PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) OFS Capital Corporation is an externally managed BDC investing in U.S. middle-market debt and equity, regulated by the 1940 Act - OFS Capital Corporation is an externally managed BDC focused on providing current income and capital appreciation through debt and equity investments in U.S. middle-market companies[14](index=14&type=chunk) - The investment portfolio as of December 31, 2021, consisted of **95% senior secured loans** and **5% subordinated loans**, totaling **$344.6 million** in 58 portfolio companies, along with **$87.3 million** in equity investments and **$75.2 million** in Structured Finance Notes[15](index=15&type=chunk) - The company's asset coverage ratio was **173%** as of December 31, 2021, and **176%** as of December 31, 2020, following the Board's approval to decrease the minimum asset coverage ratio from **200% to 150%**, effective May 3, 2019[20](index=20&type=chunk)[21](index=21&type=chunk) Investment Advisory Agreement Expenses (in thousands) | Year Ended December 31, | 2021 | 2020 | 2019 | | :---------------------- | :--- | :--- | :--- | | Base management fees | $7,669 | $7,605 | $8,271 | | Income Incentive Fee | $2,352 | $2,025 | $4,760 | | Income Incentive Fee waiver | — | $(441) | — | | Capital Gains Fee | $1,916 | — | — | [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, including economic conditions, leverage, illiquid investment valuation, key personnel, and regulatory compliance - Global economic, political, and market conditions, including the COVID-19 pandemic, have adversely affected and may continue to affect the company's business, results of operations, and financial condition, as well as those of its portfolio companies[176](index=176&type=chunk)[178](index=178&type=chunk) - The company finances investments with borrowed money, which magnifies potential gains or losses and increases investment risk. The asset coverage ratio was reduced from **200% to 150%** effective May 3, 2019, allowing for increased leverage[200](index=200&type=chunk)[201](index=201&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) Effect of Leverage on Returns to Common Stockholders (Hypothetical) | Assumed Return on Our Portfolio (Net of Expenses) | (10)% | (5)% | —% | 5% | 10% | | :------------------------------------------------ | :---- | :--- | :--- | :-- | :--- | | Corresponding return to common stockholder | (40.0)% | (24.8)% | (9.6)% | 5.6% | 20.8% | - A significant portion of portfolio investments are recorded at fair value, determined in good faith by the Board, leading to inherent uncertainty in valuation due to the illiquid nature of these securities[194](index=194&type=chunk) - The company is highly dependent on OFSC senior professionals and OFS Advisor for its future success, and their departure or inability to maintain relationships could adversely affect investment opportunities and operations[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 1B. Unresolved Staff Comments](index=65&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not applicable, indicating no unresolved SEC staff comments - The company has no unresolved staff comments[370](index=370&type=chunk) [Item 2. Properties](index=65&type=section&id=Item%202.%20Properties) The company does not own or lease material properties; facilities are provided by OFS Services under an Administration Agreement - The company does not own or lease any material real estate or physical properties[371](index=371&type=chunk) - Headquarters and other office facilities are provided by OFS Services through an Administration Agreement[371](index=371&type=chunk) [Item 3. Legal Proceedings](index=65&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2021, no material legal proceedings are pending or threatened against the company or its affiliates - As of December 31, 2021, the company, OFS Advisor, and OFS Services are not subject to any material pending legal proceedings[372](index=372&type=chunk) - Any incidental legal proceedings are not expected to have a material effect on the company's business, financial condition, results of operations, or cash flows[372](index=372&type=chunk) [Item 4. Mine Safety Disclosures](index=65&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable, requiring no mine safety disclosures - The company has no mine safety disclosures to report[373](index=373&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=66&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details common stock market performance, NAV, distributions, repurchases, fees, and senior securities - OFS Capital Corporation's common stock trades on the Nasdaq Global Select Market under the symbol **'OFS'**. As of March 1, 2022, the last reported sale price was **$9.85 per share**, with **13,422,413 shares** outstanding[4](index=4&type=chunk)[376](index=376&type=chunk) Common Stock Performance and Distributions | Period | NAV Per Share | High Sales Price | Low Sales Price | Cash Distribution per Share | | :-------------- | :------------ | :--------------- | :-------------- | :-------------------------- | | Fiscal 2022 Q1* | * | $10.88 | $9.50 | $0.28 | | Fiscal 2021 Q4 | $15.18 | $11.40 | $10.38 | $0.25 | | Fiscal 2021 Q3 | $14.16 | $10.55 | $8.80 | $0.24 | | Fiscal 2021 Q2 | $13.42 | $10.30 | $8.77 | $0.22 | | Fiscal 2021 Q1 | $11.96 | $9.15 | $6.82 | $0.20 | | Fiscal 2020 Q4 | $11.85 | $7.58 | $3.97 | $0.18 | | Fiscal 2020 Q3 | $11.18 | $5.08 | $4.04 | $0.17 | | Fiscal 2020 Q2 | $10.10 | $5.70 | $3.52 | $0.17 | | Fiscal 2020 Q1 | $9.71 | $11.97 | $3.70 | $0.34 | - The Board authorized a Stock Repurchase Program to acquire up to **$10.0 million** of common stock, extended through May 22, 2022. In 2021, **700 thousand shares** were repurchased at an average price of **$6.70 per share**[380](index=380&type=chunk)[383](index=383&type=chunk) Total Annual Expenses (as a percentage of net assets attributable to common stock) | Expense Category | 2021 (%) | | :--------------------------------------------------- | :------- | | Base management fees payable under the Investment Advisory Agreement | 4.23 | | Incentive fees payable under the Investment Advisory Agreement | 1.16 | | Interest payments on borrowed funds | 7.86 | | Other expenses | 2.38 | | **Total annual expenses** | **15.63** | | Base management fee reduction | (0.46) | | **Total annual expenses, net of fee reduction** | **15.17** | Senior Securities Outstanding (in thousands) | Class and Year | Total Amount Outstanding | | :---------------------- | :----------------------- | | 4.75% Notes due 2026 | $125,000 | | 4.95% Notes due 2028 | $55,000 | | SBA debentures (SBIC I LP) | $69,920 | | BNP Facility | $100,000 | | **Total Senior Securities** | **$349,920** | [Item 6. Reserved](index=74&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - Item 6 is reserved and contains no information[411](index=411&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=74&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and operations, covering key metrics, COVID-19 impact, accounting policies, portfolio, liquidity, and capital Key Performance Metrics | Metric | 2021 | 2020 | 2019 | | :---------------------------------------------- | :------ | :------ | :------ | | Net asset value per common share | $15.18 | $11.85 | $12.46 | | Net investment income per common share | $1.00 | $0.92 | $1.43 | | Net increase in net assets from operations per common share | $4.24 | $0.28 | $0.71 | | Distributions paid per common share | $0.91 | $0.86 | $1.36 | - NAV per common share increased **28% to $15.18** at December 31, 2021, from **$11.85** at December 31, 2020, primarily due to **$48.0 million** in net gains on the investment portfolio[417](index=417&type=chunk) - The weighted average realized yield on interest-bearing investments increased to **9.7%** in 2021 from **9.5%** in 2020, while weighted-average debt interest costs decreased to **5.1%** from **5.4%**[419](index=419&type=chunk) Consolidated Operating Results (in thousands) | Category | 2021 | 2020 | 2019 | | :-------------------------------------- | :------ | :------ | :------ | | Total investment income | $47,763 | $45,475 | $52,521 | | Total expenses, net of incentive fee waivers | $34,313 | $33,180 | $33,423 | | Net investment income | $13,450 | $12,295 | $19,098 | | Net gain (loss) on investments | $48,005 | $(6,704) | $(9,545) | | Loss on extinguishment of debt | $(4,591) | $(820) | — | | Loss on impairment of goodwill | — | $(1,077) | — | | Net increase in net assets from operations | $56,864 | $3,694 | $9,553 | - As of December 31, 2021, the company had **$43.0 million** in cash and cash equivalents, and unused commitments of **$25.0 million** under its PWB Credit Facility and **$50.0 million** under its BNP Facility[535](index=535&type=chunk)[537](index=537&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=102&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details exposure to market risks, including interest rate fluctuations and investment valuation, with hypothetical rate change analysis - The company is exposed to financial market risks, including changes in interest rates and investment valuations, with the COVID-19 pandemic introducing significant volatility[587](index=587&type=chunk) - As of December 31, 2021, **92%** of debt investments bore floating interest rates (mostly LIBOR-based with floors, transitioning to alternative rates) and **8%** bore fixed rates[589](index=589&type=chunk) Annualized Impact of Hypothetical Base Rate Changes in Interest Rates (in thousands) | Basis point increase | Interest income | Interest expense | Net change | | :------------------- | :-------------- | :--------------- | :--------- | | 25 | $96 | $(284) | $(188) | | 50 | $209 | $(537) | $(328) | | 75 | $447 | $(791) | $(344) | | 100 | $1,123 | $(1,044) | $79 | | 125 | $1,938 | $(1,298) | $640 | | Basis point decrease | Interest income | Interest expense | Net change | | 25 | $(76) | $178 | $102 | | 50 | $(96) | $178 | $82 | | 75 | $(116) | $178 | $62 | | 100 | $(136) | $178 | $42 | | 125 | $(157) | $178 | $21 | - Most investments lack a readily available market value and are valued at fair value by the Board, based on independent third-party valuations, leading to inherent valuation uncertainty[588](index=588&type=chunk) [ITEM 8. Financial Statements](index=104&type=section&id=ITEM%208.%20Financial%20Statements) This section presents audited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes for 2021-2019 - The consolidated financial statements for 2021, 2020, and 2019 were audited by KPMG LLP and present the financial position, results of operations, and cash flows in conformity with U.S. GAAP[598](index=598&type=chunk) Consolidated Statements of Assets and Liabilities (in thousands) | Category | Dec 31, 2021 | Dec 31, 2020 | | :------------------------ | :----------- | :----------- | | Total investments at fair value | $507,099 | $442,323 | | Cash | $43,048 | $37,708 | | Total assets | $569,048 | $483,813 | | Total liabilities | $365,304 | $324,857 | | Total net assets | $203,744 | $158,956 | | Net asset value per share | $15.18 | $11.85 | Consolidated Statements of Operations (in thousands) | Category | 2021 | 2020 | 2019 | | :-------------------------------------- | :------ | :------ | :------ | | Total investment income | $47,763 | $45,475 | $52,521 | | Total expenses, net of Income Incentive Fee waiver | $34,313 | $33,180 | $33,423 | | Net investment income | $13,450 | $12,295 | $19,098 | | Net gain (loss) on investments | $48,005 | $(6,704) | $(9,545) | | Net increase in net assets from operations | $56,864 | $3,694 | $9,553 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2021 | 2020 | 2019 | | :-------------------------------------- | :-------- | :-------- | :-------- | | Net cash provided by (used in) operating activities | $(12,009) | $80,625 | $(101,636) | | Net cash provided (used) by financing activities | $17,349 | $(56,364) | $76,911 | | Net increase (decrease) in cash | $5,340 | $24,261 | $(24,725) | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=173&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There are no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[813](index=813&type=chunk) [Item 9A. Controls and Procedures](index=173&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management assessed disclosure controls and internal control over financial reporting as effective at December 31, 2021 - The company's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of December 31, 2021[815](index=815&type=chunk) - Management concluded that the internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[818](index=818&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2021[819](index=819&type=chunk) [Item 9B. Other Information](index=173&type=section&id=Item%209B.%20Other%20Information) This item indicates no other information to disclose - There is no other information to disclose under this item[820](index=820&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=173&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable, requiring no disclosures on foreign jurisdictions preventing inspections - The company has no disclosures regarding foreign jurisdictions that prevent inspections[821](index=821&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=174&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement[823](index=823&type=chunk) [Item 11. Executive Compensation](index=174&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2022 Proxy Statement - Executive compensation information is incorporated by reference from the 2022 Proxy Statement[824](index=824&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=174&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and related stockholder matters are incorporated by reference from the 2022 Proxy Statement - Security ownership information for beneficial owners and management is incorporated by reference from the 2022 Proxy Statement[825](index=825&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=174&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Proxy Statement[826](index=826&type=chunk) [Item 14. Principal Accounting Fees and Services](index=174&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2022 Proxy Statement - Principal accounting fees and services information is incorporated by reference from the 2022 Proxy Statement[827](index=827&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=175&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules, including corporate documents and agreements, mostly incorporated by reference - The report includes financial statements, financial statement schedules (Schedule 12-14 Investments in and Advances to Affiliates), and exhibits required by Item 601 of Regulation S-K[830](index=830&type=chunk)[831](index=831&type=chunk) - Exhibits include corporate governance documents, various agreements (e.g., Investment Advisory, Administration, License), and debt-related indentures[831](index=831&type=chunk)[832](index=832&type=chunk)[833](index=833&type=chunk)[834](index=834&type=chunk) [Item 16. Form 10-K Summary](index=178&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates no Form 10-K Summary is provided - No Form 10-K Summary is provided[835](index=835&type=chunk)

OFS Capital Corporation (NASDAQ:OFS) Q4 2021 Earnings Conference Call March 4, 2022 11:00 AM ET Company Participants Steve Altebrando - VP, Capital Markets Bilal Rashid - Chairman and CEO Jeff Cerny - CFO and Treasurer Conference Call Participants Mickey Schleien - Ladenburg David Miyazaki - Confluence Investment Management Operator Good morning. And welcome to the OFS Capital Corporation Q4 and Full Year 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s ...

OFS Capital Corporation Nasdaq: OFS (common stock) Nasdaq: OFSSH (unsecured notes) Institutional Notes: PAR $2,000 4.75% Notes due 2026 Investor Presentation March 2022 ammill www.cimgroup.com | ©2018 CIM Group | TRADE SECRET / CONFIDENTIAL INFORMATION www.ofscapital.com | ©2022 OFS Capital Corporation Important Disclosures This presentation contains "forward looking statements" that are subject to risks and uncertainties. Forward-looking statements can be identified by terminology such as "anticipate," "be ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 814-00813 OFS CAPITAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 46-1339639 Reg ...

OFS Capital Corporation (NASDAQ:OFS) Q3 2021 Results Conference Call November 5, 2021 10:00 AM ET Company Participants Steve Altebrando - VP, Capital Markets Bilal Rashid - Chairman and CEO Jeff Cerny - CFO and Treasurer Conference Call Participants Mickey Schleien - Ladenburg Operator Good morning. And welcome to the OFS Capital Corporation Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportun ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Securities registered pursuant to Section 12(b) of the Act: ...

OFS Capital (NASDAQ:OFS) Q2 2021 Results Earnings Conference Call August 6, 2021 10:00 AM ET Company Participants Steve Altebrando - VP, IR Bilal Rashid - Chairman and CEO Jeffrey Cerny - CFO and Treasurer Conference Call Participants Mickey Schleien - Ladenburg Operator Good day. And welcome to the OFS Capital Second Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operato ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 814-00813 OFS CAPITAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 46-1339639 State o ...

Financial Data and Key Metrics Changes - Adjusted net investment income was $0.23 per share, up 5% from the last quarter, with NAV increasing approximately 1% to $11.96 per share as of March 31 [10][23] - The weighted average cost of debt decreased from 5.49% to 5.16% due to capital raising activities [10] - Quarterly distribution increased by 10% from $0.20 to $0.22 per share, marking the third consecutive quarterly increase [11][27] Business Line Data and Key Metrics Changes - No new loans or non-accruals were reported, indicating portfolio resilience [11] - Total investment income decreased by approximately $600,000 to $10.5 million, primarily due to lower prepayment fees and common equity dividends [25] - Total expenses decreased by approximately $200,000 to $7.9 million, attributed to lower incentive fees [26] Market Data and Key Metrics Changes - Approximately 96% of the loan portfolio was senior secured at the end of the first quarter, with 93% of loan investments being floating rate [14][29] - The portfolio consisted of 87 companies totaling approximately $466 million in fair value [28] Company Strategy and Development Direction - The company aims to preserve capital while thoughtfully growing earnings, focusing on increasing origination activities and reducing the cost of debt [12] - The company is positioned to benefit from an eventual increase in interest rates due to its floating-rate assets and primarily fixed-rate financing [15][36] - The company continues to avoid highly cyclical industries, maintaining a diversified portfolio across healthcare, technology, business services, and manufacturing [14] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about the economic recovery due to favorable fiscal and monetary policies, while remaining cautious [20] - Increased pipeline activity through new and existing borrowers is expected to lead to an increase in net investment income over time [16] - The company has a solid liquidity position, which will help in seizing new investment opportunities [34] Other Important Information - The company has a debt to equity ratio of approximately 1.4 times, with 90% of its debt maturing in 2024 or later [22] - The adviser manages over $2.5 billion in assets and has extensive experience in credit underwriting and restructuring [18][37] Q&A Session Summary - There were no questions during the Q&A session [40]

Part I [Business](index=3&type=section&id=Item%201.%20Business) The company operates as a BDC investing in U.S middle-market companies to generate income and capital appreciation, with a portfolio valued at $442.3 million at year-end 2020 - The company's investment objective is to provide stockholders with both current income and capital appreciation primarily through debt investments in U.S. middle-market companies[12](index=12&type=chunk) - A significant portion of the company's investment strategy is executed through its SBIC subsidiary, SBIC I LP, which held **approximately 46%** of the company's total consolidated assets at year-end 2020[13](index=13&type=chunk)[131](index=131&type=chunk) Portfolio Composition at Fair Value (December 31, 2020) | Investment Type | Fair Value (in millions) | Number of Portfolio Companies/Notes | | :--- | :--- | :--- | | Debt Investments | $321.4 | 49 | | Equity Investments | $64.5 | 23 | | Structured Finance Notes | $56.4 | 12 | - The company's asset coverage ratio was **176%** as of December 31, 2020, above the required minimum of 150% which became effective May 3, 2019[16](index=16&type=chunk)[17](index=17&type=chunk) - OFS Advisor manages the company's investment activities for a base management fee of **1.75%** of total assets and a two-part incentive fee based on net investment income and capital gains[19](index=19&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from the COVID-19 pandemic, its dependence on an external manager, leverage, and the speculative nature of its investments in private companies and CLOs - The **COVID-19 pandemic** has adversely affected and may continue to affect the business, results, and financial condition of the company and its portfolio companies, potentially leading to reduced dividends[175](index=175&type=chunk)[180](index=180&type=chunk) - The company is **dependent on the senior professionals of its external advisor**, OFS Advisor, and its affiliates for its success[183](index=183&type=chunk) - The use of leverage magnifies potential gains and losses, and the company's required asset coverage ratio was reduced from 200% to **150%**, allowing for increased leverage and associated risk[197](index=197&type=chunk)[205](index=205&type=chunk) - **Significant potential conflicts of interest** exist, as OFS Advisor manages other funds with similar or overlapping investment strategies[239](index=239&type=chunk)[240](index=240&type=chunk) - Investments in private and middle-market companies are inherently risky, speculative, and illiquid, and investments in Structured Finance Notes (CLOs) carry additional risks including **subordination and the potential for total loss**[286](index=286&type=chunk)[292](index=292&type=chunk)[309](index=309&type=chunk) - The company's common stock may trade **below its net asset value per share**, which limits its ability to raise additional equity capital without stockholder approval[334](index=334&type=chunk) [Unresolved Staff Comments](index=59&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - Not applicable[361](index=361&type=chunk) [Properties](index=59&type=section&id=Item%202.%20Properties) The company does not own any material real estate, as its office facilities are provided by its administrator, OFS Services - The company does not own any real estate, as its office facilities are provided by OFS Services pursuant to the Administration Agreement[362](index=362&type=chunk) [Legal Proceedings](index=59&type=section&id=Item%203.%20Legal%20Proceedings) The company and its affiliates were not subject to any material pending legal proceedings as of December 31, 2020 - The company is not currently subject to any material pending legal proceedings[363](index=363&type=chunk) [Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[365](index=365&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=61&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq and experienced significant volatility in 2020, trading at a substantial discount to NAV, while a $10 million repurchase program remains unused Quarterly Stock Price and Distribution Data (Fiscal 2020) | Quarter | NAV Per Share | High Price | Low Price | Premium/(Discount) to NAV (Low) | Cash Distribution Per Share | | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 | $9.71 | $11.97 | $3.70 | -61.9% | $0.34 | | Q2 | $10.10 | $5.70 | $3.52 | -65.1% | $0.17 | | Q3 | $11.18 | $5.08 | $4.04 | -63.9% | $0.17 | | Q4 | $11.85 | $7.58 | $3.97 | -66.5% | $0.18 | - A stock repurchase program is authorized to acquire up to **$10.0 million** of common stock through May 22, 2022, though no shares were repurchased during 2020 or 2019[371](index=371&type=chunk)[374](index=374&type=chunk) - Total annual expenses are estimated to be **19.06%** of net assets attributable to common stock after a base management fee reduction from the advisor[381](index=381&type=chunk) [Selected Consolidated Financial Data](index=71&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) Key financial data for the past five years shows declines in investment income, net investment income per share, and net asset value per share in 2020 compared to prior years Key Financial Metrics (2018-2020) | Metric (Per Share) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net Asset Value (Year-End) | $11.85 | $12.46 | $13.10 | | Net Investment Income | $0.92 | $1.43 | $1.38 | | Net Increase in Net Assets | $0.28 | $0.71 | $0.72 | | Distributions Declared | $0.86 | $1.36 | $1.73 | Statement of Operations Data (in thousands) | Line Item | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total Investment Income | $45,475 | $52,521 | $42,834 | | Total Expenses, Net | $33,180 | $33,470 | $24,449 | | Net Investment Income | $12,295 | $19,098 | $18,385 | | Net Increase in Net Assets | $3,694 | $9,553 | $9,572 | - The weighted average yield on total investments decreased year-over-year, from 10.49% in 2018 to 9.59% in 2019, and further to **8.56% in 2020**[397](index=397&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=73&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 2020 performance decline to the COVID-19 pandemic, which led to lower net investment income, portfolio losses, and a shift to lower-yielding assets - Net investment income per share **decreased by $0.51** in 2020 compared to 2019, primarily due to a decline in the net interest margin and placing loans on non-accrual status[404](index=404&type=chunk) - The portfolio experienced **net losses of $6.7 million** in 2020, driven by unrealized losses in two debt investments, partially offset by an unrealized gain in an equity investment[405](index=405&type=chunk)[406](index=406&type=chunk) - As of December 31, 2020, the company had **$37.7 million in cash** and could access an additional $111 million from its credit facilities[513](index=513&type=chunk)[516](index=516&type=chunk) - Subsequent to year-end, the company issued **$100.0 million of 4.75% notes** due 2026 to redeem higher-coupon notes, reducing interest costs[559](index=559&type=chunk)[561](index=561&type=chunk) Debt Investment Risk Category Breakdown (Fair Value) | Risk Category | Dec 31, 2020 (%) | Dec 31, 2019 (%) | | :--- | :--- | :--- | | 1 (Low Risk) | 0.0% | 0.0% | | 2 (Below Average) | 0.0% | 4.0% | | 3 (Average) | 82.2% | 85.8% | | 4 (Special Mention) | 14.1% | 10.1% | | 5 (Substandard) | 3.6% | 0.0% | | 6 (Doubtful) | 0.1% | 0.1% | | 7 (Loss) | 0.0% | 0.0% | [Quantitative and Qualitative Disclosures about Market Risk](index=99&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate volatility, as 96% of its debt investments are floating-rate while most of its borrowings are fixed-rate - The company is primarily exposed to interest rate risk, as **96% of its debt investments were floating-rate** as of December 31, 2020, while its SBA debentures and Unsecured Notes were fixed-rate[565](index=565&type=chunk)[566](index=566&type=chunk) Annualized Impact of Hypothetical Interest Rate Changes | Basis Point Change | Net Change in Income (in thousands) | | :--- | :--- | | +100 | $505 | | +50 | $43 | | -25 | $(40) | [Financial Statements and Supplementary Data](index=100&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020 and 2019, with the auditor highlighting the valuation of Level 3 investments as a critical audit matter - The financial statements for the two-year period ended December 31, 2020, were audited by KPMG LLP, which issued an opinion that they are **presented fairly in all material respects**[572](index=572&type=chunk) - The auditor identified the valuation of portfolio company investments using unobservable inputs as a **critical audit matter** due to the high degree of judgment required for Level 3 assets[577](index=577&type=chunk)[578](index=578&type=chunk) Consolidated Balance Sheet Summary (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Investments, at Fair Value | $442,323 | $516,931 | | Total Assets | $483,813 | $538,188 | | Total Liabilities | $324,857 | $371,561 | | Total Net Assets | $158,956 | $166,627 | - The Consolidated Schedule of Investments provides a detailed listing of each investment, including its industry, interest rate, maturity, principal, amortized cost, and fair value[593](index=593&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=169&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - Not applicable[778](index=778&type=chunk) [Controls and Procedures](index=169&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that the company's disclosure controls and procedures were **effective** at the reasonable assurance level as of December 31, 2020[780](index=780&type=chunk) - Based on an assessment using the COSO 2013 framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2020[782](index=782&type=chunk)[783](index=783&type=chunk) [Other Information](index=169&type=section&id=Item%209B.%20Other%20Information) There is no other information to report in this section - None[785](index=785&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=170&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive compensation, and corporate governance is incorporated by reference from the company's 2021 Proxy Statement - Information required by Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[788](index=788&type=chunk)[789](index=789&type=chunk)[790](index=790&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=171&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report, including key corporate and financing agreements - This item lists all documents filed as part of the report, including financial statements, schedules, and exhibits required by Regulation S-K[795](index=795&type=chunk) - Exhibits filed include key corporate governance documents, indentures for multiple note offerings, management and administration agreements, and required CEO/CFO certifications[796](index=796&type=chunk)[797](index=797&type=chunk)[798](index=798&type=chunk) [Form 10-K Summary](index=174&type=section&id=Item%2016.%20Form%2010-K%20Summary) There is no Form 10-K summary provided in this report - None[800](index=800&type=chunk)