Hancock Park Corporate Income Inc.
03/13/2026 | Press release | Distributed by Public on 03/13/2026 08:30
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "would," "should," "targets," "projects," and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
•our ability and experience operating a BDC or maintaining our qualification as a RIC under the Code;
•our dependence on key personnel;
•our ability to maintain or develop referral relationships;
•our ability to replicate historical results;
•the ability of OFS Advisor to identify, invest in and monitor companies that meet our investment criteria;
•the belief that the carrying amounts of our financial instruments, such as cash, cash equivalents, receivables and payables approximate the fair value of such items due to the short maturity of such instruments and that such financial instruments are held with high credit quality institutions to mitigate the risk of loss due to credit risk;
•actual and potential conflicts of interest with OFS Advisor and other affiliates of OFSAM Holdings;
•constraint on investment due to access to material nonpublic information;
•restrictions on our ability to enter into transactions with our affiliates;
•the use of borrowed money to finance a portion of our investments;
•the creation of leveraged lending opportunities as a result of the large amount of unfunded buyout commitments driving demand for leveraged buyouts over the next several years;
•our ability to incur additional leverage pursuant to Section 61(a)(2) of the 1940 Act, and the impact of such leverage on our net investment income and results of operations;
•competition for investment opportunities;
•the belief that the seniority of our debt investments in a borrower's capital structure may provide greater downside protection against adverse economic changes, including those caused by the impacts of interest rate and inflation rate changes, the ongoing war between Russia and Ukraine, the escalated armed conflict and heightened regional tensions in the Middle East, activity in South America, instability in the U.S. and international banking systems, the agenda of the U.S. presidential administration, including the impact of tariff enactment and tax reductions, trade disputes with other countries, the risk of recession or the impact of the prolonged shutdown of U.S. government services, and related market volatility on our business, our portfolio companies, our industry and the global economy;
•the percentage of investments that bear interest on a floating rate or fixed rate basis;
•the holding period of our investments;
•the impact of alternative reference rates on our business, including potential additional interest rate reductions approved by the U.S. Federal Reserve, which may impact our investment income, cost of funding and the valuation of our investments;
•the belief that our portfolio is well diversified across companies and industries;
•our ability to raise debt or equity capital as a BDC;
•the timing, form and amount of any distributions from our portfolio companies;
•the impact of a protracted decline in the liquidity of credit markets on our business;
•interest rate volatility;
•the general economy and its impact on the industries in which we invest;
•the impact of current political, economic and industry conditions, including changes in the interest rate environment, inflation, significant market volatility, supply chain and labor market disruptions, including those as a result of strikes, work stoppages or accidents, resource shortages and other conditions affecting the financial and capital markets, which, in turn, impacts our business prospects and the prospects of our portfolio companies;
•the general uncertainty surrounding the financial and political stability of the United States, the United Kingdom, the Middle East, the European Union, South America and China;
•the general economy and the impact on the industries in which we invest;
•the belief that we have sufficient levels of liquidity to support our existing portfolio companies;
•the belief that our cash and cash equivalent balances are not exposed to any significant credit risk;
•our ability to consummate credit facilities in the future on commercially reasonable terms, if at all;
•the effect of laws or regulations, including accounting pronouncements and rule issuances, governing our operations;
•the ability to continue generating strong risk-adjusted net returns by assembling a diversified portfolio of investments across a broad range of industries;
•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, cybersecurity attacks and the increasing use of artificial intelligence and machine learning technology;
•the need and availability of additional capital on favorable terms to finance growth given our expectation to distribute substantially all of our net ordinary income and net realized capital gains to our stockholders;
•the fluctuation of the fair value of our investments due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value; and
•the ability to secure financial maintenance covenants in the loans in which we invest.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Annual Report on Form 10-K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include, among others, those described or identified in"Item 1A. Risk Factors"in this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report on Form 10-K.
We have based the forward-looking statements on information available to us on the date of this Annual Report on Form 10-K. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The forward-looking statements and projections contained in this annual report on Form 10-K are excluded from the safe harbor protection provided by Section 21E of the Securities Exchange Act.
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Annual Report on Form 10-K.
Overview
Key performance metrics per common share are presented below:
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Net asset value | $ | 7.65 | $ | 10.21 | ||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Net investment income | $ | 0.63 | $ | 0.97 | $ | 1.14 | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations | (1.81) | 0.74 | 0.36 | |||||||||||||||||
| Distributions paid | 0.67 | 1.02 | 1.02 | |||||||||||||||||
Our NAV per common share decreased from $10.21 at December 31, 2024 to $7.65 at December 31, 2025, primarily due to a net loss on investments of $3,893,549, or $2.44 per common share.
For the year ended December 31, 2025, our net loss on investments was primarily due to net realized and unrealized losses of $3,201,900 on our loan portfolio and net unrealized depreciation of $764,097 on our Structured Finance Securities. As of December 31, 2025, our portfolio had non-accrual loans with an aggregate fair value of $1,043,941, or 3.5% of our total investments at fair value, compared to no non-accrual loans at December 31, 2024. See "-Portfolio Composition and Investment Activity' and "-Results of Operations" for additional details.
For the year ended December 31, 2025, total investment income decreased by $1,462,159 to $4,518,233, primarily due to a smaller interest-bearing investment portfolio, at cost, and the impact of lower SOFR rates driven by the U.S. Federal Reserve rate cuts. For the year ended December 31, 2025, the weighted-average performing income yield on interest-bearing investments decreased to 12.2%, compared to 13.9% during the year ended December 31, 2024. For the year ended December 31, 2025, total expenses, net of expense limitation support, decreased $758,560 compared to the year ended December 31, 2024, primarily due to decreases in interest expense and incentive fees. See "-Results of Operations-Investment Income" for additional details.
During the year ended December 31, 2025, our daily-average outstanding debt balance decreased to $18,568,836 from $21,461,448 during the prior year. For the year ended December 31, 2025, our weighted-average debt interest cost decreased to 6.8%, compared to 7.3% during the prior year, due to reductions in the daily-average outstanding balance (debt mix change) and debt costs on our Prime-rate based Banc of California Credit Facility. See "-Liquidity and Capital Resources" for additional details.
At December 31, 2025, the aggregate amount outstanding of the senior securities issued by us was $17,650,000, for which our asset coverage was 165%, exceeding our minimum asset coverage requirement of 150% under the 1940 Act. As of December 31, 2025, we remained in compliance with all applicable covenants under our outstanding debt facilities. As of December 31, 2025, we had an unused commitment of $4,850,000 under our Banc of California Credit Facility, subject to the terms of the borrowing base and other covenants. As of December 31, 2025, we had unfunded commitments of $1,127,528 to fund outstanding commitments to portfolio companies.
On January 28, 2026, our Board declared a distribution of $0.0167 per common share, which represented a 2.3% annualized distribution yield based on our common stock offering price as of January 29, 2026, which will be paid on April 15, 2026 to stockholders of record on January 28, 2026.
On February 25, 2026, our Board declared a distribution of $0.0167 per common share, which represented a 2.4% annualized distribution yield based on our common stock offering price as of February 26, 2026, which will be paid on April 15, 2026 to stockholders of record on February 25, 2026.
On March 3, 2026, we commenced a tender offer pursuant to which we are offering to purchase up to 15,966 shares of our issued and outstanding common stock at a price equal to our net asset value per share on March 28, 2026.
Critical Accounting Policies and Significant Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. Critical accounting policies are those that require management to make subjective or complex judgments about the effect of matters that are inherently uncertain and may change in subsequent periods. Changes that may be required in
the underlying assumptions or estimates in these areas could have a material impact on our current and future financial condition and results of operations.
Our critical accounting policies and estimates are those relating to revenue recognition, expense limitation agreements and fair value estimates. Management has discussed the development and selection of each critical accounting policy and estimate with the Audit Committee of the Board. For a description of our revenue recognition and fair value policies, see "Item 8-Financial Statements and Supplementary Data-Note 2 Summary of Significant Accounting Policies"of this report.
Revenue recognition
Interest Income: Our recognition of interest income from our loan and CLO debt investments is recognized on an accrual basis based upon the outstanding principal amount and contractual interest terms of the debt investment. Net Loan Fees are amortized or accreted into interest income over the life, or estimated life in the case of CLO debt securities, of the respective debt investment. Upon the prepayment of a debt investment, we accelerate the remaining Net Loan Fees into interest income.
PIK Income. Our recognition of PIK interest and dividends includes ongoing assessment of collectibility. We discontinue accrual of PIK income when there is reasonable doubt that the income will ultimately be collected. This includes assessments of the fair value of the investment relative to par or cost and other judgments of management. PIK income is included in our ICTI and, therefore, affects the amount we are required to pay to our stockholders in the form of distributions in order to maintain our tax treatment as a RIC, even though we may have not yet collected the cash.
CLO Subordinated Notes and Loan Accumulation Facilities. Interest income on our CLO subordinated note securities is recognized in accordance with ASC Subtopic 325-40, Beneficial Interests in Securitized Financial Assets ("ASC 325-40"), which contemplates estimating an effective yield to expected redemption utilizing estimated future cash flows from the investment. The expected cash flows of the underlying portfolio and to our security are developed utilizing a number of assumptions, including, among others, estimates of default rates, prepayment rates, redemption timing, reinvestment prices, and liquidation-redemption price. These assumptions, and correspondingly the estimated cash flows and accretable yields, are reviewed and updated at each payment date, generally quarterly. These assumed cash flows represent significant estimates and are subject to a reasonable possibility of near-term changes due to economic and credit market conditions, and the effect of these changes could be material. We ultimately may not realize income accreted on CLO subordinated note securities. The valuation of our Structured Finance Securities makes use of similar assumptions, plus a discount rate assumption, to develop estimated cash flows that are discounted to estimated net present value.
Interest income from our investments in Loan Accumulation Facilities is recognized on an accrual basis based on an estimated yield. Income notes associated with our Loan Accumulation Facility investments generally earn returns equal to the actual income earned on facility assets less costs of senior financing and manager costs. We periodically evaluate the realizability of such amounts and, if necessary, subsequently adjust the estimated yield.
An optional redemption feature of a CLO allows a majority of the holders of the CLO subordinated notes issued by the CLO issuer, after the end of a specified non-call period, to cause the redemption of the CLO subordinated notes issued by the CLO with proceeds paid through either the liquidation of the CLO's assets or through a refinancing with new debt. The optional redemption is effectively a voluntary prepayment of the CLO subordinated notes issued by the CLO prior to the stated maturity of such securities. When the optional redemption feature has been exercised on a CLO subordinated note, distributions received are first recorded as a return of capital until its cost basis is reduced to zero and recorded as realized gains thereafter. The principal amount of the CLO subordinated notes is not reduced for distributions received until the security is fully redeemed. Commencing on the optional redemption date, we cease accruing income on our CLO subordinated notes that will be redeemed. CLO subordinated notes which have been optionally redeemed are realized when the deal has been fully liquidated and discharged.
Non-Accrual Loans: We review, for placement on non-accrual status, all loans and CLO mezzanine debt investments when they become past due on principal and interest, and/or when there is reasonable doubt that principal or interest will be collected. When a loan is placed on non-accrual status, accrued and unpaid cash interest is reversed. PIK income that has been contractually capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment with corresponding adjustments to unrealized appreciation/depreciation, as applicable. Interest income and Net Loan Fees are no longer recognized as of the date the loan is placed on non-accrual status. Depending upon management's judgment, interest payments subsequently received on non-accrual investments may be recognized as interest income or applied as a reduction to amortized cost. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal and interest payments or until a restructuring occurs and, in management's judgment, it is probable that we will collect all principal and interest from the investment.
Acquisition Cost of Investments: Our lending activities may involve the acquisition of multiple financial instruments or rights either in an initial transaction, or in subsequent or "follow-on" transactions, including amendments to existing securities. These financial instruments can include loans, preferred and common stock, warrants, or membership interests in limited liability
companies. Acquired rights can include fixed or variable fees that can be either guaranteed or contingent upon operating performance of the underlying portfolio companies. Moreover, these fees may be payable in cash or additional securities. The revenue recognized on these instruments is a function of the fee or other consideration allocated to them, including amounts allocated to loan syndication fees at the time of acquisition.
These allocations are generally based on the relative fair value of the instruments at the time of the transaction, a process involving fair value estimates which is also a critical accounting policy and significant estimate. Once determined, these allocations directly affect the discount/premium and yield on debt securities, the cost and net gains/losses on equity securities, and ICTI. These allocations require an understanding of the terms and conditions of the underlying agreements and requires significant management judgment.
Expense Limitation Agreements
We have benefited from two expense limitation agreements with OFS Advisor: (i) portions of the Investment Advisory Agreement, which limits our liability to reimburse OFS Advisor for organization and offering expenses it incurs on our behalf; and (ii) the Second Amended Expense Support Agreement which limits other operating expenses. On November 26, 2024, we entered into the ESA Termination Agreement with OFS Advisor to terminate the Second Amended Expense Support Agreement effective January 1, 2025. See "Item 8-Financial Statements and Supplementary Data-Note 3. Related Party Transactions."
We considered the relevant accounting literature applicable to expense limitation agreements-particularly ASC Topic 946 and related publications by the American Institute of Certified Public Accountants, as well as publicly available documents on industry practice and the SEC Staff's views thereon. The application of this accounting literature requires interpretation of the reimbursement conditions in the expense limitation agreements, which requires significant judgment. An agreement whose reimbursement conditions are either non-substantive or whose occurrence is inevitable will generally fail to meet to the requirements of this literature, resulting in greater reported expense, lower reported net asset values, and an on-balance sheet liability to reimburse the agreement counterparty for any funds or support received.
We regularly evaluate the Investment Advisory Agreement conditions for reimbursement, and have concluded the expense-reduction recognition it has been given is appropriate because the substantive conditions for recognition of a liability by us-specifically, the sale of shares from whose proceeds OFS Advisor will be paid for unreimbursed costs-have not been satisfied.
Fair value estimates
As of December 31, 2025, total investments of $29,768,535, representing approximately 98% of our total assets, were carried at fair value on the consolidated statements of assets and liabilities. As discussed more fully in "Item 8-Financial Statements and Supplementary Data-Note 2. Summary of Significant Accounting Policies."GAAP requires us to categorize fair value measurements according to a three-level valuation hierarchy. The hierarchy gives the highest priority to quoted, active market prices for identical assets and liabilities (Level 1) and the lowest priority to valuation techniques that require significant management judgment because one or more of the significant inputs are unobservable in the market place (Level 3). All of our investments carried at fair value are classified as either Level 2 and Level 3, with 84% of our investments classified as Level 3 as of December 31, 2025. In accordance with our investment strategy, we typically do not hold equity securities or other instruments that are actively traded on an exchange (Level 1).
On September 7, 2022, pursuant to Rule 2a-5, our Board designated OFS Advisor as the valuation designee to perform fair value determinations relating to our investments for which market quotations are not readily available, and, as prescribed in Rule 2a-5, the Board maintains oversight of OFS Advisor in its capacity as valuation designee. We have engaged third-party valuation firms to provide assistance to OFS Advisor in determining the fair value of the majority of our investments.
As described in "Item 8-Financial Statements and Supplementary Data- Note 5 Fair Value of Financial Instruments,"under the oversight of the Board, we follow a process to determine these unobservable inputs used in the fair value estimates of our investments. The most significant unobservable inputs in the Level 3 fair value measurements are the discount rates (discounted cash flows approach) and EBITDA or revenue multiples (market approach). Investments classified as Level 2 are measured on the basis of Indicative Prices provided by pricing services.
Our discounted cash flow valuations involve a determination of discount rate commensurate with the risk inherent in each investment. OFS Advisor, with the assistance of independent third-party valuation firms, uses two primary methods to estimate discount rates on Portfolio Company Investments, as applicable: a method based upon a hypothetical recapitalization of the entity given its current operating performance and current market conditions; and a synthetic debt rating method, which assigns a surrogate debt rating to the entity based on known industry standards for assigning such ratings and then estimates the discount rate based on observed market yields for actual rated debt. OFS Advisor may also use a relative value method to estimate yields, which involves estimating the discount rate of non-traded subject debt investments based on an expected or assumed relationship between Indicative Prices on traded debt and the subject debt for a portfolio company. All methods for
estimating the discount rate generally involve calibration of unobservable inputs utilized in estimating the discount rate on the subject investment to its internal rate of return at close or purchase date. These methods generally produce a range of discount rates, and we generally select the midpoint of the range for use in fair value measures, subject to considerations of any prepayment fees associated with the debt.
Our market approach valuations, generally applied to equity investments and investments in impaired debt, involve a determination of an enterprise value multiple to a financial performance metric of the portfolio company, generally trailing historical EBITDA or revenue. These determinations are based on identification of a comparable set of publicly traded companies and determination of a public-to-private liquidity adjustment factor, generally through calibration to transaction prices in the subject investment instrument. We may also utilize other portfolio company earnings metrics to determine enterprise value, such as forecast EBITDA or revenue, or a weighting of multiple factors. At times, we may also use a discounted cash flow technique in valuing our equity securities. These methods generally produce a range of multiplier values and we generally select the midpoint of the range for fair value measures.
The following table illustrates the impact of our fair value measures if we selected the low or high end of the range for all investments at December 31, 2025:
| Fair Value at December 31, 2025 | Range of Fair Value | |||||||||||||||||||
|
Investment Type
|
Low-end | High-end | ||||||||||||||||||
| Debt investments: | ||||||||||||||||||||
| First lien | $ | 18,083,409 | $ | 17,810,416 | $ | 18,411,461 | ||||||||||||||
| Second lien | 5,797,049 | 5,602,281 | 6,160,158 | |||||||||||||||||
| Structured Finance Securities: | ||||||||||||||||||||
| Subordinated notes and other CLO equity related investments | 5,227,081 | 4,921,346 | 5,532,816 | |||||||||||||||||
| Equity investments: | ||||||||||||||||||||
| Preferred equity | 36,265 | 36,265 | 36,265 | |||||||||||||||||
| Common equity and warrants | 624,731 | 562,908 | 682,041 | |||||||||||||||||
| $ | 29,768,535 | $ | 28,933,216 | $ | 30,822,741 | |||||||||||||||
Related Party Transactions
We have entered into a number of business relationships with affiliated or related parties, including the following:
•The Investment Advisory Agreement with OFS Advisor to manage our operating and investment activities. Under the Investment Advisory Agreement, we have agreed to pay OFS Advisor an annual base management fee based on the average value of our total assets (other than cash and cash equivalents but including assets purchased with borrowed amounts and including assets owned by any consolidated entity) as well as an incentive fee based on our investment performance. See "Part 1, Item 1-Business-Management and Other Agreements"and "Item 8-Financial Statements-Note 3. Related Party Transactions."
•The Second Amended Dealer Manager Agreement with CCO, to provide sales, promotional and marketing services to us in connection with the Offering. See "Part 1, Item 1-Business-Management and Other Agreements"and "Item 8-Financial Statements-Note 3. Related Party Transactions."
•The Administration Agreement with OFS Capital Services, LLC, an affiliate of OFS Advisor, to provide us with the office facilities and administrative services necessary to conduct our operations. See "Part 1, Item 1-Business-Management and Other Agreements"and "Item 8-Financial Statements-Note 3. Related Party Transactions."
•Expense Limitation Agreements: We have benefited from the following contractual agreements with OFS Advisor:
◦The Investment Advisory Agreement with OFS Advisor contains provisions limiting organization and offering costs and Contractual Issuer Expenses that we incur. The Investment Advisory Agreement contains conditions under which we are obligated to reimburse OFS Advisor for expense limitations provided thereunder.
◦The Second Amended Expense Support Agreement contained provisions limiting all other operating expenses not supported under the Investment Advisory Agreement. Through the period ended December 31, 2024, the Second Amended Expense Support Agreement contained conditions under which we were obligated to reimburse OFS Advisor for expense support provided thereunder. On November 26, 2024, we entered into the ESA Termination Agreement with OFS Advisor to terminate the Second Amended Expense Support Agreement effective January 1, 2025.
See "Part 1, Item 1-Business-Management and Other Agreements" and "Item 8-Financial Statements-Note 3. Related Party Transactions."
OFS Advisor's services under the Investment Advisory Agreement are not exclusive to us and OFS Advisor is free to furnish similar services to other entities, including other funds advised or sub-advised by OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to other funds, including OFS Capital, a publicly-traded BDC with an investment strategy similar to the Company, as well as OCCI. OFS Advisor provides advisory and sub-advisory services to various funds, including: (i) CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust; and (ii) CIM Real Assets & Credit Fund, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.
The 1940 Act generally prohibits BDCs from knowingly participating in certain transactions with their affiliates without the prior approval of their independent directors and, in some cases, of the SEC. Those transactions include purchases and sales, and so-called "joint" transactions, in which a BDC and one or more of its affiliates engage in certain types of profit-making activities. Any person that owns, directly or indirectly, five percent or more of a BDC's outstanding voting securities will be considered an affiliate of the BDC for purposes of the 1940 Act, and a BDC generally is prohibited from engaging in purchases from, sales of assets to, or joint transactions with, such affiliates, absent the prior approval of the BDC's independent directors. Additionally, without the approval of the SEC, a BDC is prohibited from engaging in purchases from, sales of assets to, or joint transactions with, the BDC's officers, directors, and employees, and advisor (and its control affiliates).
BDCs may, however, invest alongside certain related parties or their respective other clients in certain circumstances where doing so is consistent with current law and SEC staff interpretations. For example, a BDC may invest alongside such accounts consistent with guidance promulgated by the SEC staff permitting the BDC and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the BDC's advisor, acting on the BDC's behalf and on behalf of other clients, negotiates no term other than price. Co-investment with such other accounts is not permitted or appropriate under this guidance when there is an opportunity to invest in different securities of the same issuer or where the different investments could be expected to result in a conflict between the BDC's interests and those of other accounts.
The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On August 4, 2020, we received our existing Order, which superseded a previous order that we received on October 12, 2016, and provides us with greater flexibility to enter into co-investment transactions with certain Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions. We are generally permitted to co-invest with Affiliated Funds if, under the terms of the Order, a "required majority" (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that: (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned; (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies; (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing; and (4) the proposed investment by us would not benefit OFS Advisor, the other Affiliated Funds that are participating in the investment, or any affiliated person of any of them (other than parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.
In addition, we have submitted a new application for exemptive relief that, if granted, would supersede our existing Order and permit us to co-invest pursuant to a different set of conditions than those in our existing Order. However, there is no guarantee that the SEC will grant such application.
Conflicts may arise when an account managed by OFS Advisor makes an investment in conjunction with an investment being made by an Affiliated Account, or in a transaction where an Affiliated Account has already made an investment. Investment opportunities are, from time to time, appropriate for more than one account in the same, different or overlapping securities of a portfolio company's capital structure. Conflicts arise in determining the terms of investments, particularly where these accounts may invest in different types of securities in a single portfolio company. Potential conflicts arise when addressing, among other things, questions as to whether payment obligations and covenants should be enforced, modified or waived, or whether debt should be restructured, modified or refinanced. See "Part 1, Item 1. Business-Conflicts of Interest"and "Item 1A. Risk Factors-Risks Related to OFS Advisor and its Affiliates-We have potential conflicts of interest related to obligations that OFS Advisor or its affiliates may have to other clients."
Portfolio Composition and Investment Activity
Our investment strategy focuses primarily on middle-market companies in the United States, including senior secured loans, which includes first lien, second lien and unitranche loans, as well as subordinated loans and, to a lesser extent, preferred, common, and other equity securities. Such middle-market company investments are more likely to be considered lower grade investments, which are either rated below investment grade by one or more nationally-recognized statistical rating agencies at the time of investment, or may be unrated but determined by OFS Advisor to be of comparable quality. We also make investments in other investment companies including Structured Finance Securities.
Portfolio Composition
As of December 31, 2025, the fair value of our debt investment portfolio totaled $23,880,458 in 24 portfolio companies, of which 76% and 24% were first lien and second lien loans, respectively. We also held equity investments in five portfolio companies with a fair value of $660,996 and five investments in Structured Finance Securities with a fair value of $5,227,081. Certain portfolio investments represent a larger percentage of our total assets or net assets and may involve longer expected holding periods or more limited liquidity alternatives than smaller positions, which management and the Board consider in connection with portfolio monitoring and valuation.
The following table summarizes the composition of our investment portfolio as of December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
|
First lien debt investments(1)
|
$ | 19,669,597 | $ | 18,083,409 | $ | 18,869,194 | $ | 18,050,368 | |||||||||||||||
| Second lien debt investments | 8,099,214 | 5,797,049 | 11,397,577 | 10,720,330 | |||||||||||||||||||
| Preferred equity investments | 34,464 | 36,265 | 34,464 | 35,763 | |||||||||||||||||||
| Common equity and warrant investments | 340,671 | 624,731 | 340,671 | 532,683 | |||||||||||||||||||
| Total debt and equity investments | 28,143,946 | 24,541,454 | 30,641,906 | 29,339,144 | |||||||||||||||||||
| Structured Finance Securities | 8,143,426 | 5,227,081 | 8,867,147 | 6,714,898 | |||||||||||||||||||
| Total investments | $ | 36,287,372 | $ | 29,768,535 | $ | 39,509,053 | $ | 36,054,042 | |||||||||||||||
| Total number of portfolio companies | 32 | 32 | 34 | 34 | |||||||||||||||||||
(1) Includes unitranche investments (which are loans that combine both senior and subordinated debt, in a first lien position), as of December 31, 2025, with an amortized cost and fair value of $14,373,479 and $13,551,279, respectively. As of December 31, 2024, the amortized cost and fair value of unitranche investments was $12,118,634 and $12,008,672, respectively. Unitranche loans generally provide leverage levels comparable to a combination of first lien and second lien or subordinated loans. Investments in "last out" pieces of unitranche loans will be similar to second lien loans in that such investments will be junior in priority to the "first out" piece of the same unitranche loan with respect to payment of principal and interest.
As of December 31, 2025, approximately 100% and 80% of our loan portfolio and total portfolio, respectively, consisted of first lien and second lien loans, based on fair value.
As of December 31, 2025, the three largest industries of our Portfolio Company Investments by fair value were: (1) Health Care and Social Assistance (19.8%); (2) Manufacturing (14.4%); and (3) Information (14.2%), totaling approximately 48.4% of our debt and equity investment portfolio. For a full summary of our investment portfolio by industry, see "Item 8-Financial Statements-Note 4. Investments."
The following table presents our ten largest investments by issuer based on fair value as of December 31, 2025:
| Issuer Name | Investment Type | Amortized Cost | Fair Value | % of Total Portfolio, at Fair Value | % of Net Assets, at Fair Value | ||||||||||||
| Honor HN Buyer, Inc. | Debt | $ | 1,930,553 | $ | 1,942,518 | 6.5 | % | 16.9 | % | ||||||||
|
Apex Credit CLO 2020 Ltd.(1)
|
Structured Finance Security | 3,022,011 | 1,862,079 | 6.3 | 16.2 | ||||||||||||
| Asurion, LLC | Debt | 1,443,871 | 1,497,428 | 5.0 | 13.1 | ||||||||||||
|
Apex Credit CLO 2022-1 Ltd.(1)
|
Structured Finance Security | 1,730,620 | 1,399,238 | 4.7 | 12.1 | ||||||||||||
| SS Acquisition, LLC | Debt | 1,377,674 | 1,386,259 | 4.7 | 12.0 | ||||||||||||
| Heritage Grocers Group, LLC (F/K/A Tony's Fresh Market / Cardenas Markets) | Debt | 1,714,578 | 1,385,385 | 4.7 | 12.0 | ||||||||||||
| 12 Interactive, LLC (D/B/A PerkSpot) | Debt | 1,366,991 | 1,374,039 | 4.6 | 12.0 | ||||||||||||
| TruGreen Limited Partnership | Debt | 1,517,919 | 1,372,500 | 4.6 | 11.9 | ||||||||||||
| One GI LLC | Debt | 1,449,425 | 1,317,527 | 4.4 | 11.4 | ||||||||||||
| Clevertech Bidco, LLC | Debt | 1,368,448 | 1,314,331 | 4.4 | 11.4 | ||||||||||||
| Total | $ | 16,922,090 | $ | 14,851,304 | 49.9 | % | 129.0 | % | |||||||||
(1) As of December 31, 2025, approximately 12.8% and 33.0% of our total portfolio at fair value and net assets, respectively, were comprised of Structured Finance Securities managed by a single adviser.
A deterioration or improvement in the operating performance of these portfolio investments, or other factors underlying the valuation of these investments, could have a material impact on our NAV.
Structured Finance Securities. The following table summarizes our Structured Finance Securities as of December 31, 2025 and December 31, 2024:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
| Subordinated notes and other CLO equity related investments | $ | 8,143,426 | $ | 5,227,081 | $ | 7,889,570 | $ | 5,714,930 | |||||||||||||||
| Mezzanine debt | - | - | 977,577 | 999,968 | |||||||||||||||||||
| Total Structured Finance Securities | $ | 8,143,426 | $ | 5,227,081 | $ | 8,867,147 | $ | 6,714,898 | |||||||||||||||
| Number of Structured Finance Securities | 5 | 5 | 6 | 6 | |||||||||||||||||||
Non-performing Structured Finance Securities are securities that have not been optionally redeemed and have an effective yield of 0.0%, as remaining residual distributions are anticipated to be recognized as a return of capital. As of December 31, 2025, the aggregate amortized cost and fair value of non-performing Structured Finance Securities were $764,195 and $334,496, respectively. As of December 31, 2024, we did not have any non-performing Structured Finance Securities.
As of December 31, 2025 and 2024, we had no Structured Finance Securities that were optionally redeemed.
Portfolio Yields: The following table presents weighted-average yield metrics for our portfolio:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
|
Weighted-average performing income yield(1):
|
|||||||||||
| Debt investments | 12.2 | % | 13.8 | % | |||||||
| Structured Finance Securities | 12.1 | 14.0 | |||||||||
| Interest-bearing investments | 12.2 | % | 13.9 | % | |||||||
| Weighted-average realized yield: | |||||||||||
|
Interest-bearing investments(2)
|
11.9 | % | 13.8 | % | |||||||
(1) Performing income yield is calculated as (a) the actual amount earned on performing interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total performing interest-bearing investments at amortized cost.
(2) Realized yield is calculated as (a) the actual amount earned on interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total interest-bearing investments at amortized cost, in each case, including debt investments on non-accrual status and non-performing Structured Finance Securities.
For the year ended December 31, 2025, our weighted-average performing income yield decreased 1.7% compared to the prior year, primarily due to a decrease in the income yield on our debt investments as a result of lower SOFR rates driven by Federal Reserve rate reductions and a decrease in the earned yields on our Structured Finance Securities related to underlying loan collateral spread compression.
The weighted average yield of our investments is not the same as a return on investment for our stockholders, but rather the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yield will remain at its current level. As of December 31, 2025, 96% of our total loan portfolio, at fair value, consisted of variable rate investments, generally indexed to SOFR. See additional information under "Item 7A. Quantitative and Qualitative Disclosures About Market Risk".
Investment Activity
The following is a summary of our investment activity for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Investments in debt and equity securities | $ | 2,848,174 | $ | 9,861,071 | |||||||
| Investments in Structured Finance Securities | 657,798 | - | |||||||||
| Total investment purchases and originations | $ | 3,505,972 | $ | 9,861,071 | |||||||
| Proceeds from principal payments on portfolio investments | $ | 4,334,185 | $ | 12,992,943 | |||||||
| Proceeds from sales or redemptions of portfolio investments | 1,671,477 | 2,959,261 | |||||||||
| Proceeds from distributions received from portfolio investments | 1,319,298 | 1,705,305 | |||||||||
| Total proceeds from principal payments, sales or redemptions, and distributions received from portfolio investments | $ | 7,324,960 | $ | 17,657,509 | |||||||
We categorize debt investments into seven risk categories based on relevant information about the ability of borrowers to service their debt. For additional information regarding our risk categories, see "Part 1, Item 1. Business-Portfolio Review/Risk Monitoring."The following table shows the classification of our debt investments portfolio by risk category as of December 31, 2025 and 2024:
| Debt Investments as of December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Risk Category | Amortized Cost | Fair Value | % of Debt Investments, at Fair Value | Amortized Cost | Fair Value | % of Debt Investments, at Fair Value | ||||||||||||||||||||
| 1 (Low Risk) | $ | - | $ | - | - | % | $ | - | $ | - | - | % | ||||||||||||||
| 2 (Below Average Risk) | - | - | - | - | - | - | ||||||||||||||||||||
| 3 (Average) | 19,709,290 | 19,156,151 | 80.2 | 22,994,301 | 22,906,190 | 79.6 | ||||||||||||||||||||
| 4 (Special Mention) | 8,059,521 | 4,724,307 | 19.8 | 7,272,470 | 5,864,508 | 20.4 | ||||||||||||||||||||
| 5 (Substandard) | - | - | - | - | - | - | ||||||||||||||||||||
| 6 (Doubtful) | - | - | - | - | - | - | ||||||||||||||||||||
| 7 (Loss) | - | - | - | - | - | - | ||||||||||||||||||||
| $ | 27,768,811 | $ | 23,880,458 | 100.0 | % | $ | 30,266,771 | $ | 28,770,698 | 100.0 | % | |||||||||||||||
Non-Accrual Loans
As of December 31, 2025
The following table shows the classification of our debt investments on non-accrual status:
| December 31, 2025 | |||||||||||
| Amortized Cost | Fair Value | ||||||||||
| First lien debt | $ | - | $ | - | |||||||
| Second lien debt | 3,264,393 | 1,043,941 | |||||||||
| Total | $ | 3,264,393 | $ | 1,043,941 | |||||||
During the year ended December 31, 2025, we placed loans to two portfolio companies on non-accrual status.
As of December 31, 2024
As of December 31, 2024, we had no debt investments on non-accrual status.
Results of Operations
Key Financial Measures
The following is a discussion of the key financial measures that management employs in reviewing the performance of our operations.
Net Investment Income: NII is a key performance metric in obtaining part of our investment objective of providing current income to stockholders. NII can be a general indicator of ICTI and the amount of distributions that will be required to be made due to RIC requirements. One of our main objectives is to increase NII, and, in turn, increase distributions to stockholders.
Net Gain (Loss) on Investments: Net gain (loss) on investments consists of the sum of: (a) realized gains and losses from the sale, redemption or write-off of portfolio investments, net of taxes; and (b) net unrealized appreciation or depreciation on portfolio investments, net of deferred taxes. In the period in which a realized gain or loss is recognized, such gain or loss will be offset by the reversal of previously recognized unrealized appreciation or depreciation, and the net gain (loss) recognized in that period will generally be smaller. The net unrealized appreciation or depreciation on debt securities is also reversed when those investments are redeemed or paid off prior to maturity.
Net Increase (Decrease) in Net Assets Resulting From Operations: Net increase (decrease) in net assets resulting from operations is a key metric in assessing our performance and the overall profit or loss of our operations.
Net Asset Value: NAV is a key performance metric related to our investment objective to provide our stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments. NAV per share is increased (decreased) by our net increase (decrease) in net assets resulting from operations, decreased by distributions paid to common stockholders, and increased (decreased) by any capital share transactions depending on if the price transacted is accretive or dilutive to NAV, as applicable. As a result, annual comparisons of net increase (decrease) in net assets resulting from operations may not be meaningful.
Portfolio Yield: Portfolio yield is a key financial metric of our investment portfolio in order to achieve our investment objective of providing current income to stockholders. Portfolio yield is a gross figure and does not contemplate changes in our costs, including on our debt and other expenses. See "Portfolio Composition and Investment Activity-Portfolio Yields"for additional information.
We do not believe that our historical operating performance is necessarily indicative of our future results of operations that we expect to report in future periods. Our investment strategy is to maintain a credit investment portfolio, primarily focused on investments in middle-market companies in the United States, including debt investments and, to a lesser extent, equity investments, including warrants and other minority equity securities. Moreover, as a BDC and a RIC, we are also subject to certain constraints on our operations, including, but not limited to, limitations imposed by the 1940 Act and the Code.
Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation.
Comparison of the years ended December 31, 2025, 2024 and 2023
Operating results for the years ended December 31, 2025, 2024, and 2023 are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Total investment income | $ | 4,518,233 | $ | 5,980,392 | $ | 7,550,577 | |||||||||||
| Total operating expenses | 3,530,592 | 4,385,512 | 5,717,069 | ||||||||||||||
| Net expense limitations under agreements with the adviser | (19,985) | (116,345) | (375,818) | ||||||||||||||
| Net operating expenses | 3,510,607 | 4,269,167 | 5,341,251 | ||||||||||||||
| Net investment income | 1,007,626 | 1,711,225 | 2,209,326 | ||||||||||||||
| Net realized losses, net of taxes | (809,620) | (929,693) | (487,580) | ||||||||||||||
| Net unrealized appreciation (depreciation), net of deferred taxes | (3,083,929) | 515,144 | (1,026,368) | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | (2,885,923) | $ | 1,296,676 | $ | 695,378 | |||||||||||
Discussion of the years ended December 31, 2025, 2024, and 2023
Investment Income
Investment income for the years ended December 31, 2025, 2024, and 2023 is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Interest income | $ | 4,227,457 | $ | 5,658,165 | $ | 7,332,911 | |||||||||||
| PIK interest income | 234,074 | 246,442 | 171,677 | ||||||||||||||
| Dividend income | 4,319 | 4,262 | 6,442 | ||||||||||||||
| Fee income | 52,383 | 71,523 | 39,547 | ||||||||||||||
| Total investment income | $ | 4,518,233 | $ | 5,980,392 | $ | 7,550,577 | |||||||||||
Interest income decreased $1,430,708 during the year ended December 31, 2025 compared to the prior year, primarily due to a smaller interest-bearing investment portfolio, at cost, and the impact of lower SOFR rates driven by the U.S. Federal Reserve rate cuts.
During the year ended December 31, 2025, we recognized PIK interest income of $234,074, which represented 5.2% of total investment income. During the year ended December 31, 2025, total PIK interest income decreased $12,368 compared to the prior year, primarily due to the placement of a second lien debt investment with an all-PIK interest rate on non-accrual status during the fourth quarter of 2025.
Fee income is primarily comprised of unused loan commitment fees, prepayment fees and syndication fees that generally result from periodic transactions rather than from holding portfolio investments, and are considered non-recurring. We may receive syndication fees on investments where OFS Advisor sources, structures and arranges the lending group. During the year ended December 31, 2025, fee income decreased $19,140 compared to the prior year, primarily due to a decrease in prepayment fee income.
Gross Expenses
Total operating expenses for the years ended December 31, 2025, 2024, 2023 are presented below:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expenses subject to limitation under the Investment Advisory Agreement: | |||||||||||||||||
| Contractual Issuer Expenses | $ | 12,595 | $ | 96,413 | $ | 366,413 | |||||||||||
| Amortization of deferred offering costs | 7,390 | 19,932 | 20,055 | ||||||||||||||
| Total expenses subject to limitation under the Investment Advisory Agreement | 19,985 | 116,345 | 386,468 | ||||||||||||||
| Other operating expenses: | |||||||||||||||||
| Interest expense | 1,255,172 | 1,561,498 | 2,144,934 | ||||||||||||||
| Base management fees | 425,729 | 496,994 | 619,862 | ||||||||||||||
| Incentive fees | 149,884 | 427,806 | 552,332 | ||||||||||||||
| Administrative fees | 661,394 | 672,185 | 818,502 | ||||||||||||||
| Professional fees | 666,127 | 667,245 | 730,348 | ||||||||||||||
| Transfer agent expenses | 154,778 | 235,080 | 209,750 | ||||||||||||||
| Excise tax | - | 9,723 | - | ||||||||||||||
| Other expenses | 197,523 | 198,636 | 254,873 | ||||||||||||||
| Total other operating expenses | 3,510,607 | 4,269,167 | 5,330,601 | ||||||||||||||
| Total operating expenses | $ | 3,530,592 | $ | 4,385,512 | $ | 5,717,069 | |||||||||||
Expenses Limited under the Investment Advisory Agreement
Offering expenses. OFS Advisor incurred offering costs of $8,243, $6,826 and $29,572 during the years ended December 31, 2025, 2024 and 2023, respectively. All offering costs are deferred and amortized over a twelve month period from the date incurred. Offering costs in these periods consist of professional fees of attorneys and other fees related to the preparation of our private placement memorandum and our dealer-manager agreement, due diligence activities, and development of marketing plans and materials for our common stock.
Contractual Issuer Expenses. OFS Advisor incurred Contractual Issuer Expenses of $12,595, $96,413 and $366,413 for the years ended December 31, 2025, 2024 and 2023, respectively, related to salaries and direct expenses of personnel of OFS Advisor and their affiliates directly involved in the Offering. For the year ended December 31, 2025, Contractual Issuer Expenses decreased $83,818 compared to the prior year, primarily due to a decrease in activity under the Offering process.
We are conditionally obligated to pay OFS Advisor up to 1.5% of the gross proceeds raised in the Offering until all reimbursable organization and offering costs and Contractual Issuer Expenses paid by OFS Advisor and their affiliates have been recovered.
We reimbursed OFS Advisor $0, $0 and $10,650 for offering costs and Contractual Issuer Expenses during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, unreimbursed and unexpired offering costs and Contractual Issuer Expenses were $520,063.
The determination of expense limitations under the Investment Advisory Agreement are presented below:
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Total Expenses limited under the Investment Advisory Agreement | $ | 19,985 | $ | 116,345 | $ | 386,468 | ||||||||||||||
| Offering costs and Contractual Issuer Expenses reimbursed | - | - | (10,650) | |||||||||||||||||
| Offering costs and Contractual Issuer Expenses limitations under the Investment Advisory Agreement | $ | 19,985 | $ | 116,345 | $ | 375,818 | ||||||||||||||
Other Operating Expenses
Interest expense. We incurred interest expense of $1,255,172, $1,561,498 and $2,144,934 for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2025, the decrease in interest expense compared to the prior year was primarily related to reductions in the daily-average outstanding balance and debt costs on our Banc of California Credit Facility.
Base management fees. Base management fees were $425,729, $496,994 and $619,862 for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2025, the decrease in base management fees compared to the prior year was primarily due to a smaller investment portfolio.
Incentive fees. Incentive fees were $149,884, $427,806 and $552,332 for the years ended December 31, 2025, 2024 and 2023, respectively. The decrease in incentive fees during the year ended December 31, 2025 was primarily due to a decrease in net investment income. For the years ended December 31, 2025, 2024 and 2023, incentive fees were comprised of Income Incentive Fees.
Administrative fees. Administrative fees were $661,394, $672,185 and $818,502 for the years ended December 31, 2025, 2024 and 2023, respectively, primarily related to legal services, accounting services related to record-keeping and the preparation and filing of required periodic reports with the SEC, and investor relation services. During the year ended December 31, 2025, administrative fees were stable compared to the prior year.
Professional fees. We incurred professional fees of $666,127, $667,245 and $730,348 for the years ended December 31, 2025, 2024 and 2023, respectively, primarily comprised of professional fees for our registered public accounting firm, attorneys and a third-party valuation service providers. During the year ended December 31, 2025, professional fees were stable compared to the prior year.
Transfer agent expenses. We incurred transfer agent expenses of $154,778, $235,080 and $209,750 for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2025, the decrease in transfer agent expenses primarily related to the change in payment frequency of common stock distributions from a monthly basis to a quarterly basis, and a smaller investor base.
During the years ended December 31, 2024 and 2023, our gross operating expenses (operating expenses exclusive of offering costs and Contractual Issuer Expenses, and before limitations) were subject to limitation under the Second Amended Expense Support Agreement.The Advisor's obligation to provide such expense support was a function of declared distributions on our common stock, and the amount of support provided was determined by reference to estimated unsupported investment company taxable income and the amount of the declared distribution. The Second Amended Expense Support Agreementprovided expense support such that distributions were not paid from Offering proceeds (i.e., not a return of capital).
On November 26, 2024, we entered into the ESA Termination Agreement with OFS Advisor to terminate the Second Amended Expense Support Agreement effective January 1, 2025. Effective upon the termination date, OFS Advisor was no longer obligated to provide expense support payments to us and OFS Advisor agreed to waive payment by us for any accrued and unpaid reimbursement payments, other than any reimbursement payments with respect to the quarter ended December 31, 2024, for which there were none.
As of December 31, 2024, unreimbursed and unexpired operating expense support was $144,315. In accordance with the ESA Termination Agreement, effective January 1, 2025, OFS Advisor waived its right to payment of any unreimbursed expense support, and we are no longer conditionally obligated to reimburse OFS Advisor for previously provided operating support of $144,315. During the years ended December 31, 2024 and 2023, OFS Advisor did not provide us with an expense support payment. See "Item 8-Financial Statements-Note 3. Related Party Transactions."
Net realized and unrealized gain (loss) on investments
During the year ended December 31, 2025, we recognized a net loss on investments of $3,893,549, as a result of net realized losses of $809,620, net unrealized depreciation of $3,063,826 and deferred income taxes of $20,103. For the year ended December 31, 2025, our net loss on investments was primarily due to net realized and unrealized losses of $3,201,900 on our loan portfolio and net unrealized depreciation of $764,097 on our Structured Finance Securities.
During the year ended December 31, 2024, we recognized a net loss on investments of $414,549, as a result of net realized losses of $922,604 and current/deferred income taxes of $56,489, which was offset by net unrealized appreciation of $564,544. For the year ended December 31, 2024, our net loss on investments was primarily due to net realized and unrealized losses of $712,461 on our loan portfolio, partially offset by net unrealized appreciation of $354,401 on our Structured Finance Securities and equity investments.
During the year ended December 31, 2023, we recognized a net loss on investments of $1,513,948, as a result of net realized losses of $474,579, net unrealized depreciation of $985,438, and current and deferred income taxes of $53,932. During the year ended December 31, 2023, we experienced net unrealized depreciation of $818,507 on our Structured Finance Securities managed by a single advisor.
Comparison of the three months ended December 31, 2025 and September 30, 2025
Consolidated operating results for the three months ended December 31, 2025 and September 30, 2025 are presented below:
| Three Months Ended | |||||||||||
| December 31, 2025 | September 30, 2025 | ||||||||||
| Investment income | |||||||||||
| Interest income | $ | 913,648 | $ | 1,001,286 | |||||||
| PIK interest income | 6,869 | 79,237 | |||||||||
| Dividend Income | 1,088 | 1,082 | |||||||||
| Fee income | 8,401 | 26,247 | |||||||||
| Total investment income | 930,006 | 1,107,852 | |||||||||
| Operating expenses | |||||||||||
| Interest expense | 286,089 | 290,697 | |||||||||
| Base management fees | 95,383 | 103,499 | |||||||||
| Incentive fees | - | 36,741 | |||||||||
| Administrative fees | 166,050 | 149,454 | |||||||||
| Professional fees | 151,756 | 163,758 | |||||||||
| Transfer agent expenses | 26,033 | 45,159 | |||||||||
| Other expenses | 52,465 | 51,731 | |||||||||
| Contractual Issuer Expenses (credits) | (4,658) | 2,871 | |||||||||
| Amortization of deferred offering costs | 2,078 | 2,078 | |||||||||
| Total operating expenses | 775,196 | 845,988 | |||||||||
| Net expense (limitations) under agreement with the adviser | 2,580 | (4,949) | |||||||||
| Net operating expenses | 777,776 | 841,039 | |||||||||
| Net investment income | 152,230 | 266,813 | |||||||||
| Net loss on investments | (1,849,170) | (1,119,459) | |||||||||
| Net decrease in net assets resulting from operations | $ | (1,696,940) | $ | (852,646) | |||||||
| Net investment income per share | $ | 0.10 | $ | 0.17 | |||||||
| Net decrease in net assets resulting from operations per share | $ | (1.11) | $ | (0.54) | |||||||
| Distributions declared per share | $ | 0.13 | $ | 0.18 | |||||||
Investment Income
During the three months ended December 31, 2025, total investment income decreased $177,846 compared to the prior quarter, primarily due to a decrease in non-recurring interest and fee income and the placement of a loan on non-accrual status and a smaller interest-bearing investment portfolio.
Gross Expenses
Total operating expenses for the three months ended December 31, 2025 and September 30, 2025 are presented below:
| Three Months Ended | |||||||||||
| December 31, 2025 | September 30, 2025 | ||||||||||
| Expenses subject to limitation under the Investment Advisory Agreement: | |||||||||||
| Amortization of deferred offering costs | $ | 2,078 | $ | 2,078 | |||||||
| Contractual Issuer Expenses (credits) | (4,658) | 2,871 | |||||||||
| Total expenses (credits) subject to limitation under the Investment Advisory Agreement | (2,580) | 4,949 | |||||||||
| Other operating expenses: | |||||||||||
| Interest expense | 286,089 | 290,697 | |||||||||
| Base management fees | 95,383 | 103,499 | |||||||||
| Incentive fees | - | 36,741 | |||||||||
| Administrative fees | 166,050 | 149,454 | |||||||||
| Professional fees | 151,756 | 163,758 | |||||||||
| Transfer agent expenses | 26,033 | 45,159 | |||||||||
| Other expenses | 52,465 | 51,731 | |||||||||
| Total other operating expenses | 777,776 | 841,039 | |||||||||
| Total operating expenses | $ | 775,196 | $ | 845,988 | |||||||
For the three months ended December 31, 2025, total operating expenses decreased $70,792 compared to the prior quarter, primarily due to a decrease in incentive fees of $36,741.
Net realized and unrealized gain (loss) on investments
For the three months ended December 31, 2025, our portfolio experienced net realized and unrealized losses of $1,849,170, primarily due to net unrealized depreciation of $1,453,737 on our non-accrual debt investments.
For the three months ended September 30, 2025, we recognized a net loss on investments of $1,119,459 due to a net realized loss of $773,945 and net unrealized depreciation of $345,514, net of taxes. For the quarter ended September 30, 2025, our net realized loss of $773,945 was primarily due to the sale of a debt investment, resulting in a current quarter impact to our NAV of $252,322.
Portfolio Yields: The following table presents weighted-average yield metrics for our portfolio:
| Three Months Ended | |||||||||||
| December 31, 2025 | September 30, 2025 | ||||||||||
|
Weighted-average performing income yield(1):
|
|||||||||||
| Debt investments | 11.1 | % | 12.3 | % | |||||||
| Structured Finance Securities | 11.7 | 11.4 | |||||||||
| Interest-bearing investments | 11.3 | % | 12.1 | % | |||||||
| Weighted-average realized yield: | |||||||||||
|
Interest-bearing investments(2)
|
10.4 | % | 11.8 | % | |||||||
(1) Performing income yield is calculated as (a) the actual amount earned on performing interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total performing interest-bearing investments at amortized cost.
(2) Realized yield is calculated as (a) the actual amount earned on interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total interest-bearing investments at amortized cost, in each case, including debt investments on non-accrual status and non-performing Structured Finance Securities.
For the three months ended December 31, 2025, the decrease in our weighted-average performing income yield was primarily due to a decrease in the earned yields of our debt investments related a loan with an 18% fixed interest rate being placed on non-accrual status during the quarter.
Liquidity and Capital Resources
At December 31, 2025, we held cash and cash equivalents of $493,834 and had an unused commitment of $4,850,000 under our Banc of California Credit Facility, subject to borrowing base requirements and other covenants.
As of December 31, 2025, we had unfunded commitments of $1,127,528 to fund outstanding commitments to portfolio companies
At December 31, 2025, the aggregate amount outstanding of the senior securities issued by us was $17,650,000, for which our asset coverage was 165%, exceeding our minimum asset coverage requirement of 150% under the 1940 Act. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.
Sources and Uses of Cash and Cash Equivalents
We expect to generate cash primarily from: (i) the net proceeds of the Offering; (ii) cash flows from our operations; (iii) the Banc of California Credit Facility and any financing arrangements we may enter into in the future; and (iv) any future offerings of our equity or debt securities. We may fund a portion of our investments through borrowings from banks, including the Banc of California Credit Facility, and issuances of senior securities. Our primary use of cash will be for: (i) investments in portfolio companies; (ii) the cost of operations (including paying OFS Advisor and OFS Services); (iii) debt service of any borrowings, including the Unsecured Note; and (iv) cash distributions to the holders of our common stock. Principal sources and uses of cash and liquidity are presented below:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
|
Cash from net investment income(1)
|
$ | 548,145 | $ | 949,863 | $ | 1,738,222 | ||||||||||||||
|
Net repayments and sales of portfolio investments(2)
|
4,148,102 | 5,421,687 | 8,915,716 | |||||||||||||||||
| Net cash provided by operating activities | 4,696,247 | 6,371,550 | 10,653,938 | |||||||||||||||||
| Net proceeds from issuances of common stock | - | - | 868,080 | |||||||||||||||||
| Repurchases of common stock | (1,559,454) | (2,008,669) | (2,217,546) | |||||||||||||||||
| Net repayments under revolving line of credit | (2,615,000) | (2,400,000) | (7,500,000) | |||||||||||||||||
|
Distributions paid to stockholders(3)
|
(1,008,043) | (1,790,628) | (1,969,788) | |||||||||||||||||
| Net cash used in financing activities | (5,182,497) | (6,199,297) | (10,819,254) | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (486,250) | $ | 172,253 | $ | (165,316) | ||||||||||||||
(1) Cash from net investment income includes all other cash flows from operating activities reported in our statements of cash flows other than the amounts described below.
(2) Net repayments and sales of portfolio investments includes the purchase and origination of portfolio investments, proceeds from principal payments on portfolio investments, proceeds from sale or redemption of portfolio investments, changes in receivable for investments sold, payable from investments purchased as reported in our statements of cash flows, as well as differences in proceeds from distributions received from Structured Finance Securities relative to accretion of interest income on Structured Finance Securities.
(3) For the year ended December 31, 2025, we estimated distributions paid to stockholders were comprised of ordinary income of 85.1% and a tax return of capital of 14.9%. The determination of the tax attributes of our distributions is made annually as of the end of our fiscal year based upon our estimated ICTI and distributions paid for the full year. Each year, if required, a statement on Form 1099-DIV identifying the source of the distribution is mailed to our stockholders. Actual 2025 U.S. federal taxable income will not be finally determined until our 2025 U.S. federal tax return is filed in 2026.
Comparison of the years ended December 31, 2025 and 2024.
During the year ended December 31, 2025, operating activities provided net cash of $4,696,247, compared to operating activities providing $6,371,550 in net cash during the year ended December 31, 2024. The decrease in cash provided by operating activities compared to the prior year was primarily due to a reduction in net repayments and sales of portfolio investments. In addition, for the year ended December 31, 2025, net cash provided by operating activities benefited from the positive cash flow impact of expense limitations under the Investment Advisory Agreement of $19,985, which reduced the net amount paid to OFS Advisor and affiliates. Expense support and limitation under the Investment Advisory Agreement is cancellable at any time.
During the year ended December 31, 2025, we used net cash of $5,182,497 in financing activities, compared to financing activities using $6,199,297 of net cash during the year ended December 31, 2024. This decrease in net cash used in financing activities was primarily due to a decrease in distributions paid to stockholders of $782,585.
Comparison of the years ended December 31, 2024 and 2023.
During the year ended December 31, 2024, operating activities provided net cash of $6,371,550, compared to operating activities providing $10,653,938 in net cash during the year ended December 31, 2023. The decrease in cash provided by operating activities compared to the prior year was primarily due to a reduction in net repayments of portfolio investments. In addition, net cash provided by operating activities benefited from the positive cash flow impact of expense limitations under the Investment Advisory Agreement of $116,345 for the year ended December 31, 2024, which reduced the net amount paid to OFS Advisor and affiliates.
During the year ended December 31, 2024, we used net cash of $6,199,297 in financing activities, compared to financing activities using $10,819,254 of net cash during the year ended December 31, 2023. This decrease in net cash used in financing activities was primarily related a decrease of $5,100,000 in net repayments on our Banc of California Credit Facility.
Borrowings
Banc of California Credit Facility: We are party to the BLA with Banc of California, as lender, to provide us with a senior secured revolving credit facility, or the Banc of California Credit Facility. The Banc of California Credit Facility is available for general corporate purposes including investment funding. The maximum availability of the Banc of California Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base, which typically excludes Structured Finance Securities, revolving loans, and non-performing loans, and as otherwise specified in the BLA.
The BLA contains customary terms and conditions, including, without limitation, affirmative and negative covenants such as information reporting requirements, a minimum tangible net asset value, a minimum quarterly net investment income after incentive fees, and a statutory asset coverage test. The BLA also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change in investment advisor, and the occurrence of a material adverse change in our financial condition. As of December 31, 2025, we were in compliance with the applicable covenants.
The key terms of the Banc of California Credit Facility as of December 31, 2025 were as follows:
| Principal Outstanding | Unused Commitment | Floor Rate | Interest Rate | Stated Coupon | Annual Commitment Fee |
Maturity Date(1)
|
|||||||||||||||||
| Banc of California Credit Facility | $ | 2,650,000 | $ | 4,850,000 | 5.00% | Prime + 0.25% | 7.00% | 0.50% | February 28, 2026 | ||||||||||||||
(1) On January 9, 2026, we amended the Banc of California Credit Facility to extend the maturity date from February 28, 2026 to February 28, 2028.
On December 15, 2023, we amended the Banc of California Credit Facility to: (i) extend the maturity date from August 31, 2024 to February 28, 2026; (ii) reduce the interest rate from the Prime Rate plus 0.75% to Prime Rate plus 0.25%; (iii) increase the interest rate floor from 4.25% to 5.00%; and (iv) eliminate the 0.50% unused line fee and replace it with an annual commitment fee of 0.50%.
On December 17, 2024, we amended the Banc of California Credit Facility to, among other things: (i) decrease the maximum commitment amount from $20,000,000 to $15,000,000; (ii) decrease the minimum tangible net asset value covenant from $15,000,000 to $12,000,000; and (iii) decrease the covenant requiring minimum quarterly net investment income after management/incentive fees from $300,000 to $200,000.
On December 29, 2025, we amended the Banc of California Credit Facility to, among other things: (i) decrease the maximum commitment amount from $15,000,000 to $7,500,000; (ii) decrease the minimum tangible net asset value covenant from $12,000,000 to $7.500,000; and (iii) decrease the covenant requiring minimum quarterly net investment income after management/incentive fee from $200,000 to $150,000.
On January 9, 2026, we amended the Banc of California Credit Facility to extend the maturity date from February 28, 2026 to February 28, 2028.
Unsecured Note: On November 27, 2019, we entered into the Note Purchase Agreement pursuant to which we issued the Unsecured Note. The purchase price of the Unsecured Note was $14,690,655 after deducting the offering price discount. Interest on the Unsecured Note is due quarterly. In addition, we are obligated to repay the Unsecured Note at par if certain change in control events occur. The Unsecured Note is a general unsecured obligation that ranks pari passu with all outstanding and future unsecured unsubordinated indebtedness we may issue.
On September 23, 2021, we executed an amendment to our Note Purchase Agreement. The amendment, among other things: (i) extended the scheduled maturity date of the Unsecured Note from November 27, 2024 to November 27, 2026; (ii)
reduced the coupon rate of the Unsecured Note from 6.50% to 5.50%; and (iii) reduced the default rate of the Unsecured Note, if applicable, from 8.50% to 7.50%. In addition, under the Note Purchase Agreement, as amended, we may, at our option, upon notice to the purchaser, redeem at any time all, or from time to time any part of, the Unsecured Note, in an amount not less than 10% of the aggregate principal amount of the Unsecured Note then outstanding in the case of a partial redemption, at 100% of the principal amount so redeemed, together with interest on such Unsecured Note accrued to, but excluding, the date of redemption, and with no redemption settlement amount paid by us in connection with any such redemption. In connection with the amendment, we paid to the purchaser a structuring fee of $150,000.
The Note Purchase Agreement contains customary terms and conditions for unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as information reporting, maintenance of our status as a business development company within the meaning of the 1940 Act and minimum asset coverage ratio. The Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, certain judgements and orders, and certain events of bankruptcy.
As of December 31, 2025, the Unsecured Note had the following terms and balances:
| Principal Outstanding | Unamortized Deferred Debt Issuance Costs | Stated Interest Rate |
Effective Interest Rate(1)
|
Maturity | |||||||||||||||||||||||||
| Unsecured Note | $ | 15,000,000 | $ | 66,630 | 5.50% | 5.98% | November 27, 2026 | ||||||||||||||||||||||
(1) The effective interest rate on the Unsecured Note includes deferred debt issuance cost amortization.
The average daily-outstanding debt balance and average interest rate for all of our debt for the years ended December 31, 2025, 2024, and 2023, were as follows:
| Year ended | Average Dollar Borrowings | Weighted Average Interest Rate | ||||||||||||
| December 31, 2025 | $ | 18,568,836 | 6.76 | % | ||||||||||
| December 31, 2024 | 21,461,448 | 7.28 | ||||||||||||
| December 31, 2023 | 28,620,959 | 7.49 | ||||||||||||
Other Liquidity Matters
We expect to fund the growth of our investment portfolio through the private placement of our common shares and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act. We cannot assure stockholders that our plans to raise capital will be successful. In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. Consequently, we may not have the funds or the ability to fund new investments or make additional investments in our portfolio companies. The illiquidity of certain portfolio investments, in particular, equity investments, may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value and incur a capital loss.
We are permitted to borrow money from time to time within the levels permitted by the 1940 Act which generally prohibits us from incurring indebtedness, unless immediately after such borrowing, we have an asset coverage ratio for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, Section 61(a)(2) of the 1940 Act provides that a BDC may reduce its asset coverage ratio from 200% to 150%, provided that certain conditions are met.
On November 6, 2018, a "required majority" (as defined in Section 57(o) of the 1940 Act) of our board of directors approved the application of a reduced 150% asset coverage ratio to us. In accordance with Section 61(a)(2) of the 1940 Act, we extended to each of our stockholders as of November 6, 2018, an offer to repurchase the equity securities held by such stockholders, with 25% of such equity securities to be repurchased in each of the four quarters following November 6, 2018. As a result, effective November 6, 2019, the asset coverage ratio test applicable to us decreased from 200% to 150%. To fund growth in our investment portfolio in the future, we anticipate needing to raise additional capital from various sources and the securitization or other debt-related markets, which may or may not be available on favorable terms, if at all.
We continue to monitor the current banking environment. If the banks and financial institutions with whom we have credit facilities enter into receivership, undergo consolidation or become insolvent in the future, our liquidity may be reduced significantly. At various times, our cash balances at third-party financial institutions exceed the federally insured limit. Our cash and cash equivalent balances are retained in custodian accounts with U.S. Bank Trust Company, National Association and we do not believe they are exposed to any significant credit risk.
Contractual Obligations
On July 15, 2016, we, with approval by our Board, entered into the Investment Advisory Agreement and the Administration Agreement. The Investment Advisory Agreement became effective as of August 30, 2016, the date that we satisfied the requirement of raising gross proceeds of $1,000,000 in the Offering, and the Board most recently approved its continuation on April 3, 2025.
On February 2, 2022, with approval by our Board, we entered into the Second Amended Expense Support Agreement and Second Amended Dealer Manager Agreement. On November 26, 2024, we entered into the ESA Termination Agreement with OFS Advisor to terminate the Second Amended Expense Support Agreement effective January 1, 2025. Effective January 1, 2025, we were no longer conditionally obligated to reimburse OFS Advisor for previously provided operating support of $144,315. See "Item 8-Financial Statements-Note 3. Related Party Transactions."
At December 31, 2025, we had $493,834 of cash and cash equivalents, as well as unused commitment under our Banc of California Credit Facility of $4,850,000, to meet our short-term contractual obligations such as unfunded commitments to portfolio companies of $1,127,528.
Short-term contractual obligations, such as the Unsecured Note that matures in 2026 and has an outstanding principal balance of $15,000,000 as of December 31, 2025, can be amended to extend the maturity date, refinanced by issuing additional senior securities in advance of the maturity date or can be repaid by selling portfolio investments that have a fair value of $29,768,535. We cannot, however, be certain that these source of funds will be available and upon terms acceptable to us in sufficient amounts in the future. All of our investments carried at fair value are classified as either Level 2 or Level 3 under ASC 820, with 84% of our investments classified as illiquid Level 3 investments as of December 31, 2025. In accordance with our investment strategy, we typically do not hold equity securities or other instruments that are actively traded on an exchange (Level 1). If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than its current fair value and incur significant realized losses on our invested capital.
Off-Balance Sheet Arrangements
OFS Advisor and its affiliates have incurred organizational and offering costs, and Contractual Issuer Expenses related to us, of which $520,063 and $875,049 were unreimbursed as of December 31, 2025 and 2024, respectively. We remain conditionally liable for organization and offering costs incurred by OFS Advisor and its affiliates on our behalf. See "Item 8- Financial Statements-Note 3. Related Party Transactions."
As of December 31, 2024, OFS Advisor had provided unreimbursed operating expense support of $144,315. Pursuant to the ESA Termination Agreement, effective January 1, 2025, OFS Advisor waived its right to payment of any unreimbursed expense support and was no longer conditionally obligated to reimburse OFS Advisor for previously provided operating support of $144,315. See "Item 8-Financial Statements-Note 3. Related Party Transactions."
We may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized on the statement of assets and liabilities. There is no guarantee that these amounts will be funded to the borrowing party now or in the future. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and will meet these unfunded commitments by using our cash on hand and utilizing our available borrowings under the Banc of California Credit Facility.
Distributions
We are taxed as a RIC under Subchapter M of the Code. Generally, a RIC is entitled to deduct dividends it pays to its stockholders from its income to determine "taxable income." Taxable income includes our taxable interest, dividend and fee income, and taxable net capital gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as gains or losses are not included in taxable income until they are realized. Taxable income includes non-cash income, such as changes in accrued and reinvested interest and dividends, which includes contractual PIK interest, and the amortization of discounts and fees. Cash collections of income resulting from contractual PIK interest and dividends or the amortization of discounts and fees generally occur upon the repayment of the loans or debt securities that include such items. Non-cash taxable income is reduced by non-cash expenses, such as realized losses and depreciation, and amortization expense.
Our Board maintains a variable dividend policy with the objective of distribution amounts of not less than 90% of our quarterly taxable income or potential annual income for a particular year. In addition, during the year, we may pay a special dividend, such that we may make additional, non-recurring, distributions of accumulated taxable income, while maintaining the option to spill over our excess taxable income to a following year. We may choose to retain a portion of our taxable income in any year and pay the 4% U.S. federal excise tax on the retained amounts. For the years ended December 31, 2025, 2024 and 2023, we recognized U.S. federal excise taxes of $0, $9,723, and $0, respectively.
The following table reflects the cash distributions per share that we declared on our common stock during the years ended December 31, 2025, 2024, and 2023. Stockholders of record as of each respective record date were entitled to receive the distribution.
| Date Declared | Record Dates | Payment Date | Per Share Amount |
Cash Distribution |
||||||||||||||||||||||
| Year ended December 31, 2025 | ||||||||||||||||||||||||||
| January 29, 2025 | January 29, 2025 | April 15, 2025 | $ | 0.06000 | $ | 99,846 | ||||||||||||||||||||
| February 26, 2025 | February 26, 2025 | April 15, 2025 | 0.06000 | 99,846 | ||||||||||||||||||||||
| March 27, 2025 | March 27, 2025 | April 15, 2025 | 0.06000 | 97,206 | ||||||||||||||||||||||
| April 26, 2025 | April 28, 2025 | July 15, 2025 | 0.06000 | 97,206 | ||||||||||||||||||||||
| May 28, 2025 | May 28, 2025 | July 15, 2025 | 0.06000 | 97,205 | ||||||||||||||||||||||
| June 26, 2025 | June 26, 2025 | July 15, 2025 | 0.06000 | 94,617 | ||||||||||||||||||||||
| July 29, 2025 | July 29, 2025 | October 15, 2025 | 0.06000 | 94,617 | ||||||||||||||||||||||
| August 27, 2025 | August 27, 2025 | October 15, 2025 | 0.06000 | 94,617 | ||||||||||||||||||||||
| September 26, 2025 | September 26, 2025 | October 15, 2025 | 0.06000 | 92,098 | ||||||||||||||||||||||
| October 29, 2025 | October 29, 2025 | January 15, 2026 | 0.04375 | 67,154 | ||||||||||||||||||||||
| November 25, 2025 | November 25, 2025 | January 15, 2026 | 0.04375 | 67,154 | ||||||||||||||||||||||
| December 29, 2025 | December 29, 2025 | January 15, 2026 | 0.04375 | 65,900 | ||||||||||||||||||||||
| $ | 0.67125 | $ | 1,067,466 | |||||||||||||||||||||||
| Year ended December 31, 2024 | ||||||||||||||||||||||||||
| January 27, 2024 | January 29, 2024 | February 5, 2024 | $ | 0.0846 | $ | 155,292 | ||||||||||||||||||||
| February 27, 2024 | February 27, 2024 | March 5, 2024 | 0.0846 | 155,292 | ||||||||||||||||||||||
| March 27, 2024 | March 27, 2024 | April 5, 2024 | 0.0846 | 151,178 | ||||||||||||||||||||||
| April 26, 2024 | April 26, 2024 | May 6, 2024 | 0.0846 | 151,178 | ||||||||||||||||||||||
| May 29, 2024 | May 29, 2024 | June 5, 2024 | 0.0846 | 151,178 | ||||||||||||||||||||||
| June 26, 2024 | June 26, 2024 | July 5, 2024 | 0.0846 | 147,168 | ||||||||||||||||||||||
| July 27, 2024 | July 29, 2024 | August 5, 2024 | 0.0846 | 147,168 | ||||||||||||||||||||||
| August 28, 2024 | August 28, 2024 | September 5, 2024 | 0.0846 | 147,168 | ||||||||||||||||||||||
| September 26, 2024 | September 26, 2024 | October 7, 2024 | 0.0846 | 143,238 | ||||||||||||||||||||||
| October 29, 2024 | October 29, 2024 | November 5, 2024 | 0.0846 | 143,238 | ||||||||||||||||||||||
| November 26, 2024 | November 26, 2024 | December 5, 2024 | 0.0846 | 143,238 | ||||||||||||||||||||||
| December 27, 2024 | December 27, 2024 | January 6, 2025 | 0.0846 | 140,785 | ||||||||||||||||||||||
| $ | 1.0152 | $ | 1,776,121 | |||||||||||||||||||||||
| Year ended December 31, 2023 | ||||||||||||||||||||||||||
| January 27, 2023 | January 27, 2023 | February 6, 2023 | $ | 0.0846 | $ | 167,313 | ||||||||||||||||||||
| February 24, 2023 | February 24, 2023 | March 6, 2023 | 0.0846 | 167,595 | ||||||||||||||||||||||
| March 29, 2023 | March 29, 2023 | April 5, 2023 | 0.0846 | 166,868 | ||||||||||||||||||||||
| April 25, 2023 | April 26, 2023 | May 5, 2023 | 0.0846 | 166,868 | ||||||||||||||||||||||
| May 26, 2023 | May 26, 2023 | June 5, 2023 | 0.0846 | 166,868 | ||||||||||||||||||||||
| June 28, 2023 | June 28, 2023 | July 5, 2023 | 0.0846 | 162,632 | ||||||||||||||||||||||
| July 27, 2023 | July 27, 2023 | August 7, 2023 | 0.0846 | 163,701 | ||||||||||||||||||||||
| August 28, 2023 | August 29, 2023 | September 5, 2023 | 0.0846 | 163,701 | ||||||||||||||||||||||
| September 26, 2023 | September 27, 2023 | October 5, 2023 | 0.0846 | 159,478 | ||||||||||||||||||||||
| October 27, 2023 | October 27, 2023 | November 6, 2023 | 0.0846 | 159,478 | ||||||||||||||||||||||
| November 27, 2023 | November 28, 2023 | December 5, 2023 | 0.0846 | 159,477 | ||||||||||||||||||||||
| December 27, 2023 | December 27, 2023 | January 5, 2024 | 0.0846 | 155,292 | ||||||||||||||||||||||
| $ | 1.0152 | $ | 1,959,271 | |||||||||||||||||||||||
Distributions of current year or accumulated prior years ICTI will be characterized as distributions of ordinary income. Distributions in excess of our current and accumulated ICTI will be treated first as a return of capital to the extent of a stockholder's tax basis, and any remaining distributions will be treated as a capital gain. For the year ended December 31, 2025, we estimated distributions paid to stockholders were comprised of ordinary income of 85.1% and a tax return of capital of 14.9%. For the years ended December 31, 2024 and 2023, we estimated distributions paid to stockholders were comprised of 100% ordinary income. The determination of the tax attributes of our distributions is made annually as of the end of its fiscal year based upon our estimated ICTI and distributions paid for the full year. Each year, if required, a statement on Form 1099-DIV identifying the source of the distribution is mailed to our stockholders. The calculation of 2025 U.S. federal taxable income is based on certain estimated amounts, including information received from third parties and, as a result, actual 2025 U.S. federal taxable income will not be finally determined until our 2025 U.S. federal tax return is filed in 2026.
Repurchase of common stock
Since November 2018, the Board has approved quarterly tender offers to purchase shares of our outstanding common stock. Since November 2019, we have conducted quarterly tender offers to purchase, in each case, 2.5% of the weighted average number of shares of the outstanding common stock for the trailing 12-month period. Commencing with the tender offer in March 2026, the Board expects to approve offers to purchase approximately 4.0% of the weighted average number of outstanding shares of our common stock in any 12-month period, subject to a 1.0% limit in each quarter. The offer to repurchase shares allow our stockholders to sell their shares back to us at a price equal to the most recently determined NAV per share of our common stock immediately prior to the date of repurchase. Any decision to repurchase shares is evaluated by our board of directors based on a variety of factors, including available liquidity, leverage considerations and investment opportunities.
The following table summarizes the common stock repurchases by us for the years ended December 31, 2025, 2024 and 2023:
| Number of Shares | Amount | |||||||||||||
| Year ended December 31, 2025 | ||||||||||||||
| January 1, 2025 through March 31, 2025 | 44,045 | $ | 448,381 | |||||||||||
| April 1, 2025 through June 30, 2025 | 43,116 | 425,120 | ||||||||||||
| July 1, 2025 through September 30, 2025 | 42,020 | 391,622 | ||||||||||||
| October 1, 2025 through December 31, 2025 | 28,641 | 253,479 | ||||||||||||
| Total | 157,822 | $ | 1,518,602 | |||||||||||
| Year ended December 31, 2024 | ||||||||||||||
| January 1, 2024 through March 31, 2024 | 48,625 | $ | 514,943 | |||||||||||
| April 1, 2024 through June 30, 2024 | 47,393 | 495,729 | ||||||||||||
| July 1, 2024 through September 30, 2024 | 46,460 | 472,034 | ||||||||||||
| October 1, 2024 through December 31, 2024 | 28,998 | 294,331 | ||||||||||||
| Total | 171,476 | $ | 1,777,037 | |||||||||||
| Year ended December 31, 2023 | ||||||||||||||
| January 1, 2023 through March 31, 2023 | 50,225 | $ | 564,529 | |||||||||||
| April 1, 2023 through June 30, 2023 | 50,083 | 535,888 | ||||||||||||
| July 1, 2023 through September 30, 2023 | 49,926 | 542,188 | ||||||||||||
| October 1, 2023 through December 31, 2023 | 49,479 | 525,963 | ||||||||||||
| Total | 199,713 | $ | 2,168,568 | |||||||||||
All repurchased shares were retired upon acquisition.
Recent Developments
Banc of California Amendment
On January 9, 2026, we amended the Banc of California Credit Facility to extend the maturity date from February 28, 2026 to February 28, 2028.
Declaration of January 2026 Distribution
On January 28, 2026, our Board declared a distribution of $0.0167 per common share, which represented a 2.3% annualized distribution yield based on our common stock offering price as of January 29, 2026, which will be paid on April 15, 2026 to stockholders of record on January 28, 2026.
Declaration of February 2026 Distribution
On February 25, 2026, our Board declared a distribution of $0.0167 per common share, which represented a 2.4% annualized distribution yield based on our common stock offering price as of February 26, 2026, which will be paid on April 15, 2026 to stockholders of record on February 25, 2026.
First Quarter 2026 Tender Offer
On March 3, 2026, we commenced a tender offer pursuant to which we are offering to purchase up to 15,966 shares of our issued and outstanding common stock at a price equal to our net asset value per share on March 28, 2026.
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