UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



	ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2020



	¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

~~COMMISSION FILE NUMBER:~~Commission file number 814-00813

OFS CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		46-1339639
(State or ~~other jurisdiction~~Other Jurisdiction of	(	I.R.S. Employer Identification No.
~~incorporation~~Incorporation or ~~organization)~~Organization	~~Identification No.)~~

10 S. Wacker Drive, Suite 2500, Chicago, Illinois		60606
Address of Principal Executive Offices		Zip Code

	(847) 734-2000
Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

~~10 S. Wacker Drive, Suite 2500~~Securities registered pursuant to Section 12(b) of the Act:

~~Chicago, Illinois 60606~~

~~(Address of principal executive office)~~

~~(847) 734-2000~~

~~(Registrant’s telephone number, including area code)~~



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	OFS	The Nasdaq Global Select Market
6.375% Notes due 2025	OFSSL	The Nasdaq Global Select Market
6.50% Notes due 2025	OFSSZ	The Nasdaq Global Select Market
5.95% Notes due 2026	OFSSI	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company”, and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	ý

Non-accelerated filer	¨ ~~(do not check if a smaller reporting company)~~	Smaller reporting company	¨

Emerging growth company	ý¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of the issuer’s Common Stock, $0.01 par value, outstanding as of ~~November 1, 2017~~July 29, 2020 was ~~13,334,851.~~13,399,694.

OFS CAPITAL CORPORATION

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	5
	Consolidated ~~Balance Sheets~~Statements of Assets and Liabilities as of ~~September~~June 30, ~~2017~~2020 (unaudited), and December 31, ~~2016~~2019��	53
	Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020 (unaudited), and ~~2016~~2019 (unaudited)	64
	Consolidated Statements of Changes in Net Assets for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2017~~2020 (unaudited), and ~~2016~~2019 (unaudited)	75
	Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020 (unaudited), and ~~2016~~2019 (unaudited)	87
	Consolidated Schedules of Investments as of ~~September~~June 30, ~~2017~~2020 (unaudited), and December 31, ~~2016~~2019	98
	Notes to Consolidated Financial Statements (unaudited)	2332
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4756
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6474
Item 4.	Controls and Procedures	6475

PART II. OTHER INFORMATION		6576
Item 1.	Legal Proceedings	6576
Item 1A.	Risk Factors	6576
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	6577
Item 3.	Defaults Upon Senior Securities	6578
Item 4.	Mine Safety Disclosures	6578
Item 5.	Other Information	6678
Item 6.	Exhibits	6779
SIGNATURES		6880

Defined Terms

We have used "we," "us," ~~"our",~~"our," "our company", and "the Company" to refer to OFS Capital Corporation in this report. We also have used several other terms in this report, which are explained or defined below:



Term	Explanation or Definition
1940 Act	Investment Company Act of 1940, as amended
Administration Agreement	Administration ~~agreement~~Agreement between the Company and OFS Services dated November 7, 2012
~~Annual Distribution Requirement~~Affiliated Account	~~Distributions to our stockholders, for each taxable year,~~Another account managed by OFS Advisor or an affiliate of ~~at least 90% of our ICTI~~OFS Advisor
ASC	Accounting Standards Codification, as issued by the FASB
~~ASC Topic 820~~	~~ASC Topic 820, "Fair Value Measurements and Disclosures"~~
ASU	Accounting Standards Updates, as issued by the FASB
BDC	Business Development Company under the 1940 Act
BLA	Business Loan Agreement, as amended, with Pacific Western Bank, as lender, which provides the Company with a senior secured revolving credit facility
BNP Facility	A secured revolving credit facility that provides for borrowings in an aggregate principal amount up to $150,000,000 issued pursuant to a Revolving Credit and Security Agreement by and among OFSCC-FS, the lenders from time to time parties thereto, BNP Paribas, as administrative agent, OFSCC-FS Holdings, LLC, a wholly owned subsidiary of the Company, as equityholder, the Company, as servicer, Citibank, N.A., as collateral agent and Virtus Group, LP, as collateral administrator
Board	The Company's board of directors
CLO	Collateralized loan obligation
Code	Internal Revenue Code of 1986, as amended
Company	OFS Capital Corporation and its consolidated subsidiaries
DRIP	Distribution reinvestment plan
EBITDA	Earnings before interest, taxes, depreciation, and amortization
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
~~FDIC~~	~~Federal Deposit Insurance Corporation~~
GAAP	Accounting principles generally accepted in the United States
HPCI	Hancock Park Corporate Income, Inc., a Maryland corporation and non-traded BDC ~~with an investment strategy similar to the Company~~ for whom OFS Advisor serves as investment adviser
ICTI	Investment company taxable income, which is generally net ordinary income plus net short-term capital gains in excess of net long-term capital losses
Indicative Prices	Market quotations, prices from pricing services or bids from brokers or dealers
Investment Advisory Agreement	Investment ~~advisory agreement~~Advisory and Management Agreement between the Company and OFS Advisor dated November 7, 2012
LIBOR	London Interbank Offered Rate
NBIP	Non-binding indicative price
Net Loan Fees	The cumulative amount of fees, such as discounts, premiums and amendment fees that are deferred and recognized as income over the life of the loan.
OCCI	OFS Credit Company, Inc., a Delaware corporation and a non-diversified, closed-end management investment company for whom OFS Advisor serves as investment adviser
OFS Advisor	OFS Capital Management, LLC, a ~~wholly-owned~~wholly owned subsidiary of OFSAM and registered investment advisor under the Investment Advisers Act of 1940, ~~Act~~
~~OFS Capital WM~~	~~OFS Capital WM, LLC, a wholly-owned investment company subsidiary~~as amended
OFS Services	OFS Capital Services, LLC, a ~~wholly-owned~~wholly owned subsidiary of OFSAM and affiliate of OFS Advisor
OFSAM	Orchard First Source Asset Management, LLC, a full-service provider of capital and leveraged finance solutions to U.S. corporations
OFSCC-FS	OFSCC-FS, LLC, an ~~established~~indirect wholly owned subsidiary of the Company
OFSCC-FS Assets	Assets held by the Company through OFSCC-FS
OFSCC-MB	OFSCC-MB, Inc., a wholly owned subsidiary taxed under subchapter C of the Code that generally holds the equity investments of the Company that are taxed as pass-through entities.



Term	Explanation or Definition
OID	Original issue discount
Parent	OFS Capital Corporation
PIK	Payment-in-kind, non-cash interest or dividends payable as an addition to the loan or equity security producing the income.
Portfolio Company Investment	A debt or equity investment ~~platform focused on meeting the capital needs of middle-market companies~~in a portfolio company. Portfolio Company Investments exclude Structured Finance Notes
Prime Rate	United States Prime interest rate
PWB Credit Facility	Senior secured revolving credit facility between the Company and Pacific Western Bank, as ~~lender.~~lender
Reunderwriting Analysis	A discount rate method based upon a hypothetical recapitalization of the entity given its current operating performance and current market condition
RIC	Regulated investment company under the Code
SBA	U.S. Small Business Administration
SBCAA	Small Business Credit Availability Act
SBIC	A fund licensed under the SBA small business investment company program
SBIC Acquisition	The Company's acquisition of the remaining ownership interests in SBIC I LP and OFS SBIC I GP, LLC on December 4, 2013
SBIC Act	Small Business Investment Act of 1958, as amended
SBIC I LP	OFS SBIC I, LP, a ~~wholly-owned~~wholly owned SBIC subsidiary of the Company
SEC	U.S. Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Secured Revolver Amendment	The amended Business Loan Agreement with Pacific Western Bank, as lender, dated June 26, 2020
Stock Repurchase Program	The open market stock repurchase program for shares of the Company’s common stock under Rule 10b-18 of the Exchange Act
Structured Finance Notes	CLO mezzanine debt and CLO subordinated debt positions.
Synthetic Rating Analysis	A discount rate method that 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.
The Order	An exemptive relief order from the SEC to permit us to co-invest in portfolio companies with certain funds managed by OFS Advisor 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
Transaction Price	The cost of an arm's length transaction occurring in the same security
Unsecured Notes	The combination of the Unsecured Notes Due April 2025, Unsecured Notes Due October 2025 and Unsecured Notes Due October 2026
Unsecured Notes Due April 2025	The Company’s $50.0 million aggregate principal amount of 6.375% notes due April 30, 2025
Unsecured Notes Due October 2025	The Company’s $46.0 million aggregate principal amount of 6.5% notes due October 30, 2025
Unsecured Notes Due October 2026	The Company's $54.3 million aggregate principal amount of 5.95% notes due October 31, 2026

Forward-Looking Statements

This quarterly report on Form 10-Q 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,”~~“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 an SBIC, or maintaining our tax treatment as a RIC under Subchapter M of 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, 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;

constraint on investment due to access to material nonpublic information;

restrictions on our ability to enter into transactions with our affiliates;

~~limitations on the amount of SBA-guaranteed debentures that may be issued by an SBIC;~~

our ability to comply with SBA regulations and requirements;

the use of borrowed money to finance a portion of our investments;

our ability to incur additional leverage pursuant to the SBCAA and the impact of such leverage on our net investment income and results of operations;

competition for investment opportunities;

our plans to focus on lower-yielding, first lien senior secured loans to larger borrowers and the impact on our risk profile, including our belief that the seniority of such loans in a borrower's capital structure may provide greater downside protection against the impact of the Coronavirus ("COVID-19") pandemic;

the percentage of investments that will bear interest on a floating rate or fixed rate basis;

interest rate volatility, including the decommissioning of LIBOR;

the ability of SBIC I LP ~~and any other portfolio companies~~ to make distributions enabling us to meet RIC requirements;

plans by SBIC I LP to repay its outstanding SBA debentures;

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;

the general economy and its impact on the industries in which we invest;

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the COVID-19 pandemic; the length and duration of the COVID-19 pandemic in the United States as well as worldwide and the magnitude of the economic impact of the outbreak; the effect of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows and those of our portfolio companies (including the expectation that a shift from cash interest to PIK interest will result from concessions granted to borrowers due to the COVID-19 pandemic), including our and their ability to achieve our respective objectives; the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business (including our belief that new loan activity in the market in which we operate has slowed) and on the availability of equity and debt capital and our use of borrowed money to finance a portion of our investments;

the belief that we have sufficient levels of liquidity to support our existing portfolio companies and deploy capital in new investment opportunities;

the belief that one or more of our investments can be restored to accrual status in the near term, or otherwise;

uncertain valuations of our portfolio ~~investments;~~investments, including our belief that overweighting the Reunderwriting Analysis method more accurately captures certain data related to illiquid private credit during the COVID-19 pandemic; and

the effect of new or modified laws or regulations governing our operations.

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 Quarterly Report on Form 10-Q 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 our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019 and in "Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

We have based the forward-looking statements on information available to us on the date of this Quarterly Report on Form 10-Q. 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 Quarterly ~~Reports~~Report on Form 10-Q are excluded from the safe harbor protection provided by Section ~~27A of the Securities Act of 1933, as amended, and Section~~ 21E of the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~

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 Quarterly Report on Form 10-Q.Act.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

OFS Capital Corporation and Subsidiaries

Consolidated ~~Balance Sheets~~Statements of Assets and Liabilities

(Dollar amounts in thousands, except per share data)


	September 30, 2017			December 31, 2016		June 30, 2020			December 31, 2019
	(unaudited)					(unaudited)
Assets
Investments, at fair value:
Non-control/non-affiliate investments (amortized cost of $224,616 and $178,279, respectively)	$	212,206		$	173,219
Affiliate investments (amortized cost of $67,260 and $76,306, respectively)	73,727			81,708
Control investments (amortized cost of $10,182 and $24,722, respectively)	10,697			26,700
Total investments at fair value (amortized cost of $302,058 and $279,307, respectively)	296,630			281,627
Cash and cash equivalents	53,868			17,659
Non-control/non-affiliate investments (amortized cost of $354,004 and $396,201, respectively)						$	314,305		$	372,535
Affiliate investments (amortized cost of $114,123 and $131,950, respectively)						114,047			135,679
Control investment (amortized cost of $10,714 and $10,520, respectively)						7,410			8,717
Total investments at fair value (amortized cost of $478,841 and $538,671, respectively)						435,762			516,931
Cash						31,781			13,447
Interest receivable	1,782			1,770		3,114			3,349
Receivable for investment sold						634			—
Prepaid expenses and other assets	4,229			3,974		4,151			4,461
Total assets	$	356,509		$	305,030	$	475,442		$	538,188

Liabilities
Revolving line of credit	$	17,100		$	9,500
SBA debentures (net of deferred debt issuance costs of $2,752 and $3,037, respectively)	147,128			146,843
Revolving lines of credit						$	51,750		$	56,450
SBA debentures (net of deferred debt issuance costs of $1,567 and $1,904, respectively)						132,203			147,976
Unsecured notes (net of deferred debt issuance costs of $4,403 and $4,798 respectively)						148,447			148,052
Interest payable	395			1,599		3,109			3,505
Management and incentive fees payable	2,400			2,119
Administration fee payable	382			435
Payable to adviser and affiliates (Note 3)						2,694			4,106
Payable for investments purchased						971			10,264
Accrued professional fees	368			477		562			621
Other liabilities	80			279		309			587
Total liabilities	167,853			161,252		340,045			371,561

Commitments and contingencies (Note 6)

Net assets
Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of September 30, 2017, and December 31, 2016, respectively	$	—		$	—
Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,334,851 and 9,700,297 shares issued and outstanding as of September 30, 2017, and December 31, 2016, respectively	133			97
Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2020, and December 31, 2019, respectively						$	—		$	—
Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,399,694 and 13,376,836 shares issued and outstanding as of June 30, 2020, and December 31, 2019, respectively						134			134
Paid-in capital in excess of par	189,278			134,300		187,437			187,305
Accumulated undistributed net investment income	6,942			6,731
Accumulated undistributed net realized gain (loss)	(2,269		)	330
Accumulated net unrealized appreciation (depreciation) on investments	(5,428		)	2,320
Total distributable earnings (losses)						(52,174		)	(20,812		)
Total net assets	188,656			143,778		135,397			166,627

Total liabilities and net assets	$	356,509		$	305,030	$	475,442		$	538,188

Number of shares outstanding	13,334,851			9,700,297		13,399,694			13,376,836
Net asset value per share	$	14.15		$	14.82	$	10.10		$	12.46

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Operations (unaudited)

(Dollar amounts in thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2020			2019			2020			2019
Investment income
Interest income:
Non-control/non-affiliate investments	$	5,759		$	4,355		$	15,281		$	13,522		$	8,233		$	9,287		$	17,305		$	17,929
Affiliate investments	1,796			1,643			5,382			5,000			1,692			2,660			4,086			4,993
Control investment	263			582			1,406			1,413			209			263			405			522
Total interest income	7,818			6,580			22,069			19,935			10,134			12,210			21,796			23,444
Dividend income:
Payment-in-kind interest and dividend income:
Non-control/non-affiliate investments	77			102			289			264			264			96			525			193
Affiliate investments	242			343			944			1,166			191			300			460			552
Control investments	92			83			262			194
Control investment													102			28			187			55
Total payment-in-kind interest and dividend income													557			424			1,172			800
Dividend income:
Affiliate investments													—			—			100			173
Control investment													—			89			—			89
Total dividend income	411			528			1,495			1,624			—			89			100			262
Fee income:
Non-control/non-affiliate investments	679			169			1,004			1,164			279			154			764			496
Affiliate investments	197			48			431			87			8			5			13			210
Control investments	17			34			135			75
Control investment													3			18			6			33
Total fee income	893			251			1,570			1,326			290			177			783			739

Total investment income	9,122			7,359			25,134			22,885			10,981			12,900			23,851			25,245

Expenses
Interest expense	1,503			1,320			4,229			3,936			4,931			3,645			9,853			7,100
Management fees	1,310			1,120			3,726			3,324
Management fee													1,869			2,055			3,888			3,898
Incentive fee	1,090			817			2,249			2,407			215			1,245			1,098			2,408
Professional fees	284			260			840			877			460			368			1,108			903
Administration fee	274			255			982			1,009			500			417			1,020			854
General and administrative expenses	259			290			1,050			923

Total expenses	4,720			4,062			13,076			12,476

Other expenses													399			310			746			394
Total expenses before incentive fee waiver													8,374			8,040			17,713			15,557
Incentive fee waiver (see Note 3)													—			—			(441		)	—
Total expenses, net of incentive fee waiver													8,374			8,040			17,272			15,557
Net investment income	4,402			3,297			12,058			10,409			2,607			4,860			6,579			9,688

Net realized and unrealized gain (loss) on investments
Net realized gain (loss) on non-control/non-affiliate investments	(5,204		)	58			(5,041		)	2,624
Net realized gain on affiliate investments	3,617			—			4,491			—
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments	1,196			(538		)	(7,350		)	(3,668		)
Net realized and unrealized gain (loss)
Net realized loss on non-control/non-affiliate investments													(1,040		)	(90		)	(10,013		)	(894		)
Loss on extinguishment of debt													—			—			(149		)	—
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes													6,808			(3,630		)	(15,614		)	(2,972		)
Net unrealized appreciation (depreciation) on affiliate investments	(2,901		)	(363		)	(2,243		)	79			(880		)	1,660			(3,804		)	540
Net unrealized appreciation (depreciation) on control investment	65			(66		)	1,845			(439		)	163			553			(1,501		)	723

Net loss on investments	(3,227		)	(909		)	(8,298		)	(1,404		)

Net increase in net assets resulting from operations	$	1,175		$	2,388		$	3,760		$	9,005

Net gain (loss)													5,051			(1,507		)	(31,081		)	(2,603		)
Net increase (decrease) in net assets resulting from operations													$	7,658		$	3,353		$	(24,502	)	$	7,085
Net investment income per common share – basic and diluted	$	0.33		$	0.34		$	1.00		$	1.07		$	0.19		$	0.36		$	0.49		$	0.73
Net increase in net assets resulting from operations per common share – basic and diluted	$	0.09		$	0.25		$	0.31		$	0.93
Net increase (decrease) in net assets resulting from operations per common share – basic and diluted													$	0.57		$	0.25		$	(1.83	)	$	0.53
Distributions declared per common share	$	0.34		$	0.34		$	1.02		$	1.02		$	0.17		$	0.34		$	0.51		$	0.68
Basic and diluted weighted average shares outstanding	13,331,690			9,694,353			12,089,895			9,692,634			13,392,608			13,361,193			13,384,808			13,359,338

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets (unaudited)

(Dollar amounts in thousands)

Nine Months Ended September 30,
2017 2016
Increase in net assets resulting from operations:
Net investment income $ 12,058

$ 10,409
Net realized gain (loss) on investments (550 )
2,624
Net change in unrealized appreciation/depreciation on investments (7,748 )
(4,028 )
Net increase in net assets resulting from operations 3,760

9,005
Distributions to stockholders from:

Accumulated net investment income (12,362 )
(9,886 )
Total distributions to stockholders (12,362 )
(9,886 )
Common stock transactions:

Public offering of common stock, net of expenses 53,348
—
Reinvestment of stockholder distributions 132

79
Net increase in net assets resulting from capital transactions 53,480

79
Net increase in net assets 44,878

(802 )
Net assets:

Beginning of period $ 143,778

$ 143,012
End of period $ 188,656

$ 142,210
Accumulated undistributed net investment income $ 6,942

$ 5,320
Common stock activity:

Public offering of common stock 3,625,000
—
Common stock issued from reinvestment of stockholder distributions 9,554

6,040
Common stock issued and outstanding at beginning of period 9,700,297

9,691,170
Common stock issued and outstanding at end of period 13,334,851

9,697,210



	Preferred Stock			Common Stock
	Number of shares	Par value		Number of shares	Par value		Paid-in capital in excess of par		Total distributable earnings (losses)			Total net assets
Balances at January 1, 2019	—	$	—	13,357,337	$	134	$	187,540	$	(12,651	)	$	175,023
Net increase in net assets resulting from operations:
Net investment income	—	—		—	—		—		9,688			9,688
Net realized loss on investments	—	—		—	—		—		(894		)	(894		)
Net unrealized depreciation on investments, net of taxes	—	—		—	—		—		(1,709		)	(1,709		)
Tax reclassifications of permanent differences	—	—		—	—		165		(165		)	—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		9,124	—		109		—			109
Dividends declared	—	—		—	—		—		(9,085		)	(9,085		)
Net increase (decrease) for the period ended June 30, 2019	—	—		9,124	—		274		(2,165		)	(1,891		)
Balances at June 30, 2019	—	$	—	13,366,461	$	134	$	187,814	$	(14,816	)	$	173,132

Balances at March 31, 2019	—	$	—	13,361,134	$	134	$	187,604	$	(13,480	)	$	174,258
Net increase in net assets resulting from operations:
Net investment income	—	—		—	—		—		4,860			4,860
Net realized loss on investments	—	—		—	—		—		(90		)	(90		)
Net unrealized appreciation on investments, net of taxes	—	—		—	—		—		(1,417		)	(1,417		)
Tax reclassifications of permanent differences	—	—		—	—		146		(146		)	—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		5,327	—		64		—			64
Dividends declared	—	—		—	—		—		(4,543		)	(4,543		)
Net increase for the period ended September 30, 2018	—	—		5,327	—		210		(1,336		)	(1,126		)
Balances at June 30, 2019	—	$	—	13,366,461	$	134	$	187,814	$	(14,816	)	$	173,132

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets (unaudited)

(Dollar amounts in thousands)



	Preferred Stock			Common Stock
	Number of shares	Par value		Number of shares	Par value		Paid-in capital in excess of par		Total distributable earnings (losses)			Total net assets
Balances at January 1, 2020	—	$	—	13,376,836	$	134	$	187,305	$	(20,812	)	$	166,627
Net decrease in net assets resulting from operations:
Net investment income	—	—		—	—		—		6,579			6,579
Net realized loss on investments	—	—		—	—		—		(10,013		)	(10,013		)
Loss on extinguishment of debt	—	—		—	—		—		(149		)	(149		)
Net unrealized depreciation on investments, net of taxes	—	—		—	—		—		(20,919		)	(20,919		)
Tax reclassifications of permanent differences	—	—		—	—		36		(36		)	—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		22,858	—		96		—			96
Dividends declared	—	—		—	—		—		(6,824		)	(6,824		)
Net increase (decrease) for the period ended June 30, 2020	—	—		22,858	—		132		(31,362		)	(31,230		)
Balances at June 30, 2020	—	$	—	13,399,694	$	134	$	187,437	$	(52,174	)	$	135,397

Balances at March 31, 2020	—	$	—	13,392,529	$	134	$	187,387	$	(57,538	)	$	129,983
Net increase in net assets resulting from operations:
Net investment income	—	—		—	—		—		2,607			2,607
Net realized loss on investments	—	—		—	—		—		(1,040		)	(1,040		)
Net unrealized appreciation on investments, net of taxes	—	—		—	—		—		6,091			6,091
Tax reclassifications of permanent differences	—	—		—	—		18		(18		)	—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		7,165	—		32		—			32
Dividends declared	—	—		—	—		—		(2,276		)	(2,276		)
Net increase for the period ended June 30, 2020	—	—		7,165	—		50		5,364			5,414
Balances at June 30, 2020	—	$	—	13,399,694	$	134	$	187,437	$	(52,174	)	$	135,397

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(Dollar amounts in thousands)

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities
Net increase in net assets resulting from operations $ 3,760

$ 9,005
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:

Net realized (gain) loss on investments 550

(2,624 )
Net change in unrealized appreciation/depreciation on investments 7,748

4,028
Amortization of Net Loan Fees (1,187 )
(1,162 )
Amendment fees collected 112

107
Payment-in-kind interest and dividend income (2,199 )
(1,903 )
Amortization of deferred debt issuance costs 402

330
Amortization of intangible asset 147

146
Purchase and origination of portfolio investments (114,663 )
(40,179 )
Proceeds from principal payments on portfolio investments 86,527

37,137
Proceeds from sale or redemption of portfolio investments 7,456

2,115
Changes in operating assets and liabilities:

Interest receivable (12 )
(267 )
Interest payable (1,204 )
(1,157 )
Management and incentive fees payable 281

(301 )
Administration fee payable (53 )
(122 )
Other assets and liabilities (147 )
(71 )
Net cash provided by (used in) operating activities (12,482 )
5,082
Cash flows from financing activities
Proceeds from common stock offering, net of expenses 53,423

—
Distributions paid to stockholders (12,231 )
(9,807 )
Borrowings under revolving line of credit 28,000

—
Repayments under revolving line of credit (20,400 )
—
Payment of debt issuance costs (101 )
—
Net cash provided by (used in) financing activities 48,691

(9,807 )
Net increase in cash and cash equivalents 36,209

(4,725 )
Cash and cash equivalents — beginning of year 17,659

32,714
Cash and cash equivalents — end of year $ 53,868

$ 27,989

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 5,031

$ 4,731
Distributions paid by issuance of common stock 132

79



	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations	$	(24,502	)	$	7,085
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) in operating activities:
Net realized loss on investments	10,013			894
Net unrealized depreciation on investments	20,919			1,709
Amortization of Net Loan Fees	(760		)	(406		)
Amendment fees collected	31			100
Payment-in-kind interest and dividend income	(1,191		)	(800		)
Accretion of interest income on structured finance notes	(2,626		)	(1,096		)
Amortization of debt issuance costs	1,016			577
Amortization of intangible asset	98			98
Purchase and origination of portfolio investments	(70,914		)	(128,376		)
Proceeds from principal payments on portfolio investments	56,276			9,266
Proceeds from sale or redemption of portfolio investments	65,528			30,316
Proceeds from distributions received from portfolio investments	3,290			1,157
Changes in operating assets and liabilities:
Interest receivable	235			(946		)
Interest payable	(396		)	(114		)
Payable to adviser and affiliates	(1,412		)	150
Receivable for investment sold	(634		)	(2,003		)
Payable for investments purchased	(9,293		)	38,129
Other assets and liabilities	194			(143		)
Net cash provided (used) in operating activities	45,872			(44,403		)

Cash flows from financing activities
Distributions paid to stockholders	(6,728		)	(8,976		)
Borrowings under revolving lines of credit	72,600			59,000
Repayments under revolving lines of credit	(77,300		)	(32,750		)
Repayments of SBA debentures	(16,110		)	—
Payment of deferred financing costs	—			(1,636		)
Repurchases of common stock under Stock Repurchase Program	—			(3		)
Net cash provided (used) by financing activities	(27,538		)	15,635
Net increase (decrease) in cash	18,334			(28,768		)
Cash at beginning of period	13,447			38,172
Cash at end of period	$	31,781		$	9,404

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	9,383		$	6,637
Reinvestment of distributions to stockholders	96			109

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments (unaudited)

~~September~~June 30, ~~2017~~2020

(Dollar amounts in thousands)

Portfolio Company(1)
Investment Type Industry Interest Rate (2) Spread Above Index (2) Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets
Non-control/Non-affiliate Investments

Armor Holdings II LLC
Other Professional, Scientific, and Technical Services

Senior Secured Loan

10.34%
(L +9.00%)
12/26/2020
$ 3,500

$ 3,474

$ 3,570

1.8 %

Avison Young Canada, Inc.
Offices of Real Estate Agents and Brokers

Senior Secured Loan (5) (6)

9.50%
N/A
12/15/2021
4,000

3,935

4,038

2.0

BCC Software, LLC (5)
Custom Computer Programming Services

Senior Secured Loan

9.24%
(L +8.00%)
6/20/2019
6,799

6,743

6,821
3.5
Senior Secured Loan (Revolver) (10) (4)

N/A
(L +8.00%)
6/20/2019
—

(6 )
—

—

6,799

6,737

6,821

3.5
BJ's Wholesale Club, Inc.
Warehouse Clubs and Supercenters

Senior Secured Loan

8.73%
(L +7.50%)
2/3/2025
7,300

7,268

6,999

3.7

Carolina Lubes, Inc. (5) (9)
Automotive Oil Change and Lubrication Shops

Senior Secured Loan

9.26%
(L +7.25%)
8/23/2022
21,411

21,226

21,226

11.3
Senior Secured Loan (Revolver)

9.26%
(L +7.25%)
8/23/2022
—

(14 )
(14 )
—
Preferred Equity (973 units) 14% PIK

2,937

2,937

1.6

21,411
24,149
24,149
12.9
Community Intervention Services, Inc. (5)
Outpatient Mental Health and Substance Abuse Centers

Subordinated Loan (7) (11)

7.0% cash / 6.0% PIK
N/A
1/16/2021
8,399

7,639

2,038

1.1
Common equity (Success Fee) (10)

—

—

—

8,399

7,639

2,038

1.1
Confie Seguros Holdings II Co.
Insurance Agencies and Brokerages

Senior Secured Loan

10.99%
(L +9.75%)
5/8/2019
7,851

7,808

7,653

4.1

Constellis Holdings, LLC
Other Justice, Public Order, and Safety Activities

Senior Secured Loan

6.33%
(L +5.00%)
4/21/2024
4,963

4,916

4,981

2.6
Senior Secured Loan

10.33%
(L +9.00%)
4/21/2025
9,950

9,809

9,915

5.3

14,913

14,725

14,896

7.9



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost			Fair Value (3)			Percent of Net Assets
Non-control/Non-affiliate Investments
Debt and Equity Investments
All Star Auto Lights, Inc. (4)	Motor Vehicle Parts (Used) Merchant Wholesalers
Senior Secured Loan		8.50%	(L +7.50%)	12/19/2019	8/20/2024	$	14,365	$	14,222		$	13,667		10.1	%

American Bath Group, LLC (15)	Plastics Plumbing Fixture Manufacturing
Senior Secured Loan		5.00%	(L +4.00%)	6/24/2019	9/30/2023	1,481		1,477			1,457			1.1

A&A Transfer, LLC	Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (15)		8.25%	(L +6.50%)	2/7/2020	2/7/2025	17,064		16,828			16,872			12.5
Senior Secured Loan (Revolver) (5)		8.25%	(L +6.50%)	2/7/2020	2/7/2025	2,136		2,096			2,112			1.6
						19,200		18,925			18,984			14.1
Bass Pro Group, LLC (14) (15)	Sporting Goods Stores
Senior Secured Loan		6.07%	(L +5.00%)	6/24/2019	9/25/2024	2,970		2,915			2,869			2.1

Baymark Health Services, Inc.	Outpatient Mental Health & Sub. Abuse Centers
Senior Secured Loan		10.21%	(L +8.25%)	3/22/2018	3/1/2025	4,000		3,973			3,803			2.8

Brookfield WEC Holdings Inc. (15)	Business to Business Electronic Markets
Senior Secured Loan		3.75%	(L +3.00%)	7/25/2019	8/1/2025	497		491			482			0.4

Calpine Corporation (15)	Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers
Senior Secured Loan		2.43%	(L +2.25%)	6/9/2020	4/6/2026	499		489			482			0.4

Carolina Lubes, Inc.	Automotive Oil Change and Lubrication Shops
Senior Secured Loan (4) (8)		9.10%	(L +7.67%)	8/23/2017	8/23/2022	19,981		19,908			19,451			14.4
Senior Secured Loan (Revolver) (5)		0.25% (18)	(L +7.67%)	8/23/2017	8/23/2022	—		(6		)	(77		)	(0.1	)
						19,981		19,902			19,374			14.3

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~September~~June 30, ~~2017~~2020

(Dollar amounts in thousands)

Portfolio Company(1)
Investment Type Industry Interest Rate (2) Spread Above Index (2) Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets
DuPage Medical Group
Offices of Physicians, Mental Health Specialists

Senior Secured Loan

4.32%
(L +3.00%)
8/15/2024
$ 1,400

$ 1,393

$ 1,400

0.7 %
Senior Secured Loan

8.32%
(L +7.00%)
8/15/2025
5,600

5,545

5,520

2.9

7,000

6,938

6,920

3.6
Eblens Holdings, Inc.
Shoe Store

Subordinated Loan

12.0% cash / 1.0% PIK
N/A
1/13/2023
8,807

8,723

8,723

4.6
Common equity (71,250 units)

713

713

0.4

8,807

9,436

9,436

5.0
Elgin Fasteners Group
Bolt, Nut, Screw, Rivet, and Washer Manufacturing

Senior Secured Loan

8.08%
(L +6.75%)
8/27/2018
3,942

3,926

3,618

1.9

Inhance Technologies Holdings LLC
Other Basic Inorganic Chemical Manufacturing

Senior Secured Loan

5.83%
(L +4.50%)
6/30/2019
1,939

1,929

1,939

1.0

Jobson Healthcare Information, LLC (5)
Other Professional, Scientific, and Technical Services

Senior Secured Loan (11)

10.13% cash / 5.05% PIK
(L +13.18%)
7/21/2019
15,247

15,007

11,841

6.3
Warrants (1,056,428 member units) (10)

7/21/2019 (12)

454

—

—

15,247

15,461

11,841

6.3
LRI Holding, LLC (5)
Electrical Contractors and Other Wiring Installation Contractors

Senior Secured Loan

10.59%
(L +9.25%)
6/30/2022
18,500

18,346

18,553

9.8
Preferred Equity (238,095 units)

300

324

0.2

18,500

18,646

18,877

10.0
Maverick Healthcare Equity, LLC (5)
Home Health Equipment Rental

Preferred Equity (1,250,000 units) (10)

900

132

0.1
Common Equity (1,250,000 units) (10)

—

—

—

900

132

0.1
My Alarm Center, LLC (5)
Security Systems Services (except Locksmiths)

Preferred Equity (1,485 Class A units), 8% PIK (10)

1,509

1,509

0.8
Preferred Equity (1,198 Class B units)

1,198

1,198

0.6
Common Equity (64,149 units)

—

—

—

2,707

2,707

1.4



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Community Intervention Services, Inc. (4) (6) (10) (11)	Outpatient Mental Health and Substance Abuse Centers
Subordinated Loan		7.0% cash / 6.0% PIK	N/A	7/16/2015	1/16/2021	$	9,918	$	7,639	$	—	—	%

Confie Seguros Holdings II Co.	Insurance Agencies and Brokerages
Senior Secured Loan		8.67%	(L +8.50%)	7/7/2015	11/1/2025	9,678		9,530		8,268		6.1

Connect U.S. Finco LLC (14) (15)	Taxi Service
Senior Secured Loan		5.50%	(L +4.50%)	11/20/2019	12/11/2026	1,995		1,986		1,884		1.4

Constellis Holdings, LLC (10)	Other Justice, Public Order, and Safety Activities
Common Equity (20,628 common shares)				3/27/2020				703		707		0.5

Convergint Technologies Holdings, LLC	Security Systems Services (except Locksmiths)
Senior Secured Loan		7.50%	(L +6.75%)	9/28/2018	2/2/2026	3,481		3,434		3,271		2.4

Davis Vision, Inc.	Direct Health and Medical Insurance Carriers
Senior Secured Loan		7.75%	(L +6.75%)	10/31/2019	12/1/2025	405		395		395		0.3

Diamond Sports Group, LLC (14) (15)	Television Broadcasting
Senior Secured Loan		3.43%	(L +3.25%)	11/19/2019	8/24/2026	1,985		1,987		1,625		1.2

DuPage Medical Group (15)	Offices of Physicians, Mental Health Specialists
Senior Secured Loan		7.75%	(L +7.00%)	8/22/2017	8/15/2025	10,098		10,163		9,488		7.0

Eblens Holdings, Inc.	Shoe Store
Subordinated Loan (11)		12.0% cash / 1.0% PIK	N/A	7/13/2017	1/13/2023	9,056		9,015		8,723		6.4
Common Equity (71,250 Class A units) (10)				7/13/2017				713		534		0.4
						9,056		9,728		9,257		6.8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~September~~June 30, ~~2017~~2020

(Dollar amounts in thousands)

Portfolio Company(1)
Investment Type Industry Interest Rate (2) Spread Above Index (2) Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets
MYI Acquiror Limited (6)
Insurance Agencies and Brokerages

Senior Secured Loan

5.80%
(L +4.50%)
5/28/2019
$ 4,686

$ 4,682

$ 4,674

2.5 %

NVA Holdings, Inc.
Veterinary Services

Senior Secured Loan

8.33%
(L +7.00%)
8/14/2022
743

743

750

0.4

O2 Holdings, LLC (5)
Fitness and Recreational Sports Centers

Senior Secured Loan

12.23%
(L +11.00%)
9/2/2021
10,500

10,428

10,389

5.5

Planet Fitness Midwest LLC (5)
Fitness and Recreational Sports Centers

Subordinated Loan

13.00%
N/A
12/16/2021
5,000

4,962

5,033

2.7

PM Acquisition LLC
All Other General Merchandise Stores

Senior Secured Loan

11.50%
N/A
10/31/2021
6,205

6,154

6,070

3.2
Common equity (499 units) (10)

499

255

0.1

6,205

6,653

6,325

3.3
Quantum Spatial, Inc.
Other Information Services

Senior Secured Loan

6.75%
(L +5.50%)
11/27/2017
2,382

2,382

2,375

1.3

Ranpak Corp.
Packaging Machinery Manufacturing

Senior Secured Loan

8.48%
(L +7.25%)
10/3/2022
1,660

1,647

1,643

0.9

Resource Label Group, LLC
Commercial Printing (except Screen and Books)

Senior Secured Loan

5.83%
(L +4.50%)
5/26/2023
1,912

1,894

1,897

1.0
Senior Secured Loan

9.83%
(L +8.50%)
11/26/2023
4,821

4,752

4,764

2.5

6,733

6,646

6,661

3.5
Security Alarm Financing Enterprises, L.P. (5)
Security Systems Services (except Locksmiths)

Subordinated Loan (14)

14.00% cash / 0.3% PIK
(L +13.00%)
6/19/2020
12,514

12,422

12,253

6.5



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4)	Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan		6.75% cash / 5.00% PIK	N/A	6/30/2017	6/30/2022	$	16,784	$	16,658	$	14,822	10.9	%
Preferred Equity (238,095 Series B units) (10)				6/30/2017				300		—		—
Preferred Equity (13,315 Series C units) (10)				8/13/2018				13		—		—
						16,784		16,971		14,822		10.9
Excelin Home Health, LLC	Home Health Care Services
Senior Secured Loan		11.50%	(L +9.50%)	10/25/2018	4/25/2024	4,250		4,191		4,219		3.1

GGC Aerospace Topco L.P.	Other Aircraft Parts and Auxiliary Equipment Manufacturing
Senior Secured Loan		9.75%	(L +8.75%)	12/29/2017	9/8/2024	5,000		4,922		4,204		3.1
Common Equity (368,852 Class A units) (10)				12/29/2017				450		196		0.1
Common Equity (40,984 Class B units) (10)				12/29/2017				50		8		—
						5,000		5,422		4,408		3.2
Inergex Holdings, LLC	Other Computer Related Services
Senior Secured Loan		8.00%	(L +7.00%)	10/1/2018	10/1/2024	16,506		16,329		15,348		11.3
Senior Secured Loan (Revolver) (5)		8.07%	(Prime + 7.00%)	10/1/2018	10/1/2024	1,406		1,386		1,308		1.0
						17,912		17,715		16,656		12.3
Institutional Shareholder Services, Inc.	Administrative Management and General Management Consulting Services
Senior Secured Loan		9.57%	(L +8.50%)	3/4/2019	3/5/2027	6,244		6,087		5,927		4.4

Intouch Midco Inc. (15)	All Other Professional, Scientific, and Technical Services
Senior Secured Loan		4.93%	(L +4.75%)	12/20/2019	8/24/2025	1,990		1,925		1,767		1.3

Milrose Consultants, LLC (4) (8)	All Other Business Support Services
Senior Secured Loan		7.18%	(L +6.18%)	7/16/2019	7/16/2025	11,500		11,428		11,340		8.4

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~September~~June 30, ~~2017~~2020

(Dollar amounts in thousands)

Portfolio Company(1)
Investment Type Industry Interest Rate (2) Spread Above Index (2) Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets
Sentry Centers Holdings, LLC
Other Professional, Scientific, and Technical Services

Senior Secured Loan

12.74%
(L +11.50%)
7/24/2019
$ 4,198

$ 4,153

$ 4,282

2.3 %
Preferred Equity (5,000 units) (10) (13)

516

516

0.3 %

4,198

4,669

4,798

2.6
smarTours, LLC (5)
Tour Operators

Preferred Equity (500,000 units) (10)

439

1,424

0.8

Southern Technical Institute, LLC (5)
Colleges, Universities, and Professional Schools

Subordinated Loan

10.30% cash / 3.0% PIK
(L +12.00%)
12/2/2020
3,494

3,423

2,741

1.5
Preferred Equity (1,764,720 units), 15.75% PIK (8) (10)

2,094

170

0.1
Warrants (2,174,905 units) (10)

3/30/2026 (12)

46

—

—

3,494

5,563

2,911

1.6
Stancor, L.P. (5)
Pump and Pumping Equipment Manufacturing

Senior Secured Loan

9.73%
(L +8.50%)
8/19/2019
8,382

8,354

8,343

4.4
Preferred Equity (1,250,000 units), 8% PIK (8) (10)

1,501

1,046

0.6

8,382

9,855

9,389

5.0
TravelCLICK, Inc.
Computer Systems Design and Related Services

Senior Secured Loan

8.99%
(L +7.75%)
11/6/2021
7,334

7,300

7,401

3.9

Truck Hero, Inc.
Truck Trailer Manufacturing

Senior Secured Loan

9.58%
(L +8.25%)
4/21/2025
4,941

4,870

5,003

2.7
Senior Secured Loan

5.33%
(L +4.00%)
4/21/2024
1,380

1,367

1,387

0.7

6,321

6,237

6,390

3.4
United Biologics Holdings, LLC (5)
Medical Laboratories

Senior Secured Loan (11)

12.0% cash / 2.0% PIK
N/A
4/30/2018
4,245

4,212

4,111

2.2
Subordinated Loan (10)

8.0% PIK
N/A
4/30/2019
7

7

5

—
Preferred Equity (151,787 units) (10)

9

20

—
Warrants (29,374 units) (10)

03/05/2022 (12)

82

20

—

4,252

4,310

4,156

2.2
Total Non-control/Non-affiliate Investments

214,012

224,616

212,206

112.4



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount	Amortized Cost		Fair Value (3)		Percent of Net Assets
My Alarm Center, LLC (4) (10) (13)	Security Systems Services (except Locksmiths)
Preferred Equity (335 Class Z units)				9/12/2018			$	325	$	1,136	0.8	%
Preferred Equity (1,485 Class A units), 8% PIK				7/14/2017			1,571		323		0.2
Preferred Equity (1,198 Class B units)				7/14/2017			1,198		10		—
Common Equity (64,149 units)				7/14/2017			—		—		—
							3,094		1,469		1.0
Online Tech Stores, LLC (4) (6)	Stationary & Office Supply Merchant Wholesaler
Subordinated Loan		13.50% PIK	N/A	2/1/2018	8/1/2023	17,456	16,129		7,124		5.3

OnSite Care, PLLC (4) (8)	Home Health Care Services
Senior Secured Loan		8.73%	(L +7.73%)	8/10/2018	8/10/2023	9,528	9,447		9,404		6.9

Panther BF Aggregator 2 LP (14) (15)	Other Commercial and Service Industry Machinery Manufacturing
Senior Secured Loan		3.68%	(L +3.50%)	11/19/2019	4/30/2026	1,985	1,969		1,898		1.4

Parfums Holding Company, Inc.	Cosmetics, Beauty Supplies, and Perfume Stores
Senior Secured Loan (15)		5.25%	(L +4.25%)	6/25/2019	6/30/2024	1,537	1,536		1,458		1.1
Senior Secured Loan		9.75%	(L +8.75%)	11/16/2017	6/30/2025	6,320	6,331		6,044		4.5
						7,857	7,867		7,502		5.6
Pelican Products, Inc.	Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan		8.75%	(L +7.75%)	9/24/2018	5/1/2026	6,055	6,059		5,389		4.0

PM Acquisition LLC	All Other General Merchandise Stores
Senior Secured Loan		11.50% cash / 2.5% PIK	N/A	9/30/2017	10/29/2021	4,876	4,833		4,397		3.2
Common Equity (499 units) (10) (13)				9/30/2017			499		47		—
						4,876	5,332		4,444		3.2
Quest Software US Holdings Inc. (15)	Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan		5.01%	(L +4.25%)	6/25/2019	5/16/2025	1,980	1,963		1,909		1.4

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~September~~June 30, ~~2017~~2020

(Dollar amounts in thousands)

Portfolio Company(1)
Investment Type Industry Interest Rate (2) Spread Above Index (2) Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets
Affiliate Investments

All Metals Holding, LLC (5)
Metal Service Centers and Other Metal Merchant Wholesalers

Senior Secured Loan

12.0% cash / 1.0% PIK
N/A
12/28/2021
$ 12,965

$ 12,343

$ 12,965

6.9 %
Common Equity (637,954 units) (10)

565

1,484

0.8

12,965

12,908

14,449

7.7
Contract Datascan Holdings, Inc. (5)
Office Machinery and Equipment Rental and Leasing

Subordinated Loan

12.00%
N/A
2/5/2021
8,000

7,984

8,000

4.2
Preferred Equity (3,061 shares), 10% PIK (10)

4,206

5,045

2.7
Common Equity (11,273 shares) (10)

104

—

—

8,000

12,294

13,045

6.9
Malabar International (5)
Other Aircraft Parts and Auxiliary Equipment Manufacturing

Subordinated Loan

11.25% cash / 2.0% PIK
N/A
11/13/2021
7,733

7,752

7,887

4.2
Preferred Stock (1,644 shares), 6% cash

4,283

8,968

4.8

7733

12,035

16,855

9.0
Master Cutlery, LLC (5)
Sporting and Recreational Goods and Supplies Merchant Wholesalers

Senior Secured Loan (11)

13.00%
N/A
10/29/2018
545

545

545

0.3
Subordinated Loan (11)

13.00%
N/A
4/17/2020
4,807

4,792

3,284

1.7
Preferred Equity (3,723 units), 5% cash, 3% PIK (8) (10)

3,483

—

—
Common Equity (15,564 units) (10)

—

—

—

5,352

8,820

3,829

2.0
NeoSystems Corp. (5)
Other Accounting Services

Subordinated Loan

10.50% cash / 1.75% PIK
N/A
8/13/2019
2,135

2,128

2,082

1.1
Preferred Equity (521,962 convertible shares), 10% PIK (10)

1,356

2,209

1.2

2,135

3,484

4,291

2.3
Pfanstiehl Holdings, Inc. (5)
Pharmaceutical Preparation Manufacturing

Subordinated Loan

10.50%
N/A
9/29/2021
3,788

3,823

3,788

2.0
Common Equity (400 shares)

217

4,975

2.6

3,788

4,040

8,763

4.6



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Resource Label Group, LLC	Commercial Printing (except Screen and Books)
Senior Secured Loan		9.95%	(L +8.50%)	6/7/2017	11/26/2023	$	4,821	$	4,784	$	4,346	3.2	%

Rocket Software, Inc. (15)	Software Publishers
Senior Secured Loan		9.01%	(L +8.25%)	11/20/2018	11/28/2026	6,275		6,174		5,933		4.4

RPLF Holdings, LLC (10) (13)	Software Publishers
Common Equity (254,110 Class A units)				1/17/2018				254		331		0.2

Sentry Centers Holdings, LLC (10) (13)	Other Professional, Scientific, and Technical Services
Common Equity (5,000 Series C units)				3/31/2014				500		200		0.1

SourceHOV Tax, Inc. (4) (8)	Other Accounting Services
Senior Secured Loan		7.87%	(L +6.37%)	3/16/2020	3/17/2025	12,915		12,826		12,739		9.5

Southern Technical Institute, LLC (4) (6) (10)	Colleges, Universities, and Professional Schools
Subordinated Loan		6.00% PIK	N/A	6/27/2018	12/31/2021	1,660		—		1,153		0.9
Equity appreciation rights				6/27/2018				—		957		0.7
						1,660		—		2,110		1.6
Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,)	Child Day Care Services
Senior Secured Loan		8.56%	(L +8.25%)	7/26/2018	7/30/2026	5,216		5,176		4,896		3.6

SSJA Bariatric Management LLC (15)	Offices of Physicians, Mental Health Specialists
Senior Secured Loan		6.00%	(L +5.00%)	8/26/2019	8/26/2024	9,975		9,892		9,196		6.8
Senior Secured Loan (Revolver) (5)		5.00%	(L +4.00%)	8/26/2019	8/26/2024	667		661		615		0.5
						10,642		10,553		9,811		7.3
Stancor, L.P. (4)	Pump and Pumping Equipment Manufacturing
Preferred Equity (1,250,000 Class A units), 8% PIK (10)				8/19/2014				1,501		1,236		0.9

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~September~~June 30, ~~2017~~2020

(Dollar amounts in thousands)

Portfolio Company(1)
Investment Type Industry Interest Rate (2) Spread Above Index (2) Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets
TRS Services, LLC (5)
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance

Senior Secured Loan

9.74%
(L +9.25%)
12/10/2019
$ 9,494

$ 9,346

$ 9,494

5.0 %
Preferred Equity (329,266 Class AA units), 15% PIK (10)

387

395

0.2
Preferred Equity (3,000,000 Class A units), 11% PIK (8) (10)

3,374

2,606

1.4
Common Equity (3,000,000 units) (10)

572

—

—

9,494

13,679

12,495

6.6
Total Affiliate Investments

49,467

67,260

73,727

39.1
Control Investments

MTE Holding Corp. (5)
Travel Trailer and Camper Manufacturing

Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.)

12.73% cash / 1.5% PIK
(L +13.00%)
11/25/2020
7,158

7,113

7,108

3.8
Common Equity (554 shares)

3,069

3,589

1.9

7,158

10,182

10,697

5.7
Total Control Investment

7,158

10,182

10,697

5.7

Total Investments

$ 270,637

$ 302,058

$ 296,630

157.2 %



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Staples, Inc. (14) (15)	Business to Business Electronic Markets
Senior Secured Loan		5.69%	(L +5.00%)	6/24/2019	4/16/2026	$	2,975	$	2,899	$	2,583	1.9	%

STS Operating, Inc.	Industrial Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (15)		5.25%	(L +4.25%)	5/16/2018	12/11/2024	629		628		583		0.4
Senior Secured Loan		9.00%	(L +8.00%)	5/15/2018	4/30/2026	9,073		9,070		8,274		6.1
						9,702		9,698		8,857		6.5
Sunshine Luxembourg VII SARL (14) (15)	Pharmaceutical Preparation Manufacturing
Senior Secured Loan		5.32%	(L +4.25%)	11/20/2019	9/25/2026	1,990		1,999		1,912		1.4

Tank Holding Corp. (15)	Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan		4.94%	(L +3.50%)	6/24/2019	3/26/2026	1,985		1,992		1,866		1.4

The Escape Game, LLC (4)	Other amusement and recreation industries
Senior Secured Loan		9.75%	(L +8.75%)	12/22/2017	12/22/2022	7,000		6,965		6,504		4.8
Senior Secured Loan		9.75%	(L +8.75%)	2/14/2020	12/31/2020	2,333		2,313		2,168		1.6
Senior Secured Loan		8.00%	(L +7.00%)	7/18/2019	12/31/2020	4,667		4,656		4,549		3.4
Senior Secured Loan (Delayed Draw)		9.75%	(L +8.75%)	7/20/2018	12/22/2022	7,000		7,000		6,504		4.8
						21,000		20,934		19,725		14.6
Transdigm Inc. (15)	Administrative Management and General Management Consulting Services
Senior Secured Loan		2.43%	(L +2.25%)	6/10/2020	5/30/2025	499		476		451		0.3

Truck Hero, Inc. (15)	Truck Trailer Manufacturing
Senior Secured Loan		9.25%	(L +8.25%)	5/30/2017	4/21/2025	7,014		6,993		6,538		4.8

United Biologics Holdings, LLC (4) (10)	Medical Laboratories
Preferred Equity (151,787 units)				4/16/2013				9		36		—
Warrants (29,374 units)				7/26/2012	3/5/2022 (12)			82		22		—
								91		58		—

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

June 30, 2020

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
United Natural Foods (15)	General Line Grocery Merchant Wholesalers
Senior Secured Loan		4.42%	(L +4.25%)	6/9/2020	10/22/2025	$	500	$	480	$	480	0.4	%

Wastebuilt Environmental Solutions, LLC (4)	Industrial Supplies Merchant Wholesalers
Senior Secured Loan		10.25%	(L +8.75%)	10/11/2018	10/11/2024	7,000		6,895		4,945		3.7

Weight Watchers International, Inc. (14) (15)	Diet and Weight Reducing Centers
Senior Secured Loan		5.50%	(L +4.75%)	6/10/2020	11/29/2024	492		492		492		0.4

Xperi (14) (15)	Semiconductor and Related Device Manufacturing
Senior Secured Loan		4.17%	(L +4.00%)	6/1/2020	6/1/2025	520		475		475		0.4

Total Debt and Equity Investments						$	318,232	$	318,750	$	284,275	210.0	%

Structured Finance Note Investments
Dryden 76 CLO, Ltd. (7)
Subordinated Notes		18.24% (9)		9/27/2019	10/20/2032 (17)	2,750		2,346 (16)		2,013		1.5

Elevation CLO 2017-7, Ltd. (7)
Subordinated Notes		13.10% (9)		2/6/2019	7/15/2030 (17)	10,000		7,210 (16)		5,343		3.9

Flatiron CLO 18, Ltd. (7)
Subordinated Notes		19.58% (9)		1/2/2019	4/17/2031 (17)	9,680		7,218 (16)		6,433		4.8

Madison Park Funding XXIII, Ltd. (7)
Subordinated Notes		20.74% (9)		1/8/2020	7/27/2047 (17)	10,000		6,792 (16)		6,371		4.7

Octagon Investment Partners 39, Ltd. (7)
Subordinated Notes		18.92% (9)		1/23/2020	10/20/2030 (17)	7,000		5,206 (16)		4,668		3.4

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

June 30, 2020

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Park Avenue Institutional Advisers CLO 2017-1
Mezzanine bond - Class D		12.98% (9)	(L +6.22%)	6/5/2020	11/14/2029 (17)	$	100	$	80	$	86	0.1	%

Regatta II Funding
Mezzanine bond - Class DR2		13.56% (9)	(L +6.95%)	6/5/2020	1/15/2029 (17)	800		673		704		0.5

THL Credit Wind River 2019‐3 CLO Ltd (7)
Subordinated Notes		13.19% (9)		4/5/2019	4/15/2031 (17)	7,000		5,729 (16)		4,412		3.3

Total Structured Finance Note Investments						$	47,330	$	35,254	$	30,030	22.2	%

Total Non-control/Non-affiliate Investments						$	365,562	$	354,004	$	314,305	232.2	%
Affiliate Investments
3rd Rock Gaming Holdings, LLC	Software Publishers
Senior Secured Loan (6)		8.50% cash / 1.0% PIK	(L +7.50%)	3/13/2018	3/12/2023	21,231		20,993		12,916		9.5
Common Equity (2,547,250 units) (10) (13)				3/13/2018				2,547		—		—
						21,231		23,540		12,916		9.5
Chemical Resources Holdings, Inc.	Custom Compounding of Purchased Resins
Senior Secured Loan (4) (8)		9.33%	(L +7.83%)	1/25/2019	1/25/2024	13,743		13,611		13,459		9.9
Common Equity (1,832 Class A shares) (10) (13)				1/25/2019				1,813		2,111		1.6
						13,743		15,424		15,570		11.5
Contract Datascan Holdings, Inc. (4)	Office Machinery and Equipment Rental and Leasing
Subordinated Loan		12.00%	N/A	8/5/2015	2/5/2021	8,022		8,005		7,557		5.6
Preferred Equity (3,061 Series A shares), 10% PIK				8/5/2015				5,848		2,572		1.9
Common Equity (11,273 shares) (10)				6/28/2016				104		51		—
						8,022		13,957		10,180		7.5
DRS Imaging Services, LLC	Data Processing, Hosting, and Related Services
Senior Secured Loan (4) (8)		10.17%	(L +9.17%)	3/8/2018	11/20/2023	10,664		10,604		10,336		7.6
Common Equity (1,135 units) (10) (13)				3/8/2018				1,135		1,356		1.0
						10,664		11,739		11,692		8.6

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

June 30, 2020

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Master Cutlery, LLC (4) (6) (10)	Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan (11)		13.00%	N/A	4/17/2015	7/31/2020	$	6,340	$	4,764	$	—	—	%
Preferred Equity (3,723 Series A units), 8% PIK				4/17/2015				3,483		—		—
Common Equity (15,564 units)				4/17/2015				—		—		—
						6,340		8,247		—		—
NeoSystems Corp. (4)	Other Accounting Services
Preferred Equity (521,962 convertible shares), 10% PIK				8/14/2014				1,785		2,250		1.7

Pfanstiehl Holdings, Inc. (4)	Pharmaceutical Preparation Manufacturing
Subordinated Loan		10.50%	N/A	1/1/2014	9/27/2024	3,788		3,788		3,788		2.8
Common Equity (400 Class A shares)				1/1/2014				217		24,051		17.8
						3,788		4,005		27,839		20.6
Professional Pipe Holdings, LLC	Plumbing, Heating, and Air-Conditioning Contractors
Senior Secured Loan		9.75% cash / 1.50% PIK	(L +8.75%)	3/23/2018	3/23/2023	7,153		7,076		6,654		4.9
Common Equity (1,414 Class A units) (10)				3/23/2018				1,414		1,150		0.8
						7,153		8,490		7,804		5.7
TalentSmart Holdings, LLC	Professional and Management Development Training
Senior Secured Loan (4)		8.50%	(L +6.75%)	10/11/2019	10/11/2024	9,875		9,727		8,438		6.2
Senior Secured Loan (Revolver) (5) (18)		8.50%	(L +6.75%)	10/11/2019	10/11/2024	500		493		427		0.3
Common Equity (1,595 Class A shares) (10) (13)				10/11/2019				1,595		840		0.6
						10,375		11,815		9,705		7.1
TRS Services, LLC (4) (10)	Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
Preferred Equity (2,088,305 Class A units), 11% PIK				12/10/2014				279		706		0.5
Common Equity (3,000,000 units)				12/10/2014				572		—		—
						—		851		706		0.5

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

June 30, 2020

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
TTG Healthcare, LLC	Diagnostic Imaging Centers
Senior Secured Loan (4)		10.00%	(L +9.00%)	3/1/2019	3/1/2024	$	12,103	$	11,961	$	11,897	8.8	%
Preferred Equity ( 2,309 Class B units) (10) (13)				3/1/2019				2,309		3,488		2.6
						12,103		14,270		15,385		11.4

Total Affiliate Investments						$	93,419	$	114,123	$	114,047	84.1	%
Control Investment
MTE Holding Corp. (4)	Travel Trailer and Camper Manufacturing
Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.)		9.50% cash / 4.5% PIK	(L +8.50%)	11/25/2015	11/25/2020	7,651		7,645		7,410		5.5
Common Equity (554 shares)				11/25/2015				3,069		—		—
						7,651		10,714		7,410		5.5
Total Control Investment						$	7,651	$	10,714	$	7,410	5.5	%

Total Investments						$	466,632	$	478,841	$	435,762	321.8	%


(1)	Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.

(2)

~~The majority~~Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L), at June 30, 2020, and reset monthly, quarterly, or semi-annually. ~~Approximately 11%~~Variable-rate loans with an aggregate cost of ~~the Company's~~$338,417 include LIBOR ~~referenced investments are subject to a~~ reference rate floor provisions of generally 0.75% to 1.75%; at ~~September~~June 30, ~~2017, with a weighted average~~2020, the reference rate on such instruments was generally below the stated floor ~~of 1.70%.~~provisions. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at ~~September~~June 30, ~~2017.~~2020. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.


(3)	~~Fair~~Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's ~~investments.~~investments and are considered Level 3 under GAAP. See Note 5 for further details.


(4)	~~The negative amount represents the excess~~Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the ~~par value~~SBA debentures and can not be pledged under any debt obligation of ~~an unfunded commitment in excess of its fair value.~~the Company.


(5)	~~Investments (or portion thereof) held by OFS SBIC I, LP. All other investments pledged as collateral under the PWB Credit Facility.~~ Subject to unfunded commitments. See Note 6 for further details.


(6)	Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company's assets, as defined under Section 55 of the 1940 Act, at the time of acquisition of any additional non-qualifying assets. As of September 30, 2017, 97.47% of the Company's assets were qualifying assets.


~~(7)~~	Investment was on non-accrual status as of ~~September~~June 30, ~~2017,~~2020, meaning the Company has ceased ~~recognizing~~recognition of all or a portion of income on the investment. See Note 2, ~~Non-accrual loans~~4 for further details.


~~(8)~~(7)	~~The fair value~~CLO subordinated debt positions are entitled to recurring distributions which are generally equal to the remaining cash flow of ~~the accrued PIK dividend at September 30, 2017 was $-0-. See~~ ~~Note 2~~, ~~Dividend income~~ ~~for further details.~~ payments made by underlying securities less contractual payments to debt holders and fund expenses.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

June 30, 2020

(Dollar amounts in thousands)


~~(9)~~(8)	The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The ~~reported interest~~table below provides additional details as of June 30, 2020:



Portfolio Company	Reported Interest Rate	Interest Rate per Credit Agreement	Additional Interest per Annum
Carolina Lubes, Inc.	9.10%	8.68%	0.42%
Chemical Resources Holdings, Inc.	9.33%	7.50%	1.83%
DRS Imaging Services, LLC	10.17%	9.00%	1.17%
Milrose Consultants, LLC	7.18%	6.50%	0.68%
OnSite Care, PLLC	8.73%	7.25%	1.48%
SourceHOV Tax, Inc.	7.87%	7.00%	0.87%

(9)

The rate disclosed is an estimated effective yield, historically established at the time of ~~9.26%~~the most recent distribution, and based upon the projection of the amount and timing of distributions in addition to the estimated amount and timing of terminal principal payments at ~~September 30, 2017, includes additional interest of 0.7% per annum as specified under~~that time. Effective yields for the ~~contractual arrangement among the Company~~Company's Structured Finance Note investments are monitored and ~~the co‑lenders.~~evaluated at each reporting date. The estimated yield and investment cost may ultimately not be realized.


(10)	Non-income producing.

~~OFS Capital Corporation and Subsidiaries~~

~~Consolidated Schedule~~(11)The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of ~~Investments - Continued~~

~~September~~additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of June 30, ~~2017~~

~~(Dollar amounts in thousands)~~

~~(11)~~

The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of September 30, 2017:

2020:



Portfolio Company	Investment Type	Range of PIK Option	Range of Cash Option	Maximum PIK Rate Allowed
Community Intervention Services, Inc.	Subordinated Loan	0% or 6.00%	13.00% or 7.00%	~~6.00~~	%6.00%
Eblens Holdings, Inc.	Subordinated Loan	0% or 1.00%	~~12.0%~~13.00% or ~~13.0%~~12.00%	~~1.00~~	%
~~Jobson Healthcare Information, LLC~~	~~Senior Secured Loan~~	~~1.5% or 4.80%~~	~~10.13% or 13.43%~~	~~4.80~~	%1.00%
Master ~~Cultery,~~Cutlery, LLC	Senior Secured Loan	0% to 13.00%	13.00% to 0%	~~13.00~~	%
~~United Biologics Holdings, LLC~~	~~Senior Secured Loan~~	~~0% or 2.00%~~	~~14.00% or 12.00%~~	~~2.00~~	%13.00%


(12)	Represents expiration date of the warrants.


(13)	~~Investment~~All or portion of investment held by a wholly-owned subsidiary subject to income tax.


(14)	Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note ~~2, Income taxes,~~5 for further details.


~~(14)~~(15)	~~The PIK provision is reset at~~Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the ~~beginning~~BNP Credit Facility and can not be pledged under any debt obligation of ~~each interest period equal~~the Company.


(16)	Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to ~~the excess of reference rate over the reference rate floor of 1.00%. The PIK interest rate in the schedule~~be received from CLO subordinated debt investments.


(17)	Maturity represents the ~~current PIK interest rate~~contractual maturity date of the structured finance notes. Expected maturity and cash flows, not contractual maturity and cash flows, were utilized in ~~effect.~~deriving the effective yield of the investments.


(18)	Commitment fee on undrawn funds.

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, ~~2016~~2019

(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type Industry Interest Rate (2)
Spread Above
Index (2)
Maturity
Principal
Amount
Amortized Cost Fair Value (3)
Percent of
Net Assets
Non-control/Non-affiliate Investments
Accurate Group Holdings, Inc. (5) Offices of Real Estate Appraisers
Subordinated Loan 13.00% N/A 8/23/2018 $ 10,000
$ 10,032
$ 10,000
7.0 %

Armor Holdings II LLC Other Professional, Scientific, and Technical Services
Senior Secured Loan 10.25% (L +9.00%) 12/26/2020 3,500
3,469
3,496
2.4

AssuredPartners, Inc Insurance Agencies and Brokerages
Senior Secured Loan 10.00% (L +9.00%) 10/20/2023 5,000
4,854
5,013
3.5

Avison Young Canada, Inc. Offices of Real Estate Agents and Brokers

Senior Secured Loan (5) (6) 9.50% N/A 12/15/2021 4,000
3,923
3,923
2.7

BCC Software, LLC (5) Custom Computer Programming Services
Senior Secured Loan 9.00% (L +8.00%) 6/20/2019 5,143
5,105
5,143
3.6
Senior Secured Loan (Revolver) (11) (4) N/A (L +8.00%) 6/20/2019 —
(8 ) —
—
5,143
5,097
5,143
3.6
Community Intervention Services, Inc. (5) Outpatient Mental Health and Substance Abuse Centers
Subordinated Loan (7) (12) 7.0% cash / 6.0% PIK N/A 1/16/2021 8,030
7,639
5,393
3.8

Confie Seguros Holdings II Co. Insurance Agencies and Brokerages
Senior Secured Loan 10.25% (L +9.00%) 5/8/2019 4,000
3,976
3,973
2.8

C7 Data Centers, Inc. (5) Other Computer Related Services
Senior Secured Loan (10) 12.47% (L +8.50%) 6/22/2020 14,850
14,738
14,883
10.4

Elgin Fasteners Group Bolt, Nut, Screw, Rivet, and Washer Manufacturing
Senior Secured Loan 8.50% (L +7.25%) 8/27/2018 4,104
4,090
3,555
2.5

Inhance Technologies Holdings LLC Other Basic Inorganic Chemical Manufacturing
Senior Secured Loan 5.50% (L +4.50%) 2/7/2018 2,032
2,027
2,017
1.4



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Non-control/Non-affiliate Investments
Acrisure, LLC (14) (15)	Insurance Agencies and Brokerages
Senior Secured Loan		6.19%	(L +4.25%)	10/29/2019	11/15/2023	$	1,995	$	1,971	$	2,004	1.2	%

AHP Health Partners (14) (15)	General Medical and Surgical Hospitals
Senior Secured Loan		6.30%	(L +4.50%)	6/27/2019	6/30/2025	2,607		2,612		2,632		1.6

Albertson's Holdings LLC (14) (15)	Supermarkets and Other Grocery (except Convenience) Stores
Senior Secured Loan		4.55%	(L +2.75%)	6/24/2019	11/17/2025	1,082		1,081		1,094		0.7

All Star Auto Lights, Inc. (4)	Motor Vehicle Parts (Used) Merchant Wholesalers
Senior Secured Loan		9.24%	(L +7.50%)	12/19/2019	8/20/2024	13,250		13,119		13,119		7.9

American Bath Group, LLC (14) (15)	Plastics Plumbing Fixture Manufacturing
Senior Secured Loan		6.05%	(L +4.25%)	6/24/2019	9/30/2023	1,489		1,484		1,498		0.9

AppLovin Corporation (14) (15)	Advertising Agencies
Senior Secured Loan		5.30%	(L +3.50%)	6/24/2019	8/15/2025	1,985		1,987		2,001		1.2

Asurion, LLC (14) (15)	Communication Equipment Repair and Maintenance
Senior Secured Loan		4.80%	(L +3.00%)	6/24/2019	11/3/2024	1,985		1,985		1,998		1.2
Senior Secured Loan		4.80%	(L +3.00%)	7/24/2019	11/3/2023	995		997		1,002		0.6
Senior Secured Loan		8.30%	(L +6.50%)	11/19/2019	8/24/2025	1,500		1,511		1,511		0.9
						4,480		4,493		4,511		2.7
Athenahealth, Inc. (14) (15)	Software Publishers
Senior Secured Loan		6.40%	(L +4.50%)	6/24/2019	2/11/2026	1,985		1,990		1,998		1.2

Bass Pro Group, LLC (14) (15)	Sporting Goods Stores
Senior Secured Loan		6.80%	(L +5.00%)	6/24/2019	9/25/2024	1,985		1,921		1,983		1.2

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, ~~2016~~2019

(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type Industry Interest Rate (2)
Spread Above
Index (2)
Maturity
Principal
Amount
Amortized Cost Fair Value (3)
Percent of
Net Assets
Intrafusion Holding Corp. (5) Other Outpatient Care Centers
Senior Secured Loan (9) 11.33% (L +6.75%) 9/25/2020 $ 14,250
$ 14,207
$ 14,393
10.0 %

Jobson Healthcare Information, LLC (5) Other Professional, Scientific, and Technical Services
Senior Secured Loan (12) 10.13% cash / 4.295% PIK (L +12.425%) 7/21/2019 14,762
14,423
12,346
8.6
Warrants (1,056,428 member units) (11) 7/21/2019 (12) 454
—
—
14,762
14,877
12,346
8.6
Maverick Healthcare Equity, LLC (5) Home Health Equipment Rental
Preferred Equity (1,250,000 units) (11) 900
1,037
0.7
Common Equity (1,250,000 units) (11) —
—
—
900
1,037
0.7
MN Acquisition, LLC (5) Software Publishers
Senior Secured Loan 10.50% (L + 9.50%) 8/24/2021 4,989
4,896
4,949
3.4

My Alarm Center, LLC (5) Security Systems Services (except Locksmiths)
Senior Secured Loan 12.00% (L +11.00%) 7/9/2019 6,250
6,034
6,260
4.4
Preferred Equity (100 Class A units) (11) 203
205
0.1
Preferred Equity (25 Class A-1 units) (11) 44
36
—
6,250
6,281
6,501
4.5
MYI Acquiror Limited (6) Insurance Agencies and Brokerages
Senior Secured Loan 5.75% (L +4.50%) 5/28/2019 4,686
4,680
4,613
3.2

NHR Holdings, LLC Other Telecommunications
Senior Secured Loan 5.50% (L +4.25%) 11/30/2018 2,666
2,652
2,630
1.8

NVA Holdings, Inc. Veterinary Services
Senior Secured Loan 8.00% (L +7.00%) 8/14/2022 650
650
651
0.5

O2 Holdings, LLC (5) Fitness and Recreational Sports Centers
Senior Secured Loan 11.77% (L +11.00%) 9/2/2021 9,500
9,417
9,430
6.6



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost			Fair Value (3)			Percent of Net Assets
BayMark Health Services, Inc.	Outpatient Mental Health and Substance Abuse Centers
Senior Secured Loan		10.21%	(L +8.25%)	3/22/2018	3/1/2025	$	4,000	$	3,970		$	4,000		2.4	%

Blackhawk Network Holdings, Inc. (14) (15)	Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan		4.80%	(L +3.00%)	10/30/2019	6/15/2025	1,995		1,982			1,999			1.2

BrightSpring Health Services (14) (15)	Residential Intellectual and Developmental Disability Facilities
Senior Secured Loan		6.21%	(L +4.50%)	6/24/2019	3/5/2026	2,985		2,991			3,006			1.8

Brookfield WEC Holdings Inc. (14) (15)	Business to Business Electronic Markets
Senior Secured Loan		4.67%	(L +3.00%)	7/25/2019	8/1/2025	1,990		2,000			2,000			1.2

Carolina Lubes, Inc.	Automotive Oil Change and Lubrication Shops
Senior Secured Loan (4) (8)		9.83%	(L +7.73%)	8/23/2017	8/23/2022	20,268		20,172			20,466			12.3
Senior Secured Loan (Revolver) (5)		0.25% (18)	(L +7.25%)	8/23/2017	8/23/2022	—		(8		)	(8		)	—
						20,268		20,164			20,458			12.3
Charter NEX US, Inc. (14) (15)	Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan		5.30%	(L +3.50%)	10/30/2019	5/16/2024	2,000		1,985			1,985			1.2

CHG Healthcare Services, Inc. (15)	All Other Outpatient Care Centers
Senior Secured Loan		4.80%	(L +3.00%)	7/24/2019	6/7/2023	1,999		2,001			2,015			1.2

Cirrus Medical Staffing, Inc. (4)	Temporary Help Services
Senior Secured Loan		10.19%	(L +8.25%)	3/5/2018	10/19/2022	12,564		12,458			12,358			7.4
Senior Secured Loan (Revolver)		10.19%	(L +8.25%)	3/5/2018	10/19/2022	1,408		1,408			1,384			0.8
						13,972		13,866			13,742			8.2
Community Intervention Services, Inc. (4) (6) (10) (11)	Outpatient Mental Health and Substance Abuse Centers
Subordinated Loan		7.00% cash / 6.00% PIK	N/A	7/16/2015	1/16/2021	9,624		7,639			—			—

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, ~~2016~~2019

(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type Industry Interest Rate (2)
Spread Above
Index (2)
Maturity
Principal
Amount
Amortized Cost Fair Value (3)
Percent of
Net Assets
PM Acquisition LLC All Other General Merchandise Stores

Senior Secured Loan 11.50% N/A 10/31/2021 $ 6,402
$ 6,340
$ 6,340
4.4 %
Common equity (499 units) (11) 499
499
0.3
6,402
6,839
6,839
4.7
Planet Fitness Midwest LLC (5) Fitness and Recreational Sports Centers
Subordinated Loan 13.00% N/A 12/16/2021 5,000
4,955
4,980
3.5

Quantum Spatial, Inc. (f/k/a Aero-Metric, Inc.) Other Information Services
Senior Secured Loan 6.75% cash / 1.0% PIK (L +6.50%) 8/27/2017 2,440
2,427
2,340
1.6

Ranpak Corp. Packaging Machinery Manufacturing
Senior Secured Loan 8.25% (L +7.25%) 10/3/2022 2,000
1,996
1,885
1.3

Security Alarm Financing Enterprises, L.P. (5) Security Systems Services (except Locksmiths)
Subordinated Loan 14.00% (L +13.00%) 6/19/2020 12,500
12,382
12,382
8.6

Sentry Centers Holdings, LLC Other Professional, Scientific, and Technical Services
Senior Secured Loan 12.40% (L +11.50%) 7/24/2019 4,209
4,145
4,171
2.9

smarTours, LLC (5) Tour Operators
Preferred Equity (500,000 units) (11) 439
1,019
0.7

Southern Technical Institute, LLC (5) Colleges, Universities, and Professional Schools
Subordinated Loan 9.0% cash / 4.0% PIK (L +12.00%) 12/2/2020 3,398
3,330
3,158
2.2
Preferred Equity (1,764,720 units), 15.75% PIK (11) 1,938
1,984
1.4
Warrants (2,174,905 units) (11) 3/30/2026 (12) 46
—
—
3,398
5,314
5,142
3.6



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Confie Seguros Holdings II Co. (14)	Insurance Agencies and Brokerages
Senior Secured Loan		10.41%	(L +8.50%)	7/7/2015	11/1/2025	$	9,678	$	9,515	$	9,382	5.6	%

Connect U.S. Finco LLC (14) (15)	Taxi Service
Senior Secured Loan		6.29%	(L +4.50%)	11/20/2019	12/11/2026	2,000		1,990		1,990		1.2

Constellis Holdings, LLC (6)	Other Justice, Public Order, and Safety Activities
Senior Secured Loan		10.93%	(L +9.00%)	4/28/2017	4/21/2025	9,950		9,846		407		0.2

Convergint Technologies Holdings, LLC	Security Systems Services (except Locksmiths)
Senior Secured Loan		8.55%	(L +6.75%)	9/28/2018	2/2/2026	3,481		3,430		3,424		2.1

Curium BidCo S.A R.L. (14) (15)	Pharmaceutical and Medicine Manufacturing
Senior Secured Loan		5.94%	(L +4.00%)	10/29/2019	7/1/2026	848		853		853		0.5

Davis Vision, Inc.	Direct Health and Medical Insurance Carriers
Senior Secured Loan		8.55%	(L +6.75%)	10/31/2019	12/1/2025	405		395		405		0.2

Dexko Global Inc. (14) (15)	Motor Vehicle Body Manufacturing
Senior Secured Loan		5.30%	(L +3.50%)	10/30/2019	7/24/2024	1,995		1,970		1,997		1.2

Diamond Sports Group, LLC (14) (15)	Television Broadcasting
Senior Secured Loan		5.03%	(L +3.25%)	11/19/2019	8/24/2026	1,995		1,997		1,997		1.2

DuPage Medical Group (15)	Offices of Physicians, Mental Health Specialists
Senior Secured Loan		8.80%	(L +7.00%)	8/22/2017	8/15/2025	10,098		10,170		10,098		6.1

Eblens Holdings, Inc.	Shoe Store
Subordinated Loan (11)		12.00% cash / 1.00% PIK		7/13/2017	1/13/2023	9,010		8,962		9,025		5.4
Common Equity (71,250 Class A units) (10)				7/13/2017				713		892		0.5
						9,010		9,675		9,917		5.9

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, ~~2016~~2019

(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type Industry Interest Rate (2)
Spread Above
Index (2)
Maturity
Principal
Amount
Amortized Cost Fair Value (3)
Percent of
Net Assets
Stancor, L.P. (5) Pump and Pumping Equipment Manufacturing
Senior Secured Loan 9.75% (L +9.00%) 8/19/2019 $ 9,450
$ 9,407
$ 9,181
6.4 %
Preferred Equity (1,250,000 units), 8% PIK (11) 1,501
835
0.6
9,450
10,908
10,016
7.0
TravelCLICK, Inc. Computer Systems Design and Related Services
Senior Secured Loan 8.75% (L +7.75%) 11/8/2021 4,000
3,879
3,946
2.7

United Biologics Holdings, LLC (5) Medical Laboratories
Senior Secured Loan (12) 12.0% cash / 2.0% PIK N/A 4/30/2018 4,181
4,106
4,034
2.8
Subordinated Loan (11) 8.0% PIK N/A 4/30/2019 7
7
6
—
Preferred Equity (151,787 units) (11) 9
20
—
Warrants (29,374 units) (11) 3/5/2022 (12) 82
114
0.1
4,188
4,204
4,174
2.9
VanDeMark Chemical Inc. Other Basic Inorganic Chemical Manufacturing
Senior Secured Loan 6.50% (L +5.25%) 11/30/2017 2,406
2,386
2,379
1.7

Total Non-control/Non-affiliate Investments 174,405
178,279
173,219
120.6
Affiliate Investments
All Metals Holding, LLC (5) Metal Service Centers and Other Metal Merchant Wholesalers
Senior Secured Loan 12.0% cash / 1.0% PIK N/A 12/28/2021 12,867
12,135
12,865
8.9
Common Equity (637,954 units) (11) 565
1,277
0.9
12,867
12,700
14,142
9.8
Contract Datascan Holdings, Inc. (5) Office Machinery and Equipment Rental and Leasing
Subordinated Loan 12.00% N/A 2/5/2021 8,000
7,980
7,902
5.5
Preferred Equity (3,061 shares), 10% PIK (11) 3,804
5,421
3.8
Common Equity (11,273 shares) (11) 104
187
0.1
8,000
11,888
13,510
9.4



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Endo International PLC (14) (15)	Pharmaceutical Preparation Manufacturing
Senior Secured Loan		6.06%	(L +4.25%)	6/24/2019	4/29/2024	$	1,985	$	1,897	$	1,906	1.1	%

Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4)	Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan		6.00% cash / 5.00% PIK	(L +6.00%)	6/30/2017	6/30/2022	16,367		16,207		14,639		8.8
Preferred Equity (238,095 Series B units) (10)				6/30/2017				300		—		—
Preferred Equity (13,315 Series C units) (10)				8/13/2018				13		—		—
						16,367		16,520		14,639		8.8
Excelin Home Health, LLC	Home Health Care Services
Senior Secured Loan		11.50%	(L +9.50%)	10/25/2018	4/25/2024	4,250		4,183		4,070		2.4

Explorer Holdings, Inc. (14) (15)	Testing Laboratories
Senior Secured Loan		5.60%	(L +3.75%)	6/25/2019	5/2/2023	1,985		1,987		2,004		1.2

Garda World Security (14) (15)	Security Systems Services (except Locksmiths)
Senior Secured Loan		6.66%	(L +4.75%)	10/24/2019	10/30/2026	1,667		1,634		1,680		1.0

GGC Aerospace Topco L.P.	Other Aircraft Parts and Auxiliary Equipment Manufacturing
Senior Secured Loan		10.65%	(L +8.75%)	12/29/2017	9/8/2024	5,000		4,912		4,084		2.5
Common Equity (368,852 Class A units) (10)				12/29/2017				450		124		0.1
Common Equity (40,984 Class B units) (10)				12/29/2017				50		5		—
						5,000		5,412		4,213		2.6
Hyland Software, Inc.	Software Publishers
Senior Secured Loan (14) (15)		5.30%	(L +3.50%)	10/24/2018	7/1/2024	1,660		1,655		1,672		1.0
Senior Secured Loan		8.80%	(L +7.00%)	10/24/2018	7/7/2025	2,601		2,614		2,617		1.6
						4,261		4,269		4,289		2.6
Inergex Holdings, LLC	Other Computer Related Services
Senior Secured Loan		8.94%	(L +7.00%)	10/1/2018	10/1/2024	16,590		16,389		16,489		9.9
Senior Secured Loan (Revolver) (5) (18)		6.05%	(L +7.00%)	10/1/2018	10/1/2024	1,875		1,853		1,864		1.1
						18,465		18,242		18,353		11.0

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, ~~2016~~2019

(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type Industry Interest Rate (2)
Spread Above
Index (2)
Maturity
Principal
Amount
Amortized Cost Fair Value (3)
Percent of
Net Assets
Intelli-Mark Technologies, Inc.(5) Other Travel Arrangement and Reservation Services
Senior Secured Loan (12) 13.00% N/A 11/23/2020 $ 8,750
$ 8,682
$ 8,841
6.2 %
Common Equity (2,553,089 shares) (11) 1,500
1,998
1.5
8,750
10,182
10,839
7.7
Master Cutlery, LLC (5) Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan 13.00% N/A 4/17/2020 4,741
4,722
4,440
3.1
Preferred Equity (3,723 units), 5% cash, 3% PIK (8) (11) 3,483
954
0.7
Common Equity (15,564 units) (11) —
—
—
4,741
8,205
5,394
3.8
NeoSystems Corp. (5) Other Accounting Services
Subordinated Loan 10.50% cash / 2.75% PIK N/A 8/13/2019 4,090
4,070
3,656
2.5
Preferred Equity (521,962 convertible shares), 10% PIK (11) 1,258
1,255
0.9
4,090
5,328
4,911
3.4
Pfanstiehl Holdings, Inc. (5) Pharmaceutical Preparation Manufacturing
Subordinated Loan (12) 10.50% N/A 9/29/2021 3,788
3,832
3,810
2.6
Common Equity (400 shares) 217
6,083
4.2
3,788
4,049
9,893
6.8
Strategic Pharma Solutions, Inc. (5) Other Professional, Scientific, and Technical Services
Senior Secured Loan 11.32% (L +10.00%) 12/18/2020 8,411
8,344
8,383
5.8
Preferred Equity (1,191 units), 6% PIK (11) 1,915
3,026
2.1
8,411
10,259
11,409
7.9
TRS Services, LLC (5) Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
Senior Secured Loan 9.75% cash / 1.5% PIK (L +10.25%) 12/10/2019 9,807
9,607
9,549
6.5
Preferred Equity (329,266 Class AA units), 15% PIK (11) 346
354
0.2
Preferred Equity (3,000,000 Class A units), 11% PIK (11) 3,170
1,707
1.2
Common Equity (3,000,000 units) (11) 572
—
—
9,807
13,695
11,610
7.9
Total Affiliate Investments 60,454
76,306
81,708
56.7



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Institutional Shareholder Services, Inc.	Administrative Management and General Management Consulting Services
Senior Secured Loan		10.44%	(L +8.50%)	3/4/2019	3/5/2027	$	6,244	$	6,075	$	6,098	3.7	%

Intouch Midco Inc. (15)	All Other Professional, Scientific, and Technical Services
Senior Secured Loan		6.05%	(L +4.25%)	12/20/2019	8/24/2025	1,995		1,925		1,925		1.2

Kindred Healthcare, Inc. (F/K/A Kindred at Home) (14) (15)	Home Health Care Services
Senior Secured Loan		5.56%	(L +3.75%)	6/25/2019	7/2/2025	2,985		2,998		3,004		1.8

McAfee, LLC (14) (15)	Software Publishers
Senior Secured Loan		5.55%	(L +3.75%)	6/25/2019	9/30/2024	1,985		1,987		1,996		1.2
Senior Secured Loan		10.30%	(L +8.50%)	11/15/2019	9/29/2025	2,000		2,002		2,018		1.2
						3,985		3,989		4,014		2.4
Micro Holding Corp (14) (15)	Internet Publishing and Broadcasting and Web Search Portals
Senior Secured Loan		5.55%	(L +3.75%)	6/25/2019	9/13/2024	1,985		1,969		1,991		1.2

Milrose Consultants, LLC (4) (8)	Administrative Management and General Management Consulting Services
Senior Secured Loan		8.14%	(L +6.20%)	7/16/2019	7/16/2025	11,500		11,420		11,394		6.7

My Alarm Center, LLC (4) (10) (13)	Security Systems Services (except Locksmiths)
Preferred Equity (1,485 Class A units), 8% PIK				7/14/2017				1,571		984		0.6
Preferred Equity (1,198 Class B units)				7/14/2017				1,198		—		—
Preferred Equity (335 Class Z units) 25% PIK				9/12/2018				325		1,136		0.7
Common Equity (64,149 units)				7/14/2017				—		—		—
								3,094		2,120		1.3
Online Tech Stores, LLC (4)	Stationery and Office Supplies Merchant Wholesalers
Subordinated Loan		10.50% cash / 3.00% PIK	N/A	2/1/2018	8/1/2023	16,323		16,113		14,559		8.7

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, ~~2016~~2019

(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type Industry Interest Rate (2)
Spread Above
Index (2)
Maturity
Principal
Amount
Amortized Cost Fair Value (3)
Percent of
Net Assets
Control Investments
Malabar International (5) Other Aircraft Parts and Auxiliary Equipment Manufacturing
Subordinated Loan 11.25% cash / 2.0% PIK N/A 11/13/2021 $ 7,617
$ 7,642
$ 7,683
5.3 %
Preferred Stock (1,644 shares), 6% cash 4,283
5,868
4.1
7,617
11,925
13,551
9.4
MTE Holding Corp. (5) Travel Trailer and Camper Manufacturing
Senior Secured Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.) 12.50% (L +11.50%) 11/25/2020 9,804
9,728
9,766
6.8
Common Equity (554 shares) 3,069
3,383
2.4
9,804
12,797
13,149
9.2
Total Control Investment 17,421
24,722
26,700
18.6

Total Investments $ 252,280
$ 279,307
$ 281,627
195.9 %



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
OnSite Care, PLLC (4) (8)	Home Health Care Services
Senior Secured Loan		9.09%	(L +7.78%)	8/10/2018	8/10/2023	$	9,541	$	9,446	$	9,162	5.5	%

Panther BF Aggregator 2 LP (14) (15)	Other Commercial and Service Industry Machinery Manufacturing
Senior Secured Loan		5.30%	(L +3.50%)	11/19/2019	4/30/2026	1,995		1,978		2,006		1.2

Parfums Holding Company, Inc.	Cosmetics, Beauty Supplies, and Perfume Stores
Senior Secured Loan (14) (15)		6.16%	(L +4.25%)	6/25/2019	6/30/2024	87		87		87		0.1
Senior Secured Loan		10.70%	(L +8.75%)	11/16/2017	6/30/2025	6,320		6,332		6,276		3.8
						6,407		6,419		6,363		3.9
Pelican Products, Inc.	Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan		9.49%	(L +7.75%)	9/24/2018	5/1/2026	6,055		6,059		5,969		3.6

Performance Team LLC (4)	General Warehousing and Storage
Senior Secured Loan		11.80%	(L +10.00%)	5/24/2018	11/24/2023	13,889		13,790		14,165		8.4

PM Acquisition LLC	All Other General Merchandise Stores
Senior Secured Loan		11.50% cash / 2.50% PIK	N/A	9/30/2017	10/29/2021	4,963		4,903		4,800		2.9
Common Equity (499 units) (10) (13)				9/30/2017				499		220		0.1
						4,963		5,402		5,020		3.0
Quest Software US Holdings Inc. (14) (15)	Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan		6.18%	(L +4.25%)	6/25/2019	5/16/2025	1,990		1,973		1,978		1.2

Refinitiv (14) (15)	Public Finance Activities
Senior Secured Loan		5.05%	(L +4.25%)	6/24/2019	10/1/2025	1,987		1,941		2,007		1.2

Resource Label Group, LLC	Commercial Printing (except Screen and Books)
Senior Secured Loan		10.60%	(L +8.50%)	6/7/2017	11/26/2023	4,821		4,777		4,591		2.8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost			Fair Value (3)			Percent of Net Assets
Restaurant Technologies, Inc. (15)	Other Grocery and Related Products Merchant Wholesalers
Senior Secured Loan		5.05%	(L +3.25%)	8/8/2019	10/1/2025	$	1,990	$	1,994		$	2,003		1.2	%

Rocket Software, Inc. (15)	Software Publishers
Senior Secured Loan		6.05%	(L +4.25%)	11/20/2018	11/28/2025	665		663			649			0.4
Senior Secured Loan		10.05%	(L +8.25%)	11/20/2018	11/28/2026	6,275		6,167			6,094			3.7
						6,940		6,830			6,743			4.1
RPLF Holdings, LLC (10) (13)	Software Publishers
Common Equity (254,110 Class A units)				1/17/2018				254			186			0.1

Sentry Centers Holdings, LLC (10) (13)	Other Professional, Scientific, and Technical Services
Common Equity (5,000 Series C units)				3/31/2014		—		500			1,490			0.9

Southern Technical Institute, LLC (4) (6) (10)	Colleges, Universities, and Professional Schools
Subordinated Loan		6.00% PIK	N/A	6/27/2018	12/31/2021	1,611		—			—			—
Other				6/27/2018		—		—			—			—
						1,611		—			—			—
Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.)	Child Day Care Services
Senior Secured Loan		6.19%	(L +4.25%)	7/26/2018	7/30/2025	972		970			978			0.6
Senior Secured Loan		10.19%	(L +8.25%)	7/26/2018	7/30/2026	7,216		7,157			7,288			4.4
						8,188		8,127			8,266			5.0
Sprint Communications, Inc. (14) (15)	Wired Telecommunications Carriers
Senior Secured Loan		4.81%	(L +3.00%)	6/24/2019	2/2/2024	1,985		1,972			1,980			1.2

SSJA Bariatric Management LLC (15)	Offices of Physicians, Mental Health Specialists
Senior Secured Loan		6.94%	(L +5.00%)	8/26/2019	8/26/2024	9,975		9,883			9,861			5.9
Senior Secured Loan (Revolver) (5)		0.50% (18)	(L +5.00%)	8/26/2019	8/26/2024	—		(6		)	(14		)	—
						9,975		9,877			9,847			5.9
Stancor, L.P. (4) (10)	Pump and Pumping Equipment Manufacturing
Preferred Equity (1,250,000 Class A units), 8% PIK				8/19/2014		—		1,501			1,607			1.0

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets

Staples, Inc. (14) (15)	Business to Business Electronic Markets
Senior Secured Loan		6.69%	(L +5.00%)	6/24/2019	4/16/2026	$	1,990	$	1,920	$	1,960	1.1	%

STS Operating, Inc.	Industrial Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (14) (15)		6.05%	(L +4.25%)	5/16/2018	12/11/2024	632		631		632		0.4
Senior Secured Loan		9.80%	(L +8.00%)	5/15/2018	4/30/2026	9,073		9,070		9,030		5.4
						9,705		9,701		9,662		5.8
Sunshine Luxembourg VII SARL (14) (15)	Pharmaceutical Preparation Manufacturing
Senior Secured Loan		6.19%	(L +4.25%)	11/20/2019	9/25/2026	2,000		2,010		2,021		1.2

Tank Holding Corp. (14) (15)	Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan		6.41%	(L +4.00%)	6/24/2019	3/26/2026	1,995		2,002		2,005		1.2

The Escape Game, LLC (4)	Other amusement and recreation industries
Senior Secured Loan		8.80%	(L +7.00%)	7/18/2019	3/31/2020	4,667		4,642		4,648		2.8
Senior Secured Loan		10.55%	(L +8.75%)	12/22/2017	12/22/2022	7,000		6,969		6,972		4.2
Senior Secured Loan		10.55%	(L +8.75%)	7/20/2018	12/22/2022	7,000		7,000		6,972		4.2
						18,667		18,611		18,592		11.2
Truck Hero, Inc. (15)	Truck Trailer Manufacturing
Senior Secured Loan		10.05%	(L +8.25%)	5/30/2017	4/21/2025	7,014		6,990		6,690		4.0

United Biologics Holdings, LLC (4) (10)	Medical Laboratories
Preferred Equity (151,787 units)				4/16/2013		—		9		15		—
Warrants (29,374 units)				7/26/2012	3/5/2022	—		82		7		—
						—		91		22		—
U.S. Anesthesia Partners (14) (15)	Freestanding Ambulatory Surgical and Emergency Centers
Senior Secured Loan		4.80%	(L +3.00%)	6/24/2019	6/23/2024	2,980		2,950		2,976		1.8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Verifone Intermediate Holdings, Inc. (14) (15)	Other Commercial and Service Industry Machinery Manufacturing
Senior Secured Loan		5.90%	(L +4.00%)	6/24/2019	8/20/2025	$	258	$	252	$	256	0.2	%

Wastebuilt Environmental Solutions, LLC (4)	Industrial Supplies Merchant Wholesalers
Senior Secured Loan		10.69%	(L +8.75%)	10/11/2018	10/11/2024	7,000		6,883		6,584		4.0

Total Debt and Equity Investments						$	372,094	$	373,074	$	350,925	210.7	%

Structured Finance Note Investments (7)
Dryden 76 CLO, Ltd.
Subordinated Notes		15.37% (9)		9/27/2019	10/20/2032	2,750		2,491		2,509		1.5

Elevation CLO 2017-7, Ltd.
Subordinated Notes		15.71% (9)		2/6/2019	7/15/2030	10,000		7,485		6,559		3.9

Flatiron CLO 18, Ltd.
Subordinated Notes		16.68% (9)		1/2/2019	4/17/2031	9,680		7,355		7,345		4.4

THL Credit Wind River 2019‐3 CLO Ltd.
Subordinated Notes		12.33% (9)		4/5/2019	4/15/2031	7,000		5,796		5,197		3.1

Total Structured Finance Note Investments						$	29,430	$	23,127	$	21,610	12.9	%

Total Non-control/Non-affiliate Investments						$	401,524	$	396,201	$	372,535	223.6	%

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Affiliate Investments
3rd Rock Gaming Holdings, LLC	Software Publishers
Senior Secured Loan		9.44% cash / 1.00% PIK	(L +7.50%)	3/13/2018	3/12/2023	$	21,373	$	21,176	$	20,099	12.1	%
Common Equity (2,547,250 units) (10) (13)				3/13/2018		—		2,547		1,044		0.6
						21,373		23,723		21,143		12.7
Chemical Resources Holdings, Inc.	Custom Compounding of Purchased Resins
Senior Secured Loan (4)(8)		9.82%	(L +7.89%)	1/25/2019	1/25/2024	13,743		13,592		13,746		8.2
Common Equity (1,832 Class A shares) (10) (13)				1/25/2019				1,813		2,662		1.6
						13,743		15,405		16,408		9.8
Contract Datascan Holdings, Inc. (4)	Office Machinery and Equipment Rental and Leasing
Subordinated Loan		12.00%	N/A	8/5/2015	2/5/2021	8,000		7,995		8,000		4.8
Preferred Equity (3,061 Series A shares) 10% PIK (10)				8/5/2015				5,599		5,671		3.4
Common Equity (11,273 shares) (10)				6/28/2016				104		671		0.4
						8,000		13,698		14,342		8.6
DRS Imaging Services, LLC	Data Processing, Hosting, and Related Services
Senior Secured Loan (4) (8)		11.21%	(L +9.27%)	3/8/2018	11/20/2023	10,741		10,670		10,569		6.3
Common Equity (1,135 units) (10) (13)				3/8/2018				1,135		1,331		0.8
						10,741		11,805		11,900		7.1
Master Cutlery, LLC (4) (6) (10)	Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan (11)		13.00%	N/A	4/17/2015	4/17/2020	5,947		4,764		255		0.2
Preferred Equity (3,723 Series A units), 8% PIK				4/17/2015		—		3,483		—		—
Common Equity (15,564 units)				4/17/2015		—		—		—		—
						5,947		8,247		255		0.2
NeoSystems Corp. (4) (10)	Other Accounting Services
Preferred Equity (521,962 convertible shares) 10% PIK				8/14/2014		—		1,698		2,250		1.4

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Pfanstiehl Holdings, Inc. (4)	Pharmaceutical Preparation Manufacturing
Subordinated Loan		10.50%	N/A	1/1/2014	9/29/2022	$	3,788	$	3,807	$	3,788	2.3	%
Common Equity (400 Class A shares)				1/1/2014		—		217		11,979		7.2
						3,788		4,024		15,767		9.5
Professional Pipe Holdings, LLC	Plumbing, Heating, and Air-Conditioning Contractors
Senior Secured Loan		10.55% cash / 1.50% PIK	(L +9.27%)	3/23/2018	3/23/2023	7,099		7,008		7,170		4.3
Common Equity (1,414 Class A units) (10)				3/23/2018		—		1,414		2,413		1.4
						7,099		8,422		9,583		5.7
TalentSmart Holdings, LLC	Professional and Management Development Training
Senior Secured Loan (4)		8.50%	(L +6.75%)	10/11/2019	10/11/2024	10,000		9,833		9,833		5.9
Senior Secured Loan (Revolver) (5) (18)		8.50%	(L +6.75%)	10/11/2019	10/11/2024	250		242		242		0.1
Common Equity (1,500 Class A shares) (10) (13)				10/11/2019		—		1,500		1,500		0.9
						10,250		11,575		11,575		6.9
TRS Services, LLC (4) (11)	Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
Senior Secured Loan		10.55% cash / 1.00% PIK	(L +8.75%)	12/10/2014	3/16/2020	14,624		14,615		14,623		8.8
Preferred Equity (329,266 Class AA units), 15% PIK (10)				6/30/2016		—		545		547		0.3
Preferred Equity (3,000,000 Class A units), 11% PIK (10)				12/10/2014		—		3,374		3,095		1.9
Common Equity (3,000,000 units) (10)				12/10/2014		—		572		—		—
						14,624		19,106		18,265		11.0
TTG Healthcare, LLC	Diagnostic Imaging Centers
Senior Secured Loan (4)		10.71%	(L +9.00%)	3/1/2019	3/1/2024	12,103		11,938		11,767		7.1
Preferred Equity ( 2,309 Class B units) (10) (13)				3/1/2019				2,309		2,424		1.5
						12,103		14,247		14,191		8.6

Total Affiliate Investments						$	107,668	$	131,950	$	135,679	81.5	%

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Control Investment
MTE Holding Corp. (4)	Travel Trailer and Camper Manufacturing
Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.)		10.26% cash / 4.50% PIK	(L +8.50%)	11/25/2015	11/25/2020	$	7,464	$	7,451	$	7,464	4.5	%
Common Equity (554 shares)				11/25/2015		—		3,069		1,253		0.8
						7,464		10,520		8,717		5.3
Total Control Investment						$	7,464	$	10,520	$	8,717	5.3	%

Total Investments						$	516,656	$	538,671	$	516,931	310.4	%


(1)	Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.

(2)

~~The majority~~Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L) ~~or Prime (P)~~, generally between 1.7% and 2.1% at December 31, 2019, and reset monthly, quarterly, or semi-annually. ~~Substantially all~~Variable-rate loans with an aggregate cost of ~~the Company's~~$420,410 include LIBOR ~~referenced investments are subject to a~~ reference rate floor provisions of generally 1% to 2%; at December 31, ~~2016, with a weighted average~~2019, the reference rate ~~floor of 1.11%.~~on all such instruments was above the stated floors. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, ~~2016.~~2019. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.


(3)	~~Fair~~Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's ~~investments.~~investments and are considered Level 3 under GAAP. See Note 5 for further details.


(4)	~~The negative fair value is~~Investments (or portion thereof) held by SBIC I LP. These assets (or a portion thereof) are held to support the ~~result~~SBA debentures and can not be pledged under any debt obligation of the ~~unfunded commitment being below par.~~Company.


(5)	~~Investments held by OFS SBIC I LP. All other investments pledged as collateral under the PWB Credit Facility.~~Subject to unfunded commitments. See Note 6 for further details.


(6)	Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company's assets, as defined under Section 55 of the 1940 Act, at the time of acquisition of any additional non-qualifying assets. As of December 31, 2016, 98.4% of the Company's assets were qualifying assets.


~~(7)~~	Investment was on non-accrual status as of December 31, ~~2016,~~2019, meaning the Company has ceased ~~recognizing~~recognition of all or a portion of income on the investment. See Note 2, ~~Non-accrual loans~~4 for further details.


(7)	Structured Finance Notes are considered CLO subordinated debt positions. CLO subordinated debt positions are entitled to recurring distributions which are generally equal to the remaining cash flow of payments made by underlying securities less contractual payments to debt holders and fund expenses.


(8)	~~The fair value of the accrued PIK dividend at December 31, 2016 was $-0-. See~~ ~~Note 2~~, ~~Dividend income~~ ~~for further details.~~


~~(9)~~	The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The ~~reported interest rate~~table below provides additional details as of ~~11.33% at~~ December 31, ~~2016, includes additional interest~~2019:



Portfolio Company	Reported Interest Rate	Interest Rate per Credit Agreement	Additional Interest per Annum
Carolina Lubes, Inc.	9.83%	9.35%	0.48%
Chemical Resources Holdings, Inc.	9.82%	7.93%	1.89%
DRS Imaging Services, LLC	11.21%	9.94%	1.27%
Milrose Consultants, LLC	8.14%	7.44%	0.70%
OnSite Care, PLLC	9.49%	7.96%	1.53%

(9)

The rate disclosed is an estimated effective yield based upon the current projection of ~~2.08% per annum as specified under~~ the ~~contractual arrangement among~~amount and timing of distributions in addition to the ~~Company~~estimated amount and timing of terminal principal payments. Effective yields for the ~~co‑lenders.~~Company's Structured Finance Note investments are monitored and evaluated at each reporting date. The estimated yield and investment cost may ultimately not be realized.

(10)

The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The reported interest rate of 12.47% at December 31, 2016, includes additional interest of 2.97% per annum as specified under the contractual arrangement among the Company and the co‑lenders.


~~(11)~~	Non-income producing.

~~(12)~~

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, ~~2016~~2019

(Dollar amounts in thousands)

(11)The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of December 31, 2019:



Portfolio Company	Investment Type	Range of PIK Option	Range of Cash Option	Maximum PIK Rate Allowed
Community Intervention Services, Inc.	Subordinated Loan	0% or 6.00%	13.00% or 7.00%	~~6.00~~	%6.00%
~~Intelli-Mark Technologies, Inc.~~	~~Senior Secured Loan~~	~~0% or 2.00%~~	~~13.00% or 11.50%~~	~~2.00~~	%
~~Jobson Healthcare Information, LLC~~	~~Senior Secured Loan~~	~~1.50% and 4.295%~~	~~10.13% and 12.925%~~	~~4.295~~	%
~~Pfanstiehl~~Eblens Holdings, Inc.	Subordinated Loan	0% or ~~2.00%~~1.00%	~~10.50%~~13.00% or ~~% 8.50%~~12.00%	~~2.00~~	%1.00%
~~United Biologics Holdings,~~Master Cutlery, LLC	Senior Secured Loan	0% to 13.00%	13.00% to 0%	13.00%
TRS Services, LLC	Senior Secured Loan	0% or ~~2.00%~~1.00%	~~14.00%~~12.65% or ~~12.00%~~1.00%	~~2.00~~	%1.00%


~~(13)~~(12)	Represents expiration date of the warrants.


(13)	All or portion of investment held by OFSCC-MB.


(14)	Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details.


(15)	Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Credit Facility and can not be pledged under any other debt obligation of the Company.


(16)	Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO Structured Finance Note investments.


(17)	Maturity represents the contractual maturity date of the structured finance notes. Expected maturity and cash flows, not contractual maturity and cash flows, were utilized in deriving the effective yield of the investments.


(18)	Commitment fee on undrawn funds.

See Notes to Financial Statements.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 1. Organization

OFS Capital Corporation, a Delaware corporation, is an externally managed, closed-end, non-diversified management investment company. The Company has elected to be regulated as a BDC under the 1940 Act. In addition, for income tax purposes, the Company has elected to be treated as a RIC under Subchapter M of the Code.

The Company’s investment objective is to provide stockholders with both current income and capital appreciation ~~through its strategic investment focus~~ primarily onthrough debt investments and, to a lesser extent, equity ~~investments primarily in middle-market companies principally in the United States.~~investments. OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company.

In addition, OFS Advisor ~~also~~ serves as the investment adviser for HPCI, a ~~Maryland corporation~~non-traded BDC with an investment strategy and ~~a BDC. HPCI’s investment~~ objective is similar to that of the Company. OFS Advisor also serves as the investment adviser for OCCI, a non-diversified, externally managed, closed-end management investment company that has registered as an investment company under the 1940 Act that primarily invests in the equity tranche of CLOs.

The Company may make investments directly or through one of its subsidiaries: SBIC I LP, ~~its investment company subsidiary licensed under the SBA~~OFSCC-FS or OFSCC-MB.

The Company may make follow-on investments in current portfolio companies held through SBIC ~~Program. The SBIC Program is designed to stimulate the flow of capital into eligible businesses.~~I LP. SBIC I LP is subject to SBA regulatory requirements, ~~including~~including: limitations on the businesses and industries in which it can ~~invest,~~invest; requirements to invest at least 25% of its regulatory capital in eligible smaller businesses, as defined under the SBIC ~~Act,~~Act; limitations on the financing terms of ~~investments,~~investments; and capitalization thresholds that may limit distributions to the ~~Company, and~~Company. SBIC I LP is subject to periodic audits and examinations of its financial statements. SBIC I LP intends, over time, to repay its outstanding SBA debentures prior to the scheduled maturity date of its debentures.

InOFSCC-FS is a special-purpose vehicle formed in April ~~2017,~~2019 for the purpose of acquiring senior secured loan investments. OFSCC-FS has debt financing through its BNP Facility which provides OFSCC-FS with borrowing capacity of up to $150 million.

OFSCC-MB is a wholly-owned subsidiary taxed under subchapter C of the Code and generally holds the equity investments of the Company issued 3,625,000 shares of its common stock in a follow-on public offering at an offering price of $14.57 per share (the "Offering"), including shares purchased by the underwriters pursuant to their exercise of the over-allotment option. OFS Advisor paid all of the underwriting discounts and commissions, and a supplemental payment of $0.25 per share that represented the difference between the public offering price of $14.57 per share and the net offering proceeds of $14.82 per share, the Company's net asset value per share at the time of the Offering. All payments made by OFS Advisor in connection with the Offering are ~~not subject to reimbursement by the Company. The Company received net proceeds from the Offering of $53,723.~~taxed as pass-through entities.

Note 2. ~~Basis~~Summary of ~~Presentation and~~ Significant Accounting Policies

Basis of presentation: The Company ~~prepares its consolidated financial statements~~is an investment company as defined in ~~accordance with GAAP, including~~the accounting and reporting guidance under ASC Topic 946, Financial Services–Investment Companies,. The accompanying interim consolidated financial statements of the ~~1940 Act, Articles 6 or 10 of Regulation S-X,~~Company and related financial information have been prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form ~~10-Q. In~~10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. However, in the opinion of management, the consolidated financial statements include all adjustments, consisting only of normal and recurring accruals and adjustments, necessary for fair presentation ~~have been made.~~as of and for the periods presented. Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation. These consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

~~Principles~~Significant Accounting Policies:The following information supplements the description of ~~consolidation:~~ ~~The Company consolidates majority-owned, investment company subsidiaries. The Company does not own any controlled operating company whose business consists of providing services~~significant accounting policies contained in Note 2 to the ~~Company, which would also require consolidation. All intercompany balances and transactions are eliminated upon consolidation.~~

~~Investments:~~ The Company applies fair value accounting in accordance with ASC Topic 820, which defines fair value, establishes a framework to measure fair value, and requires disclosures regarding fair value measurements. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined through the use of models and other valuation techniques, valuation inputs, and assumptions market participants would use to value the investment. Highest priority is given to prices for identical assets quoted in active markets (Level 1) and the lowest priority is given to unobservable valuation inputs (Level 3). The availability of observable inputs can vary significantly and is affected by many factors, including the type of product, whether the product is new to the market, whether the product is traded on an active exchange orCompany's consolidated financial statements included in the ~~secondary market, and~~Company's Annual Report on Form 10-K for the current market conditions. To the extent that the valuation is based on less observable or unobservable inputs, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for financial instruments classified as Level 3 (i.e., those instruments valued using non-observable inputs), which comprise the entirety of the Company’s investments.

Changes to the valuation policy are reviewed by management and the Company’s Board. As the Company’s investments change, markets change, new products develop, and valuation inputs become more or less observable, the Company will continue to refine its valuation methodologies.

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~

~~See~~ ~~Note 5~~ ~~for more detailed disclosures of the Company’s fair value measurements of its financial instruments.~~

~~Investment classification:~~ The Company classifies its investments in accordance with the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in those companies in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of board representation, “Affiliate Investments” are defined as investments in those companies in which the Company owns between 5% and 25% of the voting securities, and “Non-Control/Non-Affiliate Investments” are those that neither qualify as Control Investments nor Affiliate Investments.year ended December 31, 2019.

Use of estimates:The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

~~Reportable segments: The Company has a single reportable segment and single operating segment structure.~~

~~Cash and cash equivalents~~: Cash and cash equivalents consist of cash and highly liquid investments not held for resale with original maturities of three months or less. The Company’s cash and cash equivalents are maintained with a member bank of the FDIC and, at times, such balances may be in excess of the FDIC insurance limits. Included in cash and cash equivalents was $52,345 and $17,659 held in a US Bank Money Market Deposit Account as of September 30, 2017, and December 31, 2016, respectively.

~~Revenue recognition:~~

~~Interest income:~~ Interest income is recorded on an accrual basis and reported as interest receivable until collected. Interest income is accrued daily based on the outstanding principal amount and the contractual terms of the debt investment. Certain of the Company’s investments contain a payment-in-kind interest income provision (“PIK interest”). The PIK interest, computed at the contractual rate specified in the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash, and recorded as interest income, as applicable, on the consolidated statements of operations. The Company discontinues accrual of interest income, including PIK interest, when there is reasonable doubt that the interest income will be collected.

Loan origination fees, original issue discount (“OID”), market discount or premium, and loan amendment fees (collectively, “Net Loan Fees”) are recorded as an adjustment to the amortized cost of the investment, and accreted or amortized as an adjustment to interest income over the life of the respective debt investment using a method that approximates the effective interest method. When the Company receives a loan principal payment, the unamortized Net Loan Fees related to the paid principal is accelerated and recognized in interest income.

Further, the Company may acquire or receive equity, warrants or other equity-related securities (“Equity”) in connection with the Company’s acquisition of, or subsequent amendment to, debt investments. The Company determines the cost basis of Equity based on their fair value, and the fair value of debt investments and other securities or consideration received. Any resulting difference between the face amount of the debt and its recorded cost resulting from the assignment of value to the Equity is treated as OID, and accreted into interest income as described above.

~~Dividend income~~: Dividend income on common stock, generally payable in cash, is recorded at the time dividends are declared. Dividend income on preferred equity securities is accrued daily based on the the contractual terms of the preferred equity investment. Dividends on preferred equity securities may be payable in cash or in additional preferred securities, and are generally not payable unless declared or upon liquidation. Declared dividends payable in cash are reported as dividend receivables until collected. Non-cash dividends payable in additional preferred securities or contractually earned but not declared (“PIK dividends”) are recognized at fair value and recorded as an adjustment to the cost basis of the investment. At September 30, 2017, the Company had four preferred equity securities (Master Cutlery, LLC, Stancor, L.P., Southern Technical Institute, LLC, and TRS Services, LLC), with an aggregate amortized cost and fair value of $10,452 and $3,822, respectively, for which the fair value of the accrued PIK dividend for the three months ended September 30, 2017 was $-0-. In addition, beginning June 30, 2017, the Company discontinued recognition of the cash preferred dividend from its investment in Master Cutlery, LLC. At December 31, 2016, the Company had one preferred equity security (Master Cutlery, LLC) with an amortized cost and fair value of $3,483, and $954, respectively, for which the fair value of the accrued PIK dividend for the three months ended December 31, 2016 was $-0-.

~~Fee income:~~ The Company generates revenue in the form of management, valuation, and other contractual fees, that is recognized as the related services are rendered. In the general course of its business, the Company receives certain fees from portfolio companies which are non-recurring in nature. Such non-recurring fees include prepayment fees on certain loans repaid

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~

prior to their scheduled due date, which are recognized as earned when received, and fees for capital structuring or advisory services from certain portfolio companies, which are recognized as earned upon closing of the investment.

~~Net realized and unrealized gain or loss on investments:~~ Investment transactions are reported on a trade-date basis. Unsettled trades as of the balance sheet date are included in payable for investments purchased on the consolidated balance sheets. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of the investment. Investments are valued at fair value as determined in good faith by Company management under the supervision and review of the Board. After recording all appropriate interest, dividend, and other income, some of which is recorded as an adjustment to the cost basis of the investment as described above, the Company reports changes in the fair value of investments as net changes in unrealized appreciation/depreciation on investments in the consolidated statements of operations.

~~Non-accrual loans~~: When there is reasonable doubt that principal, cash interest, or PIK interest will be collected, loan investments are placed on non-accrual status and the Company will generally cease recognizing cash interest, PIK interest, or Net Loan Fee amortization, as applicable. When an investment is placed on non-accrual status, all interest previously accrued but not collected, other than PIK interest that has been contractually added to the adjusted cost basis of the investment prior to the designation date, is reversed against current period interest income. Interest payments subsequently received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. 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, and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal and interest. At September 30, 2017, the Company had one loan (Community Intervention Services, Inc.) on non-accrual status with respect to all interest and Net Loan Fee amortization, with an amortized cost and fair value of $7,639 and $2,038, respectively. The Company's loan investment in My Alarm Center, LLC, which was on non-accrual status at June 30, 2017, was restructured and exchanged for a new class of preferred equity securities and common equity securities in July 2017. See ~~Note 4~~ for further discussion. At December 31, 2016, the Company had one loan (Community Intervention Services, Inc.) on non-accrual status with respect to PIK interest and Net Loan Fees with an amortized cost and fair value of $7,639 and $5,393, respectively.

~~Income taxes:~~ The Company has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. To qualify as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements, and timely distribute at least 90% of its ICTI to its stockholders. The Company has made, and intends to continue to make, the requisite distributions to its stockholders, which generally relieves the Company from U.S. federal income taxes.

Depending on the level of ICTI earned in a tax year, the Company may choose to retain ICTI in an amount less than that which would trigger federal income tax liability under Subchapter M of the Code. However, the Company would be liable for a 4% excise tax on such income. Excise tax liability is recognized when the Company determines its estimated current year annual ICTI exceeds estimated current year distributions.

The Company may utilize wholly-owned holding companies taxed under Subchapter C of the Code when making equity investments in portfolio companies taxed as pass-through entities to meet its source-of-income requirements as a RIC. These “tax blocker” entities are consolidated in the Company’s GAAP financial statements and may result in federal income tax expense with respect to income derived from those investments. Such income, net of applicable federal income tax, is not included in the Company’s tax-basis net investment income until distributed by the holding company, which may result in temporary differences and character differences between the Company’s GAAP and tax-basis net investment income and realized gains and losses. Federal income tax expense from such holding-company subsidiaries is included in general and administrative expenses in the consolidated statements of operations.

The Company evaluates tax positions taken in the course of preparing its tax returns to determine whether they are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold could result in greater and undistributed ICTI, income and excise tax expense, and, if involving multiple years, a re-assessment of the Company’s RIC status. GAAP requires recognition of accrued interest and penalties related to uncertain tax benefits as income tax expense. There were no uncertain income tax positions at September 30, 2017 or December 31, 2016. The current and prior three tax years remain subject to examination by U.S. federal and most state tax authorities.

~~Distributions:~~ Distributions to common stockholders are recorded on the declaration date. The timing of distributions as well as the amount to be paid out as a distribution is determined by the Board each quarter. Distributions from net investment income and net realized gains are determined in accordance with the Code. Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment. Distributions paid in excess of taxable net investment income and net realized gains are considered returns of capital to stockholders.

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~

The Company has adopted a DRIP that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Board authorizes, and the Company declares a cash distribution, then stockholders who have not “opted out” of the DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution.

~~The Company may use newly issued shares under the guidelines of the DRIP, or the Company may purchase shares in the open market in connection with its obligations under the plan.~~

~~Deferred debt issuance costs~~: Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. Deferred debt issuance costs are presented as a direct reduction of the related debt liability on the consolidated balance sheets except for deferred debt issuance costs associated with the Company’s line of credit arrangements, which are included in prepaid expenses and other assets on the consolidated balance sheets. Deferred debt issuance costs are amortized to interest expense over the term of the related debt.

~~Goodwill:~~ On December 4, 2013, in connection with the SBIC Acquisition, the Company recorded goodwill of $1,077, which is included in prepaid expenses and other assets on the consolidated balance sheets. Goodwill is not subject to amortization. Goodwill is evaluated for impairment annually or more frequently if events occur or circumstances change that indicate goodwill may be impaired. There have been no goodwill impairments since the date of the SBIC Acquisition.

~~Intangible asset:~~ On December 4, 2013, in connection with the SBIC Acquisition, the Company recorded an intangible asset of $2,500 attributable to the SBIC license. The Company amortizes this intangible asset on a straight-line basis over its estimated useful life of 13 years. The Company expects to incur annual amortization expense of approximately $195 in each of the years ending December 31, 2025 and $145 in 2026.

The Company tests its intangible asset for impairment if events or circumstances suggest that the asset carrying value may not be fully recoverable. The intangible asset, net of accumulated amortization of $747 and $600 at September 30, 2017 and December 31, 2016, respectively, is included in prepaid expenses and other assets.

~~Interest expense: Interest expense is recognized on an accrual basis.~~

Concentration of credit ~~risk~~risk:: Aside from its debt instruments, including investments in Structured Finance Notes of CLOs, financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during the year, the Company may exceed the federally insured limits. ~~To mitigate this risk, the~~The Company places cash deposits only with high credit quality ~~institutions. Management~~institutions which OFS Advisor believes will mitigate the risk of loss ~~is minimal.~~due to credit risk. The amount of loss due to credit risk from debt investments if borrowers fail to perform according to the terms of

~~New Accounting Standards:~~ ~~The following table discusses ASUs issued by the FASB adopted or yet to be adopted by the Company during 2017:~~

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

the contracts, and the collateral or other security for those instruments proved to be of no value to the Company, is equal to the Company's recorded investment in debt instruments and the unfunded loan commitments as disclosed in Note 6.



~~Standard~~	~~Description~~	~~Effect of Adoption on the the financial statements~~
~~Standards that are not yet adopted~~
~~ASU 2014-09, Revenue from Contracts with Customers~~	Supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of the standard is to recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard defines a five step process to achieve this core principle. The standard must be adopting using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures)	In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, such that the guidance is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is not permitted. The Company has completed its initial evaluation phase and has determined the impact of its pending adoption of ASU 2014-09 is not expected to have a material effect on the Company's consolidated financial statements.
~~ASU 2016-01, Financial Instruments – Overall~~	Modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Entities will have to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value, and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820 - Fair Value Measurement, and as such these investments may be measured at cost	Annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is required to record its investments at fair value with changes in fair value recognized in net income in accordance with ASC Topic 946, ~~Financial Services—Investment Companies. Therefore, the adoption of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements~~
~~ASU 2016-15, Statement of Cash Flows~~	Addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows	Annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years and early adoption is permitted. The Company is currently evaluating the impact of this ASU will have on the Company's consolidated financial position and disclosures.
~~ASU 2016-19, Technical Corrections and Improvements~~	Makes minor corrections and clarifications that affect a wide variety of topics in the Accounting Standards Codification, including an amendment to ASC Topic 820, Fair Value Measurement, which clarifies the difference between a valuation approach and a valuation technique when applying the guidance of that Topic. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. The transition guidance for the ASC Topic 820 amendment must be applied prospectively because it could potentially involve the use of hindsight that includes fair value measurements	Annual reporting periods beginning after December 15, 2017, including interim periods within those years. Early application is permitted for any fiscal year or interim period for which the entity’s financial statements have not yet been issued. The Company is currently evaluating the impact this ASU will have on the Company’s consolidated financial position or disclosures
~~ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~	Amends certain narrow aspects of ASU 2014-09, including loan guarantee fees, impairment testing of contract costs, provisions for losses on construction-type and production type contracts, advertising costs, scope exception clarifications, and various disclosures	The effective date and transition requirements are the same as the effective date and transition requirements for ASU 2014-09 and is not expected to have a material effect on the Company's consolidated financial statements.

~~OFS Capital Corporation~~New accounting pronouncement issued: In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 840): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates (e.g., LIBOR) that are expected to be discontinued. ASU 2020-04 allows, among other things, certain contract modifications, such as those within the scope of Topic 310 on receivables, to be accounted as a continuation of the existing contract. This ASU was effective upon the issuance and ~~Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~



~~Standard~~	~~Description~~	~~Effect of Adoption on the the financial statements~~
~~Standards that are not yet adopted~~
~~ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~	Removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill	Annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early application is permitted. The adoption of ASU 2017-04 is not expected to have a material effect on the Company's consolidated financial statements.
ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 620-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets	Defines "insubstance nonfinancial asset", unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributios of nonfinancial assets to joint ventures	The effective date and transition requirements are the same as the effective date and transition requirements for ASU 2014-09 and is not expected to have a material effect on the Company's consolidated financial statements.
~~ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities~~	~~Shortens the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Securities held at a discount are to continue to be amortized to maturity~~	Annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the ASU in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The adoption of ASU 2017-08 is not expected to have a material effect on the Company's consolidated financial statements.

its optional relief can be applied through December 31, 2022. The Company will consider this optional guidance prospectively, if applicable.

Note 3. Related Party Transactions

Investment Advisory and Management Agreement: OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company pursuant to anthe Investment Advisory Agreement. The continuation of the Investment Advisory Agreement was most recently ~~re-approved~~approved by the Board on April ~~7, 2017.~~2, 2020. Under the terms of the Investment Advisory Agreement, which are in accordance with the 1940 Act and subject to the overall supervision of the Company’s Board, OFS Advisor is responsible for sourcing potential investments, conducting research and diligence on potential investments and equity sponsors, analyzing investment opportunities, structuring investments, and monitoring investments and portfolio companies on an ongoing basis. ~~OFS Advisor is a subsidiary of OFSAM and a registered investment advisor under the Investment Advisers Act of 1940, as amended.~~

OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to usthe Company and OFS Advisor is free to furnish similar services to other entities, including other ~~BDCs~~funds affiliated with OFS Advisor, so long as its services to usthe Company are not impaired. OFS Advisor also serves as the investment adviser or collateral manager to CLO funds and other ~~assets,~~companies, including HPCI ~~a non-traded BDC with an investment strategy similar to the Company.~~and OCCI.

OFS Advisor receives fees for providing services, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% and based on the average value of the Company’s total assets (other than cash ~~and cash equivalents~~ but including assets purchased with borrowed amounts and ~~including~~ assets owned by any consolidated entity) at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the quarter. OFS Advisor has elected to exclude the value of the intangible asset and goodwill resulting from the SBIC Acquisition from the base management fee calculation.

OFS ~~Capital Corporation and Subsidiaries~~

~~Notes~~Advisor agreed to ~~Financial Statements~~

~~(Dollar amounts in thousands, except~~reduce a portion of its base management fee by reducing the portion of such fee from 0.4375% per ~~share data)~~

quarter (1.75% annualized) to 0.25% per quarter (1.00% annualized) of the average value of the portion of the OFSCC-FS Assets, at the end of the two most recently completed calendar quarters to the extent that such portion of the OFSCC-FS Assets are financed using leverage (also calculated on an average basis) that causes the Company’s statutory asset coverage ratio to fall below 200%. When calculating its statutory asset coverage ratio, the Company excludes its SBA guaranteed debentures from its total outstanding senior securities as permitted pursuant to exemptive relief granted by the SEC dated November 26, 2013. Effective January 1, 2020, OFS Advisor agreed to further reduce the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the portion of the OFSCC-FS Assets at the end of the two most recently completed calendar quarters without regard to the statutory asset coverage ratio. The base management fee reduction by OFS Advisor is ~~payable quarterly in arrears~~renewable on an annual basis and ~~was $1,310 and $3,726 for~~ the ~~three and nine months ended September 30, 2017, respectively and $1,120 and $3,324, for~~amount of the ~~three and nine months ended September 30, 2016.~~base management fee reduced with respect to the OFSCC-FS Assets shall not be subject to recoupment by OFS Advisor.

The incentive fee has two parts. The first part ("~~Part One"~~Income Incentive Fee") is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination and sourcing, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement ~~(as defined~~(defined below) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest or dividend feature (such as OID, debt instruments with PIK interest, equity investments with accruing or PIK dividend and zero coupon securities), accrued income that the Company has not yet received in cash.

Pre-incentive fee net investment income is expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter and adjusted for any share issuances or repurchases during such quarter. Accordingly, as a result of the Offering, the Part One incentive fee was reduced by $(593) for the three months ended June 30, 2017, determined by adjusting the value of net assets, as defined above, at March 31, 2017 by the daily weighted average of the Offering proceeds available

OFS Capital Corporation and Subsidiaries

Notes to ~~the Company during the three months ended June 30, 2017.~~Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The incentive fee with respect to pre-incentive fee net income is 20.0% of the amount, if any, by which the pre-incentive fee net investment income for the immediately preceding calendar quarter exceeds a 2.0% hurdle rate (which is 8.0% annualized) ~~hurdle rate~~ and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, OFS Advisor receives no incentive fee until the net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up,” 100.0% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, OFS Advisor will receive 20.0% of the pre-incentive fee net investment income.

Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter in which the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the quarterly minimum hurdle rate, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses. The Company’s net investment income used to calculate this part of the incentive fee is also included in the amount of the Company’s gross assets used to calculate the base management fee. These calculations are appropriately prorated for any period of less than three months.

The second part ~~("Part Two")~~ of the incentive fee (the “Capital Gain Fee”) is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), ~~commencing on December 31, 2012,~~ and equals 20.0% of the Company’s aggregate realized capital gains, if any, on a cumulative basis from the date of the election to be a BDC through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation through the end of such year, less all previous amounts paid in respect of the Capital Gain Fee; provided that the incentive fee determined as of December 31, 2012, was calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses and unrealized capital depreciation for the period beginning on the date of the Company’s election to be a BDC and ending December 31, 2012.Fee.

The Company accrues the Capital Gain Fee if, on a cumulative basis, the sum of net realized capital gains and (losses) plus net unrealized appreciation and (depreciation) is positive. If, on a cumulative basis, the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation) decreases during a period, the Company will reverse any excess Capital Gain Fee previously accrued such that the amount of Capital Gains Fee accrued is no more than 20% of the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation).

On May 4, 2020, OFS Advisor ~~has excluded from~~agreed to irrevocably waive the ~~Capital Gain Fee calculation any realized gain with respect to (1) the SBIC Acquisitions, and (2) the WM Asset Sale.~~

~~The Company incurred incentive fee expense~~receipt of ~~$1,090 and $2,249 for the three and nine months ended September 30, 2017, respectively, which consisted entirely of Part One incentive fees~~$441 in Income Incentive Fees (based on net investment income)~~, and included a share issue adjustment of $(593) for the nine months ended September 30, 2017,~~ related to net investment income, that it would otherwise be entitled to receive under the ~~Company's Offering. The Company incurred incentive fee expense of $817 and $2,407~~Investment Advisory Agreement for the three ~~and nine~~ months ended ~~September 30, 2016, respectively,~~March 31, 2020. As a result of the voluntary fee waiver, the Company incurred Income Incentive Fee expense of $442 for the three months ended March 31, 2020, which consisted of Part One incentive fees (based on net investment income) of $817 and $2,546, respectively. Part Two incentive fees (based upon net realized and unrealized gains and losses, or capital gains) were $-0- and $(139).

~~OFS~~is equal to half the Income Incentive Fee expense the Company would have incurred for the three months ended March 31, 2020. The voluntary fee waiver did not include Capital ~~Corporation and Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~

Gain Fees, which was $0 for the three months ended March 31, 2020.

License Agreement: The Company entered into a license agreement with OFSAM under which OFSAM has agreed to grant the Company a non-exclusive, royalty-free license to use the name “OFS.”

Administration Agreement: OFS Services ~~a wholly-owned subsidiary of OFSAM,~~ furnishes the Company with office facilities and equipment, necessary software licenses and subscriptions, and clerical, bookkeeping and record keeping services at such facilities pursuant to anthe Administration Agreement. Under the Administration Agreement, OFS Services performs, or oversees the performance of, the Company’s required administrative services, which include being responsible for the financial records that the Company is required to maintain and preparing reports to its stockholders and all other reports and materials required to be filed with the SEC or any other regulatory authority. In addition, OFS Services assists the Company in determining and publishing its net asset value, oversees the preparation and filing of its tax returns and the printing and dissemination of reports to its stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Under the Administration Agreement, OFS Services also provides managerial assistance on the Company’s behalf to those portfolio companies that have accepted the Company’s offer to provide such assistance. Payment under the Administration Agreement is equal to an amount based upon the Company’s allocable portion of OFS Services’s overhead in performing its obligations under the Administration Agreement, including, but not limited to, rent, information technology services and the Company’s allocable portion of the cost of its officers, including its chief executive officer, chief financial officer, chief compliance officer, chief accounting officer and their respective staffs. To the extent that OFS Services outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to OFS Services.

~~Administration fee expense was $274~~Equity Ownership: As of June 30, 2020, affiliates of OFS Advisor held 2,946,474 shares of common stock, which is approximately 22% of the Company's outstanding shares of common stock.

OFS Capital Corporation and ~~$982~~Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Distributions paid to affiliates and expenses recognized under agreements with OFS Advisor and OFS Services for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively. For the three~~2020 and ~~nine months ended September 30, 2016, administration fee expense was $255 and $1,009, respectively.~~ 2019 are presented below:



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Base management fees	$	1,869	$	2,055	$	3,888		$	3,898
Incentive fees:
Income Incentive Fee	215		1,245		1,098			2,408
Incentive fee waiver	—		—		(441		)	—
Administration fee expense	500		417		1,020			854
Distributions paid to affiliates	501		1,002		1,503			2,004

Note 4. Investments

As of ~~September~~June 30, ~~2017,~~2020, the Company had loans to 3757 portfolio companies, of which ~~76%~~90% were senior secured loans and ~~24%~~10% were subordinated loans, at fair value, as well as equity investments in 1714 of these portfolio companies. The Company also held an equity ~~investment~~investments in ~~three~~ eightportfolio companies in which it did not hold a debt ~~investment.~~investment and eight investments in Structured Finance Notes. At ~~September~~June 30, ~~2017,~~2020, the Company's investments consisted of the following:

Amortized Cost Percentage of Net Assets Fair Value Percentage of Net Assets
Senior secured debt investments $ 196,477

104.1 % $ 194,153
102.9 %
Subordinated debt investments 70,768

37.5
62,942
33.4
Preferred equity 28,492

15.1
28,499
15.1
Common equity and warrants 6,321

3.4
11,036
5.8
Total 302,058

160.1 % 296,630
157.2 %



			Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Senior secured debt investments ⁽¹⁾	$	352,264	73.6	%	260.2	%	$	325,659	74.7	%	240.5	%
Subordinated debt investments	56,985		11.9		42.1		35,755		8.2		26.4
Preferred equity	18,621		3.9		13.8		11,757		2.7		8.7
Common equity, warrants and other	15,717		3.3		11.6		32,561		7.5		24.0
Total debt and equity investments	443,587		92.7		327.7		405,732		93.1		299.6
Structured Finance Notes	35,254		7.3		26.0		30,030		6.9		19.5
Total investments	$	478,841	100.0	%	353.7	%	$	435,762	100.0	%	319.1	%


(1)	Includes debt investments, typically referred to as unitranche, in which we have entered into contractual arrangements with co‑lenders whereby, subject to certain conditions, we have agreed to receive our principal payments after the repayment of certain co‑lenders pursuant to a payment waterfall. Amortized cost and fair value of these investments were $75,406 and $74,381, respectively.

In July, 2017, the Company's senior secured debt investment with a cost basis of $6,701, and preferred equity investments, with an aggregate cost basis of $247, in My Alarm Center, LLC, were restructured and exchanged for common equity and a new class of preferred equity securities with a fair value of $-0- and $1,745 respectively. As of June 30, ~~2017,~~2020, the Company ~~recognized cumulative unrealized losses~~had international domiciled debt investments, all denominated in US dollars, with an amortized cost and fair value of ~~$5,203, which upon restructuring, was realized during the quarter ended September 30, 2017.~~

~~At September 30, 2017, all but one (domiciled in Canada) of the Company’s~~$5,910 and $5,563, respectively, and debt and equity investments with an amortized cost and fair value of ~~$3,935~~$437,677 and ~~$4,038, respectively, were~~$400,169 domiciled in the United States. Geographic composition is determined by the location of the corporate headquarters of the portfolio company. The industry compositions of the Company’s debt and equity investment portfolio ~~were~~was as follows:


			Percentage of:						Percentage of:						Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets		Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Administrative and Support and Waste Management and Remediation Services
Security Systems Services (except Locksmiths)	$	15,129	5.0	%	8.0	%	$	14,960	5.0	%	7.9	%	$	6,528	1.5	%	4.8	%	$	4,740	1.2	%	3.5	%
Tour Operators	439		0.1		0.2		1,424		0.5		0.8
Arts, Entertainment, and Recreation
Fitness and Recreational Sports Centers	15,390		5.1		8.2		15,422		5.2		8.2
Other Amusement and Recreation Industries													20,934		4.7		15.5		19,725		4.9		14.5
Construction
Electrical Contractors and Other Wiring Installation Contractors													16,971		3.8		12.5		14,822		3.7		10.9

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Percentage of: Percentage of:
Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets
Electrical Contractors and Other Wiring Installation Contractors
18,646

6.2

9.9
18,877
6.4
10.0
Education Services

Colleges, Universities, and Professional Schools
5,563

1.8

2.9
2,911
1.0
1.5
Finance and Insurance

Insurance Agencies and Brokerages
12,490

4.1

6.6
12,327
4.2
6.5
Offices of Real Estate Agents and Brokers
3,935

1.3

2.1
4,038
1.4
2.1
Health Care and Social Assistance

Medical Laboratories
4,310

1.4

2.3
4,156
1.4
2.2
Offices of Physicians, Mental Health Specialists
6,938

2.3

3.7
6,920
2.3
3.7
Outpatient Mental Health and Substance Abuse Centers
7,639

2.5

4.0
2,038
0.7
1.1
Information

Other Information Services
2,382

0.8

1.3
2,375
0.8
1.3
Manufacturing

Bolt, Nut, Screw, Rivet, and Washer Manufacturing
3,926

1.3

2.1
3,618
1.2
1.9
Commercial Printing (except Screen and Books)
6,646

2.2

3.5
6,661
2.2
3.5
Other Aircraft Parts and Auxiliary Equipment Manufacturing
12,035

4.0

6.4
16,855
5.7
8.9
Other Basic Inorganic Chemical Manufacturing
1,929

0.6

1.0
1,939
0.7
1.0
Packaging Machinery Manufacturing
1,647

0.5

0.9
1,643
0.6
0.9
Pharmaceutical Preparation Manufacturing
4,040

1.3

2.1
8,763
3.0
4.6
Pump and Pumping Equipment Manufacturing
9,855

3.3

5.2
9,389
3.2
5.0
Travel Trailer and Camper Manufacturing
10,182

3.5

5.4
10,697
3.5
5.7
Truck Trailer Manufacturing
6,237

2.1

3.3
6,390
2.2
3.4
Other Services (except Public Administration)

Automotive Oil Change and Lubrication Shops
24,149

8.0

12.8
24,149
8.0
12.8
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
13,679

4.6

7.3
12,495
4.2
6.6
Professional, Scientific, and Technical Services

Computer Systems Design and Related Services
7,300

2.4

3.9
7,401
2.5
3.9
Custom Computer Programming Services
6,737

2.2

3.6
6,821
2.3
3.6
Other Accounting Services
3,484

1.2

1.8
4,291
1.4
2.3
Other Professional, Scientific, and Technical Services
23,604

7.8

12.5
20,209
6.8
10.7
Veterinary Services
743

0.2

0.4
750
0.3
0.4
Public Administration

Other Justice, Public Order, and Safety Activities
14,725

4.9

7.8
14,896
5.0
7.9
Real Estate and Rental and Leasing

Home Health Equipment Rental
900

0.3

0.5
132
—
0.1
Office Machinery and Equipment Rental and Leasing
12,294

4.1

6.5
13,045
4.4
6.9
Retail Trade

Warehouse Clubs and Supercenters
7,268

2.4

5.0
6,999
2.4
5.0
Shoe store
9,436

3.1

3.9
9,436
3.2
3.7
All Other General Merchandise Stores
6,653

2.2

3.5
6,325
2.1
3.4
Wholesale Trade

Metal Service Centers and Other Metal Merchant Wholesalers
12,908

4.3

6.8
14,449
4.9
7.7



		Percentage of Total			Percentage of Total
	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets
Plumbing, Heating, and Air-Conditioning Contractors	8,490	1.9	6.3	7,804	1.9	5.8
Education Services
Colleges, Universities, and Professional Schools	—	—	—	2,110	0.5	1.6
Professional and Management Development Training	11,815	2.7	8.7	9,705	2.4	7.2
Finance and Insurance
Direct Health and Medical Insurance Carriers	395	0.1	0.3	395	0.1	0.3
Insurance Agencies and Brokerages	9,530	2.1	7.0	8,268	2.0	6.1
Health Care and Social Assistance
Child Day Care Services	5,176	1.2	3.8	4,896	1.2	3.6
Diagnostic Imaging Centers	14,270	3.2	10.5	15,385	3.8	11.4
Home Health Care Services	13,638	3.1	10.1	13,623	3.4	10.1
Medical Laboratories	91	—	0.1	58	—	—
Offices of Physicians, Mental Health Specialists	20,716	4.7	15.3	19,299	4.8	14.3
Outpatient Mental Health and Substance Abuse Centers	11,612	2.6	8.6	3,803	0.9	2.8
Information
Data Processing, Hosting, and Related Services	11,739	2.6	8.7	11,692	2.9	8.6
Software Publishers	29,969	6.8	22.2	19,180	4.7	14.2
Television Broadcasting	1,987	0.4	1.5	1,625	0.4	1.2
Manufacturing
Commercial Printing (except Screen and Books)	4,784	1.1	3.5	4,346	1.1	3.2
Custom Compounding of Purchased Resins	15,424	3.5	11.4	15,570	3.8	11.5
Other Aircraft Parts and Auxiliary Equipment Manufacturing	5,422	1.2	4.0	4,408	1.1	3.3
Other Commercial and Service Industry Machinery Manufacturing	1,969	0.4	1.5	1,898	0.5	1.4
Pharmaceutical Preparation Manufacturing	6,004	1.4	4.4	29,751	7.3	21.9
Plastics Plumbing Fixture Manufacturing	1,477	0.3	1.1	1,457	0.4	1.1
Pump and Pumping Equipment Manufacturing	1,501	0.3	1.1	1,236	0.3	0.9
Semiconductor and Related Device Manufacturing	475	0.1	0.4	475	0.1	0.4
Travel Trailer and Camper Manufacturing	10,714	2.4	7.9	7,410	1.8	5.5
Truck Trailer Manufacturing	6,993	1.6	5.2	6,538	1.6	4.8
Unlaminated Plastics Profile Shape Manufacturing	8,051	1.8	5.9	7,255	1.8	5.4
Other Services (except Public Administration)
Automotive Oil Change and Lubrication Shops	19,902	4.5	14.7	19,374	4.8	14.3

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)



		Percentage of Total			Percentage of Total
	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance	851	0.2	0.6	706	0.2	0.5
Diet and Weight Reducing Centers	492	0.1	0.4	492	0.1	0.4
Professional, Scientific, and Technical Services
Administrative Management and General Management Consulting Services	17,991	4.1	13.3	17,718	4.4	13.1
All Other Professional, Scientific, and Technical Services	1,925	0.4	1.4	1,767	0.4	1.3
Other Accounting Services	14,611	3.3	10.8	14,989	3.7	11.1
Other Computer Related Services	17,715	4.0	13.1	16,656	4.0	12.3
Other Professional, Scientific, and Technical Services	500	0.1	0.4	200	—	0.1
Public Administration
Other Justice, Public Order, and Safety Activities	703	0.2	0.5	707	0.2	0.5
Real Estate and Rental and Leasing
Office Machinery and Equipment Rental and Leasing	13,957	3.1	10.3	10,180	2.5	7.5
Retail Trade
Cosmetics, Beauty Supplies, and Perfume Stores	7,867	1.8	5.8	7,502	1.8	5.5
Shoe store	9,728	2.2	7.2	9,257	2.3	6.8
Sporting Goods Stores	2,915	0.7	2.2	2,869	0.7	2.1
All Other General Merchandise Stores	5,332	1.2	3.9	4,444	1.1	3.3
Transportation and Warehousing
Taxi Service	1,986	0.4	1.5	1,884	0.5	1.4
Wholesale Trade
Business to Business Electronic Markets	3,390	0.8	2.5	3,065	0.8	2.3
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers	1,963	0.4	1.4	1,909	0.5	1.4
Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers	18,924	4.3	14.0	18,984	4.7	14.0
Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers	489	0.1	0.4	482	0.1	0.4
General Line Grocery Merchant Wholesalers	480	0.1	0.4	480	0.1	0.4
Industrial Machinery and Equipment Merchant Wholesalers	9,698	2.2	7.2	8,857	2.1	6.5
Industrial Supplies Merchant Wholesalers	6,895	1.6	5.1	4,945	1.2	3.7
Motor Vehicle Parts (Used) Merchant Wholesalers	14,222	3.2	10.5	13,667	3.4	10.1
Sporting and Recreational Goods and Supplies Merchant Wholesalers	8,247	1.9	6.1	—	—	—
Stationary & Office Supply Merchant Wholesaler	16,129	3.6	11.9	7,124	1.8	5.3

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Percentage of: Percentage of:
Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets
Sporting and Recreational Goods and Supplies Merchant Wholesalers
8,820

2.9

4.7
3,829
1.3
2.0

$ 302,058

100.0 %
160.1 % $ 296,630
100.0 % 157.2 %



			Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Total debt and equity investments	$	443,587	100.0	%	327.6	%	$	405,732	100.0	%	299.7	%
Structured Finance Notes	35,254		—		26.0	%	30,030		—		19.5	%
Total investments	$	478,841	100.0	%	353.6	%	$	435,762	100.0	%	319.2	%

As of December 31, ~~2016,~~2019, the Company had loans to 3979 portfolio companies, of which ~~74%~~90% were senior secured loans and ~~26%~~10% were subordinated loans, at fair value, as well as equity investments in 1715 of these portfolio companies. The Company also held an equity investment in ~~two~~six portfolio companies in which it did not hold a debt ~~interest.~~

investment, as well as four investments in Structured Finance Notes. At December 31, ~~2016,~~2019, investments consisted of the following:


											Percentage of Total						Percentage of Total
	Amortized Cost		Percentage of Net Assets		Fair Value		Percentage of Net Assets		Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Senior secured debt investments	$	182,315	126.8	%	$	180,955	125.9	%	$	421,970	78.3	%	253.2	%	$	408,724	79.1	%	245.3	%
Subordinated debt investments	66,591		46.3		63,410		44.1		56,731		10.5		34.0		43,091		8.3		25.9
Preferred equity	23,293		16.2		23,721		16.5		21,925		4.1		13.2		17,729		3.4		10.6
Common equity and warrants	7,108		4.9		13,541		9.4
Common equity, warrants and other									14,919		2.8		9.0		25,777		5.0		15.5
Total debt and equity investments									515,545		95.7	%	309.4	%	495,321		95.8	%	297.3	%
Structured Finance Notes									23,126		4.3		14.0		21,610		4.2		12.9
Total	$	279,307	194.2	%	$	281,627	195.9	%	$	538,671	100.0	%	323.4	%	$	516,931	100.0	%	310.2	%

At December 31, ~~2016,~~2019, the Company had international domiciled debt investments, all ~~but one (domiciled~~denominated in ~~Canada)~~US dollars, with an amortized cost and fair value of ~~the Company’s~~$10,309 and $10,374, respectively, and debt and equity investments with an amortized cost and fair value of ~~$3,923~~$505,232 and ~~$3,923, respectively, were~~$484,945 domiciled in the United States. ~~Geographic composition is determined by the location of the corporate headquarters of the portfolio company.~~ The industry compositions of the Company’s debt and equity investment portfolio were as follows:

Percentage of: Percentage of:
Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets
Administrative and Support and Waste Management and Remediation Services
Other Travel Arrangement and Reservation Services $ 10,182
3.6 % 7.1 % $ 10,839
3.8 % 7.5 %
Security Systems Services (except Locksmiths) 18,663
6.7
13.0
18,883
6.7
13.1
Tour Operators 439
0.2
0.3
1,019
0.4
0.7
Arts, Entertainment, and Recreation
Fitness and Recreational Sports Centers 14,372
5.1
10.0
14,410
5.1
10.0
Education Services
Colleges, Universities, and Professional Schools 5,314
1.9
3.7
5,142
1.8
3.6
Finance and Insurance
Insurance Agencies and Brokerages 13,510
4.8
9.4
13,599
4.8
9.5
Health Care and Social Assistance
Medical Laboratories 4,204
1.5
2.9
4,174
1.5
2.9
Other Outpatient Care Centers 14,207
5.2
9.9
14,393
5.1
10.0
Outpatient Mental Health and Substance Abuse Centers 7,639
2.7
5.3
5,393
1.9
3.8
Information
Other Information Services 2,427
0.9
1.7
2,340
0.8
1.6
Other Telecommunications 2,652
0.9
1.8
2,630
0.9
1.8
Software Publishers 4,896
1.8
3.4
4,949
1.8
3.4
Manufacturing
Bolt, Nut, Screw, Rivet, and Washer Manufacturing 4,090
1.5
2.8
3,555
1.3
2.5
Other Aircraft Parts and Auxiliary Equipment Manufacturing 11,925
4.3
8.3
13,551
4.8
9.4
Other Basic Inorganic Chemical Manufacturing 4,413
1.6
3.1
4,396
1.6
3.1



			Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Administrative and Support and Waste Management and Remediation Services
Security Systems Services (except Locksmiths)	$	8,158	1.6	%	4.9	%	$	7,224	1.5	%	4.3	%
Temporary Help Services	13,866		2.7		8.3		13,742		2.8		8.2
Arts, Entertainment, and Recreation
Other Amusement and Recreation Industries	18,611		3.6		11.2		18,592		3.8		11.2
Construction
Electrical Contractors and Other Wiring Installation Contractors	16,520		3.2		9.9		14,639		3.0		8.8
Plumbing, Heating, and Air-Conditioning Contractors	8,422		1.6		5.1		9,583		1.9		5.8
Education Services
Colleges, Universities, and Professional Schools	—		—		—		—		—		—
Professional and Management Development Training	11,574		2.2		6.9		11,575		2.3		6.9
Finance and Insurance
Direct Health and Medical Insurance Carriers	395		0.1		0.2		405		0.1		0.2
Insurance Agencies and Brokerages	11,487		2.2		6.9		11,386		2.3		6.8
Health Care and Social Assistance

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Percentage of: Percentage of:
Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets
Packaging Machinery Manufacturing 1,996
0.7
1.4
1,885
0.7
1.3
Pharmaceutical Preparation Manufacturing 4,049
1.4
2.8
9,893
3.5
6.9
Pump and Pumping Equipment Manufacturing 10,908
3.9
7.6
10,016
3.6
7.0
Travel Trailer and Camper Manufacturing 12,797
4.6
8.9
13,149
4.7
9.1
Other Services (except Public Administration)
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance 13,695
4.9
9.5
11,610
4.1
8.1
Professional, Scientific, and Technical Services

Computer Systems Design and Related Services 3,879
1.4
2.7
3,946
1.4
2.7
Custom Computer Programming Services 5,097
1.8
3.5
5,143
1.8
3.6
Other Accounting Services 5,328
1.9
3.7
4,911
1.7
3.4
Other Computer Related Services 14,738
5.3
10.3
14,883
5.3
10.4
Other Professional, Scientific, and Technical Services 32,750
11.7
22.7
31,422
11.2
21.8
Veterinary Services 650
0.2
0.5
651
0.2
0.5
Real Estate and Rental and Leasing
Home Health Equipment Rental 900
0.3
0.6
1,037
0.4
0.7
Office Machinery and Equipment Rental and Leasing 11,888
4.3
8.3
13,510
4.8
9.4
Offices of Real Estate Agents and Brokers 3,923
1.4
2.7
3,923
1.4
2.7
Offices of Real Estate Appraisers 10,032
3.6
7.0
10,000
3.6
7.0
Retail Trade
All Other General Merchandise Stores 6,839
2.4
4.8
6,839
2.4
4.8
Wholesale Trade
Metal Service Centers and Other Metal Merchant Wholesalers 12,700
4.5
8.8
14,142
5.0
9.8
Sporting and Recreational Goods and Supplies Merchant Wholesalers 8,205
3.0
5.7
5,394
1.9
3.8
$ 279,307
100.0 % 194.2
$ 281,627
100.0 % 195.9 %



		Percentage of Total			Percentage of Total
	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets
All Other Outpatient Care Centers	2,001	0.4	1.2	2,015	0.4	1.2
Child Day Care Services	8,126	1.6	4.9	8,266	1.7	5.0
Diagnostic Imaging Centers	14,247	2.8	8.6	14,191	2.9	8.5
Freestanding Ambulatory Surgical and Emergency Centers	2,950	0.6	1.8	2,976	0.6	1.8
General Medical and Surgical Hospitals	2,612	0.5	1.6	2,632	0.5	1.6
Home Health Care Services	16,627	3.2	10.0	16,236	3.3	9.7
Medical Laboratories	91	—	0.1	22	—	—
Offices of Physicians, Mental Health Specialists	20,047	3.9	12.0	19,945	4.0	12.0
Outpatient Mental Health and Substance Abuse Centers	11,609	2.3	7.0	4,000	0.8	2.4
Residential Intellectual and Developmental Disability Facilities	2,991	0.6	1.8	3,006	0.6	1.8
Information
Data Processing, Hosting, and Related Services	11,805	2.3	7.1	11,900	2.4	7.1
Internet Publishing and Broadcasting and Web Search Portals	1,969	0.4	1.2	1,992	0.4	1.2
Software Publishers	41,054	8.0	24.5	38,373	7.7	22.9
Television Broadcasting	1,997	0.4	1.2	1,997	0.4	1.1
Wired Telecommunications Carriers	1,972	0.4	1.2	1,980	0.4	1.2
Manufacturing
Commercial Printing (except Screen and Books)	4,778	0.9	2.9	4,591	0.9	2.8
Custom Compounding of Purchased Resins	15,405	3.0	9.2	16,408	3.3	9.8
Motor Vehicle Body Manufacturing	1,970	0.4	1.2	1,997	0.4	1.2
Other Aircraft Parts and Auxiliary Equipment Manufacturing	5,412	1.0	3.2	4,213	0.9	2.5
Other Commercial and Service Industry Machinery Manufacturing	2,229	0.4	1.3	2,262	0.5	1.4
Pharmaceutical and Medicine Manufacturing	853	0.2	0.5	853	0.2	0.5
Pharmaceutical Preparation Manufacturing	7,931	1.5	4.8	19,694	4.0	11.8
Plastics Plumbing Fixture Manufacturing	1,484	0.3	0.9	1,498	0.3	0.9
Pump and Pumping Equipment Manufacturing	1,501	0.3	0.9	1,607	0.3	1.0
Travel Trailer and Camper Manufacturing	10,520	2.0	6.3	8,717	1.7	5.2
Truck Trailer Manufacturing	6,990	1.4	4.2	6,690	1.4	4.0
Unlaminated Plastics Profile Shape Manufacturing	10,046	1.9	6.0	9,959	2.0	6.0
Other Services (except Public Administration)
Automotive Oil Change and Lubrication Shops	20,165	3.9	12.1	20,458	4.0	12.3
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance	19,106	3.7	11.5	18,265	3.7	11.0

~~Unconsolidated Significant Subsidiaries:~~ In accordance with Regulation S-X and GAAP, the Company is not permitted to consolidate any subsidiary or other entity that is not an investment company, including those in which the Company has a controlling interest unless the business of the controlled operating company consists of providing services to the Company. In accordance with Regulation S-X Rules 3-09 and 4-08(g), the Company evaluates its unconsolidated controlled portfolio companies as significant subsidiaries under the respective rules. As of September 30, 2017, MTE Holding Corp. was considered a significant unconsolidated subsidiary under Regulation S-X Rule 4-08(g). The Company's voting ownership in MTE Holding Corp. is limited to 50% through a substantive participating voting rights agreement with an unaffiliated investor. Based on the requirements under Regulation S-X Rule 4-08(g), the summarized consolidated financial information of MTE Holding Corp. and Subsidiaries is presented below:

Balance Sheet: September 30, 2017 December 31, 2016
Current assets $ 6,861
$ 5,535
Noncurrent assets 25,245
24,681
Total Assets $ 32,106
$ 30,216
Current liabilities $ 2,757
$ 2,401
Noncurrent liabilities 17,162
16,889
Total liabilities 19,919
19,290
Non-controlling interest 5,441
4,878
Total equity 6,746
6,048

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)



		Percentage of Total			Percentage of Total
	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets
Communication Equipment Repair and Maintenance	4,493	0.9	2.7	4,512	0.9	2.7
Professional, Scientific, and Technical Services
Administrative Management and General Management Consulting Services	17,496	3.4	10.5	17,492	3.5	10.5
Advertising Agencies	1,987	0.4	1.2	2,001	0.4	1.2
All Other Professional, Scientific, and Technical Services	1,925	0.4	1.2	1,925	0.4	1.2
Other Accounting Services	1,698	0.3	1.0	2,250	0.5	1.4
Other Computer Related Services	18,242	3.5	10.9	18,353	3.7	11.0
Other Professional, Scientific, and Technical Services	500	0.1	0.3	1,490	0.3	0.9
Testing Laboratories	1,987	0.4	1.2	2,004	0.4	1.2
Public Administration
Other Justice, Public Order, and Safety Activities	9,846	1.9	5.9	407	0.1	0.2
Public Finance Activities	1,941	0.4	1.2	2,007	0.4	1.2
Real Estate and Rental and Leasing
Office Machinery and Equipment Rental and Leasing	13,698	2.7	8.2	14,342	2.9	8.6
Retail Trade
Cosmetics, Beauty Supplies, and Perfume Stores	6,419	1.2	3.9	6,363	1.3	3.8
Shoe Store	9,675	1.8	5.8	9,917	2.0	6.0
Sporting Goods Stores	1,921	0.4	1.2	1,983	0.4	1.2
Supermarkets and Other Grocery (except Convenience) Stores	1,081	0.2	0.6	1,094	0.2	0.7
All Other General Merchandise Stores	5,402	1.0	3.2	5,020	1.0	3.0
Transportation and Warehousing
General Warehousing and Storage	13,790	2.7	8.3	14,165	2.9	8.5
Taxi Service	1,990	0.4	1.2	1,990	0.4	1.2
Wholesale Trade
Business to Business Electronic Markets	3,920	0.8	2.4	3,960	0.8	2.4
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers	3,955	0.8	2.4	3,976	0.8	2.4
Industrial Machinery and Equipment Merchant Wholesalers	9,700	1.9	5.8	9,662	2.0	5.8
Industrial Supplies Merchant Wholesalers	6,883	1.3	4.1	6,584	1.3	4.0
Motor Vehicle Parts (Used) Merchant Wholesalers	13,119	2.5	7.9	13,119	2.6	7.9
Other Grocery and Related Products Merchant Wholesalers	1,995	0.4	1.2	2,003	0.4	1.2
Sporting and Recreational Goods and Supplies Merchant Wholesalers	8,247	1.6	4.9	255	0.1	0.2
Stationery and Office Supplies Merchant Wholesalers	16,113	3.1	9.7	14,559	2.9	8.7

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
Summary of Operations: 2017 2016 2017 2016
Net Sales $ 7,709
$ 7,040
23,571
$ 21,058
Gross Profit 2,310
2,358
7,519
6,951
Net income 433
599
1,885
1,935
Net income attributable to MTE Holding Corp. 240
332
1,043
1,071



			Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Total debt and equity investments	$	515,545	100.0	%	309.4	%	$	495,321	100.0	%	297.3	%
Structured Finance Notes	23,126		—		14.0	%	21,610		—		12.9	%
Total investments	$	538,671	100.0	%	323.4	%	$	516,931	100.0	%	310.2	%

When there is reasonable doubt that principal, cash interest, or PIK interest will be collected, loan investments are placed on non-accrual status and the Company will generally cease recognizing cash interest, PIK interest, or Net Loan Fee amortization, as applicable. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal, interest and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal. The aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization was $49,525 and $21,193, respectively, at June 30, 2020, and $22,249 and $662, respectively, at December 31, 2019.

On March 27, 2020, the Company's debt investment in Constellis Holdings, LLC was restructured pursuant to which, the Company converted its non-accrual debt investment for 20,628 common shares of equity. The cost and fair value of the common shares received were $703 and $703, respectively, as of March 31, 2020. The Company recognized a realized loss on the restructuring of $9,145 for the six months ended June 30, 2020, which was fully recognized as an unrealized loss as of December 31, 2019.

On January 31, 2019, Maverick Healthcare Equity, LLC was acquired in a purchase transaction. Proceeds from this transaction were insufficient to redeem the class of equity held by the Company. Accordingly, during the six months ended June 30, 2019, the Company recognized a net loss of $89, which is comprised of $900 realized loss net of $811 unrealized loss reversal.

Note 5. Fair Value of Financial Instruments

The Company’s investments are valued at fair value as determined ~~in good faith~~ by ~~Company management under~~ the ~~supervision, and review and approval of the~~Company's Board. These fair values are determined in accordance with a documented valuation policy and a consistently applied valuation ~~process as described below:~~

For each debt investment, a basic credit risk rating review process is completed. The risk rating on every credit facility is reviewed and either reaffirmed or revised by OFS Advisor’s investment committee.

~~Each portfolio company or investment is valued by OFS Advisor.~~

~~The preliminary valuations are documented and are then submitted to OFS Advisor’s investment committee for ratification.~~

Third-party valuation firm(s) provide valuation services as requested, by reviewing the investment committee’s preliminary valuations. OFS Advisor’s investment committee’s preliminary fair value conclusions on each of the Company’s assets for which sufficient market quotations are not readily available is reviewed and assessed by a third-party valuation firm at least once in every 12-month period, and more often as determined by the audit committee of the Company’s Board or required by the Company’s valuation policy. Such valuation assessment may be in the form of positive assurance, range of values or other valuation method based on the discretion of the Company’s Board.

The audit committee of the Board reviews the preliminary valuations of OFS Advisor’s investment committee and independent valuation firms and, if appropriate, recommends the approval of the valuations by the Board.

The Company’s Board discusses valuations and determines the fair value of each investment in the portfolio in good faith based on the input of OFS Advisor, the audit committee and, where appropriate, the respective independent valuation firm.process.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values are determined with models or other valuation techniques, valuation inputs, and assumptions market participants would use in pricing an asset or liability. Valuation inputs are organized in a hierarchy that gives the highest priority to prices for identical assets or liabilities quoted in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs in the fair value hierarchy are described below:

Level 11:: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Level 22:: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include: (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived principally from or corroborated by observable market data.

Level 33:: Unobservable inputs for the asset or liability, and situations where there is little, if any, market activity for the asset or liability at the measurement date.

The inputs into the determination of fair value are based upon the best information under the circumstances and may require significant ~~management~~ judgment or ~~estimation.~~estimation by management. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The ~~Company’s~~Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

~~OFS Capital Corporation~~ The Company generally categorizes its investment portfolio into Level 2 and ~~Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~

Level 3 of the hierarchy.

The Company assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the measurement date. All of the Company’s investments, which are measured at fair value, were categorized as Level 3 based upon the lowest level of significant input to the valuations.There were no transfers among Level 1, 2 and 3 for the three and nine months ended September 30, 2017 and 2016.

Each quarter, for investments for which unadjusted quoted prices in active markets are not available, the Company assesses whether market quotations, prices from pricing services or bids from brokers or dealers (collectively, "Indicative Prices") are available, as well as the Company's ability to transact at such Indicative Prices. Investments for which sufficient Indicative Prices exist are generally valued consistent with such Indicative Prices. The Company ~~periodically corroborates~~ observed Indicative Prices with its actual investment purchase prices and/or other valuation techniques, such as the discounted cash flow method described below. Based on the corroborating analysis and the experience of the Company’s managementsignificant declines in purchasing and selling these investments, the Company believes that these Indicative Prices may be reasonable indicators of fair value. In certain instances, the Company may partially rely on Indicative Prices when the Company determines such Indicative Prices are not of sufficient strength to rely on as the sole indication of fair value. In such instances, the Company applies a weighting factor to the Indicative Price and an alternative fair value analysis, typically a discounted cash flow analysis. The weighting factor placed on an Indicative Price is applied consistently based upon its relative strength, which considers, among other factors, and when available, the depth andmarket liquidity ~~of the Indicative Price. Weighting factors are not significant to the overall fair value measurement, but rather are applied to incorporate relevant market data when available.~~

In addition, each quarter, the Company assesses whether an arm’s length transaction occurred in the same security, including the Company's new investments during the quarter, the cost of which (“Transaction Prices”), may be considered a reasonable indication of fair value for up to three months after the transaction date.

Due to the private nature of this marketplace (meaning actual transactions are not publicly reported), and the non-binding nature of the Indicative Prices, and the general inability to observe the input for the full length of the term of an investment, the Company believes that these valuation inputs are classified as Level 3 within the fair value hierarchy.

In the absence of sufficient, actionable Indicative Prices or Transaction Prices, as an indication of fair value, and consistent with the policies and methodologies adopted by the Board, the Company performs detailed valuations of its debt and equity investments, including an analysis on the Company’s unfunded loan commitments, using both the market and income approaches as appropriate. There is no one methodology to estimate fair value and, in fact, for any one portfolio company, fair value is generally best expressed as a range of values. The Company may also engage one or more independent valuation firms(s) to conduct independent appraisals of its investments to develop the range of values, from which the Company derives a single estimate of value. Under the income approach, the Company typically prepares and analyzes discounted cash flow models to estimate the present value of future cash flows of either an individual debt investment or of the underlying portfolio company itself.

The primary method used to estimate the fair value of the Company's debt investments is the discounted cash flow method. However, if there is deterioration in credit quality or a debt investment is in workout status, the Company may consider other methods in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. The discounted cash flow approach to determining fair value (or a range of fair values) involves applying an appropriate discount rate(s) to the estimated future cash flows using various relevant factors depending on investment type, including the latest arm’s length or market transactions involving the subject security, a benchmark credit spread or other indication of market yields, and company performance. The valuation based on the inputs determined to be the most reasonable and probable is used as the fair value of the investment, which may include a weighting factor applied to multiple valuation methods. The determination of fair value using these methodologies may take into consideration a range of factors including, but not limited to, the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financing transactions subsequent to the acquisition of the investment and anticipated financing transactions after the valuation date.

~~The Company changed the primary method used to value certain of its investments, primarily equity investments, as of December 31, 2016, from the income approach to the market approach, principally~~ due to the nature of evidence available under the discounted cash flow method, and to better align with industry practice. The Company may also utilize an income approach when estimating the fair value of its equity securities, either as a primary methodology if consistent with industry practice or if the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach.COVID-19 pandemic that

Under the market approach, the Company estimates the enterprise value of portfolio companies. Typically, the enterprise value of a private company is based on multiples of EBITDA, net income, revenues, or other relevant basis. The valuation based on

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

~~the inputs determined to be the most reasonable and probable is used~~disqualified certain NBIP as ~~the~~Level 2 inputs. Senior securities with a fair value of $-0- and 2,915 were transfered from Level 2 to Level 3 during the ~~investment, which may include~~three and six months ended June 30, 2020, respectively, while senior securities with a ~~weighting factor applied to multiple valuation methods. In estimating the enterprise~~fair value of $4,256 and $-0- were transferred from Level 3 to Level 2 during the three and six months ended June 30, 2020, respectively. Senior securities with a portfolio company, the Company analyzes various factors consistent with industry practice, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, the portfolio company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizablefair value of ~~any collateral, financing transactions subsequent~~$14,219 were transfered from Level 3 to Level 2 during the ~~acquisition of the investment~~three and ~~anticipated financing transactions after the valuation date.~~six months ended June 30, 2019.

~~Application of these valuation methodologies involves a significant degree of judgment by management.~~ Due to the inherent uncertainty of determining the fair value of Level 3 investments, the fair value of the investments may differ significantly from the values that would have been used had a ready market or observable inputs existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions, or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company might realize significantly less than the value at which such investment had previously been recorded. The Company’s investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.

The following tables presents the Company's investment portfolio measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.



Security	Level 1		Level 2		Level 3		Fair Value at June 30, 2020
Debt investments	$	—	$	19,408	$	342,006	$	361,414
Equity investments	—		—		44,318		44,318
Structured Finance Notes	—		—		30,030		30,030
	$	—	$	19,408	$	416,354	$	435,762



Security	Level 1		Level 2		Level 3		Fair Value at December 31, 2019
Debt investments	$	—	$	74,666	$	377,149	$	451,815
Equity investments	—		—		43,506		43,506
Structured Finance Notes	—		—		21,610		21,610
	$	—	$	74,666	$	442,265	$	516,931

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following tables provide quantitative information about valuation techniques and the Company’s significant ~~Level 3 fair value~~ inputs to the Company’s Level 3 fair value measurements as of ~~September~~June 30, ~~2017,~~2020 and December 31, ~~2016.~~2019. In addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The table below ~~is not intended to be exhaustive, but rather~~ provides information on the significant Level 3 inputs as they relate to the Company’s fair value measurements.

Fair Value at September 30, 2017 (1)

Valuation technique

Unobservable inputs

Range
(Weighted average)

Fair Value at June 30, 2020

Valuation technique

Unobservable inputs

Range
(Weighted average)

Debt investments:

Senior secured

126,310

Discounted cash flow

Discount rates

6.18% - 17.65% (11.52%)

268,196

Discounted cash flow

Discount rates

6.69% - 24.01% (11.31%)

Senior secured

25,138

Market approach

EBITDA multiples

7.75x - 9.00x (7.91x)

Senior secured

12,917

Market approach

Revenue multiples

2.00x - 2.00x (1.60x)

Subordinated

28,631

Discounted cash flow

Discount rates

6.88% - 23.51% (18.24%)

Subordinated

7,124

Market approach

EBITDA multiples

7.82x - 7.82x (7.82x)

Subordinated

—

Market approach

Revenue multiples

0.10x - 0.15x (0.25x)

Structured Finance Notes⁽³⁾:

Subordinated notes

29,240

Discounted cash flow

Discount rates

18.50% - 25.00% (21.34%)

11,841

Enterprise value

EBITDA multiple

7.50x - 7.50x (7.50x)

Constant Default Rate⁽¹⁾

2.00% - 2.00% (2.00%)

Constant Default Rate⁽²⁾

3.00% - 3.00% (3.00%)

Subordinated

48,897

Discounted cash flow

Discount rates

11.06% - 25.00% (15.05%)

Recovery Rate

60.00% - 60.00% (60.00%)

Mezzanine debt

790

Discounted cash flow

Discount rates

9.25% - 9.50% (9.47%)

Constant Default Rate⁽¹⁾

2.00% - 2.00% (2.00%)

Constant Default Rate⁽²⁾

3.00% - 3.00% (3.00%)

5,322

Enterprise value

EBITDA multiple

7.25x - 7.81x (7.47x)

Recovery Rate

60.00% - 60.00% (60.00%)

Equity investments:

Preferred equity

22,855

Enterprise value

EBITDA multiples

5.00x - 13.48x (7.16x)

9,582

Market approach

EBITDA multiples

6.50x - 15.00x (7.16x)

Common equity and warrants

10,324

Enterprise value

EBITDA multiples

4.72x - 9.40x (5.65x)

Preferred equity

706

Market approach

Revenue multiples

0.15x - 0.75x (0.75x)

Preferred equity

1,469

Market approach

Recurring monthly revenue

38.00x - 38.00x (38.00x)

Common equity, warrants and other

32,361

Market approach

EBITDA multiples

3.25x - 15.00x (8.61x)

Common equity, warrants and other

200

Market approach

Revenue multiples

0.15x - 4.00x (1.03x)

Common equity, warrants and other

—

Market approach

Recurring monthly revenue

38.00x - 38.00x (38.00x)

416,354


~~(1)~~	~~Excludes $56,002, $8,723, and $6,356, of senior secured debt investments, subordinated debt investments, and equity investments, respectively, valued at Transaction Prices.~~

(1) Constant default rates for the next eighteen months.

(2) Constant default rates for the twelve months following the next eighteen months.

(3) The cash flows utilized in the discounted cash flow calculations assume liquidation at current market prices and redeployment of proceeds on all assets currently in default and all assets below specified fair value thresholds.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Fair Value at December 31, 2016 (1)

Valuation technique

Unobservable inputs

Range
(Weighted average)

Fair Value at December 31, 2019

Valuation technique

Unobservable inputs

Range
(Weighted average)

Debt investments:

Senior secured

149,128

Discounted cash flow

Discount rates

6.70% - 18.71% (12.07%)

295,835

Discounted cash flow

Discount rates

5.64% - 17.42% (11.17%)

Senior secured

15,031

Market approach

EBITDA multiples

8.09x - 13.22x (13.08x)

Senior secured

23,193

Market approach

Transaction Price

Subordinated

35,371

Discounted cash flow

Discount rates

6.38% - 18.86% (14.32%)

Subordinated

7,464

Market approach

EBITDA multiples

4.75x - 6.35x (6.35x)

Subordinated

255

Market approach

Revenue multiple

Structured Finance Notes:

Subordinated Notes⁽²⁾

21,610

Discounted cash flow

Discount rates

14.50% - 19.50% (17.16%)

15,901

Enterprise value

EBITDA multiples

7.25x - 7.50x (7.31x)

Constant default rate⁽¹⁾

1.26% - 1.40% (1.33%)

Recovery rate

69.30% - 70.00% (69.70%)

Subordinated

45,635

Discounted cash flow

Discount rates

10.75% - 21.24% (14.19%)

5,393

Enterprise value

EBITDA multiples

8.00x - 8.00x (8.00x)

Equity investments:

Preferred equity

13,185

Market approach

EBITDA multiples

6.25x - 13.22x (4.96x)

Preferred equity

2,424

Market approach

Revenue multiples

0.23x - 9.58x (9.58x)

Preferred equity

2,120

Market approach

Recurring monthly revenue

40.00x - 40.00x (40.00x)

Common equity, warrants and other

22,788

Market approach

EBITDA multiples

4.50x - 13.22x (13.03x)

Common equity, warrants and other

1,489

Market approach

Revenue multiples

0.23x - 7.00x (7.00x)

Common equity, warrants and other

1,500

Transaction Price

442,265

Equity investments

Preferred equity

23,721

Enterprise value

EBITDA multiples

4.50x - 8.50x (6.82x)

Common equity and warrants

13,042

Enterprise value

EBITDA multiples

5.00x - 8.50x (6.07x)


~~(1)~~	~~Excludes $15,926, $12,382, and $499 of senior secured debt investments, subordinated debt investments, and equity investments, respectively, valued at Transaction Prices.~~

(1) Constant default rates for the next twelve months.

(2) The cash flows utilized in the discounted cash flow calculations assume liquidation at current market prices and redeployment of proceeds on all assets currently in default and all assets below specified fair value thresholds.

Averages in the preceding two tables were weighted by the fair value of the related instruments.

Changes in market credit spreads or events impacting the credit quality of the underlying portfolio company (both of which could impact the discount rate), as well as changes in EBITDA and/or EBITDA multiples, among other things, could have a significant impact on ~~debt~~ fair values, with the fair value of a particular debt investment susceptible to change in inverse relation to the changes in the discount ~~rate but in tandem with changes in EBITDA and/or EBITDA multiples.~~rate. Changes in EBITDA and/or EBITDA multiples, as well as changes in the discount rate, could have a significant impact on ~~equity~~ fair values, with the fair value of an equity investment susceptible to change in tandem with the changes in EBITDA and/or EBITDA multiples, and ~~other multiples.~~in inverse relation to changes in the discount rate. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following tables present changes in investments measured at fair value using Level 3 inputs for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016.~~

Nine Months Ended September 30, 2017

Senior
Secured Debt
Investments
Subordinated
Debt
Investments
Preferred Equity
Common Equity and Warrants
Total
Level 3 assets, January 1, 2017 $ 180,955

$ 63,410

$ 23,721

$ 13,541

$ 281,627

Net realized gain (loss) on investments (4,957 )
—

2,814

558

(1,585 )
Net change in unrealized appreciation/depreciation on investments (949 )
(4,660 )

(421 )
(1,718 )
(7,748 )
Amortization of Net Loan Fees 1,136
` 51

—

—

1,187
Capitalized PIK interest and dividends 682

452

1,065

—

2,199
Purchase and origination of portfolio investments 100,619

8,700

4,631

713

114,663
Proceeds from principal payments on portfolio investments (71,903 )
(14,624 )

—

—

(86,527 )
Sale and redemption of portfolio investments —

—

(5,056 )
(2,058 )
(7,114 )
Conversion from debt investment to equity investment (1,745 )
—

1,745

—

—
Conversion from subordinated to senior secured debt investment (9,631 )
9,631

—

—

—
Other (54 )
(18 ) —
—

—

(72 )

Level 3 assets, September 30, 2017 $ 194,153

$ 62,942

$ 28,499

$ 11,036

$ 296,630
2019.

Nine Months Ended September 30, 2016
Senior
Secured Debt
Investments Subordinated
Debt
Investments Preferred Equity Common Equity and Warrants Total
Level 3 assets, January 1, 2016 $ 160,437
$ 64,240
$ 22,133
$ 10,486
257,296

Net realized gain (loss) on investments —
7
—
2,560
2,567
Net change in unrealized appreciation/depreciation on investments 803
(279 ) (4,549 ) (3 ) (4,028 )
Amortization of Net Loan Fees 610
180
—
—
790
Capitalized PIK interest, dividends, and fees 506
693
1,031
—
2,230
Purchase and origination of portfolio investments 35,638
3,786
646
104
40,174
Proceeds from principal payments on portfolio investments (22,729 ) (14,408 ) —
—
(37,137 )
Sale and redemption of portfolio investments —
—
—
(2,560 ) (2,560 )
Equity received in connection with purchase of portfolio investments and amendments (346 ) (79 ) 247
381
203
Conversion from debt investment to equity investment (321 ) (1,765 ) 2,039
47
—
Other (404 ) (95 ) 133
—
(366 )

Level 3 assets, September 30, 2016 $ 174,194
$ 52,280
$ 21,680
$ 11,015
$ 259,169



	Six Months Ended June 30, 2020
	Senior Secured Debt Investments			Subordinated Debt Investments			Preferred Equity			Common Equity, Warrants and Other		Structured Finance Notes			Total
Level 3 assets, January 1, 2020	$	334,059		$	43,090		$	17,729		$	25,777	$	21,610		$	442,265

Net realized loss on investments	(9,217		)	—			—			—		—			(9,217		)
Net unrealized appreciation (depreciation) on investments	(10,855		)	(7,590		)	(2,668		)	5,986		(3,707		)	(18,834		)
Amortization of Net Loan Fees	642			—			—			—		—			642
Accretion of interest income on structured-finance notes	—			—			—			—		2,626			2,626
Capitalized PIK interest and dividends	586			255			341			—		—			1,182
Purchase and origination of portfolio investments	48,678			—			—			95		12,791			61,564
Proceeds from principal payments on portfolio investments	(50,158		)	—			—			—		—			(50,158		)
Sale and redemption of portfolio investments	(9,696		)	—			(3,645		)	—		—			(13,341		)
Proceeds from distributions received from portfolio investments	—			—			—			—		(3,290		)	(3,290		)
Conversion from debt investment to equity investment (Note 4)	(703		)	—			—			703		—			—
Transfers in to Level 3	2,915			—			—			—		—			2,915

Level 3 assets, June 30, 2020	$	306,251		$	35,755		$	11,757		$	32,561	$	30,030		$	416,354

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)



	Six Months Ended June 30, 2019
	Senior Secured Debt Investments			Subordinated Debt Investments		Preferred Equity			Common Equity, Warrants and Other		Structured Finance Notes			Total
Level 3 assets, January 1, 2019	$	319,017		$	44,540	$	14,613		$	18,627	$	—		$	396,797

Net realized gain (loss) on investments	6			—		(900		)	—		—			(894		)
Net unrealized appreciation (depreciation) on investments	(3,570		)	212		(512		)	2,334		210			(1,326		)
Amortization of Net Loan Fees	590			43		—			—		—			633
Accretion of interest income on structured-finance notes	—			—		—			—		1,096			1,096
Capitalized PIK interest and dividends	162			180		433			—		—			775
Purchase and origination of portfolio investments	64,551			—		2,309			1,813		20,921			89,594
Proceeds from principal payments on portfolio investments	(9,266		)	—		—			—		—			(9,266		)
Sale and redemption of portfolio investments	(30,316		)	—		—			—		—			(30,316		)
Proceeds from distributions received from portfolio investments	—			—		—			—		(1,157		)	(1,157		)
Transfers out of Level 3	(14,219		)	—		—			—		—			(14,219		)

Level 3 assets, June 30, 2019	$	326,955		$	44,975	$	15,943		$	22,774	$	21,070		$	431,717

The net ~~change in~~ unrealized ~~appreciation/depreciation for the nine months ended September 30, 2017 and 2016~~appreciation (depreciation) reported in the Company’s consolidated statements of operations for the six months ended June 30, 2020 and 2019, attributable to the Company’s ~~Level 3~~ assets still held at those respective period ends was ~~$(5,425)~~as follows:



	Six Months Ended June 30,
	2020			2019
Senior secured debt investments	$	(22,112	)	$	(3,792	)
Subordinated debt investments	(7,590		)	212
Preferred equity	(2,666		)	(1,323		)
Common equity, warrants and other	5,986			2,334
Structured Finance Notes	(3,707		)	210
Net unrealized depreciation on investments held	$	(30,089	)	$	(2,359	)

OFS Capital Corporation and ~~$(904), respectively.~~ Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Other Financial Assets and Liabilities

GAAP requires disclosure of the fair value of financial instruments for which it is practical to estimate such ~~value and the methods and significant assumptions used to estimate fair~~ value. ~~It excludes from this requirement nonfinancial assets and liabilities. Accordingly, the required fair value disclosures provide only a partial estimate of the fair value of the Company.~~ The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments. The PWB Credit Facility and BNP Facility are variable rate instruments and fair value is approximately book value.

The following tables present the fair value measurements of the Company's ~~SBA-guaranteed debentures are carried at cost~~debt and ~~with their longer maturity dates,~~indicate the fair value hierarchy of the significant unobservable inputs utilized by the Company to determine such fair values as of June 30, 2020 and December 31, 2019:



	June 30, 2020
Description	Level 1		Level 2		Level 3⁽¹⁾		Total
PWB Credit Facility	$	—	$	—	$	21,100	$	21,100
BNP Facility	—		—		30,650		30,650
Unsecured Notes Due April 2025	45,800		—		—		45,800
Unsecured Notes Due October 2025	45,614		—		—		45,614
Unsecured Notes Due October 2026	47,806		—		—		47,806
SBA-guaranteed debentures	—		—		141,135		141,135
Total debt, at fair value	$	139,220	$	—	$	192,885	$	332,105



	December 31, 2019
Description	Level 1		Level 2		Level 3 ⁽¹⁾		Total
PWB Credit Facility	$	—	$	—	$	—	$	—
BNP Facility	—		—		56,450		56,450
Unsecured Notes Due April 2025	50,600		—		—		50,600
Unsecured Notes Due October 2025	49,282		—		—		49,282
Unsecured Notes Due October 2026	54,282		—		—		54,282
SBA-guaranteed debentures	—		—		155,562		155,562
Total debt, at fair value	$	154,164	$	—	$	212,012	$	366,176

(1) For Level 3 measurements, fair value is estimated by discounting remaining payments ~~using~~at current market rates for similar instruments at the measurement date and considering such factors as the legal maturity date. As

The following are the carrying values and fair values of ~~September~~the Company’s debt as of June 30, ~~2017,~~2020 and December 31, ~~2016, the fair value of the Company’s SBA debentures using Level 3 inputs is estimated at $153,265~~2019:



	As of June 30, 2020				As of December 31, 2019
Description	Carrying Value		Fair Value		Carrying Value		Fair Value
PWB Credit Facility	$	21,100	$	21,100	$	—	$	—
BNP Facility	30,650		30,650		56,450		56,450
Unsecured Notes Due April 2025	48,762		45,800		48,634		50,600
Unsecured Notes Due October 2025	47,215		45,614		47,093		49,282
Unsecured Notes Due October 2026	52,470		47,806		52,325		54,282
SBA-guaranteed debentures	132,203		141,135		147,976		155,562
Total debt, at fair value	$	332,400	$	332,105	$	352,478	$	366,176

OFS Capital Corporation and ~~$159,708, respectively.~~Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 6. Commitments and Contingencies

~~Unfunded~~The Company has the following unfunded commitments to ~~the Company's~~ portfolio companies as of ~~September~~June 30, ~~2017, were as follows:~~2020:


Name of Portfolio Company	Investment Type	September 30, 2017		Investment Type	Commitment
BCC Software, LLC	Senior Secured Revolver	$	1,094
TRS Services, LLC	Senior Secured Loan	500
Carolina Lubes, Inc.	Senior Secured Loan	2,920		Senior Secured Loan (Revolver)	$	2,920
Inergex Holdings, LLC				Senior Secured Loan (Revolver)	1,406
		$	4,514		$	4,326

From time to time, the Company is involved in legal proceedings in the normal course of its business. Although the outcome of such litigation cannot be predicted with any certainty, management is of the opinion, based on the advice of legal counsel, that final disposition of any litigation should not have a material adverse effect on the financial position of the Company as of ~~September~~June 30, ~~2017.~~2020.

Additionally, the Company is subject to periodic inspection by regulators to assess compliance with applicable BDC regulations ~~related to being a BDC~~ and the SBIC I LP is subject to periodic inspections by the SBA.

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide for general ~~indemnifications.~~indemnification. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not occurred. The Company believes the risk of any material obligation under these indemnifications to be low.

Note 7. Borrowings

SBA Debentures:The ~~SBIC Program allows~~SBA debentures issued by SBIC I LP ~~to obtain leverage~~and other SBA regulations generally restrict assets held by issuing SBA-guaranteed debentures, subject to issuance of a capital commitment by the SBA and customary procedures. These debentures are non-recourse to the Company, have interest payable semi-annually and a ten-year maturity. The interest rate is fixed at the time of SBA pooling, which is March and September of each year, at a market-driven spread over U.S. Treasury Notes with ten-year maturities.

Under present regulations of the SBIC Act, the maximum amount of SBA-guaranteed debt that may be issued by a single SBIC licensee is $150,000. An SBIC fund may borrow up to two times the amount of its regulatory capital, subject to customary regulatory requirements. For two or more SBICs under common control, the maximum amount of outstanding SBA-provided leverage cannot exceed $350,000. In connection with the SBIC Acquisition, the Company increased its total commitments to SBIC I LP to $75,000, which became a wholly-owned investment company subsidiary of the Company on December 4, 2013. During 2014, the Company fully funded its $75,000 commitment to SBIC I LP. ~~As of September 30, 2017, and December 31, 2016, SBIC I LP had fully drawn the $149,880 of leverage commitments from the SBA.~~

On a stand-alone basis, SBIC I LP held ~~$248,247~~$236,907 and ~~$247,512~~$249,576 in assets at ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, respectively, which accounted for approximately ~~70%~~50% and ~~81%~~49% of the Company’s total consolidated assets, respectively. The ~~SBIC~~average dollar amount of borrowings outstanding during the six months ended June 30, 2020 and 2019, were $139,081 and $149,880, respectively. These assets can not be pledged under any debt obligation of the Company.

On March 1, 2020, SBIC I LP prepaid $16,110 of SBA debentures that were contractually due September 1, 2023, March 1, 2024 and September 1, 2024. The Company recognized a loss on extinguishment of debt of $149 related to the charge-off of deferred borrowing costs on the prepaid debentures. As of June 30, 2020, SBIC I LP had outstanding SBA debentures of $133,770.

BNP Facility: OFSCC-FS has up to $150,000 of available credit under the BNP Facility maturing on June 20, 2024, of which $30,650 was drawn as of June 30, 2020. The effective interest rate on the BNP Facility was 5.55% at June 30, 2020. The average dollar amount of borrowings outstanding during the six months ended June 30, 2020 and 2019, were $49,688 and $-0-, respectively. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS, which were $58,057, or 12%, of the Company's total consolidated assets at June 30, 2020. The unused commitment under the BNP Facility was $119,350 as of June 30, 2020.

39PWB Credit Facility:The Company has up to $100,000 of available credit under its PWB Credit Facility maturing February 28, 2021, of which $21,100 was drawn as of June 30, 2020. The average dollar amount of borrowings outstanding during the six months ended June 30, 2020 and 2019, were $23,248 and $28,932, respectively. The effective interest rate on the PWB Credit Facility was 5.64% at June 30, 2020. As of June 30, 2020, the Company had an unused commitment under the PWB Credit Facility of $78,900, subject to a borrowing base and other covenants.

On June 26, 2020, the BLA was amended to, among other things: (i) reduce the Minimum Tangible Net Asset Value (as defined in the Secured Revolver Amendment) covenant from $125.0 million to $100.0 million; (ii) reduce the Minimum Quarterly Net Investment Income (as defined in the Secured Revolver Amendment) covenant from $3.0 million to $2.0 million; (iii) increase the Debt/Worth Ratio (as defined in the Secured Revolver Amendment) covenant from 300% to 350%; and (iv) add a new covenant commencing on June 30, 2020 restricting net losses (defined as income after adjustments to the investment portfolio for gains and losses, realized and unrealized, also shown as net increase (decrease) in net assets resulting from operations) in more than two quarters during the prior four quarters then ended.

On July 29, 2020, the Company executed an amendment to its BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100,000 to $50,000.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

~~The following table shows the Company’s outstanding SBA debentures payable as~~Unsecured Notes: As of ~~September~~June 30, ~~2017, and December 31, 2016:~~

SBA debentures outstanding
Pooling Date Maturity Date Fixed Interest Rate September 30, 2017 December 31, 2016
September 19, 2012 September 1, 2022 3.049 % $ 14,000
$ 14,000
September 25, 2013 September 1, 2023 4.448
7,000
7,000
March 26, 2014 March 1, 2024 3.995
5,000
5,000
September 24, 2014 September 1, 2024 3.819
4,110
4,110
September 24, 2014 September 1, 2024 3.370
31,265
31,265
March 25, 2015 March 1, 2025 2.872
65,920
65,920
September 23, 2015 September 1, 2025 3.184
22,585
22,585
SBA debentures outstanding 149,880
149,880
Unamortized debt issuance costs (2,752 ) (3,037 )
SBA debentures outstanding, net of unamortized deferred debt issuance costs $ 147,128
$ 146,843

~~The Company received exemptive relief from the SEC effective November 26, 2013, which permits~~2020, the Company ~~to exclude SBA guaranteed debentures from the definition of senior securities in the statutory 200% asset coverage ratio under the 1940 Act, allowing for greater capital deployment.~~

The effective interest rate on the SBA debentures, which includes amortization of deferred debt issuance costs, was 3.43% as of September 30, 2017. Interest expense on the SBA debentures was $1,295 and $3,846 for the three and nine months ended September 30, 2017, respectively, which includes amortization of debt issuance costs of $95 and $286, respectively. Interest expense on the SBA debentures was $1,295 and $3,860 for the three and nine months ended September 30, 2016, respectively, which includes amortization of debt issuance costs of $95 and $286, respectively.

~~The weighted-average fixed cash interest rate on the SBA debentures as of September 30, 2017, and December 31, 2016 was 3.18%.~~

~~PWB Credit Facility:~~ ~~On November 5, 2015, the Company entered into a BLA~~had Unsecured Notes with Pacific Western Bank, as lender, to provide the Company with the PWB Credit Facility, a $15,000 senior secured revolving credit facility scheduled to mature on November 6, 2017. The PWB Credit Facility is available for general corporate purposes including investment funding. The maximum availability of the PWB Credit Facility is equal to 50% of thean aggregate outstanding principal ~~amount~~ of eligible loans included in the borrowing base and otherwise specified in the BLA. The PWB Credit Facility is guaranteed by OFS Capital WM and secured by all of the Company’s current and future assets excluding assets held by SBIC I LP and the Company’s SBIC I LP and SBIC I GP partnership interests.

On October 31, 2016, the BLA was amended to, among other things (i) increase the maximum amount available under the PWB Credit Facility from $15 million to $25 million, (ii) extend the maturity date from November 6, 2017 to October 31, 2018, (iii) increase the fixed interest rate from 4.75% to 5.00% per annum, and (iv) exclude subordinated loan investments (as defined in the BLA) from the borrowing base. In addition, as of the amendment date, the Company will incur an unused commitment fee, payable monthly in arrears, equal to 0.50% per annum on any unused portion of the PWB Credit Facility in excess of $15,000, which is included in interest expense on the consolidated statement of operations. There were no advances under the facility prior to the October 31, 2016, amendment.

On August 9, 2017, the BLA was further amended to increase the maximum amount available under the PWB Credit Facility from $25 million to $35 million, and change the interest rate from a fixed per annum rate of 5.00% to a variable rate initially set at 5.00%, calculated as the Prime Rate plus a 0.75% margin, with a 5.00% floor. As of September 30, 2017, the interest rate on the unpaid principal balance of the PWB Credit Facility was 5.00%. All other principal covenants and terms under the PWB Credit Facility remained the same. The Company incurred deferred debt issuance costs of $100 in connection with the amendment.

$152,850. The average dollar amount of borrowings outstanding during the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, was $11,073~~2020 and ~~$5,823,~~2019, were $152,850 and $98,525, respectively. The weighted effective interest rate on the Unsecured Notes was 6.78% at June 30, 2020.

The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all current and future unsecured indebtedness of the Company. Because the Unsecured Notes are not secured by any of the Company's assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which ~~includes amortization~~the Company subsequently grants a security interest), to the extent of ~~deferred debt issuance costs, as~~the value of ~~September 30, 2017, was 5.44% based maximum amount available~~the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility. ~~Deferred debt issuance~~

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Financial Statements~~

~~(Dollar amounts in thousands, except per share data)~~

~~costs, net of accumulated amortization, was $240 and $256 as of September 30, 2017 and December 31, 2016, respectively. Amortization of debt issuance costs was $47 and $117~~Interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively. Availability under the PWB Credit Facility as of September 30, 2017, was $17,900 based~~2020 and 2019 on the Company's outstanding borrowings is presented below:



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
SBA Debentures	$	1,114		$	1,280		$	2,338		$	2,548
PWB Credit Facility	702			633			991			1,094
Unsecured Notes Due April 2025	860			860			1,721			1,720
Unsecured Notes Due October 2025	850			866			1,700			1,732
Unsecured Notes Due October 2026	880			—			1,784			—
BNP Facility	525			6			1,319			6
Total interest expense	$	4,931		$	3,645		$	9,853		$	7,100

Average dollar borrowings	$	359,640		$	282,608		$	364,867		$	277,337
Weighted average interest rate	5.26		%	4.98		%	5.23		%	4.96		%

Interest expense includes the stated ~~advance rate of 50% under~~interest on the ~~borrowing base.~~

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 incentiveoutstanding balance, commitment 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,on undrawn amounts, and the ~~occurrence~~amortization of ~~a material adverse change in our financial condition. As of September 30, 2017, the Company was in compliance with the applicable covenants.~~deferred financing costs.

Note 8. Federal Income Tax

The Company has elected to be taxed as a RIC under Subchapter M of the Code. Maintenance of its status as a RIC, requires the Company requires annual distributions to its stockholders at least 90% of its ICTI, as defined by the Code. Additionally, to avoid a 4% excise tax on undistributed earnings the Company must distribute each calendar year the sum of (i) 98% of its ordinary income for such calendar year (ii) 98.2% of its net capital gains for the one-year period ending October 31 of that calendar year, and (iii) any income recognized, but not distributed, in preceding years and on which the Company paid no federal income tax. Maintenance of the Company's RIC status also requires adherence to certain source of income and asset diversification requirements.

The Company has met the required distribution, source of income and asset diversification requirements as of September 30, 2017, and intends to continue to meet these requirements. Accordingly, there is no liability for federal income taxes at the Company level. The Company’s ICTI differs from the net increase in net assets resulting from operations primarily due to differences in income recognition on the unrealized appreciation/depreciation of investments, income from Company’s equity investments in pass-through entities, PIK dividends that have not yet been declared and paid by underlying portfolio companies, capital gains and losses and the net creation or utilization of capital loss carryforwards.

The determination of the tax attributes of the ~~Company’s~~Company's distributions is made annually as of the end of its fiscal year based ~~upon~~on its ICTI and distributions for the full ~~year and distributions paid for the full~~ year. If the tax characteristics of the Company’s $12,362 distributions paid during 2017 were determined as of September 30, 2017, approximately $3,314 would have represented return of capital to its stockholders.

The Company records reclassifications to its capital accounts ~~related to~~for permanent ~~differences between GAAP and tax treatment related to goodwill amortization, excise taxes, and other permanent differences;~~ and temporary differences between the GAAP and tax treatment of ~~realized gains~~components of income and ~~losses, income arising from Company’s equity investments in pass-through entities, PIK dividends,~~the bases of assets and ~~other temporary differences. Reclassifications for the three and nine months ended September 30, 2017 and 2016, were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016 2017
2016
Paid-in capital in excess of par $ 1,470

$ (38 )
$ 1,534

$ (2 )
Undistributed net investment income 184

70

516

97
Accumulated net realized gain (loss) (1,654 )
(32 )
(2,050 )
(95 )
liabilities.

The tax-basis cost of investments and associated tax-basis gross unrealized appreciation (depreciation) inherent in the fair value of investments as of ~~September~~June 30, ~~2017,~~2020 and December 31, ~~2016,~~2019, were as follows:


	September 30, 2017			December 31, 2016			June 30, 2020			December 31, 2019
Tax-basis amortized cost of investments	$	294,310		$	273,414		$	474,836		$	531,781
Tax-basis gross unrealized appreciation on investments	19,361			19,554			29,961			24,326
Tax-basis gross unrealized depreciation on investments	(17,041		)	(11,341		)	(69,035		)	(39,176		)
Tax-basis net unrealized appreciation on investments	2,320			8,213
Tax-basis net unrealized depreciation on investments							(39,074		)	(14,850		)
Fair value of investments	$	296,630		$	281,627		$	435,762		$	516,931

For further information, see the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 9. Financial Highlights

The following is a schedule of financial highlights for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

Three Months Ended September 30, Nine Months Ended
September 30,
2017
2016 2017
2016
Per share data:
Net asset value per share at beginning of period $ 14.40
$ 14.76
$ 14.82
$ 14.76
Distributions⁽⁴⁾
(0.34 )
(0.34 ) (1.02 ) (1.02 )
Net investment income 0.33
0.34
1.00
1.07
Net realized gain on non-control/non-affiliate investments (0.39 )
0.01

(0.42 )
0.27
Net realized gain on affiliate investments 0.27

—

0.37

—
Net change in unrealized appreciation/depreciation on non-control/non-affiliate investments 0.09

(0.06 )
(0.61 )
(0.38 )
Net change in unrealized appreciation/depreciation on affiliate investments (0.22 )
(0.04 )
(0.19 )
0.01
Net change in unrealized depreciation on control investment —

—

0.15

(0.04 )
Issuance of common stock ⁽⁷⁾
—

—

(0.03 )
—
Other ⁽⁸⁾
0.01

—

0.08

—
Net asset value per share at end of period $ 14.15

$ 14.67

$ 14.15

$ 14.67

Per share market value, end of period $ 13.17
$ 13.03
$ 13.17
$ 13.03
Total return based on market value ⁽¹⁾
(5.6 )% 4.0 % 2.8 % 22.4 %
Total return based on net asset value ⁽²⁾
0.6 % 1.4 % 2.1 % 6.2 %
Shares outstanding at end of period 13,334,851
9,697,210
13,334,851
9,697,210
Weighted average shares outstanding 13,331,690
9,694,353
12,089,895
9,692,634
Ratio/Supplemental Data (in thousands except ratios)

Average net asset value ⁽³⁾
$ 190,326
$ 142,645
$ 167,454
$ 142,578
Net asset value at end of period $ 188,656
$ 142,210
$ 188,656
$ 142,210
Net investment income $ 4,402
$ 3,297
$ 12,058
$ 10,409
Ratio of total expenses to average net assets ⁽⁵⁾
9.9 % 11.4 % 10.4 % 11.7 %
Ratio of net investment income to net assets at end of period ⁽⁵⁾
9.3 % 9.3 % 8.5 % 9.8 %
Portfolio turnover ⁽⁶⁾
13.5 % 2.2 % 33.2 % 15.5 %



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Per share operating performance:
Net asset value per share at beginning of period	$	9.71		$	13.04		$	12.46		$	13.10
Net investment income ⁽⁴⁾	0.19			0.36			0.49			0.73
Net realized loss on non-control/non-affiliate investments ⁽⁴⁾	(0.08		)	(0.01		)	(0.75		)	(0.07		)
Loss on extinguishment of debt⁽⁴⁾	—			—			(0.01		)	—
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments ⁽⁴⁾	0.52			(0.27		)	(1.17		)	(0.22		)
Net unrealized appreciation (depreciation) on affiliate investments ⁽⁴⁾	(0.07		)	0.12			(0.28		)	0.04
Net unrealized appreciation (depreciation) on control investment ⁽⁴⁾	0.01			0.05			(0.11		)	0.05
Total from investment operations	0.57			0.25			(1.83		)	0.53
Distributions	(0.17		)	(0.34		)	$	(0.51	)	(0.68		)
Issuance of common stock⁽⁹⁾	(0.01		)	—			$	(0.02	)	—
Net asset value per share at end of period	$	10.10		$	12.95		$	10.10		$	12.95

Per share market value, end of period	$	4.52		$	12.00		$	4.52		$	12.00
Total return based on market value ^(1)(10)	15.2		%	5.0		%	(54.5		)%	19.8		%
Total return based on net asset value ^(2)(10)	7.9		%	2.1		%	(8.9		)%	4.6		%
Shares outstanding at end of period	13,399,694			13,366,461			13,399,694			13,366,461
Weighted average shares outstanding	13,392,608			13,361,193			13,384,808			13,359,338
Ratio/Supplemental Data (in thousands except ratios)
Average net asset value ⁽³⁾	$	132,690		$	173,708		$	144,002		$	174,146
Net asset value at end of period	$	135,397		$	173,132		$	135,397		$	173,132
Net investment income	$	2,607		$	4,860		$	6,579		$	9,688
Ratio of total expenses, net to average net assets ⁽⁵⁾⁽⁷⁾	25.2		%	18.5		%	24.0		%	17.9		%
Ratio of net investment income to average net assets ⁽⁵⁾⁽⁸⁾	7.9		%	11.2		%	9.1		%	11.1		%
Portfolio turnover ⁽⁶⁾	1.6		%	4.0		%	15.0		%	9.3		%


(1)	~~Calculation is~~Calculated as ending market value less beginning market value, ~~adjusting~~adjusted for distributions reinvested at prices ~~obtained in~~based on the Company’s ~~distribution~~dividend reinvestment plan for the respective distributions.


(2)	~~Calculation is~~Calculated as ending net asset value less beginning net asset value, ~~adjusting~~adjusted for distributions reinvested at the Company’s ~~quarter-end net asset value~~dividend reinvestment plan for the respective distributions.


(3)	Based on the average of the net asset ~~values as~~value at the ~~end~~beginning of the indicated period and the preceding calendar ~~quarter for three-month periods, and net asset values as the end of the indicated and three preceding calendar quarters for nine-month periods.~~quarter.

(4)

~~The components of~~Calculated on the distributions are presented on an income tax basis. The determination of the tax attributes of the Company’s distributions is made annually as of the end of its fiscal year based upon its ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. If the tax characteristics of the Company’s distributions paid during 2017 were determined as of September 30, 2017, approximately $0.27 peraverage share ~~would represent a return of capital.~~method.


(5)	Annualized.


(6)	Portfolio turnover rate is calculated using the lesser of period-to-date sales and principal payments or period-to-date purchases over the average of the invested assets at fair value.


(7)	~~The issuance~~Ratio of ~~common~~total expenses before incentive fee waiver to average net assets was 24.6% for the six months ended June 30, 2020.


(8)	Ratio of net investment income before incentive fee waiver to average net assets was 8.5% for the six months ended June 30, 2020.


(9)	Common stock ~~on a per share basis reflects the incremental net asset value change as a result of the Offering.~~issued through DRIP.


(10)	Not annualized.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


~~(8)~~	Represents the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.

Note 10. ~~Distributions~~Capital Transactions

Distributions:The Company intends to ~~make distributions~~distribute to ~~its~~ stockholders, on a quarterly basis, of substantially all of its net investment income. In addition, although the Company intends to ~~make distributions of~~distribute at least annually net realized capital gains, net of taxes if any, ~~at least annually,~~ out of assets legally available for such ~~distributions, it~~distribution, the Company may ~~in the future decide to~~also retain such capital gains for ~~investment.~~investment through a deemed distribution.

The Company may be limited in its ability to make distributions due to the BDC asset coverage requirements of the 1940 Act. The Company’s ability to make distributions may ~~also~~ be affected by ~~its ability~~SBIC I LP's distributions to ~~receive~~the Company, which are governed by SBA regulations and currently require the prior approval of the SBA. In addition, distributions from OFSCC-FS to the Company are restricted by the terms and conditions of the BNP Facility. Net assets of SBIC I LP ~~which is governed by SBA regulations. Consolidated~~were $103,215, and consolidated cash ~~and cash equivalents~~at June 30, 2020 includes ~~$52,245~~$22,710 held by SBIC I LP, of which $1,648 was ~~not~~ available for distribution to the Company. Net Assets of OFSCC-FS were $26,293, and consolidated cash at ~~September~~June 30, ~~2017.~~2020 includes $780 held by OFSCC-FS, of which $-0- was available for distribution to the Company.

The following table summarizes distributions declared and paid for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

Date Declared Record Date Payment Date
Amount
Per Share

Cash
Distribution

DRIP Shares
Issued

DRIP Shares
Value
Nine Months Ended September 30, 2016
March 7, 2016 March 17, 2016 March 31, 2016 $ 0.34
$ 3,280
1,154
$ 15
May 2, 2016 June 16, 2016 June 30, 2016 0.34
3,269
1,998
26
August 5, 2016 September 16, 2016 September 30, 2016 0.34
3,258
2,888
38
$ 1.02
$ 9,807
6,040

$ 79
Nine Months Ended September 30, 2017
March 9, 2017
March 17, 2017
March 31, 2017
$ 0.34

$ 3,257

2,919

$ 41
May 2, 2017
June 16, 2017
June 30, 2017
0.34

4,483

3,439

49
August 1, 2017
September 15, 2017
September 29, 2017
0.34

4,491

3,196

42
$ 1.02
$ 12,231
9,554
$ 132

For the nine months ended September 30, 2017, $132 of the total $12,363 paid to stockholders represented DRIP participation, during which the Company satisfied the DRIP participation requirements with the issuance of 9,554 shares at an average value of $13.89 per share at the date of issuance. For the nine months ended September 30, 2016, $79 of the total $9,886 paid to stockholders represented DRIP participation, during which the Company satisfied the DRIP participation requirements with the issuance of 6,040 shares at an average value of $12.96 per share at the date of issuance.

~~Since the Company’s IPO, distributions to stockholders total $63,242, or $6.29 per share, on a cumulative basis.~~



Date Declared	Record Date	Payment Date	Amount Per Share		Cash Distribution		DRIP Shares Issued		DRIP Shares Value
Six Months Ended June 30, 2019
March 5, 2019	March 22, 2019	March 29, 2019	$	0.34	$	4,497	3,797		$	45
April 30, 2019	June 21, 2019	June 28, 2019	0.34		4,479		5,327		64
			$	0.68	$	8,976	$	9,124	$	109
Six Months Ended June 30, 2020
March 11, 2020	March 24, 2020	March 31, 2020	$	0.34	$	4,484	15,693		$	64
May 4, 2020	June 23, 2020	June 30, 2020	0.17		2,244		7,165		32
			$	0.51	$	6,728	$	22,858	$	96

Distributions in excess of the Company’s current and accumulated ICTI would be treated first as a return of capital to the extent of the stockholder’s adjusted tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of the Company’s distributions is made annually as of the end of its fiscal year based upon its ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. Each year, a statement on Form 1099-DIV identifying the ~~source~~tax character of ~~the distribution~~distributions is mailed to the Company’s stockholders. If

Stock repurchase program:

The Company maintains a Stock Repurchase Program under which the ~~tax characteristics~~Company may acquire up to $10.0 million of its outstanding common stock. No shares of common stock were repurchased under the ~~Company’s distributions paid~~Stock Repurchase Program during ~~2017 were determined as of September~~the six months ended June 30, ~~2017, approximately $0.27 per share of the Company’s distributions represented a return of capital to its stockholders,~~2020 and 2019, respectively.

On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period ending May 22, 2022, or until the approved dollar amount has been used to repurchase shares.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 11. Consolidated Schedule of Investments In and Advances To Affiliates

Name of Portfolio Company Investment Type(1) Net Realized Gain (Loss) Net change in unrealized appreciation/depreciation Interest, Fees and
Dividends Credited to
Income(2) December 31, 2016, Fair Value Gross
Additions(3) Gross
Reductions(4) September 30, 2017, Fair Value (5)
Control Investments
Malabar International (8) Subordinated Loan $ —

$ 74

$ 536

$ 7,683

$ 150

$ (7,833 )
$ —
Preferred Equity —

1,608

65

5,868

1,608

(7,476 )
—
—

1,682

601

13,551

1,758

(15,309 )
—

MTE Holding Corp. Subordinated Loan $ —

$ (43 ) $ 1,005

$ 9,766

$ 59

$ (2,717 )
$ 7,108
Common Equity —

206
197

3,383

206

—

3,589
—

163
1,202

13,149

265

(2,717 )
10,697

Total Control Investments —

1,845
1,803

26,700

2,023

(18,026 )
10,697
Affiliate Investments
All Metals Holding, LLC Senior Secured Loan —

(108 ) 1,383

12,865

208

(108 )
12,965
Common Equity(6) —

207
—

1,277

207

1,484
—

99
1,383

14,142

415

(108 )
14,449

Contract Datascan Holdings, Inc. Subordinated Loan —

94
732

7,902

98

8,000
Preferred Equity(6)(7) —

(778 ) 402

5,421

402

(778 )
5,045
Common Equity(6) —

(187 ) —

187

(187 )
—
—

(871 ) 1,134

13,510

500

(965 )
13,045

Intelli-Mark Technologies, Inc. Senior Secured Loan —

(159 ) 613

8,841

68

(8,909 )
—
Common Equity(6) 874

(498 ) —

1,998

—

(1,998 )
—
874

(657 ) 613

10,839

68

(10,907 )
—

Malabar International (8) Subordinated Loan —

20
281

—

7,893

(6 )
7,887
Preferred Equity —

1,492
34

—

8,968

—

8,968
—

1,512
315

—

16,861

(6 )
16,855

Master Cutlery, LLC Senior Secured Loan —

—

—

—

545

—

545
Subordinated Loan —

(1,226 ) 459

4,440

106

(1,262 )
3,284
Preferred Equity(6)(7) —

(954 ) —

954

—

(954 )
—
Common Equity (6) —

—
—

—

—

—

—
—

(2,180 ) 459

5,394

651

(2,216 )
3,829



		Period Ended June 30, 2020
Name of Portfolio Company	Investment Type (1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/(depreciation)			Interest & PIK Interest		Dividends		Fees		Total Income (2)		December 31, 2019, Fair Value		Gross Additions (3)		Gross Reductions (4)			June 30, 2020, Fair Value (5)
Control Investment
MTE Holding Corp.	Subordinated Loan	$	—	$	(248	)	$	592	$	—	$	6	$	598	$	7,464	$	194	$	(248	)	$	7,410
	Common Equity	—		(1,253		)	—		—		—		—		1,253		—		(1,253		)	—
		—		(1,501		)	592		—		6		598		8,717		194		(1,501		)	7,410

Total Control Investment		—		(1,501		)	592		—		6		598		8,717		194		(1,501		)	7,410
Affiliate Investments
3rd Rock Gaming Holdings, LLC	Senior Secured Loan	—		(7,000		)	578		—		—		578		20,099		67		(7,250		)	12,916
	Common Equity (6)	—		(1,044		)	—		—		—		—		1,044		—		(1,044		)	—
		—		(8,044		)	578		—		—		578		21,143		67		(8,294		)	12,916

Chemical Resources Holdings, Inc.	Senior Secured Loan	—		(306		)	684		—		—		684		13,746		19		(306		)	13,459
	Common Equity (6)	—		(551		)	—		—		—		—		2,662		—		(551		)	2,111
		—		(857		)	684		—		—		684		16,408		19		(857		)	15,570

Contract Datascan Holdings, Inc.	Subordinated Loan	—		(453		)	530		—		—		530		8,000		10		(453		)	7,557
	Preferred Equity (7)	—		(3,348		)	250		—		—		250		5,671		249		(3,348		)	2,572
	Common Equity (6)	—		(620		)	—		—		—		—		671		—		(620		)	51
		—		(4,421		)	780		—		—		780		14,342		259		(4,421		)	10,180

DRS Imaging Services, LLC	Senior Secured Loan	—		(167		)	603		—		—		603		10,569		11		(244		)	10,336
	Common Equity (6)	—		25			—		—		—		—		1,331		25		—			1,356
		—		(142		)	603		—		—		603		11,900		36		(244		)	11,692

Master Cutlery, LLC	Subordinated Loan (6)	—		(255		)	—		—		—		—		255		—		(255		)	—
	Preferred Equity (6)	—		—			—		—		—		—		—		—		—			—
	Common Equity (6)	—		—			—		—		—		—		—		—		—			—
		—		(255		)	—		—		—		—		255		—		(255		)	—

NeoSystems Corp.	Preferred Equity (7)	—		(87		)	87		—		—		87		2,250		87		(87		)	2,250

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


																			Period Ended June 30, 2020
Name of Portfolio Company	Investment Type(1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/depreciation			Interest, Fees and Dividends Credited to Income(2)		December 31, 2016, Fair Value		Gross Additions(3)		Gross Reductions(4)			September 30, 2017, Fair Value (5)		Investment Type (1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/(depreciation)			Interest & PIK Interest		Dividends		Fees		Total Income (2)		December 31, 2019, Fair Value		Gross Additions (3)		Gross Reductions (4)			June 30, 2020, Fair Value (5)

NeoSystems Corp.	Subordinated Loan	—		368			327		3,656		426		(2,000		)	2,082
	Preferred Equity(6)(7)	—		856			98		1,255		954		—			2,209
		—		1,224			425		4,911		1,380		(2,000		)	4,291

Pfanstiehl Holdings, Inc	Subordinated Loan	—		(13		)	289		3,810		—		(22		)	3,788		Subordinated Loan	$	—	$	19		$	177	$	—	$	—	$	177	$	3,788	$	21	$	(21	)	$	3,788
	Common Equity	—		(1,108		)	84		6,083		—		(1,108		)	4,975		Common Equity	—		12,072			—		100		—		100		11,979		12,072		—			24,051
		—		(1,121		)	373		9,893		—		(1,130		)	8,763			—		12,091			177		100		—		277		15,767		12,093		(21		)	27,839

Strategic Pharma Solutions, Inc.	Senior Secured Loan	—		(39		)	904		8,383		67		(8,450		)	—
Professional Pipe Holdings, LLC																		Senior Secured Loan	—		(584		)	431						431		7,170		68		(584		)	6,654
																		Common Equity (6)	—		(1,263		)	—		—		—		—		2,413		—		(1,263		)	1,150
																			—		(1,847		)	431		—		—		431		9,583		68		(1,847		)	7,804

TalentSmart Holdings, LLC																		Senior Secured Loan	—		(1,289		)	445		—		—		445		9,833		19		(1,414		)	8,438
																		Senior Secured Loan (Revolver)	—		(66		)	21		—		—		21		242		251		(66		)	427
	Preferred Equity(6)(7)	3,617		(1,111		)	81		3,026		81		(3,107		)	—		Common Equity (6)	—		(755		)	—		—		—		—		1,500		95		(755		)	840
		3,617		(1,150		)	985		11,409		148		(11,557		)	—			—		(2,110		)	466		—		—		466		11,575		365		(2,235		)	9,705

TRS Services, Inc.	Senior Secured Loan	—		206			825		9,549		304		(359		)	9,494		Senior Term Loan	—		(8		)	81		—		7		88		14,623		9		(14,632		)	—
	Preferred Equity (Class AA units)(6)(7)	—		—			41		354		41					395		Preferred Equity (Class AA units) (7)	—		(2		)	6		—		—		6		547		5		(552		)	—
	Preferred Equity (Class A units)(6)(7)	—		695			204		1,707		899					2,606		Preferred Equity (Class A units) (6)	—		706			—		—		—		—		3,095		706		(3,095		)	706
	Common Equity (6)	—		—			—		—		—		—			—		Common Equity (6)	—		—			—		—		—		—		—		—		—			—
		—		901			1,070		11,610		1,244		(359		)	12,495			—		696			87		—		7		94		18,265		720		(18,279		)	706

TTG Healthcare, LLC																		Senior Secured Loan	—		108			653		—		6		659		11,767		130		—			11,897
																		Preferred Equity (6)	—		1,064			—		—		—		—		2,424		1,064		—			3,488
																			—		1,172			653		—		6		659		14,191		1,194		—			15,385

Total Affiliate Investments		4,491		(2,243		)	6,757		81,708		21,267		(29,248		)	73,727			—		(3,804		)	4,546		100		13		4,659		135,679		14,908		(36,540		)	114,047
Total Control and Affiliate Investments		$	4,491	$	(398	)	$	8,560	$	108,408	$	23,290	$	(47,274	)	$	84,424		$	—	$	(5,305	)	$	5,138	$	100	$	19	$	5,257	$	144,396	$	15,102	$	(38,041	)	$	121,457


(1)	Principal balance of debt investments ~~interest rate~~and ownership detail ~~maturity date, dividend rate on preferred~~for equity investments ~~and industry classification~~ are shown in the consolidated schedule of investments. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


(2)	Represents the total amount of interest, fees or dividends included in income for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2020, that an investment was included in Control or Affiliate Investment categories, respectively.


(3)	Gross additions include increases in cost basis resulting from a new portfolio investment, PIK interest, fees and dividends, ~~and~~ accretion of ~~OID. Gross additions also include~~OID, and net increases in unrealized net appreciation or decreases in net unrealized depreciation.


(4)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if ~~any. Gross reductions also include~~any, and net decreases in net unrealized appreciation or net increases in unrealized depreciation.


(5)	Fair value was determined using significant unobservable inputs. See Note 5 for further details.


(6)	Non-income producing.


(7)	Dividends credited to income include dividends contractually earned but not declared.


~~(8)~~	~~Malabar was reclassified from a control investment to an affiliate investment during the three months ended September 30, 2017, due to a decrease in voting interest.~~

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 12. Subsequent Events Not Disclosed Elsewhere

On ~~October 31, 2017,~~July 28, 2020, the ~~Company’s~~ Board declared a distribution of ~~$0.34~~$0.17 per share for the ~~fourth~~third quarter of ~~2017,~~2020, payable on ~~December 29, 2017,~~September 30, 2020 to stockholders of record as of ~~December 15, 2017.~~September 23, 2020.

COVID-19

The Company evaluated events subsequent to June 30, 2020 through July 30, 2020. On March 11, 2020, the World Health Organization declared the novel coronavirus as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to the COVID-19 pandemic. The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions have created, and continue to create, disruption in global supply chains and adversely impact a number of industries. The outbreak could have a continued adverse impact on economic and market conditions on a global scale. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic. Nevertheless, the ongoing COVID-19 pandemic presents material uncertainty and risks with respect to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Further, the operational and financial performance of the portfolio companies in which the Company makes investments have been, and may continue to be, significantly impacted by the COVID-19 pandemic, which in turn has, and may continue to have, an impact on the valuation of the Company’s investments.

Accordingly, the Company cannot predict the extent to which its business, financial condition, results of operations and cash flows will be affected at this time. The potential impact to the Company’s results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond the Company’s control.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Overview~~

We are an externally managed, closed-end, non-diversified management investment company and have elected to be treated as a BDC under the 1940 Act. Our investment activities are managed by OFS Advisor; and OFS Services, an affiliate of OFS Advisor, provides the administrative services necessary for us to operate. In exchange for these services we pay OFS Advisor a base management fee and an incentive fee and we pay OFS Services an administration fee. The base management fee, incentive fee, and the administration fee represents a substantial portion of our total expenses.

Our investment objective is to provide our stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments in middle-market companies in the United States. We believe that these middle-market companies represent a significant growth segment of the U.S. economy and often require substantial capital investments to grow. Middle-market companies have historically constituted the bulk of our portfolio companies since inception, and as of September 30, 2017. We believe that this market segment will continue to produce significant investment opportunities for us.

In April 2017, we issued 3,625,000 shares of our common stock in a follow-on public offering at an offering price of $14.57 per share (the "Offering"), including shares purchased by the underwriters pursuant to their exercise of the over-allotment option. OFS Advisor paid all of the underwriting discounts and commissions and an additional supplemental payment of $0.25 per share, representing the difference between the public offering price of $14.57 per share and the net offering proceeds of $14.82 per share, which also represented our NAV per share at the time of the Offering. All payments made by OFS Advisor in connection with the Offering are not subject to reimbursement by us. We received net proceeds from this Offering of $53.7 million

Our investment strategy includes SBIC I LP, a licensee under the SBA's SBIC program. The SBIC license allows SBIC I LP to receive SBA-guaranteed debenture funding, subject to the issuance of a leverage commitment by the SBA and other customary procedures. SBA leverage funding is subject to SBIC I LP’s payment of certain fees to the SBA, and the ability of SBIC I LP to draw on the leverage commitment is subject to its compliance with SBA regulations and policies, including an audit by the SBA. On a stand-alone basis, SBIC I LP held approximately $248.2 million and $247.5 million in assets at September 30, 2017 and December 31, 2016, respectively, which accounted for approximately 70% and 81% of our total consolidated assets, respectively.

We generate revenue in the form of interest income on debt investments, capital gains, and dividend income from our equity investments. Our debt investments typically have a term of three to eight years and bear interest at fixed and floating rates. As of September 30, 2017, floating rate and fixed rate loans comprised 73% and 27%, respectively, of our current debt investment portfolio at fair value; however, in accordance with our investment strategy, we expect that over time the proportion of fixed rate loans will continue to increase. We expect to make quarterly distributions, such that we distribute substantially all of our ICTI. In addition, although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

Further, we have elected to be taxed as a RIC under the Code. As a RIC, we are not required to pay corporate-level federal income taxes on any income that we distribute to our stockholders from our ICTI. We are required to recognize ICTI in circumstances in which we have not received a corresponding payment in cash. For example, we hold debt obligations that are treated under applicable tax rules as issued with OID and debt instruments with PIK interest, and we must include in ICTI each year the portion of the OID and PIK interest that accrues for that year (as it accrues over the life of the obligation), irrespective of the fact the cash representing such income is received by us in that taxable year. The continued recognition of non-cash ICTI may cause difficulty in meeting the Annual Distribution Requirement. We may be required to sell investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities to meet this requirement. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

We are permitted to borrow money from time to time within the levels permitted by the 1940 Act (which generally allows us to incur leverage for up to 50% of our asset base). We may borrow money when the terms and conditions available are favorable to do so and are aligned with our investment strategy and portfolio composition. The use of borrowed funds or the proceeds of preferred stock to make investments would have its own specific benefits and risks, and all of the costs of borrowing funds or issuing preferred stock would be borne by holders of our common stock. For a discussion of the risks associated with leverage, see “Item 1A. Risk Factors—Risks Related to our Business and Structure" in our Annual Report on Form 10-K for the year ended December 31, 2016. As a BDC, we may need to raise additional capital, which will expose us to

~~risks, including the typical risks associated with leverage.~~ For additional overview information on the Company, see "Item 1. Business" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

~~The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order~~Overview

Key performance metrics are presented below:



	June 30, 2020		December 31, 2019
Net asset value per common share	$	10.10	$	12.46



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Net investment income per common share	$	0.19	$	0.36	$	0.49		$	0.73
Net increase (decrease) in net assets resulting from operations per common share	0.57		0.25		(1.83		)	0.53
Distributions paid per common share	0.17		0.34		0.51			0.68

Net investment income per share declined $0.17 from the ~~SEC permitting~~corresponding quarter in the ~~BDC~~prior year primarily due to ~~do so. On~~an approximately $0.24 decline in net interest margin—total interest income less interest expense—per share. Weighted average yield on debt and Structured Finance Notes for the three months ended June 30, 2020, declined to 9.01% from 11.10% in the second quarter ending June 30, 2019, due to the Company's continuing shift to lower-yielding, first lien senior secured loans of larger borrowers, and well as the placement of our loans to Online Tech Stores, LLC and 3rd Rock Gaming Holding, LLC, with an aggregate cost of $37.1 million, on non-accrual status during the six months ended June 30, 2020. These factors adversely impacted the weighted-average yield by 1.1% and net interest margin by $0.08 per share compared to the prior year quarter. Our weighted-average interest costs increased to 5.26% from 4.98%, principally due to borrowings under our Unsecured Notes Due October ~~12, 2016, we received exemptive relief from~~2026 and the SEC to permit us to co-invest in portfolio companies with certain other funds managed by OFS Advisor (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies and restrictionsBNP Facility, as well as an increase in uninvested cash, which reduced net interest margin by $0.10 per share. As of June 30, 2020, approximately 85% of our debt is fixed rate. The decline in net interest margin was partially offset by declines in management and incentive fees of $0.10 per share as a result of the decline in net interest margin as well as the unrealized losses on our portfolio.

Our portfolio experienced net gains of $5.1 million, or $0.38 per share, during the three months ended June 30, 2020, principally on the strength of improvement in the fair values of $9.0 million in our Structured Finance Note investments and our loan investments acquired in the broadly syndicated market, due to increased liquidity in the broadly syndicated market. Our directly originated loans experienced net depreciation of $1.9 million, or 0.6%, such loans were generally mixed in their results. The net appreciation in our directly originated loans included a decrease in the fair value of our debt investment in 3rd Rock Gaming Holding, LLC of $4.2 million and well as six other directly originated loans which declined an aggregate of $3.0 million. The net appreciation in our directly originated loans was primarily due to our investment in the common equity of Pfanstiehl Holdings, Inc., a pharmaceutical ingredients manufacturer, which appreciated $6.9 million in the quarter as a result of performance improvements and expansion of the valuation multiple. In addition to Pfansteihl Holdings, Inc., our equity appreciation rights in Southern Technical Institute, LLC increased $1.0 million in value as the company emerged from operational and regulatory issues it experienced in the prior year. Management believes, with continued operational improvements, our investment in the subordinated debt of Southern Technical Institute, LLC can be restored to accrual status in the near term. Excluding Pfansteihl Holdings, Inc. and Southern Technical Institute, LLC, the remainder of or equity investments experienced net depreciation of $2.6 million led by Contact Datascan Holdings, Inc., which declined $1.5 million on weakening performance principally caused by the impact of the COVID-19 pandemic on the retail sector, a market they serve. Despite this second quarter recovery, our portfolio is down $30.1 million, or $2.2 per share, for the six months ended June 30, 2020, or $43.1 million in the aggregate.

Since OFS Advisor implemented its business continuity plan in mid-March, the entire team has effectively transitioned to remote work and we are currently capable of maintaining our normal functionality to complete our operational requirements.

We have actively monitored our portfolio companies throughout this period of economic uncertainty, which has included assessments of our portfolio companies' operational and liquidity outlook. During the three months ended June 30, 2020, we extended the maturity date on two subordinated debt investments and rescheduled the due date of two portfolio

company's second quarter 2020 interest or amortization payments until the third quarter of 2020. However, 96% of our performing loans as of March 31, 2020, satisfied their second quarter 2020 interest payments. As of June 30, 2020, we have unfunded commitments of $4.3 million. We continue to believe new loan activity in the market in which we operate has slowed and we continue to observe a decrease in origination and underwriting activity. During the three months ended June 30, 2020, we purchased five broadly syndicated loans for an aggregate cost of $2.4 million, however, there have been no Portfolio Company Investments directly originated since March 16, 2020.

At June 30, 2020, our asset coverage ratio was 166% and we remained in compliance with all applicable financial thresholds under our outstanding debt and our minimum asset coverage requirements under the 1940 Act. On June 26, 2020, we amended the PWB Credit Facility to provide flexibility with current financial covenants and thresholds. As of June 30, 2020, we had an unused commitment of $78.9 million under our PWB Credit Facility, as well as an unused commitment of $119.4 million under our BNP Facility, both subject to a borrowing base and other ~~pertinent factors,~~covenants. Based on fair values and equity capital at June 30, 2020, we could access these available lines of credit for $68 million and remain in compliance with our asset coverage requirements. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and selectively deploy capital in new investment opportunities in this challenging environment. On July 29, 2020, we executed an amendment to our BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100 million to $50 million. As of July 29, 2020, after giving effect to the reduction, our PWB Credit Facility had an unused commitment of $36.2 million, subject to ~~compliance with certain conditions (the “Order”). Pursuant~~a borrowing base and other covenants.

On July 28, 2020, the Board declared a distribution of $0.17 per share for the third quarter of 2020, payable on September 30, 2020 to stockholders of record as of September 23, 2020.

We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide, and the magnitude of the economic impact of the outbreak, including the impact of travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. As such, we are unable to predict the duration of any business and supply-chain disruptions, the extent to which the COVID-19 pandemic will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition. Depending on the duration and extent of the disruption to the ~~Order, we are generally permitted to co-invest with Affiliated Funds if a “required majority” (as defined in Section 57(o) of the 1940 Act)~~operations of our ~~independent directors make~~portfolio companies, we expect that certain ~~conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable~~portfolio companies will experience financial distress and ~~fair~~possibly default on their financial obligations to us and their other capital providers. We also expect that some of our ~~stockholders~~portfolio companies may significantly curtail business operations, furlough or lay off employees and ~~do not involve overreaching by us or~~terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis. These developments would likely result in a decrease in the value of our ~~stockholders~~investment in any such portfolio company.

We are also subject to financial risks, including changes in market interest rates. As of June 30, 2020, approximately $341 million (principal amount) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on ~~the part~~an equivalent applicable currency rate), and many of ~~any person concerned and (2) the transaction is consistent~~which are subject to certain floors. In connection with the ~~interests~~COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our ~~stockholders~~floating interest rate liabilities tied to LIBOR. As of June 30, 2020, the majority of our variable rate debt investments are subject to the base rate floor, therefore, partially reducing the impact from the recent decrease in LIBOR over the past three months on our gross investment income.

We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and ~~is consistent with~~guidance from U.S. and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of the COVID-19 pandemic on our financial condition, results of operations or cash flows in the future. However, to the extent our portfolio companies continue to be adversely impacted by the COVID-19 pandemic, our future net investment ~~objective~~income, financial condition, results of operations and ~~strategies.~~the fair value of our portfolio investments may be materially adversely impacted.

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, disclosure of 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 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 of Directors.~~Board. For descriptions of our revenue recognition and fair value policies, see "Item 8. Financial Statements - Notes to Financial Statements - Note 2 ~~to the consolidated financial statements included~~2" and "Management's Discussion and Analysis - Critical Accounting Policies and Significant Estimates" in ~~"Item 1.–Financial Statements" of this Quarterly~~our Annual Report on Form ~~10-Q.~~

~~Revenue recognition.~~ Our investment activities frequently 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. (Acquired rights and financial instruments together, "Instruments".)

The revenue recognized on these Instruments is a function of the fee or other consideration allocated to them, including amounts allocated to capital structuring fees, at the time of acquisition. Additionally, subsequent amendments to these Instruments can involve both

~~a determination as to whether the amendment is~~


◦	~~of such significance to deem it the consummation of the initial investment transaction and the acquisition of new Instruments (i.e., a "significant modification"), or~~


◦	~~a modification of those Instruments to be recognized over their remaining lives,~~ ~~and~~

~~an additional allocation of consideration among newly acquired Instruments.~~

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. Moreover, these allocations and determinations can differ between GAAP and federal income tax bases. Once determined, these allocations directly effect the discount/premium and yield on debt securities, the cost and net gains/losses on equity securities, and capital structuring fees recognized in the statements of operations; and ICTI. These allocations require an understanding of the terms and conditions of the underlying agreements and significant management judgment. The table below presents the impact to the initial cost bases of allocated consideration to acquired Instruments10-K for the ~~nine months~~year ended ~~September 30, 2017, and 2016, (in thousands):~~December 31, 2019.

Nine Months Ended September 30,
2017 2016
Loans:
Net Loan Fees (excluding equity securities and cash amendment fees) $ (968 ) $ (646 )
Equity securities (including performance-contingent fees) —
(793 )
Equity securities (including performance-contingent fees) —
793
Capital structuring fees (651 ) (153 )

Fair value estimates. AsOur approach to fair value estimates was significantly adjusted in response to the economic uncertainty associated with the spread of ~~September 30, 2017, approximately 83%~~the COVID-19 pandemic. Our use of NBIP includes assessment of whether a sufficient number of market quotations are available or whether a sufficient number of indicative prices from pricing services or brokers or dealers have been received, and whether the depth of the markets from which those quotes were received is sufficient to transact at those prices in amounts approximating our positions in such assets. Moreover, these assessments are generally based on a 90-day moving average of our ~~total assets were carried~~depth and liquidity metrics. The 90-day moving average generally counters the effects of intermittent quoting activity observed and month- and quarter-ends, irregular quoting activity that tends to artificially inflate our metrics. We observed significant declines in market liquidity beginning in the middle of March and concluded the 90-day moving average was not representative of current market conditions given the significant market dislocation during this period. Accordingly, we adjusted our depth and liquidity assessment to one based on a 5-day moving average of the metrics in our liquidity assessments as of March 31, 2020, and partially reverted, utilizing a 30-day moving average, in our June 30, 2020, assessments, as liquidity partially returned to the loan market. One measure of liquidity in the broadly syndicated loan market is the average bid-ask spread on the ~~consolidated balance sheets~~Refinitiv Market Overall (North America) Loan Index which narrowed to 1.98 points at ~~fair value. As discussed more fully~~June 30, 2020, from 3.41 points at March 31, 2020, but has not yet returned to its long-term historic average of 1.0. These changes to our depth and liquidity metrics, as well as changes in ~~“Item 1.–Financial Statements–Note 2” GAAP requires us~~the level of the metrics themselves, led to ~~categorize financial assets and liabilities carried at~~the transfer of seven instruments with an aggregate amortized cost of $12.7 million from a fair value ~~according~~estimate based on Level 2 NBIP inputs to ~~a three-level valuation hierarchy. The hierarchy gives the highest priority~~estimates based on models and Level 3 inputs at March 31, 2020, of which three investments with an aggregate amortized cost of $4.4 million reverted back 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 assets carried at fair value ~~are classified as~~estimates based on Level ~~3; we typically do not hold equity securities or other instruments that are actively traded on an exchange.~~2 NBIP inputs.

~~As described in “Item 1.–Financial Statements–Note 5~~”, we follow a process, under the supervision and review of the Board, to determine these unobservable inputs used to calculate the fair values of our investments. The most significant unobservable inputs in these fair value measurements are the discount rates, EBITDA multiples and projected cash flows contractually due from the investment.

We consider a variety of factors in our determination of the discount rate to be applied to an investment including, among other things, investment type, LIBOR swap rate, indicative yields from independent third-party sources and the yield on our investment relative to indicative yields at the time of our investment (initial and subsequent investments) in the portfolio company.

We also ~~consider~~adjusted our Level 3 fair value models throughout this period of heightened economic uncertainty. Our processes included assessments of the impact of the COVID-19 pandemic on the financial condition, results of operations or cash flows of our portfolio companies. Initially, such forward-looking assessments were fragmentary, however as such forward-looking estimates became more reliable, such information was directly incorporated into our fair value models. In circumstances in which reliable forward-looking information, we considered the market impact on performance-metric multiples and related impact on enterprise values. Additionally, management observed a ~~variety of factors~~decrease in the historic correlation between market spreads used in our ~~determination~~synthetic debt rating method and those used in our reunderwriting analysis. These market spreads, though highly correlated before the on-set of COVID-19, relate to different segments of the ~~EBITDA multiple~~lending market primarily on the basis of borrower size. The synthetic debt rating method is based on market spreads for larger borrowers with rated debt, while the reunderwring analysis market spreads are used for what are considered middle-market borrowers. Management concluded, given the break-down in this relationship, the relative weight given to ~~be applied~~each of these methods required adjustment to ~~an investment including, among other things,~~correspond to the ~~actual EBITDA multiple~~market most closely associated with the subject investment. Accordingly, we decreased the weighting for the ~~last arms-length transaction,~~synthetic debt rating method and increased the ~~ratio~~weighting for the reunderwriting analysis in the current period year, from a weighting of 50/50 to a weighting of 10/90, at March 31, 2020, and partially reverting to generally 25/75 at June 30, 2020. We believe the ~~portfolio company’s EBITDA multiple~~overweighting to the ~~average of EBITDA multiples on comparable public companies ("Comparable Multiples"), and~~reunderwriting analysis more accurately captures the ~~change~~market in ~~Comparable Multiples and the financial performance of the underlying comparable public companies relative to the financial performance of the portfolio company.~~

For both the discount rate and the EBITDA multiple we also consider developments at the portfolio company since our investment including, but not limited to, trends in the portfolio company’s earnings and leverage multiple, and input from our independent third-party valuation firms. This process typically results in a single selected discount rate and/or EBITDA multiple for each investment.

which these instruments are exchanged.

The following table illustrates the ~~sensitivity~~impact of our fair value measures ~~to reasonably likely changes to~~if we selected the ~~estimated discount rate and EBITDA multiple inputs used in our debt and equity investment valuations~~low or high end of the range of values for all investments at ~~September~~June 30, ~~2017~~2020 (dollar amounts in thousands):


	Fair Value at September 30, 2017		Weighted average discount rate/EBITDA multiple at September 30, 2017		Discount rate sensitivity						EBITDA multiple sensitivity
Valuation Method / Investment Type				-10% Weighted average			+10% Weighted average			+0.5x			-0.5x
Discounted cash flow
Investment Type																Fair Value at June 30, 2020		Range of Fair Value
																		Low-end		High-end
Debt investments:
Senior Secured	$	126,310	11.52%		$	128,711		$	123,162		N/A			N/A
Senior secured																$	325,659	$	318,380	$	332,791
Subordinated	$	48,897	15.05%		$	49,843		$	47,395		N/A			N/A		35,755		34,090		37,073

Enterprise value
Debt investments:
Senior Secured	$	11,841	7.50x		N/A			N/A			$	12,626		$	11,055
Subordinated	$	5,322	7.47x		N/A			N/A			$	6,239		$	4,405
Structured Finance Notes:
Subordinated notes																29,240		$	27,023	31,455
Mezzanine debt																790		770		809

Equity investments:
Preferred equity	$	22,855	7.16x		N/A			N/A			$	25,316		$	19,441	11,757		10,544		12,925
Common equity and warrants	$	10,324	5.65x		N/A			N/A			$	10,441		$	8,042
Common equity, warrants and other																32,561		28,731		36,179
																$	435,762	$	419,538	$	451,232

The table above presents the impact to our debt and equity investment fair value accounting measures by uniformly modifying our discount rate and EBITDA valuation inputs, as applicable. This discount rate sensitivity measures included in the table do not present the estimated effect of hypothetical changes in actual, observed interest rates, which would affect the cash flows from many of the underlying investments as they are indexed to LIBOR or the Prime Rate of interest, the operating environment of many of our portfolio companies, and other factors, as well as our estimates of the discount rate valuation input. The effect of hypothetical changes in actual, observed interest rates on our fair value measures is not subject to reasonable estimation.

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 “Item 1–Financial Statements–Note 3”.

The Administration Agreement with OFS ~~Capital~~ Services, an affiliate of OFS Advisor, to provide us with the office facilities and administrative services necessary to conduct our operations. See “Item 1–Financial Statements–Note 3.

A license agreement with OFSAM, the parent company of OFS Advisor, under which OFSAM has agreed to grant us a non-exclusive, royalty-free license to use the name “OFS.” Under this agreement, we have a right to use the “OFS” name for so long as OFS Advisor or one of its affiliates remains our investment adviser. Other than with respect to this limited license, we have no legal right to the “OFS” name. This license agreement will remain in effect for so long as the Investment Advisory Agreement with OFS Advisor is in effect.

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 ~~BDCs~~funds affiliated with OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to CLO funds and other assets, including ~~Hancock Park Corporate Income,~~HPCI and OCCI. Additionally, OFS Advisor provides sub-advisory services to CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a ~~non-traded~~corporation that qualifies as a real estate investment trust. Additionally, OFS Advisor serves as sub-adviser to CIM Real Assets & Credit Fund, a newly organized externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.

OFS Advisor agreed to reduce a portion of its base management fee by reducing the portion of such fee from 0.4375% per quarter (1.75% annualized) to 0.25% per quarter (1.00% annualized) of the OFSCC-FS Assets at the end of the two most recently completed quarters to the extent that such portion of the OFSCC-FS Assets are financed using leverage (also calculated on an average basis) that causes the Company’s statutory asset coverage ratio to fall below 200%. When calculating its statutory asset coverage ratio, the Company excludes its SBA guaranteed debentures from its total outstanding senior securities as permitted pursuant to exemptive relief granted by the SEC dated November 26, 2013. Effective January 1, 2020, OFS Advisor agreed to further reduce the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the portion of OFSCC-FS Assets at the end of the two most recently completed calendar quarters without regard to the statutory asset coverage ratio. The base management fee reduction by OFS Advisor is renewable on an annual basis and the amount of the base management fee reduction with respect to the OFSCC-FS Assets shall not be subject to recoupment by OFS Advisor.

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 October 12, 2016, we received the Order from the SEC to permit us to co-invest in portfolio companies with certain BDCs, registered investment companies and private funds managed by OFS Advisor, or any adviser that controls, is controlled by, or is under common control with, OFS Advisor and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, in a manner consistent with our investment strategy as well as applicable law, including the terms and conditions of the Order. Pursuant to the Order, we are generally permitted to participate in a co-investment transaction if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors makes 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 of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. On July 8, 2020, we received a notice from the SEC related to the new co-investment application that we and certain affiliates filed, which, if granted, would supersede the Order and would permit us greater flexibility to enter into co-investment transactions. The notice period ends on August 3, 2020, and, unless there is a request for a hearing, we expect our new exemptive order to be issued after the notice period ends.

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through at least December 31, 2020, the Company may, subject to the satisfaction of certain conditions, co-invest in its existing portfolio companies with certain other funds managed by the Advisor or its affiliates, even if such other fund has not previously invested in such existing portfolio company. Without this order, the Company generally would not be able to participate in such co-investments unless the affiliated fund had previously acquired securities of the portfolio company in a co-investment transaction with the Company.

Conflicts may arise when we make an investment in conjunction with an investment ~~strategy similar~~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. For a discussion of the risks associated with conflicts of interest, see "Item 1A. Business — Conflicts of Interest", "Item 1A. Risk Factors — Risks Related to OFS Advisor and its Affiliates —We have potential conflicts of interest related to the ~~Company.~~purchases and sales that OFS Advisor makes on our behalf and/or on behalf of Affiliated Accounts" and "Item 1A. Risk Factors — Regulations — Conflicts of Interest - Conflicts Related to Portfolio Investments" in our Annual Report on Form 10-K for the year ended December 31, 2019.

Portfolio Composition and Investment Activity

Portfolio Composition

As of ~~September~~June 30, ~~2017,~~2020, the fair value of our debt investment portfolio totaled ~~$257.1~~$361.4 million in 3757 portfolio companies, of which ~~76%~~90% and ~~24%~~10% were senior secured loans and subordinated loans, respectively, and approximately ~~$39.5~~$44.3 million in equity investments, at fair value, in 1722 portfolio ~~companies~~companies. We also have eight investments in ~~which we also held debt investments and three portfolio companies in which we solely held an equity investment.~~Structured Finance Notes with a fair value of $30.0 million. We had unfunded commitments of ~~$4.5~~$4.3 million to ~~three~~two portfolio companies at ~~September~~June 30, ~~2017.~~2020. Set forth in the tables and charts below is selected information with respect to our portfolio as of ~~September~~June 30, ~~2017,~~2020 and December 31, ~~2016.~~2019.

The following table summarizes the composition of our ~~investment portfolio~~Portfolio Company Investments as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016~~2019 (dollar amounts in thousands):

September 30, 2017 December 31, 2016
Amortized Cost Fair Value Amortized Cost Fair Value
Senior secured debt investments ⁽¹⁾
$ 196,477

$ 194,153
$ 182,315
$ 180,955
Subordinated debt investments 70,768

62,942
66,591
63,410
Preferred equity 28,492

28,499
23,293
23,721
Common equity and warrants 6,321

11,036
7,108
13,541
$ 302,058

$ 296,630
$ 279,307
$ 281,627
Total number of portfolio companies 40
40
41
41



	June 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Senior secured debt investments ⁽¹⁾	$	352,264	$	325,659	$	421,970	$	408,724
Subordinated debt investments	56,985		35,755		56,731		43,091
Preferred equity	18,621		11,757		21,925		17,729
Common equity, warrants and other	15,717		32,561		14,919		25,777
Total Portfolio Company Investments	$	443,587	$	405,732	$	515,545	$	495,321
Total number of portfolio companies	65		65		85		85

(1)

Includes debt investments in which we have entered into contractual arrangements with co‑lenders whereby, subject to certain conditions, we have agreed to receive our principal payments after the repayment of certain co‑lenders pursuant to a payment waterfall. The aggregate amortized cost and fair value of these investments was ~~$21,226~~$75,406 and ~~$21,226~~$74,381, respectively, at ~~September~~June 30, ~~2017,~~2020, and $68,207 and $67,480, respectively, ~~and $28,945 and $29,276,~~ at December 31, ~~2016, respectively~~2019.

~~The following table shows the portfolio composition by geographic region~~Approximately 80% of our Portfolio Company Investments at ~~amortized cost and~~ fair value, ~~and as a percentage of total investments; the geographic composition is determined by the location~~are senior securities of the ~~portfolio companies' corporate headquarters (dollar amounts~~borrower, rather than in ~~thousands):~~

Amortized Cost Fair Value
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
South - US $ 125,824
41.7 % $ 120,005
42.9 % $ 124,082
41.8 % $ 122,511
43.5 %
Northeast - US 105,586
34.9
85,693
30.7
92,236
31.0
78,186
27.8
West - US 43,190
14.3
59,120
21.2
48,208
16.3
61,219
21.7
Midwest - US 23,523
7.8
10,566
3.8
28,066
9.5
15,788
5.6
Canada 3,935
1.3
3,923
1.4
4,038
1.4
3,923
1.4
Total $ 302,058
100.0 % $ 279,307
100.0 % $ 296,630
100.0 % $ 281,627
100.0 %
the subordinated securities, preferred equity or common equity. We believe the seniority of our debt investments in the borrowers' capital structure may provide greater downside protection against the impact of the COVID-19 pandemic.

As of ~~September~~June 30, ~~2017,~~2020, our ~~investment portfolio’s~~Portfolio Company Investment's three largest industries by fair value, were (1) Manufacturing (19.8%), (2) ~~Professional, Scientific, and Technical Services,~~Wholesale Trade (14.7%), and (3) ~~Other Services (except Public Administration)~~Health Care and Social Assistance (14.1%, totaling approximately ~~47.9%~~48.5% of the investment portfolio. We have limited exposure to the Retail Trade industry (5.9%) which has been significantly impacted by the COVID-19 pandemic.For a full summary of our investment portfolio by industry, see “Item 1–Financial Statements–Note 44."".

The following table presents our investment portfolio by each wholly owned legal entity within the consolidated group as of June 30, 2020, and December 31, 2019 (dollar amounts in thousands):



	June 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
OFS Capital Corporation (Parent)	$	182,090	$	159,117	$	181,980	$	169,230
SBIC LP	227,842		211,941		256,858		246,371
OFSCC-FS	57,439		55,038		88,458		88,936
OFSCC-MB	11,470		9,666		11,375		12,394
Total investments	$	478,841	$	435,762	$	538,671	$	516,931

The following table presents our debt investment portfolio by investment size as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016~~2019 (dollar amounts in thousands):


	Amortized Cost								Fair Value								Amortized Cost								Fair Value
	September 30, 2017				December 31, 2016				September 30, 2017				December 31, 2016				June 30, 2020				December 31, 2019				June 30, 2020				December 31, 2019
Up to $4,000	$	27,410	10.2	%	$	34,547	13.9	%	$	28,373	11.0	%	$	41,419	17.0	%	$	35,605	8.7	%	$	77,809	16.3	%	$	35,042	9.7	%	$	75,033	16.6	%
$4,001 to $7,000	56,065		21.0		57,996		23.3		62,004		24.1		55,342		22.6		60,878		14.9		71,558		14.9		57,448		15.9		68,806		15.2
$7,001 to $10,000	79,287		29.7		78,446		31.5		64,609		25.1		80,735		33.0		75,922		18.6		95,567		20.0		93,009		25.7		77,978		17.3
$10,001 to $13,000	35,193		13.2		34,549		13.9		47,448		18.5		37,593		15.4		77,755		19.0		54,273		11.3		59,228		16.4		53,903		11.9
Greater than $13,000	69,290		25.9		43,368		17.4		54,661		21.3		29,276		12.0		159,089		38.8		179,494		37.5		116,687		32.3		176,095		39.0
Total	$	267,245	100.0	%	$	248,906	100.0	%	$	257,095	100.0	%	$	244,365	100.0	%	$	409,249	100.0	%	$	478,701	100.0	%	$	361,414	100.0	%	$	451,815	100.0	%

The following table displays the composition of our performing debt investment and Structured Finance Note portfolio by weighted average yield as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016:~~2019:


	September 30, 2017						December 31, 2016						June 30, 2020								December 31, 2019
	Senior Secured		Subordinated		Total		Senior Secured		Subordinated		Total		Senior Secured		Subordinated		Structured Finance				Senior Secured		Subordinated		Structured Finance
Weighted Average Yield ⁽¹⁾	Debt		Debt		Debt		Debt		Debt		Debt
Weighted Ave. Yield ⁽¹⁾													Debt				Notes		Total		Debt				Notes		Total
Less than 8%	11.4	%	—	%	8.7	%	8.7	%	11.4	%	9.5	%	18.6	%	—	%	—	%	15.6	%	20.1	%	—	%	—	%	17.3	%
8% - 10%	32.4		—		24.5		7.7		—		5.6		53.8		—		—		45.2		21.5		—		—		18.5
10% - 12%	32.4		9.4		26.8		32.6		11.9		27.0		24.8		13.3		—		21.8		48.8		8.6		—		42.7
12% - 14%	7.7		54.2		19.0		30.9		58.1		38.2		1.3		59.8		38.8		8.8		8.4		38.3		25.1		12.0
Greater than 14%	16.1		36.4		21.0		20.1		18.6		19.7		1.5		26.9		61.2		8.6		1.2		53.1		74.9		9.5
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Weighted average yield	10.88	%	13.45	%	11.50	%	11.95	%	12.44	%	12.08	%
Weighted average yield - performing debt and Structured Finance Note investments ⁽¹⁾													9.15	%	12.98	%	17.12	%	10.14	%	9.80	%	13.52	%	15.13	%	10.40	%
Weighted average yield - total debt and Structured Finance Note investments ⁽²⁾													8.60	%	6.48	%	17.12	%	9.01	%	9.57	%	10.57	%	15.13	%	9.94	%

(1) The weighted average yield on our performing debt and Structured Finance Note investments is computed as (a) the sum of (i) the annual stated accruing interest on debt investments plus the annualized accretion of Net Loan Fees; and (ii) the annual effective yield on Structured Finance Notes divided by (b) amortized cost of our debt and Structured Finance Note investments, excluding debt investments in non-accrual status as of the balance sheet date.

(2) The weighted average yield on our total debt and Structured Finance Note investments is computed as (a) the sum of (i) the annual stated accruing interest plus the annualized accretion of Net Loan Fees and (ii) plus the annual effective yield on Structured Finance Notes divided by (b) amortized cost of our debt and Structured Finance Note investments, including debt investments in non-accrual status as of the balance sheet date.

The weighted average yield on total investments was 8.52% and 9.59% at June 30, 2020 and December 31, 2019, respectively. Weighted average yield on total investments is computed as (a) the sum of (i) the annual stated accruing interest

on our debt investments at the balance sheet date plus the annualized accretion of Net Loan Fees, (ii) the effective yield on our performing preferred equity investments, and (iii) the annual effective yield on Structured Finance Notes, divided by (b) amortized cost of our ~~debt investments, excluding~~total investment portfolio, including assets onin non-accrual ~~basis~~status as of the balance sheet date. ~~Including assets on non-accrual, the weighted average yield of our debt investment portfolio was 11.17% and 11.72%, at September 30, 2017 and December 31, 2016.~~

The weighted average yield decreased from 12.08% at December 31, 2016 to 11.50% at September 30, 2017, primarily due to the deployment of cash during the six months ended September 30, 2017, including partial deployment of proceeds received from our April 2017 follow-on public offering, into $46.1 million of senior secured debt investments with a weighted average yield of 9.2% at September 30, 2017. The weighted average yield of our ~~debt~~ investments is not the same as a return on investment for our stockholders but, rather, ~~relates to a portion of~~the gross investment income from our investment portfolio ~~and is calculated~~ 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.

The weighted average yield on performing portfolio-company debt securities, including Structured Finance Notes, decreased to 10.14% at June 30, 2020, from 10.40% at December 31, 2019, primarily due to the 8.5% weighted-average yield of new investments. The weighted average yield on total debt, including Structured Finance Notes, decreased to 9.01% at June 30, 2020, from 9.94% at December 31, 2019, primarily due to the change to non-accrual status of our investments in Online Tech Stores, LLC and 3rd Rock Gaming Holding, LLC.

As of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, floating rate loans at fair value were ~~73%~~87% and ~~66%~~93% of our debt ~~investment~~ portfolio, excluding Structured Finance Notes, respectively, and fixed rate loans at fair value were ~~27%~~13% and ~~34%~~7% of ~~our debt investment~~this portfolio, respectively.

Investment Activity

The following is a summary of our ~~investment~~Portfolio Company Investment activity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016 (in~~2020 (dollar amounts in millions).


	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017				Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Debt Investments		Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments
Investments in new portfolio companies	$	36.9	$	3.6	$	95.8	$	3.9	$	2.4	$	—	$	42.3	$	—
Investments in existing portfolio companies
Follow-on investments	0.5		0.9		12.6		1.4		0.5		—		10.1		0.1
Delayed draw funding	0.5		—		1.0		—
Restructured investments									—		—		—		0.7
Delayed draw and revolver funding									4.3		—		5.7		—
Total investments in existing portfolio companies	1.0		0.9		13.6		1.4		4.8		—		15.8		0.8
Total investments in new and existing portfolio companies	$	37.9	$	4.5	$	109.4	$	5.3	$	7.2	$	—	$	58.1	$	0.8
Number of new portfolio company investments	4		2		13		3
Number of existing portfolio company investments	2		1		11		2
Number of new Portfolio Company Investments									5		—		10		—
Number of existing Portfolio Company Investments									4		1		15		3

Proceeds/distributions from principal payments/ equity investments	$	35.1	$	—	$	86.5	$	—	19.1		—		56.3		—
Proceeds from investments sold or redeemed	5.1		—		—		7.5		23.4		—		61.9		3.6
Total proceeds from principal payments, equity distributions and investments sold	$	40.2	$	—	$	86.5	$	7.5	$	42.5	$	—	$	118.2	$	3.6

In July 2017, our senior secured debt investment with a cost basis of $6.7 million, and preferred equity investments, with an aggregate cost basis of $0.3 million, in My Alarm Center, LLC, were restructured and exchanged for common equity and a new class of preferred equity securities with a fair value of $-0- and $1.8 million, respectively. As of June 30, 2017, we recognized cumulative unrealized losses of $5.2 million on our pre-restructured securities of My Alarm Center, LLC, which upon restructuring, were realized during the quarter ended September 30, 2017.

~~As of November 3, 2017, we closed $7.0 million of senior secured debt~~Notable investments in ~~two~~ new ~~portfolio companies and $6.3 million of senior secured debt investments in four existing~~ portfolio companies during the ~~fourth quarter~~six months ended June 30, 2020, include A&A Transfer, LLC ($23.7 million senior secured loan and $1.6 million revolver) and SourceHOV Tax, Inc. ($12.8 million senior secured loan).

The weighted-average yield of ~~2017.~~direct debt investments in new portfolio companies during the six months ended June 30, 2020 was 8.5%.

We also invested $12.8 million in Structure Finance Notes with a weighted average annual effective yield of 19.6% during the six months ended June 30, 2020.

Non-cash investment activity

The following is a summary of our Portfolio Company Investment activity for the three and six months ended June 30, 2019 (dollar amounts in millions).


	Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016					Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
	Debt Investments		Equity Investments		Debt Investments			Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments
Investments in new portfolio companies	$	14.3	$	—	$	23.3		$	—	$	40.8	$	—	$	72.3	$	4.1
Investments in existing portfolio companies
Follow-on investments	1.2		—		11.9		(1)	0.8		13.0		—		22.8		—
Refinanced investments	—		—		3.3			—
Delayed draw funding	0.9		—		0.9			—
Delayed draw and revolver funding										5.4		—		8.2		—
Total investments in existing portfolio companies	2.1		—		16.1			0.8		18.4		—		31.0		—
Total investments in new and existing portfolio companies	$	16.4	$	—	$	39.4		$	0.8	$	59.2	$	—	$	103.3	$	4.1
Number of new portfolio company investments	2		—		5			—
Number of existing portfolio company investments	2		—		8			1
Number of new Portfolio Company Investments										22		—		25		2
Number of existing Portfolio Company Investments										7		—		14		—

Proceeds/distributions from principal payments/ equity investments	$	5.5	$	—	$	37.1		$	—	3.3				9.3		$	—
Proceeds from investments sold or redeemed	—		—		—			2.1		14.0				30.3		—
Total proceeds from principal payments, equity distributions and investments sold	$	5.5	$	—	$	37.1		$	2.1	$	17.3	$	—	$	39.6	$	—


~~(1)~~	~~Acquired no-cost LLC membership interest in connection with a follow-on debt investment in an existing portfolio company valued at $0.3 million.~~

~~During~~Notable investments in new portfolio companies during the ~~nine~~six months ended ~~September~~June 30, ~~2016, we converted a~~2019, include Chemical Resources Holdings, Inc. ($13.6 million senior secured loan and $1.8 million ~~portion~~in common equity) and TTG Healthcare, LLC ($11.9 million senior secured loan and $2.3 million preferred equity).

The weighted-average yield of ~~our subordinated~~direct debt ~~investment~~investments in ~~Southern Technical Institute, LLC,~~new portfolio companies during the six months ended June 30, 2019 was 10.7%.

We also invested $20.9 million in Structure Finance Notes with a ~~principal amount~~weighted average annual effective yield of ~~$1.8 million into equity units and warrants valued at $1.8 million. No gain or loss was recognized as a result of~~13.89% during the ~~conversion. In addition, we received equity in a portfolio company valued at $0.2 million as consideration for an amendment to a senior secured debt investment in the same portfolio company.~~six months ended June 30, 2019.

Our level of investment activity may vary substantially from period to period depending on various factors, including, but not limited to, the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make. We believe new loan activity in the market in which we operate has slowed and we have observed a decrease in origination and underwriting activity. The number of deals currently being reviewed and evaluated has decreased since the beginning of the year. During the three months ended June 30, 2020, we purchased five broadly syndicated loans for an aggregate cost of $2.4 million, however, there has been no Portfolio Company Investments directly originated since March 16, 2020.

Risk Monitoring

We categorize direct investments in the debt ~~investments~~securities of portfolio companies 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 “Item 1. Business–Portfolio Review/Risk Monitoring” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. The following table shows the classification of our debt ~~investments~~securities of portfolio companies, excluding Structured Finance Notes, by credit risk rating as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016~~2019 (dollar amounts in thousands):


	September 30, 2017				December 31, 2016				Debt Investments, at Fair Value
Risk Category	Debt Investments, at Fair Value		% of Debt Investments		Debt Investments, at Fair Value		% of Debt Investments		June 30, 2020				December 31, 2019
1 (Low Risk)	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%
2 (Below Average Risk)	3,788		1.5		3,810		1.6		3,788		1.0		17,953		4.0
3 (Average)	221,212		86.0		192,078		78.6		286,444		79.3		387,654		85.8
4 (Special Mention)	26,773		10.4		43,084		17.6		64,058		17.7		45,546		10.1
5 (Substandard)	3,284		1.3		5,393		2.2		7,124		2.0		—		—
6 (Doubtful)	2,038		0.8		—		—		—		—		662		0.1
7 (Loss)	—		—		—		—		—		—		—		—
	$	257,095	100.0	%	$	244,365	100.0	%	$	361,414	100.0	%	$	451,815	100.0	%

During the nine months ended September 30, 2017, we reclassified our subordinated debt investment in Community Intervention Service, Inc, designated non-accrual at September 30, 2017, from risk category 5 to risk category 6 with a fair value of $5.4 million at December 31, 2016, and reclassified our subordinated debt investment in Master Cutlery, LLC from risk category 4 to risk category 5 with a fair value $4.4 million at December 31, 2016. Each reclassification was primarily due

~~to a degradation~~Changes in the underlying business of the portfolio company. In addition, we reclassified one debt investment from risk category 4 to risk category 3, with a fair value of $9.5 million at December 31, 2016. All other year changes in distribution of our debt investments across risk categories were a result of new debt investments, the receipt of amortization payments on existing debt investments, repayment of certain debt investments in full, changes in the fair value of our existing debt investments, ~~within~~realized gains on the ~~categories,~~sale of investments, as well as changes in risk categories. Debt investments with a cost and ~~other~~fair value of $42,969 and $32,075, respectively, had risk rating downgrades from risk category 3 to risk category 4 during the six months ended June 30, 2020. A debt investment ~~activity.~~with a cost and fair value of $16,129 and $7,124, respectively, had a risk rating downgrade from risk category 4 to risk category 5 during the six months ended June 30, 2020. A debt investment with a cost and fair value of $-0- and $1,153, respectively, had a risk rating upgrade from risk category 6 to risk category 4 during the six months ended June 30, 2020.

Non-Accrual Loans

~~At September 30, 2017,~~When there is reasonable doubt that principal, cash interest, or PIK interest will be collected, loan investments are placed on non-accrual status and the Company ~~had one loan (Community Intervention Services, Inc.)~~will generally cease recognizing cash interest, PIK interest, or Net Loan Fee amortization, as applicable. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal, interest and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal. During the six months ended June 30, 2020, our debt investments in Online Tech Stores, LLC and 3rd Rock Gaming Holding, LLC were placed on non-accrual status due to the reasonable doubt that principal and interest will be collected. The aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization ~~with an amortized~~was $49,525 and $21,193, respectively, at June 30, 2020, and $12,403 and $850, respectively, at December 31, 2019.

On March 27, 2020, our debt investment in Constellis Holdings, LLC was restructured. We converted our non-accrual debt investment for 20,628 common shares of equity. The cost and fair value of ~~$7,639~~the common shares received were $0.7 million and ~~$2,038,~~$0.7 million as of June 30, 2020, respectively. ~~The Company's loan investment in My Alarm Center, LLC,~~We recognized a realized loss on the restructuring of $9.1 million for the six months ended June 30, 2020, which was ~~on non-accrual status at June 30, 2017, was restructured and exchanged for a new class~~fully recognized as unrealized losses as of ~~preferred equity securities and common equity securities in July 2017. See "Item 1.–Financial Statements–Note 4" for further information. At~~ December 31, 2016, we had one loan (Community Intervention Services, Inc.) on non-accrual status with respect to PIK interest and unamortized Net Loan Fees with an amortized cost and fair value of $7,639 and $5,393, respectively.2019.

~~PIK and Cash Dividend Accruals~~

At September 30, 2017, we had four preferred equity securities (Master Cutlery, LLC, Stancor, L.P., Southern Technical Institute, LLC, and TRS Services, LLC), with an aggregate amortized cost and fair value of $10,452 and $3,822, respectively, for which the fair value of the accrued PIK dividend for the three months ended September 30, 2017 was $-0-. In addition, beginning June 30, 2017, the Company discontinued recognition of the cash preferred dividend from its investment in Master Cutlery, LLC. At December 31, 2016, the Company had one preferred equity security (Master Cutlery, LLC) with an amortized cost and fair value of $3,483, and $954, respectively, for which the fair value of the accrued PIK dividend for the three months ended December 31, 2016 was $-0-.

Results of Operations

Our key financial measures are described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations–Results of Operations–Key Financial ~~Measures~~

Measures" in our Annual Report on Form 10-K for the year ended December 31, 2019. The following is a discussion of the key financial measures that management employs in reviewing the performance of our operations.

~~Total Investment Income.~~ We generate revenue in the form of interest income on debt investments and dividend income from our equity investments. Our debt investments typically have a term of three to eight years and bear interest at fixed and floating rates. As of September 30, 2017, floating rate and fixed rate loans comprised 73% and 27%, respectively, of our debt investment portfolio at fair value; however, in accordance with our investment strategy, we expect that over time the proportion of fixed rate loans will continue to increase. In some cases, our investments provide for PIK interest, or PIK dividends (meaning interest or dividends paid in the form of additional principal amount of the loan or equity security instead of in cash). We also generate revenue in the form of management, valuation, and other contractual fees, which is recognized as the related services are rendered. In the general course of business, we receive certain fees from portfolio companies which are non-recurring in nature. Such non-recurring fees include prepayment fees on certain loans repaid prior to their scheduled due date, which are recognized as earned when received, and fees for capital structuring services from certain portfolio companies, which are recognized as earned upon closing of the investment. Net Loan Fees are capitalized, and accreted or amortized over the life of the loan as interest income. When we receive principal payments on a loan in an amount that exceeds its amortized cost, we will also recognize the excess principal payment as income in the period it is received.

~~Expenses~~. Our primary operating expenses include interest expense due under our outstanding borrowings, the payment of fees to OFS Advisor under the Investment Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement and other operating costs described below. Additionally, we will pay interest expense on any outstanding debt under any new credit facility or other debt instrument we may enter into. We will bear all other out-of-pocket costs and expenses of our operations and transactions, whether incurred by us directly or on our behalf by a third party, including:

~~the cost of calculating our net asset value, including the cost of any third-party valuation services;~~

~~the cost of effecting sales and repurchases of shares of our common stock and other securities;~~

~~fees payable to third parties relating to making investments, including out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments;~~

~~transfer agent and custodial fees;~~

~~out-of-pocket fees and expenses associated with marketing efforts;~~

~~federal and state registration fees and any stock exchange listing fees;~~

~~U.S. federal, state and local taxes;~~

~~independent directors’ fees and expenses;~~

~~brokerage commissions;~~

~~fidelity bond, directors’ and officers’ liability insurance and other insurance premiums;~~

~~direct costs, such as printing, mailing and long-distance telephone;~~

~~fees and expenses associated with independent audits and outside legal costs;~~

~~costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; and~~

~~other expenses incurred by either OFS Services or us in connection with administering our business.~~

~~Net Gain (Loss) on Investments.~~ Net gain (loss) on investments consists of the sum of: (a) realized gains and losses from the sale of debt or equity securities, or the redemption of equity securities; and (b) net unrealized appreciation or depreciation on debt and equity investments. In the period in which a realized gain or loss is recognized, such gain or loss will generally be offset by the reversal of accumulated net unrealized appreciation or depreciation, and the net gain recognized in that period will generally be smaller. The accumulated net unrealized appreciation or depreciation on debt securities is also reversed when those investments are redeemed or paid off prior to maturity. In such instances, the reversal of accumulated unrealized appreciation or depreciation will be reported as a net loss or gain, respectively, and may be partially offset by the acceleration of any premium or discount on the debt security, which is reported in interest income, and any prepayment fees on the debt security, which is reported in fee income.

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.~~operations. We are primarily focused on debt investments in middle-market and larger companies in the United States ~~including debt investments~~ and, to a lesser extent, equity investments, including warrants and other minority equity securities and Structured Finance Notes, which differs to some degree from our historical investment concentration, ~~in senior secured loans~~debt investments to middle-market companies in the United ~~States.~~States and, to a lesser extent, equity investments, including warrants and other minority equity securities. Moreover, as a BDC and a RIC, we will also be subject to certain constraints on our operations, including, but not limited to, limitations imposed by the 1940 Act and the Code. In addition, SBIC I ~~L.P.~~LP is subject to regulation and oversight by ~~they~~ SBA. For the reasons described above, the results of operations described below may not necessarily be indicative of the results we expect to report in future periods.

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. As a result, annual comparisons of net increase (decrease) in net assets resulting from operations may not be meaningful.

Comparison of the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 and ~~2016~~2019

Consolidated operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, are as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016			2017			2016			2020		2019			2020			2019
Investment income
Interest income:
Cash interest income	$	6,742		$	5,872		$	19,592		$	17,781
Cash interest income (including accretion of interest on Structured Finance Notes)													$	9,712	$	11,961		$	20,925		$	22,941
Net Loan Fee amortization	518			352			1,187			1,162			403		228			817			406
PIK interest income	485			311			1,134			868
Other interest income	73			45			156			124			19		21			54			97
Total interest income	7,818			6,580			22,069			19,935			10,134		12,210			21,796			23,444
PIK income:
PIK interest income													393		205			829			366
Preferred equity PIK dividends													164		219			343			434
Total PIK income													557		424			1,172			800
Dividend income:
Preferred equity cash dividends	34			82			99			410
Preferred equity PIK dividends	286			396			1,065			1,032
Common equity dividends	91			50			331			182
Common and preferred equity cash dividends													—		89			100			262
Total dividend income	411			528			1,495			1,624			—		89			100			262
Fee income:
Management, valuation, and other	43			69			127			167
Prepayment, structuring, and other fees	850			182			1,443			1,159
Management and syndication													—		133			378			651
Prepayment and other fees													290		44			405			88
Total fee income	893			251			1,570			1,326			290		177			783			739
Total investment income	9,122			7,359			25,134			22,885			10,981		12,900			23,851			25,245
Total expenses	4,720			4,062			13,076			12,476
Total expenses, net													8,374		8,040			17,272			15,557
Net investment income	4,402			3,297			12,058			10,409			2,607		4,860			6,579			9,688
Net loss on investments	(3,227		)	(909		)	(8,298		)	(1,404		)
Net increase in net assets resulting from operations	$	1,175		$	2,388		$	3,760		$	9,005
Net gain (loss) on investments													5,051		(1,507		)	(31,081		)	(2,603		)
Net increase (decrease) in net assets resulting from operations													$	7,658	$	3,353		$	(24,502	)	$	7,085

Interest and PIK income by debt investment type for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, is summarized below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016		2017		2016		2020			2019		2020			2019
Interest income:
Interest income and PIK interest income:
Senior secured debt investments	$	5,721	$	4,979	$	16,170	$	13,930	$	8,167		$	10,386	$	18,084		$	19,933
Subordinated debt investments	2,097		1,601		5,899		6,005		953			1,400		1,911			2,780
Total interest income	$	7,818	$	6,580	$	22,069	$	19,935
Structured Finance Notes									1,407			629		2,630			1,097
Total interest income and PIK interest income									10,527			12,415		22,625			23,810
Plus purchased premiums (less Net Loan Fees) accelerations									(132		)	13		(235		)	12
Recurring interest income and PIK interest income									$	10,395		$	12,428	$	22,390		$	23,822

~~Interest~~Investment Income

We consider our interest income ~~increased~~on direct debt investments to portfolio companies—other than acceleration of Net Loan Fees recognized upon the repayment of a loan—PIK interest income, and the accretable yield on Structured Finance Notes to be recurring in nature. Such recurring interest income and PIK interest income decreased by ~~$1.2~~$1.9 million for the three months ended ~~September~~June 30, ~~2017,~~2020, compared to the three months ended ~~September~~June 30, ~~2016. The $1.2 million increase was~~2019, primarily due to a ~~$1.1~~$0.2 million ~~increase primarily attributable to a 19% increase~~decrease in the average outstanding performing loan balance, ~~and a $0.2 million increase in Net Loan Fee amortization, offset~~as well as by a ~~$0.1~~$1.7 million decrease ~~primarily attributable to~~resulting from a 30189 basis ~~points~~point decrease in the ~~weighted average~~recurring earned yield inon our portfolio. ~~Acceleration~~

Due to the COVID-19 pandemic and the impact to our borrowers, we experienced a partial shift from cash interest to PIK interest as a result of concessions granted to borrowers to support the borrowers' liquidity. Total PIK income was $1.2 million and $0.8 million for the six months ended June 30, 2020 and June 30, 2019, respectively. During the three months ended June 30, 2020, we amended two loans to extend the receipt of $0.7 million in second quarter interest until July 2020, of which $0.4 million was not recognized in the second quarter due to reasonable doubt whether it will be collected.

Syndication fees, prepayment fees and the acceleration of Net Loan Fees ~~of $0.3 million~~generally result from periodic transactions rather than from holding portfolio investments and ~~$0.1 million~~are considered to be non-recurring. Syndication fees which are recognized when OFS Advisor sources, structures, and arranges the lending group, and for which we were ~~included in interest income~~additional compensation declined to $-0- for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~

~~Interest~~2020, compared to $0.4 million in the first quarter of 2020 due to the drop in direct loan originations from approximately $33.4 million in the first quarter to $-0- in the second quarter, primarily due to the impacts of the COVID-19 pandemic. Total fee income ~~increased by $2.1 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, compared to the ~~nine months ended September 30, 2016. The $2.1 million increase was due to a $2.7 million increase primarily attributable to a 15% increase~~corresponding period in the average outstanding loan balance, and a $0.1 million increase in accelerated Net Loan Fee amortization, offset by a $0.7 million decrease primarily attributable to a 42 basis point decrease in the weighted average yield in our portfolio. Acceleration of Net Loan Fees of $0.5 million and $0.4 million were included in interest income for the nine months ended September 30, 2017 and 2016, respectively.

~~Fee income increased by $0.6 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, primarily~~prior year, remained consistent due to an increase in prepayment fees, ~~and structuring fees of $0.3 million and $0.4 million, respectively,~~which offset ~~by a $0.1 million~~the decrease in ~~other~~syndication fees. ~~We recorded prepayment fees~~Since the onset of ~~$0.3 million resulting from $17.5 million of unscheduled principal payments during~~the COVID-19 pandemic, we have continued to source and screen loan investments, although we have observed a decrease in underwriting and origination activity. During the three months ended ~~September~~June 30, ~~2017. We did not receive any unscheduled principal payments subject to prepayment fees during~~2020, we purchased five broadly syndicated loans for an aggregate cost of $2.4 million, however, there has been no Portfolio Company Investments directly originated since March 16, 2020.

Expenses

Operating expenses for the three and six months ended ~~September~~June 30, 2016. We recorded structuring fees of $0.5 million in connection with the closing of $30.2 million of investments during the three months ended September 30, 2017, compared to structuring fees of $0.1 million in connection with the closing of $9.5 million of investments during the three months ended September 30, 2016.

Fee income increased by $0.2 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to a $0.5 million increase in structuring fees, offset by a $0.2 million decrease in prepayment fees2020 and $0.1 million in other fees. We recorded structuring fees of $0.7 million in connection with the closing of $48.7 million of investments during the nine months ended September 30, 2017, compared to structuring fees of $0.2 million in connection with the closing of $15.7 million of investments during the nine months ended September 30, 2016. We recorded prepayment fees of $0.7 million resulting from $45.7 million of unscheduled principal payments during the nine months ended September 30, 2017, compared to prepayment fees of $0.9 million resulting from $24.8 million of unscheduled principal payments we recorded during the nine months ended September 30, 2016.

~~Expenses~~2019, are presented below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2020		2019		2020			2019
Interest expense	$	1,503	$	1,320	$	4,229	$	3,936	$	4,931	$	3,645	$	9,853		$	7,100
Management fees	1,310		1,120		3,726		3,324
Management fee									1,869		2,055		3,888			3,898
Incentive fee	1,090		817		2,249		2,407		215		1,245		1,098			2,408
Professional fees	284		260		840		877		460		368		1,108			903
Administration fee	274		255		982		1,009		500		417		1,020			854
General and administrative expenses	259		290		1,050		923
Total expenses	$	4,720	$	4,062	$	13,076	$	12,476
Other expenses									399		310		746			394
Total expenses before incentive fee waiver									$	8,374	$	8,040	$	17,713		$	15,557
Incentive fee waiver									—		—		(441		)	—
Total expenses, net of incentive fee waiver									$	8,374	$	8,040	$	17,272		$	15,557

Interest expense for the three and ~~nine~~six months ended ~~September~~June 30, 2017, increased over the corresponding periods in the prior year due to an increase in borrowings under our PWB Credit Facility. The average dollar amount of borrowings outstanding under the PWB Credit Facility during the three and nine months ended September 30, 2017, was $11.1 million and $5.8 million, respectively. There were no borrowings under the PWB Credit Facility during the three or nine months ended September 30, 2016.

~~Management fee expense for the three and nine months ended September 30, 2017,~~2020 increased over the corresponding periods in the prior year due to an increase in our average ~~total assets, primarily~~borrowings related to the issuance of the Unsecured Notes Due October 2026 and

borrowings under the BNP Facility. Interest expense incurred on our debt during the three and six months ended June 30, 2020 and 2019 is summarized below (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
SBA Debentures	$	1,114	$	1,280	$	2,338	$	2,548
PWB Credit Facility	702		633		991		1,094
Unsecured Notes Due April 2025	860		860		1,721		1,720
Unsecured Notes Due October 2025	850		866		1,700		1,732
Unsecured Notes Due October 2026	880		—		1,784		—
BNP Facility	525		6		1,319		6
Total interest expense⁽¹⁾	$	4,931	$	3,645	$	9,853	$	7,100

(1) Interest expense is inclusive of interest on the outstanding balance, commitment fees on undrawn amounts, and the amortization of deferred financing costs.

Management fee expense for the three months ended June 30, 2020 decreased $0.2 million over the corresponding period in the prior year due to a ~~increase~~decrease in our average total assets resulting from a decline in the fair value of our portfolio investments.

The $1.0 million decrease in incentive fee expense during the three months ended June 30, 2020 and the $1.3 million decrease in incentive fee expense prior to the Income Incentive Fee waiver of $0.4 million during the six months ended June 30, 2020, compared to the corresponding periods in the prior year was attributable to a decrease in net investment ~~activity, including deployment~~income resulting from a decline in net interest margin. On May 4, 2020, OFS Advisor agreed to irrevocably waive the receipt of ~~funds from~~$0.4 million in Income Incentive Fees (based on net investment income) related to net investment income, that it would otherwise be entitled to receive under the ~~Offering.~~

Investment Advisory Agreement for the three months ended March 31, 2020. As a result of the voluntary fee waiver, we incurred Income Incentive ~~fee~~Fee expense ~~increased by $0.3~~of $0.4 million for the three months ended ~~September 30, 2017, compared~~March 31, 2020, which is equal to half the Income Incentive Fee expense we would have incurred for the three months ended ~~September~~March 31, 2020.

The $0.1 million and $0.2 million increase in professional fees for the three and six months ended June 30, ~~2016,~~2020, respectively, compared to the corresponding periods in the prior year, were attributable to additional costs related to accounting and tax services.

Administration fee expense for the three and six months ended June 30, 2020 increased $0.1 million and $0.2 million, respectively, over the corresponding periods in the prior year, due to an increase in ~~pre-incentive fee net~~our allocable portion of OFS Services’s overhead, primarily related to the increase in the size of the investment ~~income compared~~portfolio and services related to fair value determination.

Other expenses for the six months ended June 30, 2020 increased $0.4 million, over the corresponding period in the prior year, ~~which was primarily attributable to an increase in the average investment balance as a result of net investment activity, including deployment of funds from the Offering.~~

~~Incentive fee expense decreased by $0.2 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. The decrease was~~ primarily due to write-off of deferred offering costs relating to our prior shelf registration and an excise tax accrual during the during the six months ended June 30, 2020, as well as a ~~$0.6 million decrease in Part One incentive fees, due to a share issuance adjustment related to the Offering, which raised the hurdle rate to a level that was not exceeded~~reversal of an excise tax accrual in the ~~second~~first quarter ~~because the Offering Proceeds were not fully deployed, offset by an increase in pre-incentive fee net investment income due to an increase in net investment activity, including additional deployment~~ of ~~funds from the Offering, and an~~

increase in the accrued Capital Gains Fee. During the nine months ended September 30, 2017, we did not incur a Capital Gains Fee, compared to a Capital Gains Fee of $(0.1) million recorded during nine months ended September 30, 2016, which represents the reversal of the accrued Capital Gains Fee at December 31, 2015.2019.

Net ~~Loss on Investments~~realized and unrealized gain (loss)

Net ~~gain (loss)~~loss by investment type for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, are~~2019, were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2020			2019			2020			2019
Senior secured debt	$	(1,669	)	$	(368	)	$	(5,906	)	$	859		$	(4,637	)	$	(3,254	)	$	(23,368	)	$	(3,383	)
Subordinated debt	(2,306		)	(193		)	(4,660		)	(272		)	(125		)	57			(7,590		)	212
Preferred equity	270			(497		)	2,949			(4,549		)	(1,016		)	137			(2,253		)	(1,592		)
Common equity and warrants	478			149			(681		)	2,558
Net loss on investments	(3,227		)	(909		)	$	(8,298	)	$	(1,404	)
Common equity, warrants and other													6,330			1,722			5,986			1,950
Structured Finance Notes													4,499			(169		)	(3,707		)	210
Total net gain (loss) on investments													5,051			(1,507		)	(30,932		)	(2,603		)
Loss on extinguishment of debt													—			—			(149		)	—
Total net gain (loss)													$	5,051		$	(1,507	)	$	(31,081	)	$	(2,603	)

Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020

Our portfolio experienced net gains of $5.1 million in the second quarter primarily as a result of performance improvements and expansion of the companies' valuation multiples at Pfanstiehl Holdings, Inc. and Southern Technical Institute, LLC, which lifted the value of our equity investments in those companies a combined $7.9 million, as well the return of liquidity to the broadly syndicated loan market, which contributed to the improvement in the fair values of $9.0 million of our Structured Finance Note investments and our loan investments acquired in the broadly syndicated market. One measure of liquidity in the broadly syndicated loan market is the average bid-ask spread on the Refinitiv Market Overall (North America) Loan Index which narrowed to 1.98 points at June 30, 2020, from 3.41 points at March 31, 2020, but has not yet returned to its long-term historic average of 1.0. These net gains were partially offset by $7.5 million in net losses, principally on our debt and equity investments in Contract Datascan Holdings, Inc., TalentSmart Holdings, LLC and 3rd Rock Gaming Holding, LLC, as well as other portfolio companies as a result of the impact of the COVID-19 pandemic.

Our portfolio experienced net unrealized losses of $20.9 million during the six months ended June 30, 2020, primarily due to the adverse economic effects of the COVID-19 pandemic on market conditions and the overall economy, and the related declines in quoted loan prices that have not yet fully recovered. Additionally, we incurred realized losses of $10.0 million, primarily due to the loss of $9.1 million on the restructuring of our debt investment in Constellis Holdings, LLC, which was fully recognized as an unrealized loss as of December 31, 2019.

Within our senior debt investments, we recognized net losses of $4.6 million during the three months ended June 30, 2020, primarily as a result of unrealized depreciation of $4.2 million and $0.9 million on our senior secured debt in 3rd Rock Gaming Holding, LLC and Talent Smart Holdings, LLC, respectively, offset by net unrealized appreciation of $1.5 million on the remaining senior secured debt investments. We also recognized net realized losses of $1.0 million due to the sale of approximately $25.2 million of loans at cost, for an average price of approximately 96% of par.

Within our subordinated debt investments, we recognized unrealized depreciation of $0.1 million during the three months ended June 30, 2020, primarily as a result of unrealized depreciation of $0.4 million on Contract Datascan Holdings, Inc., offset primarily by unrealized appreciation of $0.3 million on Southern Technical Institute, LLC.

Within our preferred equity investments, we recognized unrealized depreciation of $1.0 million for the three months ended June 30, 2020, primarily as a result of unrealized depreciation of $1.4 million on Contract Datascan Series A units, offset by net unrealized appreciation of $0.4 million on the remaining preferred equity investments.

Within our common equity, warrants and other investments, we recognized unrealized appreciation of $6.3 million for the three months ended June 30, 2020, primarily as a result of unrealized appreciation of $6.9 million on Pfanstiehl Holdings, Inc., offset by net unrealized depreciation of $0.6 million on our remaining common equity, warrant and other investments as a result of negative portfolio company-specific performance factors.

Within our Structured Finance Note investments, we recognized unrealized appreciation of $4.5 million for the three months ended June 30, 2020, primarily due to the return of liquidity to the broadly syndicated loan market, which underlie these investments.

Three and six months ended June 30, 2019

We recognized net losses of ~~$1.7~~$3.3 million on senior secured debt during the three months ended ~~September~~June 30, ~~2017,~~2019, primarily as a result of the unrealized depreciation of $2.5 million on Constellis Holdings, LLC. Additional net unrealized losses of $0.3 million for the six months ended June 30, 2019 were primarily a result of net negative impact of portfolio company-specific performance factors. ~~In addition,~~We also recognized a ~~previously recognized cumulative unrealized loss~~realized gain of ~~$5.0~~$0.2 million at June 30, 2017, on My Alarm Center, LLC was realized during the three months ended September 30, 2017 upon restructure of the senior secured debt investment into preferred and common equity interests.

~~We recognized net losses of $5.9 million on senior secured debt during the nine months ended September 30, 2017,~~ primarily as a result of the ~~negative impact~~partial sale of ~~portfolio company-specific performance factors, including a realized loss of $5.0 million on~~ our ~~senior secured debt~~ investment in ~~My Alarm Center, LLC recognized upon restructuring~~Cenexel Clinical Research Holdings, Inc. and the sale of our investment in the third quarter of 2017. We held this investment from the fourth quarter of 2015 and recognized unrealized appreciation of $0.2 million and $-0-during the years ended December 31, 2016 and 2015, respectively.Davis Vision, Inc.

We recognized net ~~losses~~gains of ~~$2.3~~$0.1 million on subordinated debt during the three months ended ~~September~~June 30, ~~2017,~~2019, primarily as a result of ~~the negative~~net positive impact of portfolio company-specific performance ~~factors, including an unrealized depreciation~~factors. Additional net gains of ~~$1.2~~$0.2 million ~~recognized on our subordinated debt investment in Community Intervention Services, Inc., which was placed on non-accrual during 2016.~~

~~We recognized net losses of $4.7 million on subordinated debt during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 were primarily as a result of ~~the net negative impact~~unrealized appreciation of ~~portfolio company-specific performance factors, including an unrealized depreciation of $3.4~~$0.5 million ~~recognized~~ on ~~our subordinated debt investment in Community Intervention Services, Inc., which was placed on non-accrual during 2016.~~Online Tech Stores, LLC.

We recognized net gains of ~~$0.3~~$0.1 million on preferred equity investments for the three months ended September 30, 2017, primarily as a result of the positive impact from changes to EBITDA multiples used in our valuations as a result of pending transactions, offset by the net negative impact of portfolio company-specific performance factors. Included in net gains of $0.3 million for the three months ended September 30, 2017, was a realized gain of $3.6 million we recognized upon exit of a preferred equity investment. We recognized cumulative unrealized appreciation of approximately $3.6 million on this investment through June 30, 2017, which resulted in a net gain of $-0- during the three months ended September 30, 2017. In addition, previously recognized cumulative unrealized depreciation of $0.3 million at June 30, 2017, on our preferred equity investments in My Alarm Center, LLC, was realized upon restructuring.

~~We recognized net gains of $2.9 million on preferred equity investments for the nine months ended September 30, 2017,~~2019, primarily as a result of the net positive impact ~~from changes to EBITDA multiples used in our valuations as a result of pending transactions, offset by the net negative impact~~ of portfolio company-specific performance factors. ~~Included in~~We recognized net ~~gains~~losses of ~~$2.9~~$1.6 million on preferred equity securities for the ~~nine~~six months ended ~~September~~June 30, ~~2017, was~~2019, primarily due to a realized ~~gain~~loss of ~~$3.6 million we recognized upon exit of a preferred equity investment. We recognized cumulative unrealized appreciation of approximately $1.1~~$0.9 million on ~~this investment through December 31, 2016, which resulted in a net gain of $2.5 million during the nine months ended September 30, 2017. In addition, previously recognized cumulative~~Maverick Healthcare Equity, LLC and unrealized depreciation of ~~$0.3~~$0.8 million ~~at June 30, 2017,~~ on our ~~preferred equity investments~~investment in ~~My Alarm Center,~~TRS Services, LLC ~~was realized upon restructuring.~~Class A units.

We recognized net gains of ~~$0.5~~$1.7 million on common equity and warrant investments for the three months ended ~~September~~June 30, ~~2017,~~2019, primarily as a result of ~~the positive impact~~unrealized appreciation of ~~portfolio company-specific performance factors.~~

~~We recognized~~$0.7 million and $0.6 million on our investments in Professional Pipe Holdings, LLC and MTE Holding Corporation respectively. Additional net ~~losses~~gains of ~~$0.7~~$2.0 million on common equity and warrant investments for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 were primarily as a result of unrealized appreciation of $4.3 million across several portfolio company investments from the ~~negative~~positive impact of portfolio company-specific performance ~~factors. Included~~factors,

offset by unrealized depreciation of $2.3 million in the net loss was a realized gain of $0.9 million from the exit of a common equity investment, for which we had recognized cumulative unrealized appreciation of $0.5 million through December 31, 2016, resulting in a net gain of $0.4 million during the nine months ended September 30, 2017.

~~Three and nine months ended September 30, 2016~~

~~We recognized net losses of $0.4 million on senior secured debt during the three months ended September 30, 2016, primarily~~Contract Datascan Holdings, Inc. as a result of the net impact of portfolio company-specific performance factors, offset by the impact of changes to certain market loan indices, and the impact of certain investments moving closer to their expected exit events.

We recognized net gains of $0.9 million on senior secured debt during the nine months ended September 30, 2016, primarily as a result of the impact of changes to certain market loan indices, and by the impact of portfolio company-specific performance factors, partially offset by the pay-off of certain senior secured debt investments.

~~We recognized net losses of $0.2 million on subordinated debt during the three months ended September 30, 2016, principally as a result of the net impact of~~negative portfolio company-specific performance factors.

We recognized ~~net losses~~unrealized depreciation of ~~$0.3~~$0.2 million on subordinated debt during the nine months ended September 30, 2016, principally due to the pay-off of certain subordinated debt investments, offset by the net impact of portfolio company-specific performance factors.

~~We recognized net losses of $0.5 million on preferred equity investments~~Structured Finance Notes for the three months ended ~~September~~June 30, ~~2016, primarily attributable to the net impact of portfolio company-specific performance factors, offset primarily by the impact of certain investments moving closer to their expected exit events.~~

We recognized net losses of $4.6 million on preferred equity investments for the nine months ended September 30, 2016, primarily attributable to the net impact of portfolio company-specific performance factors, offset primarily by the impact of certain investments moving closer to their expected exit events.

~~We recognized net gains of $0.1 million on common equity~~2019, and warrant investments for the three months ended September 30, 2016, primarily due to the net impact of certain investments moving closer to their expected exit events, offset by the negative net impact of portfolio company-specific performance factors.

We recognized net gains of $2.6 million on common equity and warrant investments for the nine months ended September 30, 2016, primarily due to the net impact of portfolio company-specific performance factors and the net impact of certain investments moving closer to their expected exit events. In addition, we realized gains of $2.6 million from the redemption of an equity investment. We held this investment from the first quarter of 2014 and recognized unrealized appreciation of ~~$2.1~~$0.2 million ~~and $0.5 during~~for the ~~years ended December 31, 2015 and 2014, respectively. There was no net gain during the nine~~six months ended ~~September~~June 30, ~~2016, on this transaction.~~2019, primarily as a result of net positive impact of mark-to-market adjustments since our investment purchases.

Liquidity and Capital Resources

~~We manage the liquidity~~At June 30, 2020, we held cash of $31.8 million, which includes cash of $22.7 million held by SBIC I LP, ("our wholly owned SBIC. Our use of cash held by SBIC ~~Liquidity") separately from our general corporate liquidity ("Corporate Liquidity"). At September 30, 2017, our Corporate Liquidity and our~~I LP may be restricted by SBA regulation, including limitations on the amount of cash SBIC Liquidity includes cash and cash equivalents of $1.6 million and $52.2 million, respectively. Additionally, we had $17.9 million in Corporate Liquidity available through our PWB Credit Facility at September 30, 2017. TransfersI LP can distribute to the Parent. Any such distributions to the Parent from SBIC ~~Liquidity to Corporate Liquidity~~I LP are ~~limited by~~generally restricted under SBA regulations to a statutory measure of undistributed accumulated earnings of SBIC I LP and require the prior approval of the SBA. During the six months ended June 30, 2020, the Parent received no cash distributions from SBIC I LP and management currently anticipates a portion of cash held by SBIC I LP at June 30, 2020, will be used in the third quarter of 2020 for the early repayment of SBA debentures. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. At June 30, 2020, OFSCC-FS held cash of $0.8 million and had unused commitments under the BNP Facility of $119.4 million, of which $-0- was available for distribution under the terms of the BNP Facility. During the six months ended June 30, 2020, the Parent received $1.1 million in cash distributions from OFSCC-FS.

At June 30, 2020, we had an unused commitment of $78.9 million under our ~~ability~~PWB Credit Facility, as well as an unused commitment of $119.4 million under our BNP Facility, both subject to ~~transfer liquidity from Corporate Liquidity to SBIC Liquidity is currently limited to capital contributions~~a borrowing base and other covenants. The Parent may make unsecured loans to SBIC I ~~LP. Additionally,~~LP, the ~~use~~aggregate which cannot exceed $35 million at any given time, and no interest may be charged on the unpaid principal balance. There were no intercompany loans between the Parent and SBIC I LP as of ~~SBIC Liquidity is limited by regulation; see "Item 1.–Business–Small Business Investment Company Regulations"~~June 30, 2020. On July 29, 2020, we executed an amendment to our BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100 million to $50 million. As of July 29, 2020, after giving effect to the reduction, our ~~Annual Report~~PWB Credit Facility had an unused commitment of $36.2 million, subject to a borrowing base and other covenants.

Based on ~~Form 10-K~~fair values and equity capital at June 30, 2020, we could access available lines of credit for ~~the year ended December 31, 2016. During the nine months ended September 30, 2017,~~$68 million and remain in compliance with our asset coverage requirements. As of July 29, 2020, we ~~transferred $3.1 million from from SBIC Liquidity~~had cash on hand of approximately $23.3 million. We continue to ~~Corporate Liquidity. At September 30, 2017, $2.5 million cash~~believe that we have sufficient levels of liquidity to support our existing portfolio companies and ~~cash equivalents were available to transfer from SBIC Liquidity to Corporate Liquidity.~~selectively deploy capital in new investment opportunities in this challenging environment.

Sources and Uses of Cash ~~and Cash Equivalents~~

We generate operating cash ~~through operations~~flows from net investment income and the net liquidation of portfolio investments, and use cash in our operations in the net purchase of portfolio investments. Significant variations may exist between net investment income and cash from net investment income, primarily due to the recognition of non-cash investment income, including certain Net Loan Fee amortization, PIK interest, and PIK dividends, which generally will not be fully realized in cash until we exit the investment. As discussed in "Item 1.–Financial Statements–Note 3,", we pay OFS Advisor a quarterly incentive fee with respect to our pre-incentive fee net investment income, which includes investment income that we have not received in cash. In addition, we must distribute substantially all of our taxable income, which approximates, but will not always equal, the cash we generate from net investment income to maintain our RIC tax treatment. Historically, our distributions have been in excess of taxable income,

and we have limited history of net taxable gains. We also obtain cash to fund investments or general corporate activities from the issuance of securities and our revolving line of credit. These principal sources and uses of cash and liquidity are presented below (in thousands):

Nine Months Ended September 30,
2017 2016
Cash from net investment income $ 8,198

$ 6,009
Cash received from realized gains 3,959

2,179
Net purchases and originations of portfolio investments excluding cash received from realized gains (24,639 )
(3,106 )
Net cash provided by (used in) operating activities (12,482 )
5,082
Proceeds from common stock offering, net of expenses 53,423

—
Cash distributions paid (12,231 )
(9,807 )
Net repayment of borrowings on PWB Credit Facility 7,600

—
Payment of debt issuance costs (101 ) —
Increase (decrease) in cash and cash equivalents $ 36,209
$ (4,725 )



	Six Months Ended June 30,
	2020			2019
Cash from net investment income	$	1,619		$	7,239
Net (purchases and originations)/repayments and sales of portfolio investments	44,253			(51,642		)
Net cash provided (used) in operating activities	45,872			(44,403		)

Distributions paid to stockholders⁽¹⁾	(6,728		)	(8,976		)
Net borrowings under lines of credit	(4,700		)	26,250
Repayment of SBA debentures	(16,110		)	—
Other financing	—			(1,639		)
Net cash provided (used) by financing activities	(27,538		)	15,635
Increase (decrease) in cash	$	18,334		$	(28,768	)

~~At September 30, 2017, we held cash and cash equivalents of $53.9 million, an increase of $36.2 million from December 31, 2016.~~


(1)	The determination of the tax attributes of our distributions is made annually as of the end of our fiscal year based upon our ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our distributions for a full year. See "Item 1–Financial Statements–Note 10."

Cash from net investment income

~~Net cash~~Cash from net investment income ~~increased $2.2~~decreased $5.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016. The net increase to net cash from investment income was~~2019, principally due to an decrease in collected net interest and fee income of $2.3 million and increase in interest ~~income, common dividends, prepayment~~expense paid of $4.1 million, offset by an decrease in fees paid to OFS Advisor and ~~structuring fees collected, and~~affiliates of $0.1 million, as well as a decrease in ~~cash~~other expenses paid for incentive fees, which primarily resulted from a share issuance adjustment related to the Offering , offset by a decrease in preferred equity cash dividends collected, an increase in cash paid for management fees, primarily due to a increase in net investment activity, including additional deployment of ~~funds from the Offering, and an increase in cash interest paid on our PWB Credit Facility.~~

~~Cash received from realized gains~~

Cash received on realized gains may differ from realized gains in the statement of operations due to delays in the receipt of sale proceeds related to escrow and earn-out provisions in the investment sales transactions.$0.7 million.

Net ~~purchases~~(purchases and ~~originations~~originations)/repayments and sales of portfolio investments ~~excluding cash received from realized gains~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, net purchases and originations of portfolio investments were primarily due to ~~$114.7~~$80.2 million of cash we used to purchase portfolio investments, offset by ~~$90.0~~$124.5 million of cash we received from amortized cost repayments and sales on our portfolio investments. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, net purchases were due to ~~$40.2~~$90.2 million of cash we used to purchase portfolio ~~investments. These cash purchases were~~investments, offset by ~~$37.1~~$38.7 million of cash we received from principal payments and sales on our portfolio investments. See "—Portfolio Composition and Investment Activity–Investment Activity."

~~Proceeds from common stock offering, net~~Net cash provided (used) in operating activities

Net cash provided (used) in operating activities increased $90.3 million for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, primarily due to the sale of ~~expenses~~

In April 2017, we issued 3,625,000 shares of our common stock in a follow-on public offering at an offering price of $14.57 per share, including shares purchased by the underwriters pursuant to their exercise of the over-allotment option. OFS Advisor paid all of the underwriting discounts and commissionsOFSCC-FS securities and an additional ~~supplemental payment~~$47.0 million increase in principal payments due to loan payoffs. Cash flow provided in operating activities was reduced by $1.0 million as a result of ~~$0.25 per share, representing the difference between the public offering price~~deferrals of ~~$14.57 per share~~interest payments and the ~~net offering proceeds~~rescheduling of ~~$14.82 per share, which also represented~~an amortization payment. Ninety-six percent of our ~~NAV per share at~~performing loans as of March 31, 2020 paid interest for the ~~time~~second quarter of ~~the Offering. All payments made by OFS Advisor in connection with the Offering are not subject to reimbursement by us. We received net proceeds from this Offering of $53.7 million~~2020.

Borrowings

SBA Debentures

SBIC I LP has a SBIC license that ~~allowed~~allows it to obtain leverage by issuing SBA-guaranteed debentures, subject to issuance of a capital commitment by the SBA and customary procedures. These debentures are non-recourse to us, and bear interest payable semi-annually, and each debenture has a maturity date that is ten years following issuance. The interest rate was fixed at the first pooling date after issuance, which was March and September of each year, at a market-driven ~~spreads~~spread over U.S. Treasury Notes with ten-year maturities. SBA regulations currently limit the amount that an SBIC may borrow up to a maximum of $150 million when it has at least $75 million in regulatory capital, receives a leverage commitment from the SBA and has been through an examination by the SBA subsequent to licensing. ~~For two or more SBICs under common control, the~~

~~maximum amount of outstanding SBA-provided leverage cannot exceed $350 million.~~ As of ~~December 31, 2016~~June 30, 2020 and ~~2015,~~2019, SBIC I LP had ~~fully drawn the~~outstanding debentures of $133.8 million and $149.9 million, ~~of leverage commitments from the SBA.~~

In January 2015, we filed an application with the SBA for a second SBIC license, which, if approved, would provide up to $75.0 million in additional SBA debentures for the funding of our future investments upon our contribution of at least $37.5 million in additional regulatory capital and subject to the issuance of a leverage commitment by the SBA and other customary procedures. There can be no assurance as to whether or when this application will be approved by the SBA.respectively.

On a stand-alone basis, SBIC I LP held ~~$248.2~~$236.9 million, and ~~$247.5~~$249.6 million in assets at ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, respectively, which accounted for approximately ~~70%~~50% and ~~81%~~46% of the Company’s total consolidated assets, respectively.

As part of our plans to focus on lower-yielding, first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile, SBIC I LP intends, over time, to repay its outstanding SBA debentures prior to the scheduled maturity dates of its debentures. Under a plan approved by the SBA, we will only make follow-on investments in current portfolio companies held by SBIC I LP. We believe that investing in more senior loans to larger borrowers is consistent with our view of the private loan market and will reduce our overall leverage on a consolidated basis. On March 1, 2020, SBIC I LP prepaid $16.1 million of SBA debentures that were contractually due September 1, 2023, March 1, 2024 and September 1, 2024. We recognized a loss on extinguishment of debt of $0.15 million related to the charge-off of deferred borrowing costs on the prepaid debentures.

SBIC I LP is periodically examined and audited by the SBA’s staff to determine its compliance with SBA regulations. If SBIC I LP fails to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit SBIC I LP’s use of debentures, declare outstanding debentures immediately due and payable, and/or limit SBIC I LP from making ~~new investments.~~distributions.

We have received exemptive relief from the SEC effective November 26, 2013, which permits us to exclude SBA guaranteed debentures from the definition of senior securities in the statutory 150% asset coverage ratio under the 1940 Act.

PWB Credit Facility

~~The~~We are party to a BLA with Pacific Western Bank, as lender, to provide us with a senior secured revolving credit facility, or the PWB Credit Facility, which is available for general corporate purposes including investment ~~funding and is scheduled to mature on October 31, 2018. In addition, we incur an unused commitment fee, payable monthly in arrears, equal to 0.50% per annum on any unused portion~~funding. The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in ~~excess of $15.0 million.~~

~~On August 9, 2017,~~ the ~~BLA was amended to increase~~borrowing base, which excludes subordinated loan investments (as defined in the ~~maximum amount available under~~BLA) and as otherwise specified in the PWB Credit Facility from $25 million to $35 million, and change the interest rate from a fixed per annum rate of 5.00% to a variable rate initially set at 5.00%, calculated as the prime plus a 0.75% margin, with a 5.00% floor. All other principal covenants and terms under the PWB Credit Facility remained the same. We incurred deferred debt issuance costs of $0.1 million in connection with the amendment.

~~As of September 30, 2017, we had $17.1 million outstanding at a variable interest rate of 5.00% per annum, and $17.9 million available for use under the PWB Credit Facility.~~

BLA. The PWB Credit Facility is guaranteed by ~~OFS Capital WM~~OFSCC-MB, Inc. and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS and ~~our~~the Company’s partnership interests in SBIC I LP and OFS SBIC I, ~~GP partnership interests.~~GP.

On June 26, 2020, we executed the Secured Revolver Amendment to our PWB Credit Facility. The Secured Revolver Amendment, among other things: (i) reduced the Minimum Tangible Net Asset Value (as defined in the Secured Revolver Amendment) covenant from $125.0 million to $100.0 million; (ii) reduced the Minimum Quarterly Net Investment Income (as defined in the Secured Revolver Amendment) covenant from $3.0 million to $2.0 million; (iii) increased the Debt/Worth Ratio (as defined in the Secured Revolver Amendment) covenant from 300% to 350%; and (iv) added a new covenant commencing on June 30, 2020, restricting net losses (defined as income after adjustments to the investment portfolio for gains and losses, realized and unrealized, also shown as net increase (decrease) in net assets resulting from operations) in more than two quarters during the prior four quarters then ended.

As of June 30, 2020, we had $21.1 million outstanding at a variable interest rate of 5.25% per annum, and an unused commitment of $78.9 million under the PWB Credit Facility. On July 29, 2020, we executed an amendment to our BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100 million to $50 million. As of July 29, 2020, after giving effect to the reduction, our PWB Credit Facility had an unused commitment of $36.2 million, subject to a borrowing base and other covenants.

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, a debt/worth ratio and a ~~statutory asset coverage test.~~net loss restriction. 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 ~~September~~June 30, ~~2017, the Company was~~2020, we were in compliance with the applicable covenants under the PWB Credit Facility.

Unsecured Notes

In April 2018, we publicly offered the Unsecured Notes Due April 2025 with aggregate principal of $50.0 million. The total net proceeds to the Company from the Unsecured Notes Due April 2025, after deducting underwriting discounts and offering costs of $1.8 million were $48.2 million. In October and November 2018, the Company publicly offered the Unsecured Notes Due October 2025 with aggregate principal of $48.5 million, which included a partial exercise of the underwriters' overallotment option. The total net proceeds to the Company from the Unsecured Notes Due October 2025, after deducting underwriting discounts and offering expenses of $1.7 million, were $46.8 million. In October and November 2019, we publicly offered the Unsecured Notes Due October 2026 with an aggregate principal of $54.3 million, which included a partial exercise of the underwriters' overallotment option. The total net proceeds to us from the Unsecured Notes Due October 2026, after deducting underwriting discounts and offering costs of $1.9 million were $52.4 million. The issuance of the Unsecured Notes totaled $152.9 million in aggregate principal debt, with net proceeds of $147.4 million to us.

The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all of our current and future unsecured indebtedness. Because the Unsecured Notes are not secured by any of our assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility.

In order to, among other things, reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase the Unsecured Notes for cash in open market purchases and/or privately negotiated transactions. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity, prospects for future access to capital, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.

As of June 30, 2020, the Unsecured Notes had the following terms and balances (amounts in thousands):



Unsecured Notes	Principal		Stated Interest Rate ⁽¹⁾		Effective Interest Rate ⁽²⁾		Maturity ⁽³⁾	Interest Expense ⁽⁴⁾
Unsecured Notes Due April 2025	$	50,000	6.375	%	6.88	%	4/30/2025	$	1,721
Unsecured Notes Due October 2025	48,525		6.50	%	7.01	%	10/31/2025	1,700
Unsecured Notes Due October 2026	54,325		5.95	%	6.49	%	10/31/2026	1,784
Total	$	152,850						$	5,205


(1)	The weighted-average fixed cash interest rate on the Unsecured Notes as of June 30, 2020 was 6.26%.


(2)	The effective interest rate on the Unsecured Notes includes deferred debt issuance cost amortization.

(3)

The Unsecured Notes Due April 2025 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after April 30, 2020. The Unsecured Notes Due October 2025 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after October 31, 2020. The Unsecured Notes Due October 2026 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after October 31, 2021.


(4)	Interest expense includes deferred debt issuance costs amortization.

BNP Facility

On June 20, 2019, OFSCC-FS entered into the BNP Facility, which provides for borrowings in an aggregate principal amount up to $150.0 million, of which $30.7 million was drawn as of June 30, 2020. Borrowings under the BNP Facility will bear interest based on LIBOR for the relevant interest period, plus an applicable spread. The effective interest rate on the BNP Facility was 5.55% at June 30, 2020. The BNP Facility will mature on the earlier of June 20, 2024 or upon certain other events defined in the credit agreement which result in accelerated maturity. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS. The unused commitment under the BNP Facility was $119.4 million as of June 30, 2020. As of June 30, 2020, we were in compliance with the applicable covenants.

On a stand-alone basis, OFSCC-FS held approximately $58.1 million and $92.5 million in assets at June 30, 2020 and December 31, 2019, respectively, which accounted for approximately 12.2% and 17% of our total consolidated assets, respectively.

Other Liquidity Matters

We expect to fund the growth of our investment portfolio utilizing our current borrowings, ~~under SBA debentures,~~ follow-on equity offerings, 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 our portfolio 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.

In addition, as a BDC, we generally will be required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities (including SBIC I LP’s SBA-guaranteed debt), to total senior securities, which include all of our borrowings (excluding SBA-guaranteed debt) and any outstanding preferred stock (of which we had none at ~~September~~June 30, ~~2017)~~2020), of at least ~~200%~~150%. We received an exemptive order from the SEC to permit us to exclude the debt of SBIC I LP guaranteed by the SBA from the definition of Senior Securities in the statutory ~~200%~~ asset coverage ratio under the 1940 Act. This requirement limits the amount that we may borrow. To fund growth in our investment portfolio in the future, we anticipate the need to raise additional capital from various sources, including the equity markets and the securitization or other debt-related markets, which may or may not be available on favorable terms, if at all.

On May 3, 2018, our Board, including a required majority (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. As a result, our minimum required asset coverage ratio decreased from 200% to 150%, effective May 3, 2019.

On May 22, 2018, the Board authorized the Stock Repurchase Program under which we could acquire up to $10.0 million of our outstanding common stock through the two-year period ending May 22, 2020. On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period. Under the extended Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. We expect the Stock Repurchase Program to be in place through May 22, 2022, or until the

approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We retire all shares of common stock that we purchased in connection with the Stock Repurchase Program. No shares of common stock were repurchased during the three months ended June 30, 2020.

As of June 30, 2020, the aggregate amount outstanding of the senior securities issued by us was $204.6 million, for which our asset coverage was 166%. The Small Business Administration Debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective November 26, 2013. 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.

Contractual Obligations and Off-Balance Sheet Arrangements

The following table shows our contractual obligations as of ~~September~~June 30, ~~2017~~2020 (in thousands):


	Payments due by period										Payments due by period
	Total		Less than year		1-3 years (2)		3-5 years		After 5 years (2)
Contractual Obligations (1)

Contractual Obligation ⁽¹⁾											Total		Less than year		1-3 years (2)		3-5 years (2)		After 5 years (2)
PWB Credit Facility	$	17,100	$	—	$	17,100	$	—	$	—	$	21,100	$	21,100	$	—	$	—	$	—
Unsecured Notes											152,850		—		—		50,000		102,850
SBA Debentures	149,880		—		—		—		149,880		133,770		—		14,000		97,185		22,585
BNP Facility											30,650		—		—		30,650		—
Total	$	166,980	$	—	$	17,100	$	—	$	149,880	$	338,370	$	21,100	$	14,000	$	177,835	$	125,435


(1)	Excludes commitments to extend credit to our portfolio companies.

(2)

The PWB Credit Facility is scheduled to mature on ~~October 31, 2018.~~February 28, 2021. The SBA debentures are scheduled to mature between September 2022 and 2025. SBIC I LP intends, over time, to repay outstanding SBA debentures prior to the scheduled maturity dates of its debentures. The Unsecured Notes are scheduled to mature between April 2025 and October 2026. The BNP Facility is scheduled to mature on June 20, 2024.

We continue to believe our long-dated financing, with approximately 90% of our total debt contractually maturing in 2024 and beyond, affords us operational flexibility.

We have entered into contracts with third parties under which we have material future commitments—the Investment Advisory Agreement, pursuant to which OFS Advisor has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which OFS Services has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations.

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 in the balance sheet. We had ~~$4.5~~$4.3 million ~~of total~~in unfunded commitments to ~~three~~two portfolio companies at ~~September~~June 30, ~~2017.~~2020. 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 or utilizing our available borrowings under the PWB Credit Facility.

Distributions

We are taxed as a RIC under the Code. In order to maintain our status as a RIC, we are required to distribute annually to our stockholders at least 90% of our ICTI, as defined by the Code. Additionally, to avoid a 4% excise tax on undistributed earnings we are required to distribute each calendar year the sum of (i) 98% of our ordinary income for such calendar year (ii) 98.2% of our net capital gains for the one-year period ending October 31 of that calendar year, and (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax. Maintenance of our RIC status also requires adherence to certain source of income and asset diversification requirements. 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. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of our election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow, received as consideration from the sale of

investments are collected in cash. 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 of directors maintains a variable dividend policy with the objective of distributing four quarterly distributions in an amount not less than 90-100% of our taxable quarterly income or potential annual income for a particular year. In addition, at the end of the year, we may also pay an additional special dividend, or fifth dividend, such that we may distribute approximately all of our annual taxable income in the year it was earned, while maintaining the option to spill over our excess taxable income to a following year. Each year, a statement on Form 1099-DIV identifying the source of the distribution is mailed to the Company’s stockholders. 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. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of our election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow, received as consideration from the sale of investments are collected in cash. 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. If

Recent Developments

On July 28, 2020, our Board declared a distribution of $0.17 per share for the ~~tax characteristics~~third quarter of ~~the distributions paid during fiscal 2017 were determined~~2020, payable on September 30, 2020 to stockholders of record as of September 23, 2020.

We evaluated events subsequent to June 30, ~~2017,~~2020 through July 30, 2020. On March 11, 2020, the World Health Organization declared the novel coronavirus as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to the COVID-19 pandemic. The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions have created, and may continue to create, disruption in global supply chains and adversely impact a number of industries. The outbreak could have a continued adverse impact on economic and market conditions on a global scale. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the ongoing COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risks with respect to the underlying value of our portfolio companies, our business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Further, the operational and financial performance of the portfolio companies in which we ~~estimate~~make investments have been, and may continue to be, significantly impacted by the COVID-19 pandemic, which in turn has, and may continue to have, an impact on the valuation of our investments.

Accordingly, we cannot predict the extent to which our business, financial condition, results of operations and cash flows will be affected at this time. The potential impact to our results will depend to a large extent on future developments and new information that ~~approximately $0.27 per share would represent a return~~may emerge regarding the duration and severity of ~~capital.~~the COVID-19 pandemic and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Uncertainty with respect to the economic effects of the COVID-19 outbreak has introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below. We are subject to financial market risks, including changes in interest rates. For additional information concerning the COVID-19 outbreak and its potential impact on our business and our operating results, see Part II - Other information, Item 1A. Risk Factors. As of ~~September~~June 30, ~~2017, 73%~~2020, 87% of our debt investments bore interest at floating interest rates, at fair value. The interest rates on our debt investments bearing floating interest rates are usually based on a floating LIBOR, and the debt investments

typically contain interest rate re-set provisions that adjust applicable interest rates to current market rates on a periodic basis. A significant portion of our loans that are subject to the floating LIBOR rates are also subject to a minimum base rate, or floor, that we charge on our loans if the current market rates are below the respective floors. As of ~~September~~June 30, ~~2017, 89%~~2020, a majority of our floating rate loans were based on a floating LIBOR, ~~(not~~ subject to ~~a floor).~~its floor.

Our outstanding SBA debentures and Unsecured Notes bear interest at a fixed ~~rate.~~rates. Our PWB Credit Facility ~~has a~~and BNP Facility have floating interest rate ~~provision~~provisions based on the Prime Rate and LIBOR, respectively, with ~~a 5.0%~~effective interest ~~rate floor. We expect that other credit facilities into which we may enter in the future may have floating interest rate provisions.~~rates of 5.64% and 5.55%, respectively, as of June 30, 2020.

Assuming that the interim and unaudited consolidated balance sheet as of ~~September~~June 30, ~~2017~~2020 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following tables show the annualized impact of hypothetical ~~base rate~~ changes in interest ~~rates~~rate indices (in thousands).


Basis point increase	Interest income		Interest expense		Net increase (decrease)		Interest income		Interest expense			Net increase
25							$	359	$	(137	)	$	222
50	$	959	$	87	$	872	1,100		(292		)	808
75							2,470		(447		)	2,023
100	1,902		173		1,729		4,125		(656		)	3,469
150	2,885		260		2,625
200	3,869		347		3,522
250	4,852		433		4,419
125							5,832		(919		)	4,913


Basis point decrease	Interest income			Interest expense		Net increase (decrease)			Interest income			Interest expense		Net decrease
25									$	(353	)	$	111	$	(242	)
50	$	(496	)	$	—	$	(496	)	(353		)	111		(242		)
75									(353		)	111		(242		)
100	(565		)	—		(565		)	(353		)	111		(242		)
150	(590		)	—		(590		)
200	(590		)	—		(590		)
250	(590		)	—		(590		)
125									(353		)	111		(242		)

~~(1) Our PWB Credit Facility contains a 5.0% interest rate floor, and therefore a decline in the Prime Rate would not impact interest expense.~~

I~~tem~~Item 4. Controls and Procedures

Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2017.~~2020. The term “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the foregoing evaluation of our disclosure controls and

procedures as of ~~September~~June 30, ~~2017,~~2020, our Chief Executive Officer and ~~our~~ Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

As previously disclosed in Item 9A of our Form 10-K for the year ended December 31, 2016, management concluded that there was a material weakness in internal control over financial reporting related the design and effectiveness of controls over certain key assumptions and underlying data used in our investment valuations. In response to the material weakness identified, management developed and implemented a remediation plan to address the underlying causes of the material weakness.

The remediation plan included (1) a change in the primary method used to value certain investments, primarily equity investments, from the discounted cash flow method to the market approach as of December 31, 2016, and (2) the development and formal documentation of new controls and procedures to objectively validate and document key inputs and assumptions used in developing our fair value estimates.

During the nine months ended September 30, 2017, we implemented the new internal control procedures described above to address the previously identified material weakness as of December 31, 2016. After completing our testing of the design and operating effectiveness of our control enhancements, we concluded that we have remediated the previously identified material weakness.

~~Other than as described above, no~~No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended ~~September~~June 30, ~~2017~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We, OFS Advisor and OFS Services, are not currently subject to any material pending legal proceedings threatened against us as of ~~September~~June 30, ~~2017.~~2020. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition, results of operations or cash flows.

Item 1A. Risk Factors

Investing in our common stock may be speculative and involves a high degree of risk. In addition to the other information contained in this Quarterly Report on Form 10-Q, including our financial statements, and the related notes, schedules and exhibits, you should carefully consider the risk factors described in "Part I, ~~“Item~~Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019, and in "Part II, Item 1A. Risk Factors" in our Quarterly Report in Form 10-Q for the quarter ended March 31, 2020 (the "First Quarter 10-Q"), which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K and First Quarter 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

~~There~~Other than the risks described below, there have been no material changes from the risk factors previously disclosed in ~~Part I, “Item 1A. Risk Factors”~~ in our Annual Report on Form 10-K for the year ended December 31, ~~2016, which~~2019 and First Quarter 10-Q. However, the risks below and disclosed in our Annual Report on Form 10-K and First Quarter 10-Q, may be, and will continue to be, heightened or exacerbated by the COVID-19 pandemic and any worsening of the economic environment. The risks previously disclosed in our Annual Report on Form 10-K and First Quarter 10-Q should be read together with the other ~~risk factors and~~ information disclosed elsewhere in this Quarterly Report on Form 10-Q and our other reports filed with the SEC.

We have been, and will continue to be, adversely impacted by the outbreak of COVID-19 and a potential worsening of the pandemic.

The COVID-19 pandemic has caused a sharp global slowdown of economic activity resulting in a recession, a steep increase in unemployment in the U.S., and significant volatility and disruption of financial markets. Health advisors warn that a “second wave” of the pandemic is possible if reopening is pursued too soon or in the wrong manner, which may negatively affect or exacerbate the global economy, the United States economy and the global financial markets. The pandemic had a significant adverse impact on us during the first quarter of 2020, continues to have an adverse impact us during the second quarter of 2020 and is expected to continue to adversely impact our company beyond second-quarter 2020. Because the pandemic is unprecedented in recent history, and its severity, duration and future economic consequences are difficult to predict, we cannot predict its future impact on us with any certainty.

Uncertainty relating to the LIBOR calculation process and transition timing may adversely affect the value of any portfolio of LIBOR-indexed, floating-rate debt securities.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of any portfolio of LIBOR-indexed, floating-rate debt securities. Concerns have been publicized that some of the member banks surveyed by the British Bankers' Association (“BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing. Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our potential portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our potential portfolio of LIBOR indexed, floating-rate debt securities.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next several years. As a result of this transition, interest rates on financial instruments tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may

be adversely affected. Further, any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the value of our financial instruments tied to LIBOR rates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate (“SOFR”). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain.

Additionally, on July 12, 2019 the Staff of the SEC’s Division of Corporate Finance, Division of Investment Management, Division of Trading and Markets, and Office of the Chief Accountant issued a statement about the potentially significant effects on financial markets and market participants when LIBOR is discontinued in 2021 and no longer available as a reference benchmark rate. The Staff encouraged all market participants to identify contracts that reference LIBOR and begin transitions to alternative rates. On December 30, 2019, the SEC’s Chairman, Division of Corporate Finance and Office of the Chief Accountant issued a statement to encourage audit committees in particular to understand management’s plans to identify and address the risks associated with the elimination of LIBOR, and, specifically, the impact on accounting and financial reporting and any related issues associated with financial products and contracts that reference LIBOR, as the risks associated with the discontinuation of LIBOR and transition to an alternative reference rate will be exacerbated if the work is not completed in a timely manner.

In addition, on March 25, 2020, the FCA stated that although the central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed, the outbreak of COVID-19 has impacted the timing of many firms’ transition planning, and the FCA will continue to assess the impact of the COVID-19 pandemic on transition timelines and update the marketplace as soon as possible. It is unclear if after 2021 LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us, or on our overall financial condition or results of operations. If LIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three month period ended ~~September~~June 30, ~~2017,~~2020, we issued ~~3,439~~7,165 shares of common stock to stockholders in connection with our DRIP. These issuances were not subject to the registration requirements of the Securities ~~Act of 1933, as amended.~~Act. The aggregate value of the shares of our common stock issued under our distribution reinvestment plan was approximately ~~$49,000.~~$32,385.

Issuer Purchases of Equity Securities

On May 22, 2018, the Board authorized the Company to initiate the Stock Repurchase Program under which the Company could acquire up to $10.0 million of its outstanding common stock through the two-year period ending May 22, 2020.

On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period. Under the extended Stock Repurchase Program, the Company is authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. The Company expects the Stock Repurchase Program to be in place through May 22, 2022, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate the Company to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. The Company retires all shares of common stock that it purchases in connection with the Stock Repurchase Program.

During the three months ended June 30, 2020, we repurchased -0- shares of common stock on the open market for under the Stock Repurchase Program. The following table provides information regarding the Stock Repurchase Program (amount in thousands except shares):



Period	Total Number of Shares Purchased ⁽¹⁾	Cost of Shares Purchased		Average Price Paid Per Share		Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Stock Repurchase Program
May 22, 2018 through June 30, 2018	—	$	—	$	—	$	10,000
July 1, 2018 through September 30, 2018	—	$	—	$	—	$	10,000
October 1, 2018 through December 31, 2018	300	$	3	$	10.29	$	9,997
January 1, 2019 through March 31, 2019	—	$	—	$	—	$	9,997
April 1, 2019 through June 30, 2019	—	$	—	$	—	$	9,997
July 1, 2019 through September 30, 2019	—	$	—	$	—	$	9,997
October 1, 2019 through December 31, 2019	—	$	—	$	—	$	9,997
January 1, 2020 through March 31, 2020	—	$	—	$	—	$	9,997
April 1, 2020 through June 30, 2020	—	$	—	$	—	$	9,997


(1)	Excludes shares purchased on the open market and reissued in order to satisfy the DRIP obligation.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Not applicable.~~Amendment to Senior Secured Revolving Credit Facility

On July 29, 2020, the Company executed an amendment (the “Amendment”) to its BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100,000,000 to $50,000,000. The Company expects to benefit from a reduction in the unused commitment fee of 0.50% on any unused portion of the total commitment over $15,000,000. As of July 29, 2020, the Company had $13.8 million outstanding under the PWB Credit Facility. There were no reduction penalties incurred by the Company in connection with the Amendment.

The foregoing description of the Amendment is not complete and is qualified in its entirety by the text of such Amendment, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated by reference herein.

Item 6. Exhibits

Listed below are the exhibits that are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):



		Incorporated by Reference
Exhibit Number	Description	Form and SEC File No.	Filing Date with SEC	Filed with this 10-Q

10.1	~~Change in terms~~Amendment One to the Business Loan Agreement between OFS Capital Corporation and Pacific Western Bank dated ~~August 9, 2017~~June 26, 2020	Form 8-K ~~814-00813~~	~~8/10/2017~~July 2, 2020

10.2	~~Commercial Guaranty~~Amendment Two to the Business Loan Agreement ~~among~~between OFS Capital Corporation ~~OFS Capital WM, LLC,~~ and Pacific Western Bank dated ~~August 9, 2017~~	~~8-K~~ ~~814-00813~~	~~8/10/2017~~

~~11.1~~	~~Computation of Per Share Earnings~~			+

~~14.1~~	~~OFS Capital Corporation Code of Ethics~~			*

~~14.2~~	~~OFS Capital Corporation Code of Business Conduct~~July 29, 2020			*

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended			*

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended			*

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			†

32.2	Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			†



+	~~Included in the consolidated statements of operations contained in this report~~
*	Filed herewith
†	Furnished herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Dated: ~~November 3, 2017~~July 31, 2020	OFS CAPITAL CORPORATION

	By:	/s/ Bilal Rashid
	Name:	Bilal Rashid
	Title:	Chief Executive Officer

	By:	/s/ Jeffrey A. Cerny
	Name:	Jeffrey A. Cerny
	Title:	Chief Financial Officer

~~EXHIBIT INDEX~~



		~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~	~~Description~~	~~Form and SEC File No.~~	~~Filing Date with SEC~~	~~Filed with this 10-Q~~
~~10.1~~	~~Change in terms to the Business Loan Agreement between OFS Capital Corporation and Pacific Western Bank dated August 9, 2017~~	~~8-K~~ ~~814-00813~~	~~8/10/2017~~

~~10.2~~	~~Commercial Guaranty Agreement among OFS Capital Corporation, OFS Capital WM, LLC, and Pacific Western Bank dated August 9, 2017~~	~~8-K~~ ~~814-00813~~	~~8/10/2017~~

~~11.1~~	~~Computation of Per Share Earnings~~			+

~~14.1~~	~~OFS Capital Corporation Code of Ethics~~			*

~~14.2~~	~~OFS Capital Corporation Code of Business Conduct~~			*

~~31.1~~	~~Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended~~			*

~~31.2~~	~~Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended~~			*

~~32.1~~	~~Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~			†

~~32.2~~	~~Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~			†



+	~~Included in the consolidated statements of operations contained in this report~~
*	~~Filed herewith~~
†	~~Furnished herewith~~



Portfolio Company(1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Maturity	Principal Amount		Amortized Cost			Fair Value (3)			Percent of Net Assets
Non-control/Non-affiliate Investments
Armor Holdings II LLC	Other Professional, Scientific, and Technical Services
Senior Secured Loan		10.34%	(L +9.00%)	12/26/2020	$	3,500	$	3,474		$	3,570		1.8	%

Avison Young Canada, Inc.	Offices of Real Estate Agents and Brokers
Senior Secured Loan (5) (6)		9.50%	N/A	12/15/2021	4,000		3,935			4,038			2.0

BCC Software, LLC (5)	Custom Computer Programming Services
Senior Secured Loan		9.24%	(L +8.00%)	6/20/2019	6,799		6,743			6,821			3.5
Senior Secured Loan (Revolver) (10) (4)		N/A	(L +8.00%)	6/20/2019	—		(6		)	—			—
					6,799		6,737			6,821			3.5
BJ's Wholesale Club, Inc.	Warehouse Clubs and Supercenters
Senior Secured Loan		8.73%	(L +7.50%)	2/3/2025	7,300		7,268			6,999			3.7

Carolina Lubes, Inc. (5) (9)	Automotive Oil Change and Lubrication Shops
Senior Secured Loan		9.26%	(L +7.25%)	8/23/2022	21,411		21,226			21,226			11.3
Senior Secured Loan (Revolver)		9.26%	(L +7.25%)	8/23/2022	—		(14		)	(14		)	—
Preferred Equity (973 units) 14% PIK							2,937			2,937			1.6
					21,411		24,149			24,149			12.9
Community Intervention Services, Inc. (5)	Outpatient Mental Health and Substance Abuse Centers
Subordinated Loan (7) (11)		7.0% cash / 6.0% PIK	N/A	1/16/2021	8,399		7,639			2,038			1.1
Common equity (Success Fee) (10)							—			—			—
					8,399		7,639			2,038			1.1
Confie Seguros Holdings II Co.	Insurance Agencies and Brokerages
Senior Secured Loan		10.99%	(L +9.75%)	5/8/2019	7,851		7,808			7,653			4.1

Constellis Holdings, LLC	Other Justice, Public Order, and Safety Activities
Senior Secured Loan		6.33%	(L +5.00%)	4/21/2024	4,963		4,916			4,981			2.6
Senior Secured Loan		10.33%	(L +9.00%)	4/21/2025	9,950		9,809			9,915			5.3
					14,913		14,725			14,896			7.9



Balance Sheet:	September 30, 2017		December 31, 2016
Current assets	$	6,861	$	5,535
Noncurrent assets	25,245		24,681
Total Assets	$	32,106	$	30,216
Current liabilities	$	2,757	$	2,401
Noncurrent liabilities	17,162		16,889
Total liabilities	19,919		19,290
Non-controlling interest	5,441		4,878
Total equity	6,746		6,048



	Three Months Ended September 30,				Nine Months Ended September 30,
Summary of Operations:	2017		2016		2017	2016
Net Sales	$	7,709	$	7,040	23,571	$	21,058
Gross Profit	2,310		2,358		7,519	6,951
Net income	433		599		1,885	1,935
Net income attributable to MTE Holding Corp.	240		332		1,043	1,071



				SBA debentures outstanding
Pooling Date	Maturity Date	Fixed Interest Rate		September 30, 2017			December 31, 2016
September 19, 2012	September 1, 2022	3.049	%	$	14,000		$	14,000
September 25, 2013	September 1, 2023	4.448		7,000			7,000
March 26, 2014	March 1, 2024	3.995		5,000			5,000
September 24, 2014	September 1, 2024	3.819		4,110			4,110
September 24, 2014	September 1, 2024	3.370		31,265			31,265
March 25, 2015	March 1, 2025	2.872		65,920			65,920
September 23, 2015	September 1, 2025	3.184		22,585			22,585
SBA debentures outstanding				149,880			149,880
Unamortized debt issuance costs				(2,752		)	(3,037		)
SBA debentures outstanding, net of unamortized deferred debt issuance costs				$	147,128		$	146,843



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Per share data:
Net asset value per share at beginning of period	$	14.40		$	14.76		$	14.82		$	14.76
Distributions⁽⁴⁾	(0.34		)	(0.34		)	(1.02		)	(1.02		)
Net investment income	0.33			0.34			1.00			1.07
Net realized gain on non-control/non-affiliate investments	(0.39		)	0.01			(0.42		)	0.27
Net realized gain on affiliate investments	0.27			—			0.37			—
Net change in unrealized appreciation/depreciation on non-control/non-affiliate investments	0.09			(0.06		)	(0.61		)	(0.38		)
Net change in unrealized appreciation/depreciation on affiliate investments	(0.22		)	(0.04		)	(0.19		)	0.01
Net change in unrealized depreciation on control investment	—			—			0.15			(0.04		)
Issuance of common stock ⁽⁷⁾	—			—			(0.03		)	—
Other ⁽⁸⁾	0.01			—			0.08			—
Net asset value per share at end of period	$	14.15		$	14.67		$	14.15		$	14.67

Per share market value, end of period	$	13.17		$	13.03		$	13.17		$	13.03
Total return based on market value ⁽¹⁾	(5.6		)%	4.0		%	2.8		%	22.4		%
Total return based on net asset value ⁽²⁾	0.6		%	1.4		%	2.1		%	6.2		%
Shares outstanding at end of period	13,334,851			9,697,210			13,334,851			9,697,210
Weighted average shares outstanding	13,331,690			9,694,353			12,089,895			9,692,634
Ratio/Supplemental Data (in thousands except ratios)
Average net asset value ⁽³⁾	$	190,326		$	142,645		$	167,454		$	142,578
Net asset value at end of period	$	188,656		$	142,210		$	188,656		$	142,210
Net investment income	$	4,402		$	3,297		$	12,058		$	10,409
Ratio of total expenses to average net assets ⁽⁵⁾	9.9		%	11.4		%	10.4		%	11.7		%
Ratio of net investment income to net assets at end of period ⁽⁵⁾	9.3		%	9.3		%	8.5		%	9.8		%
Portfolio turnover ⁽⁶⁾	13.5		%	2.2		%	33.2		%	15.5		%

~~Standard~~

~~Description~~

~~Period of Adoption~~

~~Effect of Adoption on the financial statements~~

~~Standards that were adopted~~

ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update)

Incorporates into the FASB ASC Topic 250, SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on the financial statements of recently issued accounting standards when adopted, and specifically for ASU 2014-09, ASU 2016-02, and ASU 2016-03. If a registrant does not know or cannot reasonably estimate the impact of adoption of the above standards, the SEC staff expects the registrant to make a statement to that effect. Consistent with SAB Topic 11.M, the SEC staff also expects the registrant to provide qualitative disclosures to help users assess the significance the adoption will have on the financial statements. In addition, conforms the SEC Staff comments included in ASU 2014-01, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for investments in Qualified Affordable Housing Projects. The primary effect of the amendment was to change the reference "effective yield method" to "proportional amortization method"

~~First Quarter of 2017~~

~~No material impact to the Company's consolidated financial statements~~