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)

Group 1 - The article discusses a newly listed fixed-income security from OFS Capital (NASDAQ: OFS) [1] - It invites active investors to join a free trial and engage in discussions with sophisticated traders and investors [1] Group 2 - The article emphasizes that past performance does not guarantee future results and does not provide specific investment recommendations [2] - It clarifies that the views expressed may not reflect those of Seeking Alpha as a whole and that the analysts are third-party authors [2]

[FORM 8-K General Information](index=1&type=section&id=FORM%208-K%20General%20Information) This section details the registrant's identity, securities, and emerging growth company status for the Form 8-K filing [Registrant and Filing Details](index=1&type=section&id=Registrant%20and%20Filing%20Details) This section provides foundational information for the Form 8-K filing, identifying the registrant, its state of incorporation, and the report date - The report is a **Form 8-K** filed by **OFS Capital Corporation**, incorporated in Delaware, with the earliest event reported on **July 15, 2025**[1](index=1&type=chunk) [Securities Information](index=1&type=section&id=Securities%20Information) This outlines the classes of securities registered by OFS Capital Corporation and their respective trading symbols and exchanges Registered Securities | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $0.01 par value per share | OFS | The Nasdaq Global Select Market | | 4.95% Notes due 2028 | OFSSH | The Nasdaq Global Select Market | [Emerging Growth Company Status](index=1&type=section&id=Emerging%20Growth%20Company%20Status) OFS Capital Corporation has indicated its status regarding the 'emerging growth company' definition under the Securities Act and Exchange Act - The registrant is not an **'emerging growth company'** as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934[4](index=4&type=chunk) [Item 2.02. Results of Operations and Financial Condition](index=2&type=section&id=Item%202.02.%20Results%20of%20Operations%20and%20Financial%20Condition) This item reports OFS Capital Corporation's preliminary Q2 2025 financial results, as announced in a press release [Preliminary Financial Estimates Announcement](index=2&type=section&id=Preliminary%20Financial%20Estimates%20Announcement) OFS Capital Corporation announced preliminary financial results for Q2 2025 via a press release, furnished as an exhibit - On **July 15, 2025**, OFS Capital Corporation issued a press release announcing preliminary estimates of certain financial results for the quarter ended **June 30, 2025**[5](index=5&type=chunk) - The full text of the press release is furnished as **Exhibit 99.1** to this Current Report on Form 8-K[5](index=5&type=chunk) - The information disclosed under this **Item 2.02**, including **Exhibit 99.1**, is furnished and not deemed 'filed' for purposes of **Section 18 of the Exchange Act**, limiting its liability[6](index=6&type=chunk) [Item 9.01. Financial Statements and Exhibits](index=2&type=section&id=Item%209.01.%20Financial%20Statements%20and%20Exhibits) This section lists the Form 8-K exhibits, specifically referencing the preliminary financial results press release [Exhibits List](index=2&type=section&id=Exhibits%20List) This section lists the exhibits accompanying the Form 8-K filing, specifically identifying the preliminary financial results press release Report Exhibits | Exhibit No. | Description | | :---------- | :---------- | | 99.1 | Press Release issued by OFS Capital Corporation on July 15, 2025 | [SIGNATURE](index=3&type=section&id=SIGNATURE) This section formally attests to the report's authenticity through the authorized signature of OFS Capital Corporation's Chief Executive Officer [Authorized Signature](index=3&type=section&id=Authorized%20Signature) This section confirms the official signing of the report by an authorized representative of OFS Capital Corporation - The report was duly caused to be signed on behalf of **OFS CAPITAL CORPORATION** by **Bilal Rashid, Chief Executive Officer**, on **July 15, 2025**[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk)

Company Overview - OFS Capital's investment portfolio totals $403 million[11], with total assets of $412 million[11] - The company's net asset value is $160 million, or $11.97 per share[11] - 100% of the loan portfolio is in senior secured loans[11] - Since 2011, OFS Capital has invested approximately $2 billion with an annualized net realized loss rate of approximately 0.24% as of March 31, 2025[11] Financial Performance (Q1 2025) - Net investment income was $0.26 per share, a decrease of $0.04 per share compared to the prior quarter[15] - Net loss on investments was $0.80 per share, primarily related to net unrealized depreciation on debt investments[15] - A quarterly distribution of $0.34 per share was paid on March 31, 2025[15] - The investment portfolio's weighted-average performing income yield decreased to 13.4% from 13.8% during the prior quarter[15] Portfolio Composition - Senior secured loans comprise approximately 54% of all investments[47] - Floating rate loans account for 90% of the loan portfolio[20] - $324 million is invested in portfolio companies, with an average investment of approximately $7.2 million across 45 companies[53] Debt and Liabilities - Unsecured funding makes up 73% of the outstanding liability mix[11] - Total outstanding debt is $248.1 million, with $107 million in undrawn commitments[54]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on high-quality dividend stocks and assets that provide long-term growth potential, which can significantly contribute to income generation [1]. - A balanced portfolio that includes both growth and income-generating assets can lead to efficient investment income while maintaining a total return aligned with the S&P [1].

Financial Data and Key Metrics Changes - The company reported net investment income of $3.5 million or $0.26 per share for the first quarter, down from $0.30 per share in the prior quarter [4][11] - The net asset value per share decreased to $11.97 from $12.85 in the previous quarter, representing a decline of approximately 7% or $0.88 [4][12] - Total investment income decreased by approximately 12% to $10.3 million this quarter, primarily due to lower nonrecurring dividend and fee income [12][13] Business Line Data and Key Metrics Changes - The company is focused on rotating non-interest earning equity positions into interest-earning assets to improve net investment income in the long term [5] - The loan portfolio remains stable with no new non-accrual loans during the quarter, and 85% of loan holdings are in first lien positions [12][14] Market Data and Key Metrics Changes - The overall economic outlook remains uncertain, with potential impacts from global tariffs and a possible slowdown in economic activity [6][17] - The company noted that M&A activity has been quiet in 2025, more than expected, due to macroeconomic uncertainty [9] Company Strategy and Development Direction - The company aims to increase net investment income over the long term by exploring the sale of non-interest earning equity positions and redeploying proceeds into interest-earning assets [17] - The company is committed to capital preservation during uncertain economic times and focuses on investing higher in the capital structure [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential negative impact of macroeconomic uncertainty on the economy but believes the portfolio is generally stable [17] - The company is proactively exploring refinancing options for debt facilities with upcoming maturities [12] Other Important Information - Approximately 73% of the company's outstanding debt is unsecured, providing additional liquidity and flexibility [9][12] - The adviser managing the company has a track record of over 25 years through multiple credit cycles and manages approximately $4.1 billion across loan and structured credit markets [10][18] Q&A Session Summary - There were no questions during the Q&A session, and the conference call concluded without any inquiries [21]

Financial Data and Key Metrics Changes - The company reported net investment income of $0.26 per share for the first quarter, down from $0.30 per share in the prior quarter [4][11] - Net asset value decreased to $11.97 per share from $12.85 per share in the previous quarter, primarily due to company-specific marks and broader credit market declines [4][12] - Total investment income decreased approximately 12% to $10.3 million, driven by lower nonrecurring dividend and fee income and reduced interest income from the loan portfolio [12][13] Business Line Data and Key Metrics Changes - The loan portfolio remains stable with no new non-accrual loans during the quarter, and 85% of loan holdings are in first lien positions [12][14] - The weighted average performing investment income yield declined to 13.4%, down about 0.4% quarter over quarter, primarily due to last year's interest rate cuts [15] Market Data and Key Metrics Changes - The overall economic outlook is uncertain, with potential impacts from global tariffs and a possible slowdown in economic activity, which could affect portfolio companies' earnings [6][17] - The company noted that M&A activity has been quiet in 2025, more than expected, due to macroeconomic uncertainty [9] Company Strategy and Development Direction - The company is focused on rotating non-interest earning equity positions into interest-earning assets to improve long-term net investment income [5][17] - There is a commitment to capital preservation during uncertain economic times, with a focus on investing higher in the capital structure [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed that the current macroeconomic uncertainty may negatively impact the economy, but the portfolio is generally stable and defensively positioned [17][18] - The company plans to maintain its quarterly distribution at $0.34 per share while evaluating the macroeconomic environment [11] Other Important Information - Approximately 73% of outstanding debt is unsecured, providing additional liquidity and flexibility [9][12] - The adviser manages approximately $4.1 billion across loan and structured credit markets, with a strong track record through multiple credit cycles [10][18] Q&A Session Summary - There were no questions during the Q&A session, and the conference concluded without any inquiries [21]

Financial Data and Key Metrics Changes - The company reported net investment income of $3,500,000 or $0.26 per share for the first quarter, down from $0.30 per share in the prior quarter, primarily due to a decrease in nonrecurring dividend and fee income [4][11] - The net asset value per share decreased to $11.97 from $12.85, representing a decline of approximately 7% or $0.88, mainly due to net unrealized depreciation on the investment portfolio [4][12] - Total investment income decreased by approximately 12% to $10,300,000, driven by lower interest income on the loan portfolio and the absence of nonrecurring income [12][13] Business Line Data and Key Metrics Changes - The loan portfolio remains stable with no new non-accrual loans during the quarter, and 85% of loan holdings are in first lien positions [12][14] - The weighted average performing investment income yield declined to 13.4%, down about 0.4% quarter over quarter, primarily due to last year's interest rate cuts [15] Market Data and Key Metrics Changes - The overall economic outlook is uncertain, with potential impacts from global tariffs and a possible slowdown in economic activity, which could affect portfolio companies' earnings [6][17] - M&A activity has been quiet, more than expected, due to macroeconomic uncertainty dampening prospects for increased activity [9] Company Strategy and Development Direction - The company is focused on rotating non-interest earning equity positions into interest-earning assets to improve long-term net investment income [5][18] - The strategy includes maintaining a diversified portfolio across multiple industries and investing higher in the capital structure [7][17] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the macroeconomic environment's impact on the economy but believes the portfolio is generally stable and defensively positioned [17][19] - The company is committed to capital preservation during uncertain economic times and has a long-standing experience that has served it well [19][20] Other Important Information - The company maintains a quarterly distribution of $0.34 per share, representing a 14.6% annualized yield based on the market price of its common stock [11] - Approximately 73% of outstanding debt is unsecured, providing additional liquidity and flexibility [8][12] Q&A Session Summary - There were no questions during the Q&A session, and the conference concluded without any inquiries [22]

[PART I. FINANCIAL INFORMATION](index=9&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements](index=9&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The company's net assets and NAV per share declined in Q1 2025 due to a net operating loss, with the investment portfolio remaining diversified [Consolidated Statements of Assets and Liabilities](index=9&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Total assets and net assets decreased during the quarter, resulting in a lower net asset value per share Consolidated Statements of Assets and Liabilities (in thousands, except per share data) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments, at fair value | $403,071 | $409,665 | | Total assets | $411,963 | $428,123 | | Total liabilities | $251,580 | $255,898 | | Total net assets | $160,383 | $172,225 | | Net asset value per share | $11.97 | $12.85 | [Consolidated Statements of Operations](index=10&type=section&id=Consolidated%20Statements%20of%20Operations) Quarterly investment income and net investment income decreased year-over-year, leading to a net loss from operations Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment income | $10,295 | $14,233 | | Total expenses | $6,830 | $8,637 | | Net investment income | $3,465 | $5,596 | | Net loss on investments | $(10,752) | $(14,645) | | Net decrease in net assets from operations | $(7,287) | $(9,049) | | Net investment income per share | $0.26 | $0.42 | | Net decrease in net assets per share | $(0.54) | $(0.67) | | Distributions declared per share | $0.34 | $0.34 | [Consolidated Statements of Changes in Net Assets](index=11&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets decreased by $11.8 million in Q1 2025, driven by a net operating loss and shareholder distributions - Net assets decreased from **$172,225 thousand** at the end of 2024 to **$160,383 thousand** at March 31, 2025[16](index=16&type=chunk) Changes in Net Assets for Q1 2025 (in thousands) | Description | Amount | | :--- | :--- | | Net investment income | $3,465 | | Net realized loss on investments | $(2,587) | | Net unrealized depreciation on investments | $(8,165) | | Distributions declared | $(4,555) | | **Net decrease for the period** | **$(11,842)** | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased significantly year-over-year, while financing activities primarily involved shareholder distributions Consolidated Cash Flows (in thousands) | Cash Flow Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,841 | $9,218 | | Net cash used in financing activities | $(4,855) | $(48,475) | | **Net decrease in cash and cash equivalents** | **$(2,014)** | **$(39,257)** | [Consolidated Schedules of Investments](index=13&type=section&id=Consolidated%20Schedules%20of%20Investments) The investment portfolio's fair value slightly decreased to $403.1 million, with a significant concentration in Pfanstiehl Holdings, Inc Portfolio Composition by Fair Value | Investment Type | Fair Value (Mar 31, 2025) | % of Total | Fair Value (Dec 31, 2024) | % of Total | | :--- | :--- | :--- | :--- | :--- | | First lien debt | $184,315 | 45.8% | $189,874 | 46.3% | | Second lien debt | $31,547 | 7.8% | $34,331 | 8.4% | | Preferred equity | $10,615 | 2.6% | $12,248 | 3.0% | | Common equity, warrants & other | $97,060 | 24.1% | $96,337 | 23.5% | | Structured Finance Securities | $79,534 | 19.7% | $76,875 | 18.8% | | **Total Investments** | **$403,071** | **100.0%** | **$409,665** | **100.0%** | - The company's equity investment in Pfanstiehl Holdings, Inc had a fair value of $90.8 million, representing **56.6% of total net assets** as of March 31, 2025[26](index=26&type=chunk)[78](index=78&type=chunk) - As of March 31, 2025, investments on non-accrual status had an aggregate amortized cost of **$39.1 million** and a fair value of **$16.9 million**[26](index=26&type=chunk)[77](index=77&type=chunk) [Notes to Consolidated Financial Statements (unaudited)](index=31&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) The notes detail the company's BDC structure, related-party transactions, portfolio valuation, and debt facilities with upcoming maturities - The company is an externally managed BDC and has elected to be treated as a RIC for tax purposes[45](index=45&type=chunk) - OFS Advisor manages operations and receives a base management fee of **1.75%** of average total assets and a two-part incentive fee[58](index=58&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - As of March 31, 2025, affiliates of OFS Advisor held approximately **22.6%** of the Company's outstanding common stock[70](index=70&type=chunk) - As of March 31, 2025, the company had **$13.8 million in unfunded commitments** to nine portfolio companies[99](index=99&type=chunk) - On March 1, 2024, the company's subsidiary, SBIC I LP, fully repaid its outstanding SBA debentures totaling **$31.9 million** and surrendered its SBIC license[49](index=49&type=chunk)[103](index=103&type=chunk) - The Board declared a second quarter 2025 distribution of **$0.34 per share**, payable on June 30, 2025[129](index=129&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the decline in NAV per share, lower investment income, and key liquidity considerations for 2025 and 2026 Key Performance Metrics Per Share | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net asset value | $11.97 | $12.85 | | Net investment income (for the quarter) | $0.26 | $0.30 | | Net (decrease) in net assets (for the quarter) | $(0.54) | $1.90 | | Distributions paid (for the quarter) | $0.34 | $0.34 | - The decrease in NAV per share was attributed to a **net loss on investments of $0.80 per share** and a quarterly distribution exceeding net investment income[131](index=131&type=chunk) - The company's **asset coverage ratio was 165%** as of March 31, 2025, exceeding the minimum requirement of 150%[135](index=135&type=chunk)[183](index=183&type=chunk) - The reinvestment period for the BNP Facility ends in June 2025, posing a **significant short-term liquidity risk** if not extended or replaced[181](index=181&type=chunk)[206](index=206&type=chunk) [Portfolio Composition and Investment Activity](index=55&type=section&id=Portfolio%20Composition%20and%20Investment%20Activity) The portfolio's fair value was $403.1 million, with high concentration in the top ten investments and a decrease in performing income yield Ten Largest Investments by Fair Value (as of March 31, 2025, in thousands) | Issuer Name | Type | Fair Value | % of Total Portfolio | % of Net Assets | | :--- | :--- | :--- | :--- | :--- | | Pfanstiehl Holdings, Inc. | Equity | $90,762 | 22.5% | 56.6% | | Kreg LLC | Debt | $17,431 | 4.3% | 10.9% | | Inergex Holdings, LLC | Debt | $17,086 | 4.2% | 10.7% | | SS Acquisition, LLC | Debt | $16,641 | 4.1% | 10.4% | | Tolemar Acquisition, Inc. | Debt | $15,320 | 3.8% | 9.6% | | Honor HN Buyer Inc. | Debt | $15,008 | 3.7% | 9.4% | | One GI LLC | Debt | $12,244 | 3.0% | 7.6% | | Boca Home Care Holdings, Inc. | Debt and Equity | $10,432 | 2.6% | 6.5% | | Contract Datascan Holdings, Inc. | Equity | $10,255 | 2.5% | 6.4% | | ICG US CLO 2021-3, Ltd. | Structured Finance | $9,893 | 2.5% | 6.2% | Portfolio Yields | Weighted-Average Performing Income Yield | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Debt investments | 12.3% | 12.9% | | Structured Finance Securities | 16.3% | 16.3% | | **Interest-bearing investments** | **13.4%** | **13.8%** | - As of March 31, 2025, debt investments on non-accrual status had a fair value of **$16.9 million**, representing 4.2% of total investments at fair value[134](index=134&type=chunk)[163](index=163&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) Investment income and expenses both decreased from Q4 2024, while a net loss on investments reversed the prior quarter's gain Quarterly Operating Results Comparison (in thousands) | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Total investment income | $10,295 | $11,648 | $14,233 | | Total expenses | $6,830 | $7,572 | $8,637 | | Net investment income | $3,465 | $4,076 | $5,596 | | Net gain (loss) on investments | $(10,752) | $21,399 | $(14,645) | - The Q1 2025 net loss on investments of **$10.8 million** was primarily due to a net loss of $8.1 million on debt investments[177](index=177&type=chunk)[178](index=178&type=chunk) - The Q4 2024 net gain on investments of **$21.4 million** was primarily driven by net unrealized appreciation on the Pfanstiehl Holdings, Inc investment[179](index=179&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company has adequate near-term liquidity but faces significant debt maturities and facility expirations in 2025 and 2026 Sources and Uses of Cash (in thousands) | Description | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,841 | $9,218 | | Net cash used in financing activities | $(4,855) | $(48,475) | | **Net decrease in cash** | **$(2,014)** | **$(39,257)** | - The company has **$125.0 million of Unsecured Notes** and the Banc of California Facility maturing in February 2026[188](index=188&type=chunk)[190](index=190&type=chunk) - The Board extended the Stock Repurchase Program to May 2026, with **$9.6 million remaining** available for repurchases[202](index=202&type=chunk)[232](index=232&type=chunk) - On June 26, 2024, stockholders authorized the company to **sell shares below NAV**, though no shares have been sold under this authorization[203](index=203&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to significant investment valuation uncertainty and interest rate risk affecting its floating-rate assets - The company faces **investment valuation risk** due to the use of unobservable inputs (Level 3) for most of its investments[217](index=217&type=chunk) - As of March 31, 2025, **$207.0 million** of the company's investments at fair value were floating-rate, making income sensitive to rate changes[218](index=218&type=chunk) Annualized Impact of Hypothetical Interest Rate Changes (in thousands) | Basis Point Change | Impact on Interest Income | Impact on Interest Expense | Net Change | | :--- | :--- | :--- | :--- | | +100 | $2,159 | $(664) | $1,495 | | -100 | $(2,204) | $697 | $(1,507) | [Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's **disclosure controls and procedures were effective** at the reasonable assurance level[224](index=224&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended March 31, 2025[225](index=225&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material pending legal proceedings that would adversely affect its financial condition - The company is **not currently subject to any material pending legal proceedings** as of March 31, 2025[227](index=227&type=chunk) [Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been **no material changes** to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024[229](index=229&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity was sold, and no shares were repurchased under the extended stock repurchase program during the quarter - The Board extended the **Stock Repurchase Program** for a two-year period ending May 22, 2026[232](index=232&type=chunk) - **No shares of common stock were repurchased** under the program during the three months ended March 31, 2025[123](index=123&type=chunk)[233](index=233&type=chunk) - As of March 31, 2025, approximately **$9.6 million remained available** for purchase under the Stock Repurchase Program[232](index=232&type=chunk) [Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[234](index=234&type=chunk) [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[235](index=235&type=chunk) [Other Information](index=70&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted new trading plans, and the company's stock traded at a significant discount to NAV during the quarter - No director or officer of the Company adopted or terminated a **Rule 10b5-1 trading arrangement** during the three months ended March 31, 2025[236](index=236&type=chunk) Q1 2025 Stock Performance | Metric | Value | | :--- | :--- | | NAV Per Share (end of Q1) | $11.97 | | High Sales Price | $9.80 | | Low Sales Price | $7.92 | | Premium (Discount) of High Price to NAV | -18.1% | | Premium (Discount) of Low Price to NAV | -33.8% | | Cash Distribution per Share | $0.34 | [Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists standard exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data - The report includes standard exhibits, such as **CEO and CFO certifications** under Sarbanes-Oxley and Inline XBRL filings[239](index=239&type=chunk) [Signatures](index=72&type=section&id=SIGNATURES) - The report was signed on May 1, 2025, by **Bilal Rashid, Chief Executive Officer, and Kyle Spina, Chief Financial Officer**[242](index=242&type=chunk)

[Financial Highlights and Recent Events](index=1&type=section&id=OFS%20CAPITAL%20CORPORATION%20ANNOUNCES%20FIRST%20QUARTER%202025%20FINANCIAL%20RESULTS) OFS Capital reported a net investment income of $0.26 per share and a net loss of $0.54 per share for Q1 2025, with NAV decreasing to $11.97 per share [First Quarter 2025 Financial Highlights](index=1&type=section&id=FIRST%20QUARTER%20FINANCIAL%20HIGHLIGHTS) OFS Capital reported a net investment income of $0.26 per share and a net loss of $0.54 per share for the first quarter of 2025, with net asset value (NAV) per common share decreasing to $11.97 from $12.85 in the previous quarter, and total investments at fair value standing at $403.1 million, while announcing a second-quarter distribution of $0.34 per share | (Per common share) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net investment income | $0.26 | $0.30 | | Earnings (loss) | $(0.54) | $1.90 | | Net asset value | $11.97 | $12.85 | | Distributions paid | $0.34 | $0.34 | | **(in millions)** | **As of March 31, 2025** | **As of December 31, 2024** | | Total investments, at fair value | $403.1 | $409.7 | | Total outstanding debt - principal | $248.1 | $248.4 | | Total net assets | $160.4 | $172.2 | - The Board of Directors declared a distribution of **$0.34 per common share** for the second quarter of 2025, payable on June 30, 2025[3](index=3&type=chunk) - Net investment income decreased to **$0.26 per common share** for Q1 2025 from **$0.30** in Q4 2024[5](index=5&type=chunk) - The investment portfolio's weighted-average performing income yield decreased to **13.4%** from **13.8%** in the prior quarter, primarily due to the reduction in the U.S. Federal Reserve target federal funds rate[5](index=5&type=chunk) [Portfolio and Investment Activities](index=2&type=section&id=PORTFOLIO%20AND%20INVESTMENT%20ACTIVITIES) As of March 31, 2025, the investment portfolio was valued at $403.1 million, with debt investments comprising $215.9 million, a weighted-average performing income yield of 13.4%, and investment purchases totaling $10.4 million, while non-accrual loans constituted 4.2% of the total portfolio at fair value with no new additions [Portfolio Composition](index=2&type=section&id=Portfolio%20Composition) As of March 31, 2025, the investment portfolio's fair value was $403.1 million, with debt investments accounting for $215.9 million (85% first lien), and equity investments and structured finance securities valued at $107.7 million and $79.5 million, respectively - As of March 31, 2025, based on fair value, the investment portfolio was comprised of: Debt investments: **$215.9 million** (85% first lien, 15% second lien); Equity investments: **$107.7 million**; Structured finance securities: **$79.5 million**[11](index=11&type=chunk) - As of March 31, 2025, **90%** of the loan portfolio consisted of floating rate loans, and **100%** consisted of first lien and second lien loans[5](index=5&type=chunk) [Portfolio Yields and Activity](index=2&type=section&id=Portfolio%20Yields%20and%20Activity) The weighted-average performing income yield on interest-bearing investments decreased to 13.4% in Q1 2025 from 13.8% in Q4 2024, with total investment purchases and originations dropping significantly to $10.4 million from $32.6 million in the prior quarter, and no new loans placed on non-accrual status Portfolio Yields | Portfolio Yields | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Weighted-average performing income yield | 13.4% | 13.8% | | Weighted-average realized yield | 11.6% | 11.9% | Portfolio Purchase Activity (in millions) | Portfolio Purchase Activity (in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investment purchases and originations | $10.4 | $32.6 | - No new loans were placed on non-accrual status during the first quarter, with non-accrual loans having an aggregate fair value of **$16.9 million**, or **4.2%** of total investments at fair value, as of March 31, 2025[8](index=8&type=chunk) [Results of Operations](index=2&type=section&id=RESULTS%20OF%20OPERATIONS) For Q1 2025, OFS Capital reported a net decrease in net assets of $7.3 million, a significant downturn from a $25.5 million increase in Q4 2024, driven by a $1.3 million decrease in total investment income to $10.3 million and a net loss on investments of $10.8 million, while total expenses fell by $0.7 million to $6.8 million primarily due to lower incentive fees [Summary of Operations](index=2&type=section&id=Summary%20of%20Operations) The company's net investment income for Q1 2025 was $3.5 million, down from $4.1 million in the previous quarter, and a substantial net loss on investments of $10.8 million, compared to a $21.4 million gain in Q4 2024, led to a net decrease in net assets from operations of $7.3 million | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended December 31, 2024 | | :--- | :--- | :--- | | Total investment income | $10.3 | $11.6 | | Total expenses | $6.8 | $7.6 | | Net investment income | $3.5 | $4.1 | | Net gain (loss) on investments | $(10.8) | $21.4 | | Net increase (decrease) in net assets | $(7.3) | $25.5 | [Investment Income](index=4&type=section&id=Investment%20Income) Total investment income for Q1 2025 decreased to $10.3 million from $11.6 million in the prior quarter, primarily caused by a $0.5 million drop in interest income due to lower SOFR rates, and a combined $0.8 million decrease in dividend and fee income from non-recurring amounts in the previous quarter - Total investment income decreased to **$10.3 million** from **$11.6 million** in the prior quarter, driven by decreases in interest income (**$0.5 million**), dividend income (**$0.5 million**), and fee income (**$0.3 million**)[12](index=12&type=chunk) - The decrease in interest income was mainly due to lower SOFR rates from Federal Reserve rate cuts, while the drop in dividend and fee income was due to non-recurring amounts in Q4 2024[13](index=13&type=chunk) [Expenses](index=4&type=section&id=Expenses) Total expenses for Q1 2025 were $6.8 million, a decrease of $0.7 million from the prior quarter, with the reduction almost entirely attributable to a $0.7 million decrease in incentive fees, which was a result of lower net investment income - Total expenses decreased by **$0.7 million** to **$6.8 million**, primarily due to a **$0.7 million** decrease in incentive fees resulting from lower net investment income return on net assets[14](index=14&type=chunk) [Net Gain (Loss) on Investments](index=4&type=section&id=Net%20Gain%20(Loss)%20on%20Investments) In Q1 2025, the company recognized a net loss on investments of $10.8 million, comprising $2.6 million in net realized losses and $8.2 million in net unrealized depreciation, with the latter driven mainly by a $7.3 million depreciation on debt investments, including $3.9 million related to non-accrual loans - A net loss on investments of **$10.8 million** was recognized, consisting of **$8.2 million** in net unrealized depreciation and **$2.6 million** in net realized losses[15](index=15&type=chunk) - The net unrealized depreciation was primarily due to a **$7.3 million** markdown on debt investments, of which **$3.9 million** was related to non-accrual debt investments[15](index=15&type=chunk) [Liquidity, Capital Resources, and Debt](index=2&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of March 31, 2025, OFS Capital had $4.1 million in cash and access to $107 million in unused credit facilities, with average borrowings for the quarter at $248.7 million at a stable interest rate of 6.29%, and $13.8 million in unfunded commitments to portfolio companies [Outstanding Debt](index=2&type=section&id=OUTSTANDING%20DEBT) During Q1 2025, average borrowings were $248.7 million with a weighted-average effective interest rate of 6.29%, figures that remained relatively stable compared to the $248.1 million in borrowings and 6.30% interest rate in Q4 2024 | Three Months Ended | Average Dollar Borrowings (in millions) | Weighted-Average Effective Interest Rate | | :--- | :--- | :--- | | March 31, 2025 | $248.7 | 6.29% | | December 31, 2024 | $248.1 | 6.30% | [Liquidity and Capital Resources](index=4&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES_sub) As of March 31, 2025, the company held $4.1 million in cash and cash equivalents, with significant available liquidity including $21.5 million unused under its Banc of California facility and $85.5 million unused under its BNP Paribas facility, subject to covenants, and unfunded commitments to portfolio companies totaling $13.8 million - As of March 31, 2025, the company had **$4.1 million** in cash and cash equivalents[16](index=16&type=chunk) - The company had a total of **$107 million** in unused commitments under its revolving credit facilities (**$21.5 million** with Banc of California and **$85.5 million** with BNP Paribas)[17](index=17&type=chunk) - Outstanding commitments to fund various undrawn revolvers and other credit facilities of portfolio companies totaled **$13.8 million**[17](index=17&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show a decrease in net assets to $160.4 million and a net loss of $7.3 million for Q1 2025, driven by investment losses [Consolidated Statements of Assets and Liabilities](index=5&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities%20(Unaudited)) As of March 31, 2025, OFS Capital's total assets were $412.0 million and total liabilities were $251.6 million, resulting in total net assets of $160.4 million, reflecting a decrease from $172.2 million at the end of 2024, with net asset value per share declining to $11.97 from $12.85 | (in millions, except per share data) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments, at fair value | $403.1 | $409.7 | | Total assets | $412.0 | $428.1 | | Total liabilities | $251.6 | $255.9 | | Total net assets | $160.4 | $172.2 | | Net asset value per share | $11.97 | $12.85 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) For the first quarter of 2025, OFS Capital generated $10.3 million in total investment income and incurred $6.8 million in expenses, resulting in a net investment income of $3.5 million ($0.26 per share), while a significant net loss on investments of $10.8 million led to a net decrease in net assets from operations of $7.3 million, or ($0.54) per share | (in millions, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended December 31, 2024 | | :--- | :--- | :--- | | Total investment income | $10.3 | $11.6 | | Total expenses | $6.8 | $7.6 | | Net investment income | $3.5 | $4.1 | | Net gain (loss) on investments | $(10.8) | $21.4 | | Net increase (decrease) in net assets | $(7.3) | $25.5 | | Net investment income per common share | $0.26 | $0.30 | | Net increase (decrease) in net assets per share | $(0.54) | $1.90 | [Company Information and Disclosures](index=4&type=section&id=Company%20Information%20and%20Disclosures) This section provides an overview of OFS Capital's business model, details for the Q1 2025 earnings conference call, and a standard forward-looking statements disclaimer [About OFS Capital](index=7&type=section&id=ABOUT%20OFS%20CAPITAL) OFS Capital is an externally managed business development company (BDC) focused on providing current income and capital appreciation, primarily investing in debt and, to a lesser extent, equity of privately held U.S. middle-market companies, typically with annual EBITDA between $5 million and $50 million, with investment activities managed by OFS Capital Management, LLC - OFS Capital is an externally managed, closed-end, non-diversified management investment company regulated as a business development company (BDC)[22](index=22&type=chunk) - The company's investment objective is to provide stockholders with current income and capital appreciation through debt and equity investments in U.S. middle-market companies with annual EBITDA between **$5 million** and **$50 million**[22](index=22&type=chunk) [Conference Call Information](index=4&type=section&id=CONFERENCE%20CALL) OFS Capital will host a conference call to discuss its Q1 2025 financial results on Friday, May 2, 2025, at 10:00 AM Eastern Time, with details provided for participation via internet webcast and telephone - A conference call to discuss results is scheduled for Friday, May 2, 2025, at **10:00 AM Eastern Time**[18](index=18&type=chunk) - Participation is available via internet at www.ofscapital.com or by telephone at **(833) 816-1364 (Domestic)** or **(412) 317-5699 (International)**[18](index=18&type=chunk)[19](index=19&type=chunk) [Forward-Looking Statements](index=7&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section serves as a legal disclaimer, cautioning that statements in the press release about future expectations are forward-looking and subject to various risks and uncertainties, noting that actual results may differ materially and directing readers to the company's SEC filings for more information on these risks, with OFS Capital undertaking no obligation to update these statements - The press release contains forward-looking statements that involve known and unknown risks and uncertainties, which may cause actual results to differ materially from expectations[23](index=23&type=chunk) - The company assumes no obligation to update the information or revise any forward-looking statements[23](index=23&type=chunk)