees(1)
— — — 848,723 
Reversal of incentive fee accrual(1)
— — — (4,660,472)
Costs incurred under Administration Agreement(1)
— — — 306,084 
Compensation expense(2)
1,030,239 3,070,409 4,960,679 3,702,517 
Directors’ fees 111,250 99,620 333,750 272,120 
Professional fees714,345 807,143 2,532,183 4,179,093 
Interest expense555,935 591,512 1,697,962 1,795,885 
Income tax expense(1,657)954 46,598 34,666 
Other expenses585,886 512,792 1,590,044 1,504,545 
Total Operating Expenses2,995,998 5,082,430 11,161,216 7,983,161 
Net Investment Loss(2,587,891)(4,702,204)(10,259,832)(6,887,733)
Realized Gains/(Losses) on Investments:
Non-controlled/non-affiliated investments2,378,390 1,772,961 9,332,643 23,632,332 
Non-controlled/affiliate investments— — — (12,334,831)
Net Realized Gain on Investments2,378,390 1,772,961 9,332,643 11,297,501 
Change in Unrealized Appreciation/(Depreciation) of Investments:
Non-controlled/non-affiliated investments17,027,314 (7,998,030)24,304,146 2,279,117 
Non-controlled/affiliate investments(997,872)11,264,416 (9,503,443)19,067,052 
Controlled investments100,000 4,924,309 185,000 (4,896,043)
Net Change in Unrealized Appreciation/(Depreciation) of Investments
16,129,442 8,190,695 14,985,703 16,450,126 
Benefit from taxes on unrealized depreciation of investments— — — 885,566 
Net Change in Net Assets Resulting from Operations$15,919,941 $5,261,452 $14,058,514 $21,745,460 
Net Change in Net Assets Resulting from Operations per Common Share:
Basic$0.89 $0.27 $0.82 $1.11 
Diluted(3)
$0.76 $0.25 $0.75 $1.00 
Weighted-Average Common Shares Outstanding
Basic17,795,538 19,472,785 17,208,723 19,650,651 
Diluted(3)
21,598,403 23,204,129 21,087,926 23,381,995 
See accompanying notes to condensed consolidated financial statements.
____________________________________________________________________________________________________________________________
(1)    This balance references a related-party transaction. Refer to “Note 3—Related-Party Arrangements” for more detail.
(2)     For the nine months ended September 30, 2020, this balance includes $1,962,431 of accelerated recognition of compensation cost related to the cancellation of unvested options on April 28, 2020. Refer to "Note 11— Stock-Based Compensation" for more detail.
(3)    For the three and nine months ended September 30, 2020 and the three and nine months ended September 30, 2019, 0 potentially dilutive common shares were excluded from the weighted-average common shares outstanding for diluted net increase in net assets resulting from operations per common share because the effect of these shares would have been anti-dilutive. Refer to “Note 6—Net Change in Net Assets Resulting from Operations per Common Share—Basic and Diluted”.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
Nine Months Ended September 30,
20202019
Net Assets at Beginning of Year$199,917,289 $195,378,159 
Change in Net Assets Resulting from Operations
Net investment income/(loss)(3,004,553)619,702 
Net realized gain/(loss) on investments6,978,240 (4,065,693)
Net change in unrealized appreciation/(depreciation) of investments(27,665,934)20,699,751 
Provision for taxes on unrealized appreciation of investments— (94,147)
Net Change in Net Assets Resulting from Operations(23,692,247)17,159,613 
Change in Net Assets Resulting from Capital Transactions
Repurchases of common stock(3,709,244)— 
Net Change in Net Assets Resulting from Capital Transactions(3,709,244)— 
Total Change in Net Assets(27,401,491)17,159,613 
Net Assets at March 31$172,515,798 $212,537,772 
Change in Net Assets Resulting from Operations
Net investment loss$(4,667,388)$(2,805,231)
Net realized gain/(loss) on investments(23,987)13,590,233 
Net change in unrealized appreciation/(depreciation) of investments26,522,195 (12,440,320)
Benefit from taxes on unrealized depreciation of investments— 979,713 
Net Change in Net Assets Resulting from Operations21,830,820 (675,605)
Change in Net Assets Resulting from Capital Transactions
Stock-based compensation1,962,431 — 
Repurchases of common stock(3,616,608)(737,119)
Net Decrease in Net Assets Resulting from Capital Transactions(1,654,177)(737,119)
Total Change in Net Assets20,176,643 (1,412,724)
Net Assets at June 30$192,692,441 $211,125,048 
Change in Net Assets Resulting from Operations
Net investment loss$(2,587,891)$(4,702,204)
Net realized gain on investments2,378,390 1,772,961 
Net change in unrealized appreciation/(depreciation) of investments16,129,442 8,190,695 
Net Change in Net Assets Resulting from Operations15,919,941 5,261,452 
Distributions
Dividends declared(7,587,779)— 
Total Distributions(7,587,779)— 
Change in Net Assets Resulting from Capital Transactions
Issuance of common stock49,882,319 — 
Conversion of 4.75% Convertible Senior Notes due March 28, 20231,805,847 — 
Stock-based compensation— 1,449,121 
Repurchases of common stock— (3,886,591)
Net Change in Net Assets Resulting from Capital Transactions51,688,166 (2,437,470)
Total Change in Net Assets60,020,328 2,823,982 
Net Assets at September 30$252,712,769 $213,949,030 
Capital Share Activity
Shares outstanding at beginning of year17,564,244 19,762,647 
Issuance of common stock from public offering3,808,979 — 
Issuance of common stock under restricted stock plan21,760 — 
Issuance of common stock from conversion of 4.75% Convertible Notes due 2023174,393 — 
Shares repurchased(1,284,565)(721,128)
Shares Outstanding at End of Period20,284,811 19,041,519 
See accompanying notes to condensed consolidated financial statements.

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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30,
20202019
Cash Flows from Operating Activities
Net change in net assets resulting from operations$14,058,514 $21,745,460 
Adjustments to reconcile net change in net assets resulting from operations to net cash provided by/(used in) operating activities:
Net realized gain on investments(9,332,643)(11,297,501)
Net change in unrealized (appreciation)/depreciation of investments(14,985,703)(16,450,126)
Change in deferred tax liability— (885,566)
Amortization of discount on 4.75% Convertible Senior Notes due 2023281,973 276,084 
Amortization of fixed income security premiums and discounts— (3,729)
Write-off of deferred offering costs— 267,541 
Stock-based compensation(1)
1,962,431 1,449,121 
Paid-in-kind interest— (383,980)
Forfeited interest on 4.75% Convertible Senior Notes due 202325,880 — 
Adjustments to escrow proceeds receivable75,844 26,221 
Purchases of investments in:
Portfolio investments(15,397,511)(25,309,145)
U.S. Treasury bills(300,000,084)(249,933,583)
Proceeds from sales or maturity of investments in:
Portfolio investments15,779,482 52,322,735 
U.S. Treasury bills200,000,000 300,000,000 
Change in operating assets and liabilities:
Prepaid expenses and other assets594,264 (2,124,641)
Interest and dividends receivable(337,374)130,322 
Deferred financing costs— (5,502)
Escrow proceeds receivable148,624 408,437 
Receivable from unsettled trades(4,094,909)— 
Payable for securities purchased89,503,257 (44,737,654)
Accounts payable and accrued expenses1,610,500 1,651,365 
Payable to executive officers(1,369,873)— 
Income tax payable35,850 — 
Accrued incentive fees(2)
— (4,660,472)
Accrued management fees(2)
— (415,056)
Accrued interest payable(475,000)(475,000)
Net Cash Provided by/(Used in) Operating Activities(21,916,478)21,595,331 
Cash Flows from Financing Activities
Proceeds from the issuance of common stock, net49,882,319 — 
Repurchases of common stock(7,325,852)(4,623,710)
Dividends paid(4,620,898)— 
Deferred offering costs(284,816)— 
Cash paid for fractional shares(40)— 
Net Cash Provided by/(Used in) Financing Activities$37,650,714 $(4,623,710)
Total Increase in Cash Balance$15,734,236 $16,971,621 
Cash Balances at Beginning of Year44,861,263 28,184,163 
Cash Balances at End of Period$60,595,499 $45,155,784 
Supplemental Information:
Interest paid$1,870,453 $2,007,872 
Conversion of 4.75% Convertible Senior Notes due 2023$1,780,000 $— 
Taxes paid$10,735 $34,666 
See accompanying notes to condensed consolidated financial statements.
_______________________
(1)    For the nine months ended September 30, 2020, this balance includes $1,962,431 of accelerated recognition of compensation cost related to the cancellation of unvested options on April 28, 2020. Refer to "Note 11— Stock-Based Compensation" for more detail.
(2)    This balance references a related-party transaction. Refer to “Note 3—Related-Party Arrangements” for more detail.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)
September 30, 2020
Portfolio Investments*Headquarters/
Industry
Date of Initial InvestmentShares/
Principal
CostFair Value% of Net
Assets
NON-CONTROLLED/NON-AFFILIATE
Coursera, Inc.Mountain View, CA
Preferred shares, Series F 8%Online Education7/15/2020166,962 $2,840,017 $2,812,510 1.11 %
Preferred shares, Series B 8%6/9/20132,961,399 14,519,519 49,885,383 19.74 %
Total17,359,536 52,697,893 20.85 %
Palantir Technologies, Inc.**
Palo Alto, CA
Common shares, Class A(3)(13)
Data Analysis5/7/20125,373,690 15,101,477 46,662,051 18.46 %
Course Hero, Inc.Redwood City, CA
Preferred shares, Series A 8%Online Education9/18/20142,145,509 5,000,001 31,818,831 12.59 %
Nextdoor.com, Inc.San Francisco, CA
Common sharesSocial Networking9/27/2018580,360 10,002,666 10,603,177 4.20 %
SharesPost, Inc.San Francisco, CA
Preferred shares, Series B 6%Online Marketplace Finance7/19/20111,771,653 2,259,716 8,258,137 3.27 %
Common shares7/20/2011770,934 123,987 1,188,410 0.47 %
Total2,383,703 9,446,547 3.74 %
Palantir Lending Trust SPV I **(10)
Palo Alto, CA
Collateralized Loan 15%, Due 6/19/2022***Data Analysis6/19/2020$6,900,000 6,900,601 6,900,000 2.73 %
Equity Participation in Underlying Collateral6/19/2020— 1,684,657 0.67 %
Total6,900,601 8,584,657 3.40 %
Enjoy Technology, Inc.Menlo Park, CA
Preferred shares, Series B 6%On-Demand Commerce7/29/20151,681,520 4,000,280 4,000,000 1.58 %
Preferred shares, Series A 6%10/16/2014879,198 1,002,440 1,939,143 0.77 %
Total5,002,720 5,939,143 2.35 %
Rent the Runway, Inc.New York, NY
Preferred sharesSubscription Fashion Rental6/17/2020339,191 5,153,945 4,891,051 1.94 %
Neutron Holdings, Inc. (d/b/a/ Lime)San Francisco, CA
Junior Preferred shares, Series 1-D(11)
Micromobility1/25/201941,237,113 10,007,322 3,485,014 1.38 %
Junior Preferred Convertible Note 4% Due 5/11/2027***5/11/2020$506,339 506,339 506,339 0.20 %
Common Warrants, Strike Price $0.01, Expiration Date 5/11/2027(11)
5/11/20202,032,967 — — — %
Total10,513,661 3,991,353 1.58 %
Treehouse Real Estate Investment Trust, Inc.Chicago, IL
Common shares***(8)
Cannabis REIT9/11/2019312,500 7,500,000 3,883,296 1.54 %
Aspiration Partners, Inc.Marina Del Rey, CA
Preferred shares, Series AFinancial Services8/11/2015540,270 1,001,815 3,288,548 1.30 %
Preferred shares, Series C-3 (12)
8/12/201924,912 281,190 169,600 0.07 %
Total1,283,005 3,458,148 1.37 %
Clever, Inc.San Francisco, CA
Preferred shares, Series B 8%Education Software12/5/20141,799,047 2,000,601 2,000,001 0.79 %
A Place for Rover Inc. (f/k/a DogVacay, Inc.)Seattle, WA
Common sharesPeer-to-Peer Pet Services11/3/2014707,991 2,506,119 1,277,667 0.51 %
Tynker (f/k/a Neuron Fuel, Inc.)Mountain View, CA
Preferred shares, Series A 8%Computer Software8/8/2012534,162 309,310 791,361 0.31 %
Fullbridge, Inc.Cambridge, MA
Common sharesBusiness Education5/13/2012517,917 6,150,506 — — %
Promissory Note 1.47%, Due 11/9/2021(4)
3/3/2016$2,270,458 2,270,858 — — %
Total8,421,364 — — %
See accompanying notes to condensed consolidated financial statements.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) - continued
September 30, 2020
Portfolio Investments*Headquarters/
Industry
Date of Initial InvestmentShares/
Principal
CostFair Value% of Net
Assets
Kinetiq Holdings, LLC(14)
Philadelphia, PA
Common shares, Class ASocial Data Platform3/30/2012112,374 — — — %
Total Non-controlled/Non-affiliate$99,438,709 $186,045,176 73.62 %
NON-CONTROLLED/AFFILIATE(1)
Ozy Media, Inc.Mountain View, CA
Preferred shares, Series C-2 6%Digital Media Platform9/11/2019683,482 $2,414,178 $1,990,069 0.79 %
Common Warrants, Strike Price $0.01, Expiration Date 4/9/20284/9/2018295,565 30,647 700,489 0.28 %
Preferred shares, Series B 6%10/3/2014922,509 4,999,999 3,350,952 1.33 %
Preferred shares, Series A 6%12/11/20131,090,909 3,000,200 3,033,832 1.20 %
Preferred shares, Series Seed 6%11/2/2012500,000 500,000 1,243,944 0.49 %
Total10,945,024 10,319,286 4.08 %
StormWind, LLC(5)
Scottsdale, AZ
Preferred shares, Series D 8%Interactive Learning11/26/2019329,337 257,267 446,142 0.18 %
Preferred shares, Series C 8%1/7/20142,779,134 4,000,787 4,856,959 1.92 %
Preferred shares, Series B 8%12/16/20113,279,629 2,019,687 2,681,401 1.06 %
Preferred shares, Series A 8%2/25/2014366,666 110,000 94,513 0.04 %
Total6,387,741 8,079,015 3.20 %
GreenAcreage Real Estate Corp.New York, NY
Common shares***(9)
Cannabis REIT8/12/2019375,000 7,501,530 6,918,750 2.74 %
NestGSV, Inc. (d/b/a GSV Labs, Inc.)San Mateo, CA
Derivative Security, Expiration Date 8/23/2024(7)
Global Innovation Platform8/23/20198,555,124 2,112,442 0.84 %
Convertible Promissory Note 8% Due 8/23/2024(4)(7)
2/17/2016$1,010,198 1,030,176 505,099 0.20 %
Preferred Warrants Series A-3, Strike Price $1.33, Expiration Date 4/4/20214/4/2014187,500 — 8,438 — %
Preferred Warrants Series A-4, Strike Price $1.33, Expiration Date 10/6/202110/6/2014500,000 — 72,500 0.03 %
Preferred Warrants Series A-4, Strike Price $1.33, Expiration Date 7/18/20217/8/2016250,000 74,380 32,500 0.01 %
Preferred Warrants Series B, Strike Price $2.31, Expiration Date 11/29/202111/29/2016100,000 29,275 — — %
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/20225/29/2017125,000 70,379 — — %
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/202312/31/2018250,000 5,080 6,125 0.00 %
Total9,764,414 2,737,104 1.08 %
CUX, Inc. (d/b/a CorpU)Philadelphia, PA
Senior Subordinated Convertible Promissory Note 4% Due 2/14/2023(4)
Corporate Education11/26/2014$1,251,158 1,256,191 312,789 0.12 %
Convertible preferred shares, Series D 6%5/31/2013169,033 778,607 73,882 0.03 %
Convertible preferred shares, Series C 8%3/29/2012615,763 2,006,077 — — %
Total4,040,875 386,671 0.15 %
Maven Research, Inc.San Francisco, CA
Preferred shares, Series C 8%Knowledge Networks7/2/2012318,979 2,000,447 — — %
Preferred shares, Series B 5%2/28/201249,505 217,206 — — %
Total2,217,653 — — %
Curious.com, Inc.Menlo Park, CA
Common sharesOnline Education11/22/20131,135,944 12,000,006 — — %
Total Non-controlled/Affiliate$52,857,243 $28,440,826 11.25 %
See accompanying notes to condensed consolidated financial statements.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) - continued
September 30, 2020
Portfolio Investments*Headquarters/
Industry
Date of Initial InvestmentShares/
Principal
CostFair Value% of Net
Assets
CONTROLLED(2)
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)Cupertino, CA
Preferred shares, Class A***(6)
Clean Technology4/15/201414,300,000 $7,151,412 $960,198 0.38 %
Common shares4/15/2014100,000 10,000 — — %
Total7,161,412 960,198 0.38 %
Total Controlled$7,161,412 $960,198 0.38 %
Total Portfolio Investments$159,457,364 $215,446,200 85.25 %
U.S. Treasury
U.S. Treasury bill, 0%, due 10/1/2020***(3)
9/30/2020$150,000,000 149,999,917 150,000,000 59.36 %
TOTAL INVESTMENTS$309,457,281 $365,446,200 144.61 %

See accompanying notes to condensed consolidated financial statements.
__________________________________________
*    All portfolio investments are non-control/non-affiliated and non-income-producing, unless otherwise identified. Equity investments are subject to lock-up restrictions upon their initial public offering (“IPO”). Preferred dividends are generally only payable when declared and paid by the portfolio company's board of directors. The Company’s directors, officers, employees and staff, as applicable, may serve on the board of directors of the Company’s portfolio investments. (Refer to “Note 3—Related-Party Arrangements”). All portfolio investments are considered Level 3 and valued using significant unobservable inputs, unless otherwise noted. (Refer to “Note 4—Investments at Fair Value”). All of the Company's portfolio investments are restricted as to resale, unless otherwise noted, and were valued at fair value as determined in good faith by the Company’s Board of Directors. (Refer to "Note 2—Significant Accounting Policies—Investments at Fair Value").
**    Indicates assets that SuRo Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Of the Company’s total investments as of September 30, 2020, 15.12% of its total investments are non-qualifying assets.
***    Investment is income-producing.

(1)“Affiliate Investments” are investments in those companies that are “Affiliated Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, a company is deemed to be an “Affiliate” of SuRo Capital Corp. if SuRo Capital Corp. owns 5% or more of the voting securities (i.e., securities with the right to elect directors) of such company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.

(2)“Control Investments” are investments in those companies that are “Controlled Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, under the 1940 Act, the Company would “Control” a portfolio company if the Company owned more than 25% of its outstanding voting securities (i.e., securities with the right to elect directors) and/or had the power to exercise control over the management or policies of such portfolio company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.

(3)Denotes an investment considered Level 1 or Level 2 and valued using observable inputs. As of September 30, 2020, 1 investment held by SuRo Capital Corp. was considered Level 1 or Level 2. Refer to “Note 4—Investments at Fair Value”.

(4)As of September 30, 2020, the investments noted had been placed on non-accrual status.

(5)SuRo Capital Corp.’s investments in StormWind, LLC are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SW Holdings, Inc.

(6)The SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) preferred shares held by SuRo Capital Corp. do not entitle SuRo Capital Corp. to a preferred dividend rate. During the nine months ended September 30, 2020, SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) declared, and SuRo Capital Corp. received, an aggregate of $200,000 in dividend distributions. SuRo Capital Corp. does not anticipate that SPBRX, INC. will pay distributions on a quarterly or regular basis or become a predictable distributor of distributions.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) - continued
September 30, 2020

(7)On August 23, 2019, SuRo Capital Corp. amended the structure of its investment in NestGSV, Inc. (d/b/a GSV Labs, Inc.). As part of the agreement, SuRo Capital Corp.’s equity holdings (warrants notwithstanding) were restructured into a derivative security. NestGSV, Inc. (d/b/a GSV Labs,Inc.) has the right to call the position at any time over a five year period, while SuRo Capital Corp. can put the shares to NestGSV, Inc. (d/b/a GSV Labs, Inc.) at the end of the five year period.

(8)During the nine months ended September 30, 2020, Treehouse Real Estate Investment Trust Inc. declared, and SuRo Capital Corp. received, an aggregate of $50,000 in dividend distributions. SuRo Capital Corp. does not anticipate that Treehouse Real Estate Investment Trust Inc. will pay distributions on a recurring or regular basis or become a predictable distributor of distributions.

(9)During the nine months ended September 30, 2020, GreenAcreage Real Estate Corp. declared an aggregate of $180,000 in dividend distributions. SuRo Capital Corp. does not anticipate that GreenAcreage Real Estate Corp. will pay distributions on a recurring or regular basis or become a predictable distributor of distributions.

(10)On June 19, 2020, SuRo Capital Corp. extended a $6.9 million, non-recourse, collateralized loan to Palantir Lending Trust SPV I. The collateralized loan to Palantir Lending Trust SPV I matures on June 19, 2022 and includes a 15% interest rate. Through the collateralized loan, SuRo Capital Corp. participates in additional upside in a future Palantir Technologies, Inc. liquidity event by receiving a percentage of the share price appreciation as captured in the Equity Participation in Underlying Collateral security. On September 30, 2020 SuRo Capital Corp. approved a request by Palantir Lending Trust SPV I to sell approximately 784,491 shares of Palantir Technologies, Inc. that comprise the underlying collateral and Equity Participation upon the direct listing of Palantir Technologies, Inc. on the same date. The sale resulted in approximately $6.0 million in proceeds expected to be received by SuRo Capital Corp subsequent to quarter-end to be applied to the Equity Participation in Underlying Collateral, the guaranteed interest accrual to date, and the loan principal, in that order.

(11)On May 11, 2020, SuRo Capital Corp. made a follow-on investment in a junior preferred convertible note to Neutron Holdings, Inc. (d/b/a Lime) as part of a recapitalization of Neutron Holdings, Inc. (d/b/a Lime), led by Uber Technologies, Inc. On May 11, 2020, SuRo Capital Corp.'s existing Series D Preferred shares were converted to Series 1-D Junior Preferred shares. As part of the transaction, SuRo Capital Corp. was issued, and received on August 24, 2020, 2,032,967 common warrants with a strike price of $0.01 and an expiration date of May 11, 2027.

(12)On June 6, 2020, the convertible note SuRo Capital Corp. had extended to Aspiration Partners, Inc. converted into Series C-3 Preferred shares at a 15% discount to Aspiration Partners, Inc.'s most recent financing round. SuRo Capital Corp. received 24,912 Series C-3 Preferred shares as a result of the conversion.

(13)On September 30, 2020, Palantir Technologies, Inc. went public via a modified direct listing on the New York Stock Exchange. Under the terms of the modified direct listing, as disclosed in Palantir Technologies, Inc.'s Amendment No. 1 to Form S-1 Registration Statement, 20% of SuRo Capital Corp.'s Class A common shares in Palantir Technoloiges, Inc. held at the time of the direct public listing were considered unrestricted, while the remaining 80% were subject to sales restrictions and are not eligible for sale until the third business day following the filing of Palantir Technologies, Inc.'s fiscal year 2020 Form 10-K filing in 2021. On September 30, 2020, SuRo Capital Corp. sold 400,000 Class A common shares of Palantir Technologies, Inc. Of the Class A common shares held at September 30, 2020, 754,738 are unrestricted and 4,618,952 are restricted.

(14)On July 29, 2020 SuRo Capital Corp. exited its investment in 4C Insights (f/k/a The Echo Systems Corp.). In connection with this exit, SuRo Capital Corp. received 112,374 Class A common shares in Kinetiq Holdings, LLC in addition to cash proceeds and amounts currently held in escrow.

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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
Portfolio Investments*Headquarters/
Industry
Date of Initial InvestmentShares/
Principal
CostFair Value% of Net
Assets
NON-CONTROLLED/NON-AFFILIATE
Coursera, Inc.Mountain View, CA
Preferred shares, Series B 8%Online Education6/9/20132,961,399 $14,519,519 $33,569,902 16.79 %
Palantir Technologies, Inc.Palo Alto, CA
Common shares, Class AData Analysis5/7/20125,773,690 16,189,935 31,582,084 15.80 %
Course Hero, Inc.Redwood City, CA
Preferred shares, Series A 8%Online Education9/18/20142,145,509 5,000,001 25,674,019 12.84 %
Parchment, Inc.Scottsdale, AZ
Preferred shares, Series D 8%E-Transcript Exchange10/1/20123,200,512 4,000,982 10,896,585 5.45 %
Nextdoor.com, Inc.San Francisco, CA
Common sharesSocial Networking9/27/2018580,360 10,006,578 10,867,365 5.43 %
Neutron Holdings, Inc. (d/b/a/ Lime)San Francisco, CA
Preferred shares, Series D 6%Micromobility1/25/201941,237,113 10,006,800 10,000,000 5.00 %
Treehouse Real Estate Investment Trust, Inc.Chicago, IL
Common shares***(11)
Cannabis REIT9/11/2019312,500 7,500,000 7,384,738 3.69 %
Enjoy Technology, Inc.Menlo Park, CA
Preferred shares, Series B 6%On-Demand Commerce7/29/20151,681,520 4,000,280 4,758,702 2.38 %
Preferred shares, Series A 6%10/16/2014879,198 1,002,440 2,488,130 1.24 %
Total5,002,720 7,246,832 3.62 %
SharesPost, Inc.San Francisco, CA
Preferred shares, Series B 6%Online Marketplace Finance7/19/20111,771,653 2,259,716 6,186,877 3.09 %
Common shares7/20/2011770,934 123,987 890,340 0.45 %
Total2,383,703 7,077,217 3.54 %
Aspiration Partners, Inc.Marina Del Rey, CA
Preferred shares, Series AFinancial Services8/11/2015540,270 1,001,815 4,471,678 2.24 %
Convertible Promissory Note 5%, Due 1/31/2021***8/12/2019$280,000 281,190 321,168 0.16 %
Total1,283,005 4,792,846 2.40 %
Clever, Inc.San Francisco, CA
Preferred shares, Series B 8%Education Software12/5/20141,799,047 2,000,601 2,000,001 1.00 %
A Place for Rover Inc. (f/k/a DogVacay, Inc.)Seattle, WA
Common sharesPeer-to-Peer Pet Services11/3/2014707,991 2,506,119 963,533 0.48 %
Tynker (f/k/a Neuron Fuel, Inc.)Mountain View, CA
Preferred shares, Series A 8%Computer Software8/8/2012534,162 309,310 789,491 0.39 %
4C Insights (f/k/a The Echo Systems Corp.)Chicago, IL
Common sharesSocial Data Platform3/30/2012436,2191,436,404 21,499 0.01 %
Fullbridge, Inc.Cambridge, MA
Common sharesBusiness Education5/13/2012517,917 6,150,506 — — %
Promissory Note 1.47%, Due 11/9/2021(4)
3/3/2016$2,270,458 2,270,858 — — %
Total8,421,364 — — %
Total Non-controlled/Non-affiliate$90,567,041 $152,866,112 76.46 %
See accompanying notes to condensed consolidated financial statements.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2019
Portfolio Investments*Headquarters/
Industry
Date of Initial InvestmentShares/
Principal
CostFair Value% of Net
Assets
NON-CONTROLLED/AFFILIATE(1)
Ozy Media, Inc.Mountain View, CA
Preferred shares, Series C-2 6%(7)
Digital Media Platform9/11/2019683,482 $2,414,178 $2,970,252 1.49 %
Common Warrants, Strike Price $0.01, Expiration Date 4/9/20284/9/2018295,565 30,647 1,182,260 0.59 %
Preferred shares, Series B 6%10/3/2014922,509 4,999,999 5,001,420 2.50 %
Preferred shares, Series A 6%12/11/20131,090,909 3,000,200 4,528,107 2.27 %
Preferred shares, Series Seed 6%11/2/2012500,000 500,000 2,002,143 1.00 %
Total10,945,024 15,684,182 7.85 %
StormWind, LLC(5)
Scottsdale, AZ
Preferred shares, Series D 8%(10)
Interactive Learning11/26/2019329,337 257,267 503,120 0.25 %
Preferred shares, Series C 8%1/7/20142,779,134 4,000,787 5,391,000 2.70 %
Preferred shares, Series B 8%12/16/20113,279,629 2,019,687 3,248,804 1.62 %
Preferred shares, Series A 8%2/25/2014366,666 110,000 157,949 0.08 %
Total6,387,741 9,300,873 4.65 %
GreenAcreage Real Estate Corp.New York, NY
Common sharesCannabis REIT8/12/2019375,000 7,501,530 7,500,000 3.75 %
NestGSV, Inc. (d/b/a GSV Labs, Inc.)San Mateo, CA
Derivative Security, Expiration Date 8/23/2024(9)
Global Innovation Platform8/23/20198,555,124 3,880,621 1.94 %
Convertible Promissory Note 8% Due 8/23/2024***(9)
2/17/2016$1,010,198 1,030,176 1,010,198 0.51 %
Preferred Warrants Series A-3, Strike Price $1.33, Expiration Date 4/4/20214/4/2014187,500 20,625 0.01 %
Preferred Warrants Series A-4, Strike Price $1.33, Expiration Date 10/6/202110/6/2014500,000 135,000 0.07 %
Preferred Warrants Series A-4, Strike Price $1.33, Expiration Date 7/18/20217/8/2016250,000 74,380 62,500 0.03 %
Preferred Warrants Series B, Strike Price $2.31, Expiration Date 11/29/202111/29/2016100,000 29,275 — — %
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 5/29/20225/29/2017125,000 70,379 — — %
Preferred Warrant Series B, Strike Price $2.31, Expiration Date 12/31/202312/31/2018250,000 5,080 2,500 0.00 %
Total9,764,414 5,111,444 2.56 %
CUX, Inc. (d/b/a CorpU)Philadelphia, PA
Senior Subordinated Convertible Promissory Note 4% Due 2/14/2023(4)(6)
Corporate Education11/26/2014$1,251,158 1,256,191 312,789 0.15 %
Convertible preferred shares, Series D 6%5/31/2013169,033 778,607 34,980 0.02 %
Convertible preferred shares, Series C 8%3/29/2012615,763 2,006,077 — — %
Preferred Warrants Series D, Strike Price $4.59, Expiration Date 2/14/20205/31/201316,903 — — — %
Total4,040,875 347,769 0.17 %
Maven Research, Inc.San Francisco, CA
Preferred shares, Series C 8%Knowledge Networks7/2/2012318,979 2,000,447 — — %
Preferred shares, Series B 5%2/28/201249,505 217,206 — — %
Total2,217,653 — — %
Curious.com, Inc.Menlo Park, CA
Common sharesOnline Education11/22/20131,135,944 12,000,006 — — %
Total Non-controlled/Affiliate$52,857,243 $37,944,268 18.98 %

See accompanying notes to condensed consolidated financial statements.
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SURO CAPITAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2019
Portfolio Investments*Headquarters/
Industry
Date of Initial InvestmentShares/
Principal
CostFair Value% of Net
Assets
CONTROLLED(2)
SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.)Cupertino, CA
Preferred shares, Class A***(8)
Clean Technology4/15/201414,300,000 $7,151,412 $775,198 0.39 %
Common shares4/15/2014100,000 10,000 — — %
Total7,161,412 775,198 0.39 %
Total Controlled$7,161,412 $775,198 0.39 %
Total Portfolio Investments$150,585,696 $191,585,578 95.83 %
U.S. Treasury
U.S. Treasury bill, 0%, due 1/2/2020***(3)
12/30/2019$50,000,000 49,996,667 50,000,000 25.01 %
TOTAL INVESTMENTS$200,582,363 $241,585,578 120.84 %

See accompanying notes to condensed consolidated financial statements.
__________________________________________
*    All portfolio investments are non-control/non-affiliated and non-income-producing, unless otherwise identified. Equity investments are subject to lock-up restrictions upon their initial public offering (“IPO”). Preferred dividends are generally only payable when declared and paid by the portfolio company's board of directors. The Company’s directors, officers, employees and staff, as applicable, may serve on the board of directors of the Company’s portfolio investments. (Refer to “Note 3—Related-Party Arrangements”). All portfolio investments are considered Level 3 and valued using significant unobservable inputs, unless otherwise noted. (Refer to “Note 4—Investments at Fair Value”). All of the Company's portfolio investments are restricted as to resale, unless otherwise noted, and were valued at fair value as determined in good faith by the Company’s Board of Directors. (Refer to "Note 2—Significant Accounting Policies—Investments at Fair Value").
**    Indicates assets that SuRo Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Of the Company’s total investments as of December 31, 2019, 0.00% of its total investments are non-qualifying assets.
***    Investment is income-producing.

(1)“Affiliate Investments” are investments in those companies that are “Affiliated Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, a company is deemed to be an “Affiliate” of SuRo Capital Corp. if SuRo Capital Corp. owns 5% or more of the voting securities (i.e., securities with the right to elect directors) of such company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.

(2)“Control Investments” are investments in those companies that are “Controlled Companies” of SuRo Capital Corp., as defined in the 1940 Act. In general, under the 1940 Act, the Company would “Control” a portfolio company if the Company owned more than 25% of its outstanding voting securities (i.e., securities with the right to elect directors) and/or had the power to exercise control over the management or policies of such portfolio company. For the Schedule of Investments In, and Advances To, Affiliates, as required by SEC Regulation S-X, Rule 12-14, refer to “Note 4—Investments at Fair Value”.

(3)Denotes an investment considered Level 1 or Level 2 and valued using observable inputs. As of December 31, 2019, no investments held by SuRo Capital Corp. were considered Level 1 or Level 2. Refer to “Note 4—Investments at Fair Value”.

(4)As of December 31, 2019, the investments noted had been placed on non-accrual status.

(5)SuRo Capital Corp.’s investments in StormWind, LLC are held through SuRo Capital Corp.'s wholly owned subsidiary, GSVC SW Holdings, Inc.

(6)On October 24, 2019, CUX, Inc. (d/b/a CorpU) completed a recapitalization, which amended SuRo Capital Corp.'s investment in the Senior Subordinated Convertible Promissory Note. As a result of the recapitalization, the principal amount of SuRo Capital Corp.'s Senior Subordinated Convertible Promissory Note was reduced by $109,331, the interest rate was reduced to 4%, and the maturity was extended to February 14, 2023.

(7)On September 11, 2019, SuRo Capital Corp. agreed to convert its 5% Convertible Promissory Note due 12/31/2018 to Ozy Media, Inc. and all related accrued interest, into 683,482 shares of Ozy Media, Inc.'s Series C-2 preferred shares.
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CONSOLIDATED SCHEDULE OF INVESTMENTS - continued
December 31, 2019


(8)During the year ended December 31, 2019, SPBRX, INC. (f/k/a GSV Sustainability Partners, Inc.) declared, and SuRo Capital Corp. received, an aggregate of $400,000 in dividend distributions.

(9)On August 23, 2019, SuRo Capital Corp. amended the structure of its investment in NestGSV, Inc. (d/b/a GSV Labs, Inc.). As part of the agreement, SuRo Capital Corp’s equity holdings (warrants notwithstanding) were restructured into a derivative security. NestGSV, Inc. (d/b/a GSV Labs,Inc.) has the right to call the position at any time over a five year period, while SuRo Capital Corp. can put the shares to NestGSV, Inc. (d/b/a GSV Labs, Inc.) at the end of the five year period. As part of the agreement, previously accrued interest under SuRo Capital Corp’s 12% Convertible Promissory Note due 12/31/2019 will be capitalized into the principal of the extended Convertible Promissory Note, and the interest on the Convertible Promissory Note is reduced from 12% to 8%. The Convertible Promissory Note’s maturity was extended to August 23, 2024. Under the amended structure, SuRo Capital Corp.’s fully diluted ownership of voting securities in the company decreased from 50.0% to 8.5%. As such, SuRo Capital Corp.'s investments in NestGSV, Inc. (d/b/a GSV Labs, Inc.) have been recategorized from controlled investments to non-controlled/affiliated investments.

(10)On November 26, 2019, SuRo Capital Corp. invested $250,000 in StormWind, LLC's Series D financing round. As part of the round, SuRo Capital Corp.'s fully diluted ownership of voting securities decreased from 25.6% to 23.4%. As such, SuRo Capital Corp.'s investments in StormWind, LLC have been recategorized from controlled investments to non-controlled/affiliated investments.

(11)During year ended December 31, 2019, Treehouse Real Estate Investment Trust Inc. declared, and SuRo Capital Corp. received an aggregate of $100,000 in dividend distributions.

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SURO CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020

NOTE 1—NATURE OF OPERATIONS

SuRo Capital Corp. ("we", "us", "our", “Company” or “SuRo Capital”), formerly known as Sutter Rock Capital Corp. and as GSV Capital Corp. and formed in September 2010 as a Maryland corporation, is an internally-managed, non-diversified closed-end management investment company. The Company has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the “1940 Act”), and has elected to be treated, and intends to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On and effective March 12, 2019, our Board of Directors approved internalizing our operating structure ("Internalization") and we began operating as an internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Prior to March 12, 2019, we were externally managed by our former investment adviser, GSV Asset Management, LLC (“GSV Asset Management”), pursuant to an investment advisory agreement (the “Investment Advisory Agreement”), and our former administrator, GSV Capital Service Company, LLC (“GSV Capital Service Company”), provided the administrative services necessary for our operations pursuant to an administration agreement (the “Administration Agreement”). Refer to "Note 3 — Related-Party Arrangements" for further detail.

The Company’s date of inception was January 6, 2011, which is the date it commenced its development stage activities. The Company’s common stock is currently listed on the Nasdaq Capital Market under the symbol “SSSS” (formerly "GSVC"). The Company began its investment operations during the second quarter of 2011.

The table below displays the Company’s subsidiaries as of September 30, 2020, which, other than GSV Capital Lending, LLC (“GCL”), are collectively referred to as the “Taxable Subsidiaries.” The Taxable Subsidiaries were formed to hold portfolio investments. The Taxable Subsidiaries, including their associated portfolio investments, are consolidated with the Company for accounting purposes, but have elected to be treated as separate entities for U.S. federal income tax purposes. GCL was formed to originate portfolio loan investments within the state of California and is consolidated with the Company for accounting purposes. Refer to “Note 2—Significant Accounting Policies—Basis of Consolidation” below for further detail.
SubsidiaryJurisdiction of
Incorporation
Formation
Date
Percentage
Owned
GCLDelawareApril 13, 2012100%
Subsidiaries below are referred to collectively, as the “Taxable Subsidiaries”
GSVC AE Holdings, Inc. (“GAE”)DelawareNovember 28, 2012100%
GSVC AV Holdings, Inc. (“GAV”)DelawareNovember 28, 2012100%
GSVC NG Holdings, Inc. (“GNG”)(1)
DelawareNovember 28, 2012100%
GSVC SW Holdings, Inc. (“GSW”)DelawareNovember 28, 2012100%
GSVC WS Holdings, Inc. (“GWS”)(1)
DelawareNovember 28, 2012100%
GSVC SVDS Holdings, Inc. (“SVDS”)DelawareAugust 13, 2013100%
__________________________________
(1)    This Taxable Subsidiary was dissolved on April 16, 2020.

The Company’s investment objective is to maximize its portfolio’s total return, principally by seeking capital gains on its equity and equity-related investments, and to a lesser extent, income from debt investments. The Company invests principally in the equity securities of what it believes to be rapidly growing venture-capital-backed emerging companies. The Company may acquire its investments in these portfolio companies through: offerings of the prospective portfolio companies, transactions on secondary marketplaces for private companies, or negotiations with selling stockholders. The Company may also invest on an opportunistic basis in select publicly traded equity securities or certain non-U.S. companies that otherwise meet its investment criteria, subject to any applicable limitations under the 1940 Act.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The interim unaudited condensed consolidated financial statements of the Company are prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is an investment company following the specialized accounting and reporting guidance specified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies. In the opinion of management, all adjustments, all of which were of a normal recurring nature, considered necessary for the fair presentation of consolidated financial statements for the interim period have been included.

The results of operations for the current interim period are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2020. The interim unaudited condensed consolidated financial statements and notes hereto should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Basis of Consolidation

Under Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’ (“AICPA”) Audit and Accounting Guide for Investment Companies, the Company is precluded from consolidating any entity other than another investment company, a controlled operating company that provides substantially all of its services and benefits to the Company, and certain entities established for tax purposes where the Company holds a 100% interest. Accordingly, the Company’s condensed consolidated financial statements include its accounts and the accounts of the Taxable Subsidiaries and GCL, its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires the Company’s management to make a number of significant estimates. These include estimates of the fair value of certain assets and liabilities and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reporting period. It is likely that changes in these estimates will occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ materially from such estimates.

Uncertainties and Risk Factors

The Company is subject to a number of risks and uncertainties in the nature of its operations, as well as vulnerability due to certain concentrations. Refer to "Risk Factors” in Part I, Item 1A of this Form 10-Q for a detailed discussion of the risks and uncertainties inherent in the nature of the Company’s operations. Refer to “Note 4—Investments at Fair Value” for an overview of the Company’s industry and geographic concentrations.

Investments at Fair Value

The Company applies fair value accounting in accordance with GAAP and the AICPA’s Audit and Accounting Guide for Investment Companies. The Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020

Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date.

Level 2—Valuations based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.

Level 3—Valuations based on unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. The majority of the Company’s investments are Level 3 investments and are subject to a high degree of judgment and uncertainty in determining fair value.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within the Level 3 table set forth in “Note 4—Investments at Fair Value” may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the measurement period in which the reclassifications occur. Refer to “Levelling Policy” below for a detailed discussion of the levelling of the Company’s financial assets or liabilities and events that may cause a reclassification within the fair value hierarchy.

Securities for which market quotations are readily available on an exchange are valued at the most recently available closing price of such security as of the valuation date, unless there are legal or contractual restrictions on the sale or use of such security that under ASC 820-10-35 should be incorporated into the security’s fair value measurement as a characteristic of the security that would transfer to market participants who would buy the security. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined to be adequate, the Company uses the quote obtained.

Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of management, our Board of Directors or the valuation committee of the Company’s Board of Directors (the “Valuation Committee”), does not reliably represent fair value, shall each be valued as follows:

1.    The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;

2.    Preliminary valuation conclusions are then documented and discussed with senior management;

3.    An independent third-party valuation firm is engaged by the Valuation Committee to conduct independent appraisals and review management’s preliminary valuations and make its own independent assessment, for all investments for which there are no readily available market quotations;

​4.    The Valuation Committee discusses the valuations and recommends to the Company’s Board of Directors a fair value for each investment in the portfolio based on the input of management and the independent third-party valuation firm; and

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5.    The Company’s Board of Directors then discusses the valuations recommended by the Valuation Committee and determines in good faith the fair value of each investment in the portfolio.

In making a good faith determination of the fair value of investments, the Company considers valuation methodologies consistent with industry practice. Valuation methods utilized include, but are not limited to the following: comparisons to prices from secondary market transactions; venture capital financings; public offerings; purchase or sales transactions; as well as analysis of financial ratios and valuation metrics of the portfolio companies that issued such private equity securities to peer companies that are public, analysis of the portfolio companies’ most recent financial statements and forecasts, and the markets in which the portfolio company does business, and other relevant factors. The Company assigns a weighting based upon the relevance of each method to determine the fair value of each investment.

For investments that are not publicly traded or that do not have readily available market quotations, the Valuation Committee generally engages an independent valuation firm to provide an independent valuation, which the Company’s Board of Directors considers, among other factors, in making its fair value determinations for these investments. For the current quarter and prior fiscal year, the Valuation Committee engaged an independent valuation firm to perform valuations of 100% of the Company’s investments for which there were no readily available market quotations.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the realized gains or losses on investments to be different from the net change in unrealized appreciation or depreciation currently reflected in the consolidated financial statements.

Equity Investments

Equity investments for which market quotations are readily available in an active market are generally valued at the most recently available closing market prices and are classified as Level 1 assets. Equity investments with readily available market quotations that are subject to sales restrictions due to an initial public offering (“IPO”) by the portfolio company will be classified as Level 1. Any other equity investments with readily available market quotations that are subject to sales restrictions that would transfer to market participants who would buy the security may be valued at a discount for a lack of marketability (“DLOM”), to the most recently available closing market prices depending upon the nature of the sales restriction. These investments are generally classified as Level 2 assets. The DLOM used is generally based upon the market value of publicly traded put options with similar terms.

The fair values of the Company’s equity investments for which market quotations are not readily available are determined based on various factors and are classified as Level 3 assets. To determine the fair value of a portfolio company for which market quotations are not readily available, the Company may analyze the relevant portfolio company’s most recently available historical and projected financial results, public market comparables, and other factors. The Company may also consider other events, including the transaction in which the Company acquired its securities, subsequent equity sales by the portfolio company, and mergers or acquisitions affecting the portfolio company. In addition, the Company may consider the trends of the portfolio company’s basic financial metrics from the time of its original investment until the measurement date, with material improvement of these metrics indicating a possible increase in fair value, while material deterioration of these metrics may indicate a possible reduction in fair value.

In determining the value of equity or equity-linked securities (including warrants to purchase common or preferred stock) in a portfolio company, the Company considers the rights, preferences and limitations of such securities. In cases where a portfolio company’s capital structure includes multiple classes of preferred and common stock and equity-linked securities with different rights and preferences, the Company may use an option pricing model to allocate value to each equity-linked security, unless it believes a liquidity event such as an acquisition or a dissolution is imminent, or the portfolio company is unlikely to continue as a going concern. When equity-linked securities expire worthless, any cost associated with these positions is
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recognized as a realized loss on investments in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. In the event these securities are exercised into common or preferred stock, the cost associated with these securities is reassigned to the cost basis of the new common or preferred stock. These conversions are noted as non-cash operating items on the Condensed Consolidated Statements of Cash Flows.

Debt Investments

Given the nature of the Company’s current debt investments (excluding U.S. Treasuries), principally convertible and promissory notes issued by venture-capital-backed portfolio companies, these investments are classified as Level 3 assets because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. The Company’s debt investments are valued at estimated fair value as determined by the Company’s Board of Directors.

Options

The Company’s Board of Directors will ascribe value to options based on fair value analyses that can include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate. These investments are classified as Level 3 assets because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. The Company’s options are valued at estimated fair value as determined by the Company’s Board of Directors.

Portfolio Company Investment Classification

The Company is a non-diversified company within the meaning of the 1940 Act. The Company classifies its investments by level of control. As defined in the 1940 Act, control investments are those where there is the power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual directly or indirectly owns beneficially more than 25% of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist when a company or individual directly or indirectly owns, controls or holds the power to vote 5% or more of the outstanding voting securities of a portfolio company. Refer to the Condensed Consolidated Schedules of Investments as of September 30, 2020 and December 31, 2019, for details regarding the nature and composition of the Company’s investment portfolio.

Levelling Policy

The portfolio companies in which the Company invests may offer their shares in IPOs. The Company’s shares in such portfolio companies are typically subject to lock-up agreements for 180 days following the IPO. Upon the IPO date, the Company transfers its investment from Level 3 to Level 1 due to the presence of an active market, or Level 2 if limited by the lock-up agreement. The Company prices the investment at the closing price on a public exchange as of the measurement date. In situations where there are lock-up restrictions, as well as legal or contractual restrictions on the sale or use of such security that under ASC 820-10-35 should be incorporated into the security’s fair value measurement as a characteristic of the security that would transfer to market participants who would buy the security, the Company will classify the investment as Level 2 subject to an appropriate DLOM to reflect the restrictions upon sale. The Company transfers investments between levels based on the fair value at the beginning of the measurement period in accordance with FASB ASC 820. For investments transferred out of Level 3 due to an IPO, the Company transfers these investments based on their fair value at the IPO date.

Securities Transactions

Securities transactions are accounted for on the date the transaction for the purchase or sale of the securities is entered into by the Company (i.e., trade date). Securities transactions outside conventional channels, such as private transactions, are recorded as of the date the Company obtains the right to demand the securities purchased or to collect the proceeds from a sale and incurs an obligation to pay for securities purchased or to deliver securities sold, respectively.

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Valuation of Other Financial Instruments

The carrying amounts of the Company’s other, non-investment financial instruments, consisting of cash, receivables, accounts payable, and accrued expenses, approximate fair value due to their short-term nature.

Cash

The Company places its cash with U.S. Bank, N.A., Bridge Bank (a subsidiary of Western Alliance Bank), and Silicon Valley Bank, and at times, cash held in these accounts may exceed the Federal Deposit Insurance Corporation insured limit. The Company believes that U.S. Bank, N.A., Western Alliance Bank, and Silicon Valley Bank are high-quality financial institutions and that the risk of loss associated with any uninsured balance is remote.

Escrow Proceeds Receivable

A portion of the proceeds from the sale of portfolio investments and sold are held in escrow as a recourse for indemnity claims that may arise under the sale agreement. Amounts held in escrow are held at estimated realizable value and included in net realized gains (losses) on investments in the Condensed Consolidated Statements of Operations for the period in which they occurred and are adjusted as needed. Any remaining escrow proceeds balances from these transactions reasonably expected to be received are reflected on the Condensed Consolidated Statement of Assets and Liabilities as escrow proceeds receivable. As of September 30, 2020 and December 31, 2019, the Company had $116,679 and $265,303, respectively, in escrow proceeds receivable.

Deferred Financing Costs

The Company records origination costs related to lines of credit as deferred financing costs. These costs are deferred and amortized as part of interest expense using the straight-line method over the respective life of the line of credit. For modifications to a line of credit, any unamortized origination costs are expensed. Included within deferred financing costs are offering costs incurred relating to the Company’s shelf registration statement on Form N-2. The Company defers these offering costs until capital is raised pursuant to the shelf registration statement or until the shelf registration statement expires. For equity capital raised, the offering costs reduce paid-in capital resulting from the offering. For debt capital raised, the associated offering costs are amortized over the life of the debt instrument. As of September 30, 2020 and December 31, 2019, the Company had deferred financing costs of $296,198 and $11,382, respectively, on the Condensed Consolidated Statement of Assets and Liabilities.
September 30, 2020December 31, 2019
Deferred credit facility costs$11,382 $11,382 
Deferred offering costs284,816 — 
Deferred Financing Costs$296,198 $11,382 

Operating Leases & Related Deposits

The Company accounts for its operating leases as prescribed by ASC 842, Leases, which requires lessees to recognize a right of use asset on the balance sheet, representing its right to use the underlying asset for the lease term, and a corresponding lease liability for all leases with terms greater than 12 months. The lease expense is presented as a single lease cost that is amortized on a straight-line basis over the life of the lease. Non-lease components (maintenance, property tax, insurance and parking) are not included in the lease cost. On June 3, 2019, the Company entered a 5-year operating lease for primary office space for which the Company has recorded a right-of-use asset and a corresponding lease liability for the operating lease obligation. These amounts have been discounted using the rate implicit in the lease. Refer to “Note 7—Commitments and Contingencies—Operating Leases and Related Deposits” for further detail.

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September 30, 2020
Stock-based Compensation

Using the fair value recognition provisions as prescribed by ASC 718, Stock Compensation, stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the appropriate service period. Determining the fair value of stock-based awards requires considerable judgment, including estimating the expected term of stock options and the expected volatility of our stock price. Differences between actual results and these estimates could have a material effect on our financial results. Forfeitures are accounted for as they occur. Refer to “Note 11—Stock-Based Compensation” for further detail.

Revenue Recognition

The Company recognizes gains or losses on the sale of investments using the specific identification method. The Company recognizes interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis. The Company recognizes dividend income on the ex-dividend date.

Investment Transaction Costs and Escrow Deposits

Commissions and other costs associated with an investment transaction, including legal expenses not reimbursed by the portfolio company, are included in the cost basis of purchases and deducted from the proceeds of sales. The Company makes certain acquisitions on secondary markets, which may involve making deposits to escrow accounts until certain conditions are met, including the underlying private company’s right of first refusal. If the underlying private company does not exercise or assign its right of first refusal and all other conditions are met, then the funds in the escrow account are delivered to the seller and the account is closed. Such transactions would be reflected on the Condensed Consolidated Statement of Assets and Liabilities as escrow deposits. As of September 30, 2020 and December 31, 2019, the Company had no material escrow deposits.

Unrealized Appreciation or Depreciation of Investments

Unrealized appreciation or depreciation is calculated as the difference between the fair value of the investment and the cost basis of such investment.

U.S. Federal and State Income Taxes

The Company elected to be treated as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with its taxable year ended December 31, 2014, has qualified to be treated as a RIC for subsequent taxable years and intends to continue to operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of the sum of investment company taxable income (“ICTI”) including payment-in-kind interest income, as defined by the Code, and net tax-exempt interest income (which is the excess of its gross tax-exempt interest income over certain disallowed deductions) for each taxable year (the "Annual Distribution Requirement"). Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward into the next tax year ICTI in excess of current year dividend distributions. Any such carryforward ICTI must be distributed on or before December 31 of the subsequent tax year to which it was carried forward.

If the Company meets the Annual Distribution Requirement, but does not distribute (or is not deemed to have distributed) each calendar year a sum of (1) 98% of its net ordinary income for each calendar year, (2) 98.2% of its capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the “Excise Tax Avoidance Requirement”), it generally will be required to pay an excise tax equal to 4% of the amount by which the Excise Tax Avoidance Requirement exceeds the distributions for the year. To the extent that the Company determines that its estimated current year annual taxable income will exceed estimated current year dividend distributions from such taxable income, the Company will accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.
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September 30, 2020

So long as the Company qualifies and maintains its tax treatment as a RIC, it generally will not pay corporate-level U.S. federal and state income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the RIC will represent obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company. Included in the Company’s condensed consolidated financial statements, the Taxable Subsidiaries are taxable subsidiaries, regardless of whether the Company is a RIC. These taxable subsidiaries are not consolidated for income tax purposes and may generate income tax expenses as a result of their ownership of the portfolio companies. Such income tax expenses and deferred taxes, if any, will be reflected in the Company’s condensed consolidated financial statements.

If it is not treated as a RIC, the Company will be taxed as a regular corporation (a “C corporation”) under Subchapter C of the Code for such taxable year. If the Company has previously qualified as a RIC but is subsequently unable to qualify for treatment as a RIC, and certain amelioration provisions are not applicable, the Company would be subject to tax on all of its taxable income (including its net capital gains) at regular corporate rates. The Company would not be able to deduct distributions to stockholders, nor would it be required to make distributions. Distributions, including distributions of net long-term capital gain, would generally be taxable to its stockholders as ordinary dividend income to the extent of the Company’s current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate stockholders would be eligible to claim a dividend received deduction with respect to such dividend; non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of the Company’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. In order to requalify as a RIC, in addition to the other requirements discussed above, the Company would be required to distribute all of its previously undistributed earnings attributable to the period it failed to qualify as a RIC by the end of the first year that it intends to requalify for tax treatment as a RIC. If the Company fails to requalify for tax treatment as a RIC for a period greater than two taxable years, it may be subject to regular corporate tax on any net built-in gains with respect to certain of its assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if the Company had been liquidated) that it elects to recognize on requalification or when recognized over the next five years. The Company was taxed as a C Corporation for its 2012 and 2013 taxable years. Refer to “Note 9—Income Taxes” for further details.

The Company elected to be treated as a RIC for the taxable year ended December 31, 2014 in connection with the filing of its 2014 tax return. As a result, the Company was required to pay a corporate-level U.S. federal income tax on the amount of the net built-in gains in its assets (the amount by which the net fair market value of the Company’s assets exceeds the net adjusted basis in its assets) either (1) as of the date it converted to a RIC (i.e., the beginning of the first taxable year that the Company qualifies as a RIC, which would be January 1, 2014), or (2) to the extent that the Company recognized such net built-in gains during the five-year recognition period beginning on the date of conversion. As of January 1, 2014, the Company had net unrealized built-in gains, but did not incur a built-in-gains tax for the 2014 tax year due to the fact that there were sufficient net capital loss carryforwards to completely offset recognized built-in gains as well as available net operating losses. The five-year recognition period ended on December 31, 2018.

Per Share Information

Net change in net assets resulting from operations per basic common share is computed using the weighted-average number of shares outstanding for the period presented. Diluted net change in net assets resulting from operations per common share is computed by dividing net increase/​(decrease) in net assets resulting from operations for the period adjusted to include the pre-tax effects of interest incurred on potentially dilutive securities, by the weighted-average number of common shares outstanding plus any potentially dilutive shares outstanding during the period. The Company used the if-converted method in accordance with FASB ASC 260, Earnings Per Share (“ASC 260”) to determine the number of potentially dilutive shares outstanding. Refer to “Note 6—Net Increase in Net Assets Resulting from Operations per Common Share—Basic and Diluted” for further detail.

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September 30, 2020
Recently Issued or Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which is intended to improve fair value and defined benefit disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures' specific requirements, and adding relevant disclosure requirements. The amendments took effect for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the eliminated and modified disclosure requirements during the three and nine months ended September 30, 2020. No significant changes to the fair value disclosures were necessary in the notes to the condensed consolidated financial statements in order to comply with ASU 2018-13.

In August 2018, the SEC issued Final Rule Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements intended to eliminate redundant, duplicative, overlapping, outdated or superseded, in light of other SEC disclosure requirements, U.S. GAAP requirements, or changes in the information environment. In part, this final rule requires an investment company to present distributable earnings in total on the consolidated balance sheet, rather than showing the three components of distributable earnings as previously required. The Company decided not to adopt this change as the current, more detailed and expanded disclosure presentation was deemed to be most helpful, useful, and transparent for users of our condensed consolidated financial statements. The impact of the adoption of this amendment on the Company's consolidated financial statements would not be material. Additionally, the final rule requires disclosure of changes in net assets within a registrant's Form 10-Q filing on a quarter-to-date and year-to-date basis for both the current year and prior year comparative periods. The Company adopted the new requirement to present changes in net assets in interim financial statements within Form 10-Q filings during the year ended December 31, 2019. The adoption of this rule did not have a material impact on the consolidated financial statements.

In March 2020, the SEC adopted a final rule under SEC Release No. 34-88365 ("SEC Rule 12b-2 Update"), amending the accelerated filer and large accelerated filer definitions in Exchange Act Rule 12b-2. The amendments include a provision under which a BDC will be excluded from the “accelerated filer” and “large accelerated filer” definitions if the BDC has (1) a public float of $75.0 million or more, but less than $700.0 million, and (2) has annual investment income of less than $100.0 million. In addition, BDCs are subject to the same transition provisions for accelerated filer and large accelerated filer status as other issuers, but instead substituting investment income for revenue. The amendments will reduce the number of issuers required to comply with the auditor attestation on the internal control over financial reporting requirement provided under Section 404(b) of the Sarbanes-Oxley Act of 2002. SEC Rule 12b-2 Update applies to annual report filings due on or after April 27, 2020. The Company is currently assessing SEC Rule 12b-2 Update and believes it will no longer be an accelerated filer, but may continue filing under the accelerated filer timeline.

In May 2020, the SEC adopted rule amendments that will impact the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules amend the definition of “significant subsidiary” in a manner that is intended to more accurately capture those portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules will be effective on January 1, 2021, but voluntary compliance is permitted in advance of the effective date. The Company has elected to comply in advance of the effective date for the quarter ended September 30, 2020. The adoption of this rule will have a moderate impact on the consolidated condensed financial statements in that far fewer subsidiaries will require disclosure under the Final Rules as compared to the previous rules.

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.


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September 30, 2020
NOTE 3—RELATED-PARTY ARRANGEMENTS

Internalization of Company’s Operating Structure

On and effective March 12, 2019 (the "Effective Date"), our Board of Directors approved internalizing our operating structure and we began operating as an internally managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Prior to the Effective Date, we were externally managed by our former investment adviser, GSV Asset Management, pursuant to the Investment Advisory Agreement, and our former administrator, GSV Capital Service Company, provided the administrative services necessary for our operations pursuant to the Administration Agreement.

The accounting implications and related controls associated with the Internalization were analyzed and updated for fiscal year 2019.

Termination of Investment Advisory Agreement

On and effective March 12, 2019, the Investment Advisory Agreement was terminated by mutual agreement of GSV Asset Management and us in connection with our Internalization.

Prior to our Internalization, GSV Asset Management served as our external investment adviser pursuant to the Investment Advisory Agreement. Pursuant to the terms of the Investment Advisory Agreement, we paid GSV Asset Management a fee for its services consisting of two components - a base management fee and an incentive fee. The base management fee was calculated at an annual rate of 2.00% of our gross assets (our total assets as reflected on our balance sheet with no deduction for liabilities). The incentive fee was determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equaled the lesser of (i) 20% of our realized capital gains during such calendar year, if any, calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle” of 8.00% per year, and a “catch-up” feature, and (ii) 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees. See “—Investment Advisory Agreement” below.

As the Investment Advisory Agreement has been terminated, there will be no base management fees or incentives fees payable to GSV Asset Management going forward.

Termination of Administration Agreement

On and effective March 12, 2019, the Administration Agreement was terminated by mutual agreement of GSV Capital Service Company and us in connection with our Internalization.

Prior to our Internalization, GSV Capital Service Company served as our external administrator and provided administrative services necessary for our operations, including but not limited to, furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with certain other administrative services, including, but not limited to, assisting us with determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders.

Under the Administration Agreement, we did not pay any fees to GSV Capital Service Company but reimbursed GSV Capital Service Company for our allocable portion of overhead and other expenses incurred by GSV Capital Service Company in performing its services under the Administration Agreement, including, but not limited to, fees and expenses associated with performing compliance functions and our allocable portion of rent and compensation of our President, Chief Financial Officer, Chief Compliance Officer and other staff providing administrative services. See “—Administration Agreement” below.

As the Administration Agreement has been terminated, there will be no costs incurred by GSV Capital Service Company going forward.
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Departure of Director and Reduction of Number of Directors

On and effective March 12, 2019, Michael T. Moe resigned from our Board of Directors in connection with our Internalization. As a result of Mr. Moe’s resignation, our Board of Directors reduced the number of directors that constitute our full Board of Directors to five directors from six directors in accordance with our bylaws. Mr. Moe will continue to provide services to us pursuant to the Consulting Agreement (as defined below). See “—Consulting Agreement.”

Consulting Agreement

On and effective March 12, 2019, we entered into a Consulting Agreement (the “Consulting Agreement”) with Michael T. Moe, the former Chairman of our Board of Directors and the Chief Executive Officer and Chief Investment Officer of GSV Asset Management, for the purpose of assisting us with certain transition services following the termination of the Investment Advisory Agreement and our Internalization.  Pursuant to the Consulting Agreement, Mr. Moe will provide certain transition services to us related to our existing portfolio investments for which Mr. Moe previously had oversight in his role as the Chief Executive Officer and Chief Investment Officer of GSV Asset Management. Such transition services will include providing information to us regarding such portfolio companies, including as a member of a portfolio company’s board of directors, assisting with the transition of portfolio company board seats as requested by us, making appropriate introductions to representatives of portfolio companies, and providing other similar types of services that we may reasonably request.

The term of the Consulting Agreement commenced on March 12, 2019 and will continue for eighteen months, unless the parties thereto mutually agree to extend the Consulting Agreement for an additional period.  Pursuant to the Consulting Agreement, we will pay Mr. Moe a total amount equal to $1,250,000. On September 12, 2020, the Consulting Agreement expired in accordance with its terms and was not renewed or extended.

For the three months ended September 30, 2020 and 2019 the Company incurred $165,771 and $208,333, respectively, of consulting expense related to the Consulting Agreement, as included in "professional fees" on the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2020 and 2019 the Company incurred $582,437 and $459,229, respectively, of consulting expense related to the Consulting Agreement, as included in "professional fees" on the Condensed Consolidated Statements of Operations. As of September 30, 2020 and December 31, 2019, the Company recorded $0 and $332,437, respectively, of prepaid expense related to the Consulting Agreement on the Condensed Consolidated Statement of Assets and Liabilities.

Amended and Restated Trademark License Agreement

On and effective March 12, 2019, we entered into an Amended and Restated Trademark License Agreement (the “Amended and Restated License Agreement”) with GSV Asset Management in connection with termination of the Investment Advisory Agreement.  See “—Termination of Investment Advisory Agreement.”

GSV Asset Management is the owner of the trade name “GSV”, and other state or unregistered “GSV” marks, including the trading symbol “GSVC” (collectively, the “Licensed Marks”). Pursuant to the Amended and Restated License Agreement, GSV Asset Management granted us a non-transferable, non-sublicensable, and non-exclusive right and license to use the Licensed Marks, solely in connection with the operation of our existing business.

The term of the Amended and Restated License Agreement commenced on March 12, 2019 and will continue for eighteen months, unless the parties thereto mutually agree to extend the Amended and Restated License Agreement for an additional period.  Pursuant to the Amended and Restated License Agreement, we will pay GSV Asset Management a total amount equal to $1,250,000. On September 12, 2020, the Amended and Restated License Agreement expired in accordance with its terms and was not renewed or extended.

For the three months ended September 30, 2020 and 2019, the Company incurred $165,771 and $208,333, respectively, of licensing expense, as included in "other expenses" on the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2020 and 2019, the Company incurred $582,438 and $459,229 respectively, of licensing expense,
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as included in "other expenses" on the Condensed Consolidated Statements of Operations. As of September 30, 2020 and December 31, 2019, the Company recorded $0 and $332,437, respectively, of prepaid expense related to the Amended and Restated Trademark License Agreement on the Condensed Consolidated Statement of Assets and Liabilities.

Investment Advisory Agreement

On March 12, 2019, in connection with the Company's Internalization, the Investment Advisory Agreement was terminated in accordance with its terms.

Prior to our Internalization on March 12, 2019, the Company had entered into the Investment Advisory Agreement with GSV Asset Management. Under the terms of the Investment Advisory Agreement, GSV Asset Management was paid a quarterly management fee and an annual incentive fee. GSV Asset Management is controlled by Michael T. Moe, the former Chairman of the Company’s Board of Directors. Mr. Moe, through his ownership interest in GSV Asset Management, was entitled to a portion of any profits earned by GSV Asset Management in performing its services under the Investment Advisory Agreement. Mr. Moe serves as the principal of GSV Asset Management and manages the business and internal affairs of GSV Asset Management. Mark Klein, the Company’s Chief Executive Officer, President, and a member of the Company’s Board of Directors, or entities with which he is affiliated, received consulting fees from GSV Asset Management equal to a percentage of each of the base management fee and the incentive fee paid by the Company to GSV Asset Management pursuant to a consulting agreement with GSV Asset Management. As the Investment Advisory Agreement has been terminated, Mr. Klein no longer has a consulting agreement or any other affiliation with GSV Asset Management.

Under the Investment Advisory Agreement, there were no restrictions on the right of any manager, partner, officer or employee of GSV Asset Management to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to, one or more of the Company’s portfolio companies). GSV Asset Management had, however, adopted an internal policy whereby any fees or compensation received by a manager, partner, officer or employee of GSV Asset Management in exchange for serving as a director of, or providing consulting services to, any of the Company’s portfolio companies would be transferred to the Company, net of any personal taxes incurred, upon such receipt for the benefit of the Company and its stockholders.

Management Fees

Under the terms of the Investment Advisory Agreement, GSV Asset Management was paid a base management fee of 2.00% of gross assets, which is the Company’s total assets reflected on its Condensed Consolidated Statement of Assets and Liabilities (with no deduction for liabilities) reduced by any non-portfolio investments. During the month of January 2018, pursuant to a voluntary waiver by GSV Asset Management, the Company paid GSV Asset Management a base management fee of 1.75%, a 0.25% reduction from the 2.00% base management fee payable under the Investment Advisory Agreement. On February 2, 2018 GSV Asset Management voluntarily agreed to reduce fees payable under the Investment Advisory Agreement (the “Waiver Agreement”). Pursuant to the Waiver Agreement, effective February 1, 2018, the base management fee is reduced to 1.75% of the Company’s gross assets, as further described below. The waiver of a portion of the base management fee is not subject to recourse against or reimbursement by the Company.

GSV Asset Management did not earn any management fees for the three months ended September 30, 2020 and 2019 and did not waive any management fees for the three months ended September 30, 2020 or 2019. For the nine months ended September 30, 2020 and 2019, GSV Asset Management earned $0 and $848,723 in management fees, respectively, and did not waive any management fees.

As the Investment Advisory Agreement has been terminated, there will be no base management fee payable to GSV Asset Management going forward.

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Incentive Fees

Under the terms of the Investment Advisory Agreement, GSV Asset Management was paid an annual incentive fee equal to the lesser of (i) 20% of the Company’s realized capital gains during each calendar year, if any, calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle,” and a “catch-up” feature, and (ii) 20% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees. Effective February 1, 2018, the incentive fee paid by the Company to GSV Asset Management under the Investment Advisory Agreement was modified pursuant to the terms of the Waiver Agreement, as further described below.

The Company was required to accrue incentive fees for all periods as if the Company had fully liquidated its entire investment portfolio at the fair value stated on the Consolidated Statements of Assets and Liabilities as of December 31, 2018 or prior to the termination of the Investment Advisory Agreement. The accrual considered both the hypothetical liquidation of the Company’s portfolio described previously, as well as the Company’s actual cumulative realized gains and losses since inception, as well any previously paid incentive fees.

For the three and nine months ended September 30, 2020, the Company did not accrue any incentive fees due to the termination of the Investment Advisory Agreement, effective March 12, 2019. For the three and nine months ended September 30, 2019, the Company reversed previously accrued incentive fees of $0 and $4,660,472, respectively, due to the termination of the Investment Advisory Agreement. As the Investment Advisory Agreement has been terminated, there will be no incentive fee payable to GSV Asset Management going forward.

Management and Incentive Fee Waiver Agreement

On February 2, 2018, GSV Asset Management voluntarily agreed to reduce the fees payable under the Investment Advisory Agreement pursuant to the Waiver Agreement. The Waiver Agreement was effective beginning February 1, 2018 and changed the fee structure set forth in the Investment Advisory Agreement by: (i) reducing the Company’s base management fee from 2.00% to 1.75%; and (ii) creating certain high-water marks that must be reached before any incentive fee is paid to GSV Asset Management.

Pursuant to the Waiver Agreement, in addition to the “hurdle” feature in the incentive fee, GSV Asset Management had agreed to additional conditions on its ability to receive an incentive fee. Specifically, the Waiver Agreement provided that an incentive fee earned by GSV Asset Management under the Investment Advisory Agreement would be payable to GSV Asset Management only if, at the time that such incentive fee becomes payable under the Investment Advisory Agreement, both the Company’s stock price and its last reported net asset value per share were equal to, or greater than, $12.55 (the “High-Water Mark”). The High-Water Mark was based upon the volume weighted average price (VWAP) of all the Company’s equity offerings since its initial public offering, less the dollar amount of all dividends paid by the Company since inception. Upon such time that the High-Water Mark was achieved, and GSV Asset Management was paid an incentive fee, a new High-Water Mark would have been established. Each new High-Water Mark would have been equal to the most recent High-Water Mark, plus 10%. Any High-Water Mark then in effect would have been adjusted to reflect any dividends paid by the Company or any stock split effected by the Company.

For the avoidance of doubt, after the effective date of the Waiver Agreement, under no circumstances would the aggregate fees earned by GSV Asset Management in any quarterly period have been higher than those aggregate fees that would have been earned prior to the effectiveness of the Waiver Agreement.

As of each of September 30, 2020 and December 31, 2019, there were no receivables owed to the Company by GSV Asset Management. As the Investment Advisory Agreement has been terminated, there will be no receivables owed to the Company by GSV Asset Management going forward.

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Administration Agreement

On March 12, 2019, in connection with the Company's Internalization, the Administration Agreement was terminated in accordance with its terms.

Prior to the Internalization, the Company had entered into the Administration Agreement with GSV Capital Service Company to provide administrative services, including furnishing the Company with office facilities, equipment, clerical, bookkeeping, record keeping services, and other administrative services. The Company reimbursed GSV Capital Service Company an allocable portion of overhead and other expenses in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of the Company’s President, Chief Financial Officer, Chief Compliance Officer and other staff providing administrative services. While there was no limit on the total amount of expenses the Company may have been required to reimburse to GSV Capital Service Company, GSV Capital Service Company would only charge the Company for the actual expenses GSV Capital Service Company incurred on the Company’s behalf, or the Company’s allocable portion thereof, without any profit to GSV Capital Service Company.

For the three months ended September 30, 2020 and 2019, the Company did not incur any costs under the Administration Agreement. For the nine months ended September 30, 2020 and 2019, the Company incurred $0 and $306,084, respectively, in such costs incurred under the Administration Agreement. As the Administration Agreement has been terminated, there will be no costs incurred by GSV Capital Service Company on behalf of the Company going forward.

License Agreement

On March 12, 2019, in connection with the Company's Internalization, as of the Effective Date, the Company entered into the Amended and Restated Trademark License Agreement to use the trade name “GSV”, and other state or unregistered “GSV” marks, including the trading symbol “GSVC.” for a period of up to eighteen months and a predetermined fee of $1,250,000. Other than with respect to this limited license, the Company has no legal right to the “GSV” name. On September 12, 2020, the Amended and Restated License Agreement expired in accordance with its terms and was not renewed or extended.

Prior to the Internalization on March 12, 2019, the Company entered into a license agreement with GSV Asset Management pursuant to which GSV Asset Management had agreed to grant the Company a non-exclusive, royalty-free license to use the name “GSV.” Under this agreement, the Company had the right to use the GSV name for so long as the Investment Advisory Agreement with GSV Asset Management is in effect.

Other Arrangements

Mark Moe, who is the brother of Michael Moe, the former Chairman of the Company’s Board of Directors, serves as Vice President of Business Development, Global Expansion for NestGSV, Inc. (d/b/a GSV Labs, Inc.), one of the Company’s portfolio companies.

In addition, the Company’s executive officers and directors, and the principals of the Company’s former investment adviser, GSV Asset Management, serve or may serve as officers, directors, or managers of entities that operate in a line of business similar to the Company’s, including new entities that may be formed in the future. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of the Company or the Company’s stockholders.

The 1940 Act prohibits the Company from participating in certain negotiated co-investments with certain affiliates unless it receives an order from the SEC permitting it to do so. As a BDC, the Company is prohibited under the 1940 Act from participating in certain transactions with certain of its affiliates without the prior approval of the Board of Directors, including its independent directors, and, in some cases, the SEC. The affiliates with which the Company may be prohibited from transacting include its officers, directors, and employees and any person controlling or under common control with the Company, subject to certain exceptions.

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In the ordinary course of business, the Company may enter into transactions with portfolio companies that may be considered related-party transactions. To ensure that the Company does not engage in any prohibited transactions with any persons affiliated with the Company, the Company has implemented certain written policies and procedures whereby the Company’s executive officers screen each of the Company’s transactions for any possible affiliations between the proposed portfolio investment, the Company, companies controlled by the Company, and the Company’s executive officers and directors.

NOTE 4—INVESTMENTS AT FAIR VALUE

Investment Portfolio Composition

The Company’s investments in portfolio companies consist primarily of equity securities (such as common stock, preferred stock and options to purchase common and preferred stock) and to a lesser extent, debt securities, issued by private and publicly traded companies. The Company may also, from time to time, invest in U.S. Treasury securities. Non-portfolio investments represent investments in U.S. Treasury securities. As of September 30, 2020, the Company had 50 positions in 24 portfolio companies. As of December 31, 2019, the Company had 46 positions in 23 portfolio companies.

The following tables summarize the composition of the Company’s investment portfolio by security type at cost and fair value as of September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
CostFair ValuePercentage of
Net Assets
CostFair ValuePercentage of
Net Assets
Private Portfolio Companies
Preferred Stock$77,832,023 $132,071,471 52.3 %$73,557,331 $125,448,358 62.8 %
Common Stock45,794,814 23,871,300 9.4 %63,425,065 59,209,559 29.6 %
Debt Investments11,964,165 8,224,227 3.3 %4,838,415 1,644,155 0.8 %
Options8,764,885 4,617,151 1.8 %8,764,885 5,283,506 2.6 %
Private Portfolio Companies
144,355,887 168,784,149 66.8 %150,585,696 191,585,578 95.8 %
Publicly Traded Portfolio Companies
Common Stock15,101,477 46,662,051 18.5 %— — — %
Total Portfolio Investments
159,457,364 215,446,200 85.3 %150,585,696 191,585,578 95.8 %
Non-Portfolio Investments
U.S. Treasury bill149,999,917 150,000,000 59.3 %49,996,667 50,000,000 25.0 %
Total Investments$309,457,281 $365,446,200 144.6 %$200,582,363 $241,585,578 120.8 %

The geographic and industrial compositions of the Company’s portfolio at fair value as of September 30, 2020 and December 31, 2019 were as follows:
As of September 30, 2020As of December 31, 2019
Fair ValuePercentage of
Portfolio
Percentage of
Net Assets
Fair ValuePercentage of
Portfolio
Percentage of
Net Assets
Geographic Region
West$199,366,432 92.5 %78.9 %$176,331,572 92.0 %88.2 %
Northeast12,196,472 5.7 %4.8 %7,847,769 4.1 %3.9 %
Mid-west3,883,296 1.8 %1.6 %7,406,237 3.9 %3.7 %
Total$215,446,200 100.0 %85.3 %$191,585,578 100.0 %95.8 %
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As of September 30, 2020As of December 31, 2019
Fair ValuePercentage of
Portfolio
Percentage of
Net Assets
Fair ValuePercentage of
Portfolio
Percentage of
Net Assets
Industry
Education Technology$95,773,772 44.5 %37.9 %$82,578,640 43.1 %41.3 %
Big Data/Cloud55,246,708 25.6 %21.9 %31,582,084 16.5 %15.8 %
Financial Technology23,706,741 11.0 %9.4 %26,754,801 14.0 %13.4 %
Social/Mobile20,922,463 9.7 %8.3 %26,573,046 13.8 %13.3 %
Marketplaces18,836,318 8.7 %7.5 %23,321,809 12.2 %11.6 %
Sustainability960,198 0.5 %0.3 %775,198 0.4 %0.4 %
Total$215,446,200 100.0 %85.3