Financial Data and Key Metrics Changes - Net investment income decreased to $0.22 per share from $0.25 per share in the prior quarter, primarily due to higher interest costs [4] - Net asset value per share declined to $10.17 from $10.91 in the previous quarter, largely driven by markdowns on equity investments [4][11] - Total investment income increased approximately 1% to $10.6 million, while total expenses rose by about 6% to $7.6 million [13] Business Line Data and Key Metrics Changes - The company placed one loan on non-accrual status, representing 1.8% of the total portfolio at fair value, while one loan was moved back to performing status [11][15] - The loan portfolio remains stable, with 88% of holdings in first lien positions based on fair value [15][16] - The weighted average performing investment income yield decreased to 13.3%, down about 0.3% quarter over quarter [16] Market Data and Key Metrics Changes - The broader economic outlook remains uncertain, with the Fed having lowered interest rates by 50 basis points this year, potentially impacting net investment income [6][14] - The company has a regulatory asset coverage ratio of 157%, a decrease of 3 percentage points from the prior quarter [12] Company Strategy and Development Direction - The company is focused on preserving capital and strengthening its balance sheet, including reducing the distribution rate to $0.17 per share for the fourth quarter [10][18] - Efforts are ongoing to monetize the minority equity position in Fansteel Holdings, which has a fair value of approximately $78.5 million [5][11] - The company aims to maintain a diversified loan portfolio and avoid highly cyclical industries, with a commitment to senior secured loans [6][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall health of the portfolio despite the challenging market conditions [6][18] - The company anticipates further net interest margin compression due to lower reference rates and higher interest costs related to refinancing [14][15] - The management remains focused on increasing net investment income over the long term through strategic actions [18][19] Other Important Information - The company completed a $69 million unsecured public bond offering and a $25 million private placement, extending debt maturities [7][12] - The company has approximately $4.1 billion in assets under management and a strong track record across multiple credit cycles [9][19] Q&A Session Summary - The Q&A session was not detailed in the provided content, and thus no specific questions or answers are available for summarization.

Financial Performance - As of September 30, 2025, the net asset value (NAV) per common share decreased to $10.17 from $10.91 at June 30, 2025, primarily due to a net loss on investments of $0.58 per common share[142]. - Total investment income for the quarter ended September 30, 2025, increased to $10.6 million from $10.5 million in the prior quarter, driven by non-recurring interest and dividend income[143]. - A net loss on investments of $7.8 million was recognized for the quarter ended September 30, 2025, attributed to a net realized loss of $4.6 million and net unrealized depreciation of $3.1 million[145]. - For the three months ended September 30, 2025, total investment income increased to $10.6 million from $10.5 million in the prior quarter, driven by non-recurring income[180]. - Net loss on investments for the three months ended September 30, 2025, was $7.8 million, primarily due to unrealized depreciation on equity investments[191]. - For the nine months ended September 30, 2025, total investment income decreased by $5.0 million compared to the prior year, mainly due to a $3.3 million decrease in total interest income[184]. - Net loss on investments for the nine months ended September 30, 2025, was $31.4 million, consisting of $20.0 million in unrealized depreciation and $11.4 million in realized losses[193]. Debt and Financing - The total outstanding debt decreased from $243.4 million at June 30, 2025, to $239.2 million at September 30, 2025, while the weighted-average debt interest costs increased to 6.67% from 6.21%[144]. - The company had $239.2 million of outstanding debt with a weighted-average effective interest rate of 7.03% as of September 30, 2025[205]. - The company redeemed $94.0 million of Unsecured Notes Due February 2026, resulting in a loss on extinguishment of debt of $0.3 million[215]. - The company issued $69.0 million in Unsecured Notes Due July 2028, with net proceeds of $67.3 million after fees[212]. - The company entered into a private placement for a $25.0 million Unsecured Note Due August 2029, with net proceeds of $24.2 million[213]. - The BNP Facility had outstanding debt of $59.2 million as of September 30, 2025, with an effective interest rate of 7.19%[220]. - Approximately 62% of the company's outstanding debt matures in more than two years, and 75% is unsecured[205]. Asset Management - As of September 30, 2025, the asset coverage ratio was 157%, exceeding the minimum requirement of 150% under the 1940 Act[146]. - The fair value of the debt investment portfolio totaled $205.6 million across 33 portfolio companies, with approximately 88% being first lien debt investments[157]. - The company had non-accrual loans with an aggregate fair value of $23.1 million, representing 6.2% of total investments at fair value[145]. - As of September 30, 2025, 100% of the loan portfolio and 56% of the total portfolio consisted of first lien and second lien loans[164]. - The three largest industries by fair value in the Portfolio Company Investments were Manufacturing (32.6%), Health Care and Social Assistance (20.8%), and Real Estate and Rental and Leasing (7.3%), totaling approximately 60.7%[165]. - As of September 30, 2025, approximately 81% of investments were qualifying assets, in compliance with BDC regulations[224]. Cash and Liquidity - As of September 30, 2025, the company held cash and cash equivalents of $5.0 million, including $2.5 million held by OFSCC-FS[197]. - The company had an unused commitment of $25.0 million under the Banc of California Credit Facility, which is scheduled to mature on February 28, 2026[198]. - Cash from net investment income for the nine months ended September 30, 2025, decreased by $1.9 million compared to the same period in 2024[202]. - The company expects to fund portfolio growth through current borrowings and future capital raises, but cannot assure stockholders of success[222]. - The reinvestment period of the BNP Facility expired on September 30, 2025, potentially constraining short-term liquidity if a new credit facility is not established[199]. Distributions - On October 28, 2025, a distribution of $0.17 per share was declared for the fourth quarter of 2025, payable on December 31, 2025[148]. - The Board declared a distribution of $0.17 per share for the fourth quarter of 2025, payable on December 31, 2025[237].

Financial Performance - Net investment income decreased to $0.22 per common share for Q3 2025, down from $0.25 per common share in Q2 2025[4] - Net loss on investments was $0.58 per common share for Q3 2025, compared to a net loss of $0.31 per common share in Q2 2025[4] - Total investment income increased to $10.6 million in Q3 2025 from $10.5 million in Q2 2025[16] - Total investment income for the three months ended September 30, 2025, was $10,551,000, a slight increase from $10,476,000 in the previous quarter[28] - Net investment income for the nine months ended September 30, 2025, was $9,688,000, down from $12,636,000 for the same period in 2024, reflecting a decrease of approximately 23.1%[28] - The company reported a net loss on investments of $31,441,000 for the nine months ended September 30, 2025, compared to a loss of $9,669,000 for the same period in 2024[28] Asset and Liability Management - Net asset value per common share decreased from $10.91 as of June 30, 2025, to $10.17 as of September 30, 2025[4] - Total assets decreased from $428,123,000 as of December 31, 2024, to $378,150,000 as of September 30, 2025, representing a decline of approximately 11.7%[27] - Total liabilities decreased from $255,898,000 as of December 31, 2024, to $241,836,000 as of September 30, 2025, a reduction of approximately 5.5%[27] - Total outstanding debt was $239.2 million as of September 30, 2025, down from $243.4 million in the previous quarter[3] - As of September 30, 2025, approximately 62% of outstanding debt matures in more than two years[12] Investment Strategy - The company targets investments of $3 million to $20 million in privately held middle-market companies with annual EBITDA between $5 million and $50 million[29] - The company is externally managed and focuses on providing current income and capital appreciation primarily through debt investments[29] Distributions - A distribution of $0.17 per common share for Q4 2025 was declared, payable on December 31, 2025[4] - Distributions declared per common share remained stable at $0.34 for both the three months ended September 30, 2025, and June 30, 2025[28] Expenses - Total expenses rose to $7.6 million in Q3 2025, an increase of $0.4 million compared to the prior quarter[17] - The company recognized a net loss on investments of $7.8 million in Q3 2025, primarily due to a net realized loss of $4.6 million[18] - Net realized loss on investments for the three months ended September 30, 2025, was $4,646,000, compared to a loss of $4,191,000 in the previous quarter[28]

Core Points - OFS Capital Corporation will report its third quarter 2025 earnings results after the market closes on October 30, 2025 [1] - A conference call to discuss the financial results will be held on October 31, 2025, at 10:00 a.m. Eastern Time, hosted by CEO Bilal Rashid and CFO Kyle Spina [2] Company Overview - OFS Capital Corporation is an externally managed, closed-end, non-diversified management investment company regulated as a business development company [3] - The company's investment objective is to provide stockholders with current income and capital appreciation primarily through debt investments, targeting investments of $3 million to $20 million in privately held middle-market companies in the U.S. [3] - OFS Capital focuses on companies with annual EBITDA between $5 million and $50 million and offers flexible solutions through various asset classes, including senior secured loans and subordinated loans [3]

Core Viewpoint - OFS Credit Company, Inc. has announced an estimated net asset value (NAV) per share of its common stock for August 31, 2025, ranging between $5.81 and $5.91 [1] Company Summary - OFS Credit Company primarily invests in collateralized loan obligation (CLO) equity and debt securities [1] - The NAV estimate provided is unaudited and does not represent a comprehensive statement of the company's financial position [1]

Core Insights - OFS Credit Company, Inc. reported a net investment income (NII) of $6.1 million, or $0.22 per common share, for the fiscal quarter ended July 31, 2025, representing an increase from the previous NII of $5.2 million [1] Financial Performance - The NII for the third quarter reflects a positive growth trend, indicating improved financial performance compared to the prior period [1]

Core Viewpoint - Ofs Capital reported mixed financial results for Q2 2025, with net investment income slightly exceeding expectations but facing significant net investment losses and a decline in net asset value per share [1][5][9] Financial Performance - Net investment income per share was $0.25, slightly above the analyst estimate of $0.24, but down 3.8% from Q1 2025 [2][5] - Total investment income reached $10.5 million, exceeding the $10.0 million estimate and showing a year-over-year increase of 1.9% [2][5] - The company experienced a net loss on investments of $12.9 million, a 19.4% increase in losses compared to the previous quarter [2][6] - Net asset value per share decreased from $11.97 to $10.91, reflecting an 8.9% decline [2][6] - Total investments at fair value fell from $403.1 million to $382.7 million, a decrease of 5.1% [2][6] Business Overview - Ofs Capital focuses on providing financing solutions to U.S. middle-market companies, which typically have annual revenues between $15 million and $300 million [3][4] - The investment strategy includes senior secured loans, subordinated debt, and some equity securities, aiming to generate recurring interest income [3][4] Portfolio Developments - During Q2 2025, the company deployed $12.5 million in new investments, an increase from $10.4 million in the prior quarter [5] - No new loans were shifted to non-accrual status, but existing non-accrual loans accounted for 4.0% of total investments based on fair value, indicating ongoing credit concerns [7] Debt Management - The company's total outstanding debt decreased from $248.1 million to $243.4 million during Q2 2025 [8] - Management issued $69.0 million in new unsecured notes at a 7.50% interest rate in July 2025, refinancing older notes with lower rates [8] Dividend and Future Outlook - The company maintained its quarterly dividend at $0.34 per share, raising concerns about potential income shortfalls if investment losses continue [9] - No explicit financial guidance was provided for the current quarter or fiscal 2025, leading to investor focus on future portfolio credit quality and potential markdowns [10]

Financial Data and Key Metrics Changes - Net investment income was stable at $0.25 per share compared to $0.26 per share in the prior quarter [4] - Net asset value (NAV) decreased to $10.91 per share from $11.97 per share in the prior quarter, primarily due to a decline in equity investments [4][13] - Total investment income increased approximately 2% to $10,500,000, driven by non-recurring fee income and a modest improvement in loan portfolio yield [15] - Total expenses increased by approximately 5% to $7,200,000, leading to a slight decline in net investment income [12][15] Business Line Data and Key Metrics Changes - The health of the credit portfolio remains stable with no new non-accruals reported [5][20] - The loan portfolio is primarily composed of 70% senior secured loans, 23% structured finance securities, and 7% equity securities [18] - The weighted average performing investment income yield increased to 13.6%, up about 0.2% quarter over quarter [18] Market Data and Key Metrics Changes - The regulatory asset coverage ratio decreased to 160%, a decline of five percentage points from the prior quarter [14] - 74% of outstanding debt was unsecured at the end of the quarter [10][14] Company Strategy and Development Direction - The company is focused on improving long-term net investment income by rotating non-interest earning equity positions into interest-earning assets [5][20] - There is a commitment to maintaining a diversified portfolio and investing higher in the capital structure, with 100% of the loan portfolio in first lien and second lien senior secured loans [8][20] - The company is cautious in deploying new capital due to subdued M&A activity and macroeconomic uncertainty [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with the current quality of the portfolio despite economic uncertainties surrounding tariffs and U.S. monetary policy [7][20] - The company believes its portfolio is defensively positioned to withstand current macroeconomic pressures [20] - Management highlighted the importance of capital preservation during uncertain economic times [21] Other Important Information - The company completed a $69,000,000 unsecured note offering with a 7.5% coupon, maturing in July 2028, to refinance existing debt [10][14] - The advisor managing the company has a strong track record and maintains approximately 23% ownership in the company, aligning interests with shareholders [22] Q&A Session Summary - The Q&A session was opened but no specific questions or answers were documented in the provided content [23]

Financial Data and Key Metrics Changes - The net investment income for the second quarter was stable at $0.25 per share, down from $0.26 per share in the prior quarter [4] - The net asset value (NAV) decreased to $10.91 per share from $11.97 per share in the previous quarter, primarily due to a decline in equity investments [4][13] - The quarterly distribution rate was maintained at $0.34 per share, representing a 16.1% annualized yield based on the market price [12][13] Business Line Data and Key Metrics Changes - Total investment income increased by approximately 2% to $10,500,000, driven by non-recurring fee income and a modest improvement in loan portfolio yield [15] - Total expenses rose by about 5% to $7,200,000, leading to a slight decline in net investment income [12][15] - The loan portfolio remained stable with no new non-accruals during the quarter, and 85% of loan holdings were in first lien positions based on fair value [16] Market Data and Key Metrics Changes - The regulatory asset coverage ratio decreased to 160%, down five percentage points from the prior quarter [14] - The weighted average performing investment income yield increased to 13.6%, up about 0.2% quarter over quarter [17] Company Strategy and Development Direction - The company is focused on improving long-term net investment income by monetizing non-interest earning equity positions, particularly the investment in FansDeal [5][19] - The strategy includes maintaining a diversified portfolio and investing higher in the capital structure, with 100% of the loan portfolio in senior secured loans [7][19] - The company is cautious in deploying new capital due to subdued M&A activity and macroeconomic uncertainty [9][19] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with the overall quality of the portfolio, noting no new non-accruals and a defensively positioned portfolio to withstand economic pressures [7][19] - There is significant uncertainty regarding tariffs and U.S. monetary policy, which may impact portfolio companies [6][19] - The company aims to preserve capital during uncertain economic times while leveraging the experience of its advisor [20][21] Other Important Information - The company completed a $69,000,000 unsecured note offering with a 7.5% coupon, intended to refinance maturing unsecured notes [10][14] - Approximately 74% of outstanding debt was unsecured at the end of the quarter, providing operational flexibility [10][14] Q&A Session Summary - The Q&A session was not detailed in the provided content, and thus no specific questions or answers are available for summary.

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements of OFS Capital Corporation and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024, including statements of assets and liabilities, operations, changes in net assets, cash flows, and schedules of investments, along with detailed notes [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) This statement details the company's financial position, including investments, assets, liabilities, and net assets, as of specific reporting dates | Metric | June 30, 2025 (thousands) | December 31, 2024 (thousands) | | :--------------------------------- | :-------------------------- | :---------------------------- | | Total investments, at fair value | $382,748 | $409,665 | | Total assets | $395,442 | $428,123 | | Total liabilities | $249,246 | $255,898 | | Total net assets | $146,196 | $172,225 | | Net asset value per share | $10.91 | $12.85 | - Total investments at fair value decreased by **$26.9 million** from December 31, 2024, to June 30, 2025, while total net assets decreased by **$26.0 million**, and net asset value per share declined by **$1.94**[14](index=14&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This statement presents the company's revenues, expenses, and net income or loss from operations over specific periods | Metric (thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total investment income | $10,476 | $11,165 | $20,771 | $25,398 | | Total expenses | $7,193 | $7,728 | $14,023 | $16,365 | | Net investment income | $3,283 | $3,437 | $6,748 | $9,033 | | Net gain (loss) on investments | $(12,914) | $6,891 | $(23,666) | $(7,754) | | Net increase (decrease) in net assets | $(9,631) | $10,328 | $(16,918) | $1,279 | | Net investment income per share | $0.25 | $0.26 | $0.50 | $0.67 | | Net increase (decrease) per share | $(0.72) | $0.77 | $(1.26) | $0.10 | - For the three months ended June 30, 2025, net investment income decreased slightly year-over-year, and the company reported a significant net loss on investments, leading to a net decrease in net assets from operations[15](index=15&type=chunk) - For the six months ended June 30, 2025, total investment income and net investment income decreased compared to the prior year, with a substantial net loss on investments contributing to a significant net decrease in net assets[15](index=15&type=chunk) [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) This statement outlines the changes in the company's net assets, including income, losses, and distributions, over specific periods | Metric (thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Balances at December 31 | $172,225 | $162,004 | | Net investment income | $6,748 | $9,033 | | Net realized loss on investments | $(6,778) | $(3,506) | | Net unrealized depreciation on investments | $(16,888) | $(4,248) | | Distributions declared | $(9,111) | $(9,111) | | Net decrease for the period | $(26,029) | $(7,832) | | Balances at June 30 | $146,196 | $154,172 | - The company experienced a net decrease in net assets of **$26.0 million** for the six months ended June 30, 2025, primarily driven by net unrealized depreciation on investments and distributions, compared to a **$7.8 million** decrease in the prior year[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric (thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $18,231 | $22,662 | | Net cash used in financing activities | $(14,061) | $(62,431) | | Net increase (decrease) in cash and cash equivalents | $4,170 | $(39,769) | | Cash and cash equivalents, end of period | $10,238 | $5,580 | - Net cash provided by operating activities decreased by **$4.4 million** for the six months ended June 30, 2025, compared to the prior year[19](index=19&type=chunk) - Net cash used in financing activities significantly decreased from **$62.4 million** in 2024 to **$14.1 million** in 2025, primarily due to lower repayments of SBA debentures[19](index=19&type=chunk) - Overall, cash and cash equivalents increased by **$4.2 million** in 2025, reversing a **$39.8 million** decrease in 2024[19](index=19&type=chunk) [Consolidated Schedules of Investments](index=8&type=section&id=Consolidated%20Schedules%20of%20Investments) This schedule provides a detailed breakdown of the company's investment portfolio by type and fair value | Investment Type | June 30, 2025 Fair Value (thousands) | December 31, 2024 Fair Value (thousands) | | :--------------------------------- | :----------------------------------- | :------------------------------------- | | Non-control/Non-affiliate Investments | $287,265 | $305,242 | | Affiliate Investments | $95,483 | $104,423 | | Total Investments | $382,748 | $409,665 | - As of June 30, 2025, the company's total investments at fair value decreased by **$26.9 million** compared to December 31, 2024[14](index=14&type=chunk)[28](index=28&type=chunk)[44](index=44&type=chunk) - Non-control/non-affiliate investments decreased by **$17.9 million**, and affiliate investments decreased by **$8.9 million**[14](index=14&type=chunk)[28](index=28&type=chunk)[44](index=44&type=chunk) [Notes to Consolidated Financial Statements](index=26&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [Note 1. Organization](index=26&type=section&id=Note%201.%20Organization) This note describes the company's structure, business objectives, and regulatory status as a Business Development Company (BDC) - OFS Capital Corporation is an externally managed, closed-end, non-diversified management investment company regulated as a BDC, aiming to provide stockholders with current income and capital appreciation primarily through debt and equity investments[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - It operates through subsidiaries like OFSCC-FS (for senior secured loans), and previously SBIC I LP (license surrendered April 2024), and OFSCC-MB (for equity investments taxed as pass-through entities)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=30&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q requirements[57](index=57&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - Key policies include revenue recognition and fair value estimates, with management making significant judgments[57](index=57&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - The company's cash and cash equivalents are held with high credit quality institutions to mitigate credit risk, though balances may exceed FDIC insured limits[57](index=57&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) [Note 3. Related Party Transactions](index=31&type=section&id=Note%203.%20Related%20Party%20Transactions) This note details transactions and relationships with affiliated entities, including management and incentive fees - OFS Advisor manages the company's operations and investments, receiving a base management fee (**1.75%** annually, reduced to **1.00%** for OFSCC-FS assets) and an incentive fee (**20.0%** of pre-incentive fee net investment income above a **2.0%** hurdle rate, plus a capital gains fee)[64](index=64&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - OFS Services provides administrative services[64](index=64&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Affiliates of OFS Advisor held approximately **22.6%** of the company's common stock as of June 30, 2025[64](index=64&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 4. Investments](index=33&type=section&id=Note%204.%20Investments) This note provides a detailed breakdown of the investment portfolio, including types, fair values, and industry concentrations | Investment Type | June 30, 2025 Fair Value (thousands) | December 31, 2024 Fair Value (thousands) | | :--------------------------------- | :----------------------------------- | :------------------------------------- | | First lien debt investments | $180,072 | $189,874 | | Second lien debt investments | $31,257 | $34,331 | | Preferred equity | $10,075 | $12,248 | | Common equity, warrants and other | $88,778 | $96,337 | | Structured Finance Securities | $72,566 | $76,875 | | Total investments | $382,748 | $409,665 | - As of June 30, 2025, the portfolio comprised **35 debt investments** (**85%** first lien, **15%** second lien), **15 equity investments**, and **15 Structured Finance Securities**[77](index=77&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) - The largest industry concentrations by fair value were Manufacturing (**28.5%**), Health Care and Social Assistance (**16.5%**), and Real Estate and Rental and Leasing (**4.9%**)[77](index=77&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) - The common equity investment in Pfanstiehl Holdings, Inc. represented **56.8%** of total net assets[77](index=77&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) Non-Accrual Loans | Non-Accrual Loans (thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Amortized Cost | $39,111 | $39,124 | | Fair Value | $15,159 | $20,803 | [Note 5. Fair Value of Financial Instruments](index=36&type=section&id=Note%205.%20Fair%20Value%20of%20Financial%20Instruments) This note explains the methodologies and inputs used to determine the fair value of financial instruments, particularly Level 3 assets - The company's investments are carried at fair value, primarily categorized as **Level 3** (unobservable inputs) under GAAP, with a lesser extent in **Level 2** (observable inputs other than quoted prices)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Fair value determinations are performed by OFS Advisor, as valuation designee, with assistance from third-party valuation firms[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Transfers from Level 3 to Level 2 for debt investments totaled **$3.6 million** for the six months ended June 30, 2025[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) Level 3 Fair Value Assets | Security Type (Level 3 Fair Value, thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------- | :------------ | :---------------- | | Debt investments | $193,823 | $202,368 | | Equity investments | $98,853 | $108,585 | | Structured Finance Securities | $72,566 | $76,875 | | Total Level 3 assets | $365,242 | $387,828 | Debt Carrying and Fair Value | Debt (thousands) | June 30, 2025 Carrying Value | June 30, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :--------------------------------- | :--------------------------- | :----------------------- | :------------------------------- | :--------------------------- | | Revolving lines of credit | $63,400 | $63,400 | $68,350 | $68,350 | | Unsecured Notes | $178,801 | $173,967 | $178,312 | $171,024 | | Total debt | $242,201 | $237,367 | $246,662 | $239,374 | [Note 6. Commitments and Contingencies](index=43&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note discloses the company's unfunded commitments, credit facilities, and potential legal liabilities - As of June 30, 2025, the company had **$16.1 million** in unfunded commitments to ten portfolio companies[106](index=106&type=chunk)[107](index=107&type=chunk) - It maintains **$10.2 million** in cash and cash equivalents, plus unused commitments of **$25.0 million** under its Banc of California Credit Facility and **$86.6 million** under its BNP Facility, to cover these obligations[106](index=106&type=chunk)[107](index=107&type=chunk) - The company is involved in normal course legal proceedings but does not expect a material adverse effect on its financial position[106](index=106&type=chunk)[107](index=107&type=chunk) [Note 7. Borrowings](index=43&type=section&id=Note%207.%20Borrowings) This note details the company's outstanding debt, credit facilities, and their terms and conditions - SBIC I LP fully repaid its **$31.9 million** SBA debentures in March 2024 and surrendered its license[110](index=110&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - The BNP Facility, with **$63.4 million** outstanding as of June 30, 2025, had its reinvestment period extended to August 31, 2025, and matures on June 20, 2027[110](index=110&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - The Banc of California Credit Facility had no outstanding debt as of June 30, 2025, with **$25.0 million** unused commitment[110](index=110&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Unsecured Notes totaling **$180.0 million** were outstanding, with **$125.0 million** due February 2026 and **$55.0 million** due October 2028[110](index=110&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) Average Borrowings and Interest Rates | Borrowing Type | Average Outstanding Balance (thousands) - 6 Months Ended June 30, 2025 | Effective Interest Rate - 6 Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------------------------------- | :------------------------------------- | | BNP Facility | $66,439 | 8.31% | | Banc of California Credit Facility | $2,057 | n/m | | Unsecured Notes | $180,000 | 5.35% | | Total Average Borrowings | $248,496 | 6.25% | [Note 8. Financial Highlights](index=46&type=section&id=Note%208.%20Financial%20Highlights) This note presents key financial performance metrics and ratios on a per-share basis for various periods | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net asset value per share (end) | $10.91 | $11.51 | $10.91 | $11.51 | | Net investment income per share | $0.25 | $0.26 | $0.50 | $0.67 | | Total income (loss) from operations per share | $(0.72) | $0.77 | $(1.26) | $0.10 | | Distributions declared per share | $0.34 | $0.34 | $0.68 | $0.68 | | Total return based on market value | (5.6)% | (7.2)% | 12.7% | (18.6)% | | Total return based on net asset value | (5.3)% | 7.9% | (8.5)% | 2.2% | | Ratio of total expenses to average net assets | 18.8% | 20.4% | 17.6% | 21.1% | | Ratio of net investment income to average net assets | 8.6% | 9.1% | 8.5% | 11.7% | - For the three months ended June 30, 2025, NAV per share decreased, and the company reported a loss from operations per share[125](index=125&type=chunk) - For the six months ended June 30, 2025, total return based on market value was positive, but total return based on NAV was negative, and net investment income per share declined compared to the prior year[125](index=125&type=chunk) [Note 9. Capital Transactions](index=47&type=section&id=Note%209.%20Capital%20Transactions) This note describes activities related to the company's capital, including distributions and share repurchase programs - The company declared quarterly distributions of **$0.34 per share** for the six months ended June 30, 2025 and 2024, totaling **$9.1 million** each period[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - These distributions were satisfied by purchasing shares on the open market through the DRIP plan[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - The Stock Repurchase Program, authorizing up to **$10.0 million** in common stock repurchases, was extended to May 22, 2026, with **$9.6 million** remaining as of June 30, 2025; no shares were repurchased during the six months ended June 30, 2025[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Note 10. Consolidated Schedule of Investments In and Advances To Affiliates](index=48&type=section&id=Note%2010.%20Consolidated%20Schedule%20of%20Investments%20In%20and%20Advances%20To%20Affiliates) This schedule provides details on investments in and advances to affiliated entities, including fair value changes | Affiliate Investment (thousands) | December 31, 2024 Fair Value | June 30, 2025 Fair Value | Net Change in Unrealized Appreciation/(Depreciation) | | :--------------------------------- | :--------------------------- | :----------------------- | :--------------------------------------------------- | | Contract Datascan Holdings, Inc. | $12,331 | $9,714 | $(3,200) | | DRS Imaging Services, LLC | $1,190 | $1,922 | $732 | | Pfanstiehl Holdings, Inc. | $89,298 | $82,993 | $(6,305) | | TalentSmart Holdings, LLC | $1,604 | $854 | $(750) | | Total Affiliate Investments | $104,423 | $95,483 | $(9,523) | - Total affiliate investments decreased by **$8.9 million** in fair value from December 31, 2024, to June 30, 2025, primarily due to net unrealized depreciation of **$9.5 million**[133](index=133&type=chunk) - Pfanstiehl Holdings, Inc. experienced the largest unrealized depreciation of **$6.3 million**[133](index=133&type=chunk) [Note 11. Subsequent Events](index=49&type=section&id=Note%2011.%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period but before the financial statements were issued - Subsequent to June 30, 2025, the company initiated redemptions of **$94.0 million** of its Unsecured Notes Due February 2026[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - It also closed a public offering of **$69.0 million** aggregate principal amount of **7.50%** Unsecured Notes Due July 2028, generating approximately **$67.3 million** in net proceeds[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - Additionally, the Board declared a distribution of **$0.34 per share** for the third quarter of 2025[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity for the periods ended June 30, 2025, and March 31, 2025, with comparisons to prior periods. It covers key performance metrics, portfolio composition, investment activity, risk monitoring, and recent developments [Overview](index=50&type=section&id=Overview) This section provides a high-level summary of the company's financial performance, key metrics, and significant events for the period | Metric | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------- | | Net asset value per share | $10.91 | $11.97 | | Net investment income per share (3 months) | $0.25 | $0.26 | | Net increase (decrease) in net assets per share (3 months) | $(0.72) | $(0.54) | | Distributions paid per share (3 months) | $0.34 | $0.34 | - NAV per common share decreased to **$10.91** at June 30, 2025, from **$11.97** at March 31, 2025, due to a net loss on investments of **$0.97 per share** and distributions exceeding net investment income[142](index=142&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) - Total investment income increased to **$10.5 million** from **$10.3 million** in the prior quarter, mainly from non-recurring fee income[142](index=142&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) - A net loss on investments of **$12.9 million** was recognized, primarily from unrealized depreciation on Pfanstiehl Holdings, Inc. and realized losses on Structured Finance Securities[142](index=142&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) - As of June 30, 2025, the asset coverage ratio was **160%**, exceeding the **150%** minimum, and the company had **$25.0 million** and **$86.6 million** in unused commitments under its Banc of California Credit Facility and BNP Facility, respectively[146](index=146&type=chunk) - Unfunded commitments totaled **$16.1 million**[146](index=146&type=chunk) [Critical Accounting Policies and Significant Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) This section discusses the accounting policies and estimates that require significant management judgment and their potential impact on financial reporting - The company's critical accounting policies and estimates relate to revenue recognition and fair value estimates, which involve significant management judgment due to the use of unobservable inputs for Level 3 investments[148](index=148&type=chunk)[149](index=149&type=chunk) - A hypothetical range analysis shows that fair value measures could vary by approximately **$15.7 million** (low-end) to **$17.4 million** (high-end) from the reported fair value of **$382.7 million** as of June 30, 2025[148](index=148&type=chunk)[149](index=149&type=chunk) [Related Party Transactions](index=51&type=section&id=Related%20Party%20Transactions) This section details the company's relationships and transactions with its investment advisor and other affiliated entities - The company has business relationships with OFS Advisor (investment advisory), OFS Services (administrative services), and OFSAM (license agreement for 'OFS' name)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - OFS Advisor's base management fee for OFSCC-FS Assets is reduced to **1.00%** annually[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - The company operates under an SEC order allowing co-investments with affiliated funds, subject to independent director approval to ensure fairness and consistency with investment objectives[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Portfolio Composition and Investment Activity](index=52&type=section&id=Portfolio%20Composition%20and%20Investment%20Activity) This section details the composition of the investment portfolio, including debt, equity, and structured finance securities, along with investment activity and risk monitoring classifications [Portfolio Composition](index=52&type=section&id=Portfolio%20Composition) This section details the breakdown of the investment portfolio by type, issuer, and concentration | Issuer Name | Type | Fair Value (thousands) | % of Total Portfolio, at Fair Value | % of Net Assets, at Fair Value | | :--------------------------------- | :----- | :--------------------- | :---------------------------------- | :----------------------------- | | Pfanstiehl Holdings, Inc. | Equity | $82,993 | 21.7% | 56.8% | | Kreg LLC | Debt | $17,522 | 4.6% | 12.0% | | Inergex Holdings, LLC | Debt | $17,044 | 4.5% | 11.8% | | SS Acquisition, LLC | Debt | $16,674 | 4.4% | 11.4% | | Honor HN Buyer Inc. | Debt | $14,969 | 3.9% | 10.3% | | Tolemar Acquisition, Inc. | Debt | $13,067 | 3.4% | 8.9% | | One GI LLC | Debt | $11,900 | 3.1% | 8.1% | | Boca Home Care Holdings, Inc. | Debt and Equity | $10,223 | 2.7% | 7.0% | | Contract Datascan Holdings, Inc. | Equity | $9,714 | 2.5% | 6.6% | | Canyon CLO 2019-1, Ltd. | Structured Finance Security | $9,540 | 2.5% | 6.5% | | Total Top 10 | | $203,646 | 53.3% | 139.4% | - As of June 30, 2025, the debt investment portfolio totaled **$211.3 million** across **35 companies** (**85%** first lien, **15%** second lien), with **$98.9 million** in equity investments and **$72.6 million** in Structured Finance Securities[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Pfanstiehl Holdings, Inc. (equity) alone constituted **21.7%** of the total portfolio and **56.8%** of net assets, with **$82.8 million** in unrealized appreciation[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Structured Finance Securities managed by a single adviser represented **4.6%** of the total portfolio and **12.1%** of net assets[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Portfolio Yields](index=53&type=section&id=Portfolio%20Yields) This section presents the weighted-average income and realized yields on the company's debt and interest-bearing investments | Yield Metric | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | | :--------------------------------- | :--------------------------- | :---------------------------- | | Weighted-average performing income yield: Debt investments | 12.5% | 12.3% | | Weighted-average performing income yield: Structured Finance Securities | 16.4% | 16.3% | | Weighted-average performing income yield: Interest-bearing investments | 13.6% | 13.4% | | Weighted-average realized yield: Interest-bearing investments | 11.9% | 11.6% | - For the three months ended June 30, 2025, the weighted-average performing income yield on interest-bearing investments increased to **13.6%** from **13.4%** in the prior quarter, primarily due to a **21 basis point** increase in earned yields on debt investments[160](index=160&type=chunk) - As of June 30, 2025, **90%** of the total loan portfolio, at fair value, consisted of variable rate investments indexed to SOFR[162](index=162&type=chunk) [Portfolio Company Investments](index=54&type=section&id=Portfolio%20Company%20Investments) This section describes the composition of investments in portfolio companies, including debt and equity, and industry concentrations | Investment Type | June 30, 2025 Fair Value (thousands) | December 31, 2024 Fair Value (thousands) | | :--------------------------------- | :----------------------------------- | :------------------------------------- | | First lien debt investments | $180,072 | $189,874 | | Second lien debt investments | $31,257 | $34,331 | | Preferred equity | $10,075 | $12,248 | | Common equity, warrants and other | $88,778 | $96,337 | | Total Portfolio Company Investments | $310,182 | $332,790 | - As of June 30, 2025, **100%** of the loan portfolio and **55%** of the total portfolio consisted of first and second lien loans by fair value[164](index=164&type=chunk) - The top three industries for Portfolio Company Investments were Manufacturing (**35.3%**), Health Care and Social Assistance (**20.3%**), and Administrative and Support and Waste Management and Remediation Services (**6.8%**)[165](index=165&type=chunk)[166](index=166&type=chunk) [Structured Finance Securities](index=54&type=section&id=Structured%20Finance%20Securities) This section details the company's investments in structured finance securities, including their fair value and performance | Investment Type | June 30, 2025 Fair Value (thousands) | December 31, 2024 Fair Value (thousands) | | :--------------------------------- | :----------------------------------- | :------------------------------------- | | Subordinated notes | $61,196 | $64,301 | | Mezzanine debt | $11,370 | $12,574 | | Total Structured Finance Securities | $72,566 | $76,875 | - As of June 30, 2025, non-performing Structured Finance Securities had an amortized cost of **$2.4 million** and a fair value of **$0.5 million**[167](index=167&type=chunk)[168](index=168&type=chunk) - During the six months ended June 30, 2025, the company sold Structured Finance Securities for **$8.5 million**, resulting in a net realized loss of **$5.7 million**[167](index=167&type=chunk)[168](index=168&type=chunk) [Investment Activity](index=55&type=section&id=Investment%20Activity) This section summarizes the company's investment purchases, originations, and proceeds from sales or repayments | Investment Activity (thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | | Total investment purchases and originations | $12,507 | $10,411 | $22,918 | $12,347 | | Total proceeds from principal payments, sales or redemptions, and distributions received | $23,581 | $9,931 | $33,512 | $32,695 | - Total investment purchases and originations for the six months ended June 30, 2025, increased to **$22.9 million** from **$12.3 million** in the prior year[169](index=169&type=chunk) - Total proceeds from principal payments, sales, and distributions also increased to **$33.5 million** from **$32.7 million** year-over-year[169](index=169&type=chunk) [Risk Monitoring](index=55&type=section&id=Risk%20Monitoring) This section outlines the company's internal risk categorization for debt investments and their fair values | Risk Category (Debt Investments, Fair Value, thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------ | :------------ | :---------------- | | 3 (Average) | $148,786 | $157,941 | | 4 (Special Mention) | $52,525 | $57,003 | | 5 (Substandard) | $8,341 | $7,159 | | 6 (Doubtful) | $1,677 | $2,102 | | Total Debt Investments | $211,329 | $224,205 | - As of June 30, 2025, **70.4%** of debt investments were categorized as 'Average Risk' (Category 3), and **24.9%** as 'Special Mention' (Category 4)[170](index=170&type=chunk) - The fair value of 'Substandard' (Category 5) debt investments increased from **$7.2 million** to **$8.3 million**, while 'Doubtful' (Category 6) decreased from **$2.1 million** to **$1.7 million**[170](index=170&type=chunk) [Non-Accrual Loans](index=55&type=section&id=Non-Accrual%20Loans) This section provides details on loans that are not currently accruing interest, including their fair value | Non-Accrual Loans (thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | First lien debt | $14,993 | $18,785 | | Second lien debt | $166 | $2,018 | | Total Fair Value | $15,159 | $20,803 | - As of June 30, 2025, the fair value of non-accrual loans decreased to **$15.2 million** from **$20.8 million** at December 31, 2024[172](index=172&type=chunk) - No new loans were placed on non-accrual status during the three or six months ended June 30, 2025[172](index=172&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) This section analyzes the company's investment income, expenses, and net realized and unrealized gains/losses on investments for the three and six months ended June 30, 2025, compared to prior periods [Investment Income](index=57&type=section&id=Investment%20Income) This section analyzes the components of the company's total investment income, including interest, dividends, and fees | Investment Income (thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | | Total interest income | $10,019 | $9,968 | $19,987 | $22,247 | | Total dividend income | $307 | $298 | $605 | $2,991 | | Total fee income | $150 | $29 | $179 | $160 | | Total investment income | $10,476 | $10,295 | $20,771 | $25,398 | - For the three months ended June 30, 2025, total investment income increased to **$10.5 million** from **$10.3 million** in the prior quarter, primarily due to a **$0.1 million** increase in non-recurring fee income[179](index=179&type=chunk)[180](index=180&type=chunk)[182](index=182&type=chunk) - For the six months ended June 30, 2025, total investment income decreased by **$4.6 million** year-over-year, mainly due to a **$2.4 million** decrease in dividend income and a **$2.3 million** decrease in interest income[179](index=179&type=chunk)[180](index=180&type=chunk)[182](index=182&type=chunk) [Expenses](index=58&type=section&id=Expenses) This section details the company's operating expenses, including interest expense, management fees, and incentive fees | Expenses (thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | | Interest expense | $3,842 | $3,858 | $7,700 | $8,689 | | Base management fee | $1,479 | $1,549 | $3,028 | $3,001 | | Income Incentive Fee | $821 | $330 | $1,151 | $2,258 | | Total expenses | $7,193 | $6,830 | $14,023 | $16,365 | - For the three months ended June 30, 2025, Income Incentive Fees increased by **$0.5 million** compared to the prior quarter due to higher net investment income return on net assets[183](index=183&type=chunk)[184](index=184&type=chunk) - For the six months ended June 30, 2025, interest expense decreased by **$1.0 million** year-over-year, primarily due to a reduction in the average outstanding debt balance[183](index=183&type=chunk)[184](index=184&type=chunk) [Net realized and unrealized gain (loss) on investments](index=58&type=section&id=Net%20realized%20and%20unrealized%20gain%20%28loss%29%20on%20investments) This section analyzes the net realized and unrealized gains or losses from the company's investment portfolio | Net Gain (Loss) on Investments (thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | | Debt investments | $(2,204) | $(8,128) | $(10,332) | $(4,331) | | Equity investments | $(9,118) | $(1,197) | $(10,315) | $(5,335) | | Structured Finance Securities | $(1,739) | $(1,526) | $(3,265) | $2,113 | | Total net loss on investments | $(12,914) | $(10,752) | $(23,666) | $(7,754) | - For the three months ended June 30, 2025, a net loss of **$12.9 million** was recognized, primarily due to **$7.8 million** in net unrealized depreciation on Pfanstiehl Holdings, Inc. common equity and **$2.0 million** on debt investments[185](index=185&type=chunk)[187](index=187&type=chunk) - For the six months ended June 30, 2025, the net loss on investments was **$23.7 million**, comprising **$17.1 million** in net unrealized depreciation (including **$6.3 million** on Pfanstiehl Holdings, Inc. and **$5.6 million** on non-accrual debt) and **$6.8 million** in net realized losses[185](index=185&type=chunk)[187](index=187&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, credit facilities, unfunded commitments, and asset coverage ratio, outlining its sources and uses of cash and strategies for funding investments and managing debt [Sources and Uses of Cash](index=60&type=section&id=Sources%20and%20Uses%20of%20Cash) This section details the cash inflows and outflows from operating and financing activities | Cash Flow (thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Cash from net investment income | $6,036 | $6,091 | | Net repayments and sales of portfolio investments | $12,195 | $16,472 | | Net cash provided by operating activities | $18,231 | $22,563 | | Net cash used in financing activities | $(14,061) | $(62,431) | | Net increase (decrease) in cash and cash equivalents | $4,170 | $(39,868) | - Net cash provided by operating activities decreased to **$18.2 million** for the six months ended June 30, 2025, from **$22.6 million** in the prior year[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - Net repayments and sales of portfolio investments were **$12.2 million**, down from **$16.5 million**[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - Net cash used in financing activities significantly decreased to **$14.1 million** from **$62.4 million**, primarily due to the repayment of SBA debentures in the prior year[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) [Borrowings](index=61&type=section&id=Borrowings) This section provides an overview of the company's outstanding debt, credit facilities, and their associated terms - As of June 30, 2025, the company had **$243.4 million** in outstanding debt with a weighted-average effective interest rate of **6.13%**[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The SBA debentures were fully repaid in March 2024[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The Banc of California Credit Facility had no outstanding debt but **$25.0 million** in unused commitment[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - Unsecured Notes totaled **$180.0 million**, with **$125.0 million** due February 2026 and **$55.0 million** due October 2028[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The BNP Facility had **$63.4 million** drawn and **$86.6 million** unused commitment, with its reinvestment period extended to August 31, 2025[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) [Other Liquidity Matters](index=62&type=section&id=Other%20Liquidity%20Matters) This section discusses the company's strategies for funding growth, regulatory requirements, and share repurchase program - The company plans to fund investment growth through current borrowings, equity offerings, and senior securities, but cannot guarantee favorable terms[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - As a BDC, at least **70%** of assets must be 'qualifying assets'; as of June 30, 2025, approximately **80%** were qualifying assets[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - The minimum required asset coverage ratio decreased from **200%** to **150%** effective May 3, 2019[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - The Stock Repurchase Program was extended to May 22, 2026, with **$9.6 million** remaining[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) [Contractual Obligations and Off-Balance Sheet Arrangements](index=63&type=section&id=Contractual%20Obligations%20and%20Off-Balance%20Sheet%20Arrangements) This section outlines the company's future payment obligations, unfunded commitments, and off-balance sheet financial instruments - As of June 30, 2025, the company had **$10.2 million** in cash and **$111.6 million** in unused credit facility commitments to meet **$16.1 million** in unfunded investment commitments[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - The BNP Facility's reinvestment period was extended to August 31, 2025, and its maturity is June 20, 2027[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - The company's **$180.0 million** Unsecured Notes include **$125.0 million** maturing in February 2026, which will be partially refinanced by new **$69.0 million** Unsecured Notes Due July 2028[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Approximately **74%** of outstanding debt carries fixed interest rates and is unsecured[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Off-balance sheet arrangements include the Investment Advisory Agreement with OFS Advisor and the Administration Agreement with OFS Services[221](index=221&type=chunk)[222](index=222&type=chunk) - The company may enter into financial instruments with off-balance sheet risk for portfolio companies but believes it has sufficient liquidity to support existing commitments[221](index=221&type=chunk)[222](index=222&type=chunk) [Distributions](index=64&type=section&id=Distributions) This section details the company's distribution policy, tax treatment requirements, and recent distribution declarations - To maintain RIC tax treatment, the company must distribute at least **90%** of its Investment Company Taxable Income (ICTI) annually[223](index=223&type=chunk)[224](index=224&type=chunk) - It aims to distribute quarterly amounts not less than **90%** of taxable quarterly income, with potential special dividends[223](index=223&type=chunk)[224](index=224&type=chunk) - A portion of 2025 distributions is estimated to be a tax return of capital[223](index=223&type=chunk)[224](index=224&type=chunk) - Distributions from OFSCC-FS to the Parent are restricted by the BNP Facility terms[223](index=223&type=chunk)[224](index=224&type=chunk) [Recent Developments](index=64&type=section&id=Recent%20Developments) This section highlights significant events that occurred after the reporting period, including debt redemptions and new offerings - On July 11 and July 22, 2025, the company issued notices to redeem an aggregate of **$94.0 million** of its Unsecured Notes Due February 2026[225](index=225&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - On July 23, 2025, it closed a public offering of **$69.0 million** aggregate principal amount of **7.50%** Unsecured Notes Due July 2028, with net proceeds of approximately **$67.3 million**[225](index=225&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - On July 29, 2025, the Board declared a distribution of **$0.34 per share** for the third quarter of 2025[225](index=225&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to financial market risks, including investment valuation risk and interest rate risk, and the potential impact of economic and geopolitical factors on its portfolio and financial performance [Investment Valuation Risk](index=66&type=section&id=Investment%20Valuation%20Risk) This section discusses the inherent uncertainties and potential fluctuations in valuing the company's investment portfolio - A significant portion of the investment portfolio lacks readily available market values and is valued at fair value by OFS Advisor, as valuation designee, with third-party assistance[231](index=231&type=chunk) - This introduces inherent uncertainty, as fair values may fluctuate significantly and differ from ultimately realized values, especially for less liquid or restricted investments[231](index=231&type=chunk) - Forced liquidation could result in substantial losses[231](index=231&type=chunk) [Interest Rate Risk](index=66&type=section&id=Interest%20Rate%20Risk) This section analyzes the company's exposure to changes in interest rates and their potential impact on income and expenses - As of June 30, 2025, **$202.0 million** of loans and mezzanine debt bore floating interest rates, making the company sensitive to interest rate changes[232](index=232&type=chunk)[233](index=233&type=chunk) - Reductions in the U.S. Federal Reserve target federal funds rate could decrease interest income and net investment income[232](index=232&type=chunk)[233](index=233&type=chunk) - The refinancing of **4.75%** Unsecured Notes due February 2026 with **7.50%** Unsecured Notes due July 2028 will result in net interest margin compression due to higher interest costs[232](index=232&type=chunk)[233](index=233&type=chunk) Impact of Interest Rate Changes on Net Investment Income | Basis Point Change | Interest Income (thousands) | Interest Expense (thousands) | Net Change (thousands) | | :----------------- | :-------------------------- | :--------------------------- | :--------------------- | | +25 | $375 | $(133) | $242 | | +50 | $748 | $(291) | $457 | | +75 | $1,121 | $(450) | $671 | | +100 | $1,494 | $(608) | $886 | | +125 | $1,867 | $(767) | $1,100 | | -25 | $(371) | $184 | $(187) | | -50 | $(744) | $343 | $(401) | | -75 | $(1,117) | $501 | $(616) | | -100 | $(1,491) | $660 | $(831) | | -125 | $(1,864) | $818 | $(1,046) | [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter - The company's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of June 30, 2025[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures [Item 1. Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material pending legal proceedings and does not expect incidental legal proceedings to have a material adverse effect on its business, financial condition, results of operations, or cash flows - As of June 30, 2025, the company is not subject to any material pending legal proceedings and does not anticipate any material adverse effects from incidental legal proceedings[241](index=241&type=chunk) [Item 1A. Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company's common stock is speculative and involves a high degree of risk. There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - Investing in the company's common stock is speculative and involves a high degree of risk[242](index=242&type=chunk)[243](index=243&type=chunk) - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K were reported[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds. The company's Stock Repurchase Program, authorizing up to $10.0 million in common stock repurchases, was extended to May 22, 2026, with $9.6 million remaining. No repurchases were made during the three months ended June 30, 2025 - No unregistered sales of equity securities or use of proceeds occurred[244](index=244&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - The Stock Repurchase Program was extended to May 22, 2026, with **$9.6 million** remaining, but no shares were repurchased during the quarter ended June 30, 2025[244](index=244&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is not applicable[248](index=248&type=chunk) [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is not applicable[249](index=249&type=chunk) [Item 5. Other Information](index=69&type=section&id=Item%205.%20Other%20Information) This section provides information on Rule 10b5-1 trading plans and the price range of common stock and distributions [Rule 10b5-1 Trading Plans](index=69&type=section&id=Rule%2010b5-1%20Trading%20Plans) This section discloses information regarding trading plans adopted or terminated by directors and officers - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[250](index=250&type=chunk) [Price Range of Common Stock and Distributions](index=69&type=section&id=Price%20Range%20of%20Common%20Stock%20and%20Distributions) This section provides historical data on the market price range of common stock and declared distributions per share | Period | NAV Per Share | High Sales Price | Low Sales Price | Premium (Discount) of High Sales Price to NAV | Premium (Discount) of Low Sales Price to NAV | Cash Distribution per Share | | :----------------- | :------------ | :--------------- | :-------------- | :-------------------------------------------- | :------------------------------------------- | :-------------------------- | | Fiscal 2025 Q2 | $10.91 | $9.52 | $7.88 | -12.7% | -27.8% | $0.34 | | Fiscal 2025 Q1 | $11.97 | $9.80 | $7.92 | -18.1% | -33.8% | $0.34 | | Fiscal 2024 Q4 | $12.85 | $8.98 | $7.81 | -30.1% | -39.2% | $0.34 | | Fiscal 2024 Q3 | $11.29 | $9.35 | $7.75 | -17.2% | -31.4% | $0.34 | | Fiscal 2024 Q2 | $11.51 | $10.14 | $8.42 | -11.9% | -26.8% | $0.34 | | Fiscal 2024 Q1 | $11.08 | $12.07 | $9.53 | 8.9% | -14.0% | $0.34 | - The company's common stock traded at a discount to NAV per share for all quarters in Fiscal 2025 and most of Fiscal 2024, with the exception of Q1 2024[252](index=252&type=chunk) - The cash distribution per share remained constant at **$0.34** across all reported quarters[252](index=252&type=chunk) [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this report, including the Certificate of Incorporation, Bylaws, Third Amendment to the Revolving Credit and Security Agreement, CEO and CFO certifications, and Inline XBRL documents - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), a recent amendment to the Revolving Credit and Security Agreement, CEO and CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents for financial statements[253](index=253&type=chunk) SIGNATURES This section contains the required signatures of the registrant's authorized officers, including the Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report is duly signed by Bilal Rashid, Chief Executive Officer, and Kyle Spina, Chief Financial Officer, on July 31, 2025[256](index=256&type=chunk)