Oxford Square Capital (US:OXSQ)2025-08-11 21:42PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited interim financial statements, showing decreased assets, NAV per share, and net investment income Statements of Assets and Liabilities Total assets and net assets decreased to $274.8 million and $157.4 million, with NAV per share at $2.06 Statements of Assets and Liabilities Summary (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Investments (at fair value) | $241,507 | $260,853 | | Total Assets | $274,847 | $299,731 | | Total Liabilities | $117,424 | $139,065 | | Total Net Assets | $157,423 | $160,665 | | Net Asset Value per Share | $2.06 | $2.30 | Schedule of Investments The $241.5 million investment portfolio was primarily Senior Secured Notes (60.8%) and CLO Equity (37.0%) Portfolio Composition by Asset Class (at Fair Value) | Asset Class | June 30, 2025 (Fair Value) | % of Total | Dec 31, 2024 (Fair Value) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Senior Secured Notes | $146.8M | 60.8% | $150.7M | 57.8% | | CLO Equity | $89.3M | 37.0% | $104.6M | 40.1% | | Equity and Other Investments | $5.3M | 2.2% | $5.6M | 2.1% | | Total | $241.5M | 100.0% | $260.9M | 100.0% | - As of June 30, 2025, the company's qualifying assets under Section 55(a) of the 1940 Act represented 67.6% of its total assets, which is below the required 70% threshold for acquiring new non-qualifying assets28 Statements of Operations Total investment income decreased to $19.7 million, leading to a $3.7 million net decrease in net assets from operations Key Operational Results (Unaudited, in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Investment Income | $19,683 | $22,123 | | Total Expenses | $8,080 | $7,863 | | Net Investment Income | $11,603 | $14,259 | | Net Realized Losses | ($14,526) | ($38,535) | | Net Change in Unrealized (Depreciation)/Appreciation | ($814) | $27,766 | | Net (Decrease)/Increase in Net Assets from Operations | ($3,736) | $3,491 | | Net Investment Income per Share | $0.16 | $0.24 | | Net (Decrease)/Increase in Net Assets per Share | ($0.05) | $0.06 | Statements of Changes in Net Assets Net assets decreased by $3.2 million due to operational losses and distributions, partially offset by capital share transactions Reconciliation of Net Assets (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :--- | :--- | | Net Assets at Beginning of Period | $160,665 | | Net (Decrease) in Net Assets from Operations | ($3,736) | | Distributions to Stockholders | ($15,058) | | Net Increase from Capital Share Transactions | $15,552 | | Net Assets at End of Period | $157,423 | Statements of Cash Flows Net cash from operating activities was $4.3 million, financing used $9.5 million, resulting in a $5.1 million net cash decrease Summary of Cash Flows (Six Months Ended, in thousands) | Cash Flow Activity | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $4,329 | $26,661 | | Net Cash from Financing Activities | ($9,461) | ($2,387) | | Net (Decrease)/Increase in Cash | ($5,132) | $24,274 | | Cash at End of Period | $29,794 | $30,014 | Notes to Financial Statements Details accounting policies, Level 3 investment valuation, borrowings, and subsequent events, with a 235% asset coverage ratio - The company's investment portfolio is valued using Level 3 inputs due to the general illiquidity of the market for its investments7778 - The Board of Directors determines the fair value quarterly, with assistance from management and third-party valuation firms7778 - As of June 30, 2025, the company's asset coverage ratio for borrowed amounts was 235%, well above the 150% minimum required by the 1940 Act139 - Subsequent to quarter-end, the company redeemed an additional $10.0 million of its 6.25% Unsecured Notes on July 18, 2025217 - The company completed a public offering of approximately $65.0 million of 7.75% Unsecured Notes due 2030 on August 7, 2025218 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting a $241.5 million portfolio, decreased investment income, and an improved 2.2 credit grade Portfolio Composition and Investment Activity The investment portfolio's fair value decreased to $241.5 million due to losses and repayments, with a 14.46% weighted average debt yield Reconciliation of Investment Portfolio (in millions) | Description | Six Months Ended June 30, 2025 | | :--- | :--- | | Beginning Portfolio Value | $260.9 | | Portfolio Investments Acquired | $16.0 | | Debt Repayments & Sales | ($19.6) | | Net Realized Losses | ($14.5) | | Net Change in Unrealized Depreciation | ($0.8) | | Other (PIK, Accretion, etc.) | ($1.5) | | Ending Portfolio Value | $241.5 | - The weighted average annualized yield on debt investments was approximately 14.46% as of June 30, 2025227 Portfolio Grading The debt portfolio's weighted average grade improved to 2.2, with 82.6% of investments rated Grade 2 for full repayment Debt Portfolio Grading by Fair Value (June 30, 2025) | Grade | Summary Description | Fair Value | % of Debt Portfolio | | :--- | :--- | :--- | :--- | | 1 | Outperforming expectations | $0M | 0.0% | | 2 | Full repayment expected | $121.3M | 82.6% | | 3 | Closer monitoring required | $25.5M | 17.4% | | 4 | Loss of interest expected | $0M | 0.0% | | 5 | Loss of principal expected | $0M | 0.0% | Results of Operations Total investment income decreased to $19.7 million, leading to a $3.7 million net decrease in net assets from operations - The decrease in total investment income for the six months ended June 30, 2025, was primarily due to a decrease in interest income from debt investments259 - For the six months ended June 30, 2025, the company recognized net realized losses on investments of approximately $14.5 million274 - The company also recognized a net change in unrealized depreciation of approximately $0.8 million for the six months ended June 30, 2025275 Liquidity and Capital Resources The company held $29.8 million in cash, sourced liquidity from operations and ATM proceeds, maintaining a 235% asset coverage ratio - Cash and cash equivalents stood at approximately $29.8 million as of June 30, 2025282 - The company raised a net total of approximately $15.1 million during the first six months of 2025 through its At-the-Market (ATM) stock offering program286 Contractual Obligations (as of June 30, 2025, in millions) | Obligation | Principal Amount | Less than 1 year | 1 – 3 years | 3 – 5 years | | :--- | :--- | :--- | :--- | :--- | | 6.25% Unsecured Notes | $34.8 | $34.8 | $— | $— | | 5.50% Unsecured Notes | $80.5 | $— | $— | $80.5 | | Total | $115.3 | $34.8 | $— | $80.5 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk, with a 100 basis point rate change impacting annual investment income by 4.8% Hypothetical Interest Rate Change Impact on Investment Income | Hypothetical Change in Base Rates | Estimated Percentage Change in Investment Income | | :--- | :--- | | Up 300 basis points | 14.4% | | Up 100 basis points | 4.8% | | Down 100 basis points | (4.8)% | | Down 300 basis points | (14.2)% | Item 4. Controls and Procedures Management confirmed effective disclosure controls and procedures as of June 30, 2025, with no material internal control changes - Management concluded that disclosure controls and procedures were effective as of June 30, 2025314 - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025316 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - As of the reporting date, the company is not a party to any material legal proceedings318 Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported for the six months ended June 30, 2025 - No material changes to risk factors were reported for the six months ended June 30, 2025319 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 106,066 unregistered shares valued at $238,263 via its distribution reinvestment plan in Q2 2025 - In Q2 2025, 106,066 shares were issued via the distribution reinvestment plan, valued at approximately $238,263320 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported Item 4. Mine Safety Disclosures This item is not applicable to the company Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during Q2 2025 Item 6. Exhibits Lists exhibits filed with the report, including CEO and CFO certifications