UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
 ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20172020

or
 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______

COMMISSION FILE NUMBER:Commission file number 814-00813

OFS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware46-1339639
(State or other jurisdictionOther Jurisdiction of(I.R.S. Employer Identification No.
incorporationIncorporation or organization)OrganizationIdentification No.)
10 S. Wacker Drive, Suite 2500, Chicago, Illinois60606
Address of Principal Executive OfficesZip 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 2500Securities 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareOFSThe Nasdaq Global Select Market
6.375% Notes due 2025OFSSLThe Nasdaq Global Select Market
6.50% Notes due 2025OFSSZThe Nasdaq Global Select Market
5.95% Notes due 2026OFSSIThe 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 filerý
    
Non-accelerated filer
¨  (do not check if a smaller reporting company)
Smaller reporting company¨
    
Emerging growth companyý¨  

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, 2017July 29, 2020 was 13,334,851.13,399,694.

OFS CAPITAL CORPORATION

TABLE OF CONTENTS
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
  
Item 1.
Item 1A.
Item 2
Item 3.
Item 4.
Item 5.
Item 6.

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:
TermExplanation or Definition
1940 ActInvestment Company Act of 1940, as amended
Administration AgreementAdministration agreementAgreement between the Company and OFS Services dated November 7, 2012
Annual Distribution RequirementAffiliated AccountDistributions to our stockholders, for each taxable year,Another account managed by OFS Advisor or an affiliate of at least 90% of our ICTIOFS Advisor
ASCAccounting Standards Codification, as issued by the FASB
ASC Topic 820ASC Topic 820, "Fair Value Measurements and Disclosures"
ASUAccounting Standards Updates, as issued by the FASB
BDCBusiness Development Company under the 1940 Act
BLABusiness 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

BoardThe Company's board of directors
CLOCollateralized loan obligation
CodeInternal Revenue Code of 1986, as amended
CompanyOFS Capital Corporation and its consolidated subsidiaries
DRIPDistribution reinvestment plan
EBITDAEarnings before interest, taxes, depreciation, and amortization
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
GAAPAccounting principles generally accepted in the United States
HPCIHancock 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
ICTIInvestment company taxable income, which is generally net ordinary income plus net short-term capital gains in excess of net long-term capital losses
Indicative PricesMarket quotations, prices from pricing services or bids from brokers or dealers
Investment Advisory AgreementInvestment advisory agreementAdvisory and Management Agreement between the Company and OFS Advisor dated November 7, 2012
LIBORLondon Interbank Offered Rate
NBIPNon-binding indicative price
Net Loan FeesThe cumulative amount of fees, such as discounts, premiums and amendment fees that are deferred and recognized as income over the life of the loan.
OCCIOFS Credit Company, Inc., a Delaware corporation and a non-diversified, closed-end management investment company for whom OFS Advisor serves as investment adviser
OFS AdvisorOFS Capital Management, LLC, a wholly-ownedwholly owned subsidiary of OFSAM and registered investment advisor under the Investment Advisers Act of 1940, Act
OFS Capital WMOFS Capital WM, LLC, a wholly-owned investment company subsidiaryas amended
OFS ServicesOFS Capital Services, LLC, a wholly-ownedwholly owned subsidiary of OFSAM and affiliate of OFS Advisor
OFSAMOrchard First Source Asset Management, LLC, a full-service provider of capital and leveraged finance solutions to U.S. corporations
OFSCC-FSOFSCC-FS, LLC, an establishedindirect wholly owned subsidiary of the Company
OFSCC-FS AssetsAssets held by the Company through OFSCC-FS
OFSCC-MBOFSCC-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.

TermExplanation or Definition
OIDOriginal issue discount
ParentOFS Capital Corporation
PIKPayment-in-kind, non-cash interest or dividends payable as an addition to the loan or equity security producing the income.
Portfolio Company InvestmentA debt or equity investment platform focused on meeting the capital needs of middle-market companiesin a portfolio company. Portfolio Company Investments exclude Structured Finance Notes
Prime RateUnited States Prime interest rate
PWB Credit FacilitySenior secured revolving credit facility between the Company and Pacific Western Bank, as lender.lender
Reunderwriting AnalysisA discount rate method based upon a hypothetical recapitalization of the entity given its current operating performance and current market condition
RICRegulated investment company under the Code
SBAU.S. Small Business Administration
SBCAASmall Business Credit Availability Act
SBICA fund licensed under the SBA small business investment company program
SBIC AcquisitionThe Company's acquisition of the remaining ownership interests in SBIC I LP and OFS SBIC I GP, LLC on December 4, 2013
SBIC ActSmall Business Investment Act of 1958, as amended
SBIC I LPOFS SBIC I, LP, a wholly-ownedwholly owned SBIC subsidiary of the Company
SECU.S. Securities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
Secured Revolver AmendmentThe amended Business Loan Agreement with Pacific Western Bank, as lender, dated June 26, 2020
Stock Repurchase ProgramThe open market stock repurchase program for shares of the Company’s common stock under Rule 10b-18 of the Exchange Act
Structured Finance NotesCLO mezzanine debt and CLO subordinated debt positions.
Synthetic Rating AnalysisA 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 OrderAn 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 PriceThe cost of an arm's length transaction occurring in the same security
Unsecured NotesThe combination of the Unsecured Notes Due April 2025, Unsecured Notes Due October 2025 and Unsecured Notes Due October 2026
Unsecured Notes Due April 2025The Company’s $50.0 million aggregate principal amount of 6.375% notes due April 30, 2025
Unsecured Notes Due October 2025The Company’s $46.0 million aggregate principal amount of 6.5% notes due October 30, 2025
Unsecured Notes Due October 2026The 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 ReportsReport 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 SheetsStatements 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 equivalents53,868

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
Cash31,781

13,447
Interest receivable1,782

1,770
3,114

3,349
Receivable for investment sold634
 
Prepaid expenses and other assets4,229

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 payable395

1,599
3,109

3,505
Management and incentive fees payable2,400

2,119
Administration fee payable382

435
Payable to adviser and affiliates (Note 3)2,694

4,106
Payable for investments purchased971

10,264
Accrued professional fees368

477
562

621
Other liabilities80

279
309

587
Total liabilities167,853

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, respectively133

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, respectively134

134
Paid-in capital in excess of par189,278

134,300
187,437

187,305
Accumulated undistributed net investment income6,942

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 assets188,656

143,778
135,397

166,627

Total liabilities and net assets$356,509

$305,030
$475,442

$538,188

Number of shares outstanding13,334,851

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
20162020
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 investments1,796

1,643

5,382

5,000
1,692

2,660

4,086

4,993
Control investment263

582

1,406

1,413
209

263

405

522
Total interest income7,818

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 investments77

102

289

264
264

96

525

193
Affiliate investments242

343

944

1,166
191

300

460

552
Control investments92

83

262

194
Control investment102

28

187

55
Total payment-in-kind interest and dividend income557

424

1,172

800
Dividend income:










Affiliate investments



100

173
Control investment

89



89
Total dividend income411

528

1,495

1,624


89

100

262
Fee income:





















Non-control/non-affiliate investments679

169

1,004

1,164
279

154

764

496
Affiliate investments197

48

431

87
8

5

13

210
Control investments17

34

135

75
Control investment3

18

6

33
Total fee income893

251

1,570

1,326
290

177

783

739












Total investment income9,122

7,359

25,134

22,885
10,981

12,900

23,851

25,245












Expenses





















Interest expense1,503

1,320

4,229

3,936
4,931

3,645

9,853

7,100
Management fees1,310

1,120

3,726

3,324
Management fee1,869

2,055

3,888

3,898
Incentive fee1,090

817
 2,249
 2,407
215

1,245

1,098

2,408
Professional fees284

260

840

877
460

368

1,108

903
Administration fee274

255

982

1,009
500

417

1,020

854
General and administrative expenses259

290

1,050

923












Total expenses4,720

4,062

13,076

12,476












Other expenses399

310

746

394
Total expenses before incentive fee waiver8,374

8,040

17,713

15,557
Incentive fee waiver (see Note 3)


 (441) 
Total expenses, net of incentive fee waiver8,374

8,040
 17,272
 15,557
Net investment income4,402

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 investments3,617



4,491


Net unrealized appreciation (depreciation) on non-control/non-affiliate investments1,196

(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 taxes6,808

(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 investment65

(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 outstanding13,331,690

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 operations3,760

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 expenses53,348
 
Reinvestment of stockholder distributions132

79
Net increase in net assets resulting from capital transactions53,480

79
Net increase in net assets44,878

(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 stock3,625,000
 
Common stock issued from reinvestment of stockholder distributions9,554

6,040
Common stock issued and outstanding at beginning of period9,700,297

9,691,170
Common stock issued and outstanding at end of period13,334,851

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 investments550

(2,624)
Net change in unrealized appreciation/depreciation on investments7,748

4,028
Amortization of Net Loan Fees(1,187)
(1,162)
Amendment fees collected112

107
Payment-in-kind interest and dividend income(2,199)
(1,903)
Amortization of deferred debt issuance costs402

330
Amortization of intangible asset147

146
Purchase and origination of portfolio investments(114,663)
(40,179)
Proceeds from principal payments on portfolio investments86,527

37,137
Proceeds from sale or redemption of portfolio investments7,456

2,115
Changes in operating assets and liabilities:




Interest receivable(12)
(267)
Interest payable(1,204)
(1,157)
Management and incentive fees payable281

(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 expenses53,423


Distributions paid to stockholders(12,231)
(9,807)
Borrowings under revolving line of credit28,000


Repayments under revolving line of credit(20,400)

Payment of debt issuance costs(101)

Net cash provided by (used in) financing activities48,691

(9,807)
Net increase in cash and cash equivalents36,209

(4,725)
Cash and cash equivalents — beginning of year17,659

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 stock132

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 investments10,013

894
Net unrealized depreciation on investments20,919

1,709
Amortization of Net Loan Fees(760)
(406)
Amendment fees collected31

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 costs1,016

577
Amortization of intangible asset98

98
Purchase and origination of portfolio investments(70,914)
(128,376)
Proceeds from principal payments on portfolio investments56,276

9,266
Proceeds from sale or redemption of portfolio investments65,528

30,316
Proceeds from distributions received from portfolio investments3,290

1,157
Changes in operating assets and liabilities:




Interest receivable235

(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 liabilities194

(143)
Net cash provided (used) in operating activities45,872

(44,403)
    
Cash flows from financing activities   
Distributions paid to stockholders(6,728)
(8,976)
Borrowings under revolving lines of credit72,600

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 cash18,334

(28,768)
   Cash at beginning of period13,447

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 stockholders96

109

See Notes to Consolidated Financial Statements.

8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments (unaudited)
SeptemberJune 30, 20172020
(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

9

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172020
(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

10

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172020
(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
























11

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172020
(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

12

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172020
(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
























13

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172020
(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 majoritySubstantially 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 SeptemberJune 30, 2017, with a weighted average2020, 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 SeptemberJune 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)
FairUnless 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 excessInvestments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the par valueSBA 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 SeptemberJune 30, 2017,2020, meaning the Company has ceased recognizingrecognition of all or a portion of income on the investment. See Note 2, Non-accrual loans4 for further details.
(8)(7)
The fair valueCLO 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 interesttable 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 underthat time. Effective yields for the contractual arrangement among the CompanyCompany'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.






14

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
Septemberadditional 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)InvestmentAll 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 atInvestments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the beginningBNP Credit Facility and can not be pledged under any debt obligation of each interest period equalthe 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 schedulebe received from CLO subordinated debt investments.
(17)Maturity represents the current PIK interest ratecontractual 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.

15

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments
December 31, 20162019
(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
                   

16

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162019
(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
 
 
                   

17

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162019
(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

18

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162019
(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

19

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162019
(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
                   

20

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162019
(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 majoritySubstantially 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 allVariable-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 average2019, 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)
FairUnless 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 isInvestments (or portion thereof) held by SBIC I LP. These assets (or a portion thereof) are held to support the resultSBA 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 recognizingrecognition of all or a portion of income on the investment. See Note 2, Non-accrual loans4 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 ratetable below provides additional details as of 11.33% at December 31, 2016, includes additional interest2019:
Portfolio CompanyReported 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, LLC11.21% 9.94% 1.27%
Milrose Consultants, LLC8.14% 7.44% 0.70%
OnSite Care, PLLC9.49% 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 amongamount and timing of distributions in addition to the Companyestimated 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)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, 2016:

21

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162019
(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 Loan0% or 2.00%13.00% or 11.50%2.00%
Jobson Healthcare Information, LLCSenior Secured Loan1.50% and 4.295%10.13% and 12.925%4.295%
PfanstiehlEblens 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, LLCSenior Secured Loan0% 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.

22

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 corporationnon-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 SBAOFSCC-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, includingincluding: 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, andCompany. 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. BasisSummary of Presentation and Significant Accounting Policies
Basis of presentation: The Company prepares its consolidated financial statementsis an investment company as defined in accordance with GAAP, includingthe 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. In10-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.
PrinciplesSignificant 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 servicessignificant 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, andCompany'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.

23

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

24

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.

25

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 riskrisk:: 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, theThe Company places cash deposits only with high credit quality institutions. Managementinstitutions 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:
StandardDescriptionPeriod of AdoptionEffect 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 2017No material impact to the Company's consolidated financial statements


26

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.
StandardDescriptionEffect 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.

27

OFS Capital CorporationNew 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)


StandardDescriptionEffect 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-approvedapproved 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 BDCsfunds 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.

28

OFS Capital Corporation and Subsidiaries

NotesAdvisor agreed to Financial Statements
(Dollar amounts in thousands, exceptreduce 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 arrearsrenewable 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, foramount 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 fromagreed 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 expensereceipt 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 $2,407Investment 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).

29

OFSis 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 $274Equity 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 $982Subsidiaries

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 ninesix months ended SeptemberJune 30, 2017, respectively. For the three2020 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 Fee215
 1,245
 1,098
 2,408
Incentive fee waiver



(441)

Administration fee expense500
 417
 1,020
 854
Distributions paid to affiliates501

1,002

1,503

2,004
Note 4. Investments
As of SeptemberJune 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 investmentinvestments in three eightportfolio companies in which it did not hold a debt investment.investment and eight investments in Structured Finance Notes. At SeptemberJune 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 investments70,768

37.5
 62,942
 33.4
Preferred equity28,492

15.1
 28,499
 15.1
Common equity and warrants6,321

3.4
 11,036
 5.8
Total302,058

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 investments56,985

11.9
 42.1
 35,755
 8.2
 26.4
Preferred equity18,621

3.9
 13.8
 11,757
 2.7
 8.7
Common equity, warrants and other15,717

3.3
 11.6
 32,561
 7.5
 24.0
  Total debt and equity investments443,587
 92.7
 327.7
 405,732
 93.1
 299.6
Structured Finance Notes35,254
 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 losseshad 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 werewas 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

30

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

31

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 twosix 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 AssetsAmortized 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 investments66,591
 46.3
 63,410
 44.1
56,731
 10.5
 34.0
 43,091
 8.3
 25.9
Preferred equity23,293
 16.2
 23,721
 16.5
21,925
 4.1
 13.2
 17,729
 3.4
 10.6
Common equity and warrants7,108
 4.9
 13,541
 9.4
Common equity, warrants and other14,919
 2.8
 9.0
 25,777
 5.0
 15.5
Total debt and equity investments515,545
 95.7% 309.4% 495,321
 95.8% 297.3%
Structured Finance Notes23,126
 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 (domicileddenominated 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            

32

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

33

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 theCompany'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’sCompany'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.

34

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

35

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 useddisqualified certain NBIP as theLevel 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 includethree and six months ended June 30, 2020, respectively, while senior securities with a weighting factor applied to multiple valuation methods. In estimating the enterprisefair 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 investmentthree 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 SeptemberJune 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 secured25,138
 Market approach EBITDA multiples 7.75x - 9.00x (7.91x)
Senior secured12,917
 Market approach Revenue multiples 2.00x - 2.00x (1.60x)
Subordinated28,631

Discounted cash flow
Discount rates
6.88% - 23.51% (18.24%)
Subordinated7,124

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 notes29,240

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%)
Subordinated48,897

Discounted cash flow
Discount rates
 11.06% - 25.00% (15.05%)
  Recovery Rate
60.00% - 60.00% (60.00%)
  
Mezzanine debt790

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 equity22,855

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 warrants10,324

Enterprise value
EBITDA multiples
 4.72x - 9.40x (5.65x)
Preferred equity706

Market approach
Revenue multiples
0.15x - 0.75x (0.75x)
Preferred equity1,469
 Market approach Recurring monthly revenue 38.00x - 38.00x (38.00x)
Common equity, warrants and other32,361

Market approach
EBITDA multiples
3.25x - 15.00x (8.61x)
Common equity, warrants and other200
 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.

36

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 secured15,031
 Market approach EBITDA multiples 8.09x - 13.22x (13.08x)
Senior secured23,193
 Market approach Transaction Price 
Subordinated35,371
 Discounted cash flow Discount rates 6.38% - 18.86% (14.32%)
Subordinated7,464
 Market approach EBITDA multiples 4.75x - 6.35x (6.35x)
Subordinated255
 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%)
Subordinated45,635
 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 equity13,185
 Market approach EBITDA multiples 6.25x - 13.22x (4.96x)
Preferred equity2,424
 Market approach Revenue multiples 0.23x - 9.58x (9.58x)
Preferred equity2,120
 Market approach Recurring monthly revenue 40.00x - 40.00x (40.00x)
Common equity, warrants and other22,788
 Market approach EBITDA multiples 4.50x - 13.22x (13.03x)
Common equity, warrants and other1,489
 Market approach Revenue multiples 0.23x - 7.00x (7.00x)
Common equity, warrants and other1,500
 Transaction Price 
  $442,265
 
Equity investments  
Preferred equity23,721
 Enterprise value EBITDA multiples  4.50x - 8.50x (6.82x)
  
Common equity and warrants13,042
 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.

37

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 ninesix months ended SeptemberJune 30, 20172020 and SeptemberJune 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 Fees1,136
`51






1,187
Capitalized PIK interest and dividends682

452


1,065



2,199
Purchase and origination of portfolio investments100,619

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 investments803
 (279) (4,549) (3) (4,028)
Amortization of Net Loan Fees610
 180
 
 
 790
Capitalized PIK interest, dividends, and fees506
 693
 1,031
 
 2,230
Purchase and origination of portfolio investments35,638
 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 Fees642
 
 
 
 
 642
Accretion of interest income on structured-finance notes
 
 
 
 2,626
 2,626
Capitalized PIK interest and dividends586
 255
 341
 
 
 1,182
Purchase and origination of portfolio investments48,678
 
 
 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 32,915
 
 
 
 
 2,915
            
Level 3 assets, June 30, 2020$306,251

$35,755

$11,757

$32,561

$30,030

$416,354


38

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 investments6
 
 (900) 
 
 (894)
Net unrealized appreciation (depreciation) on investments(3,570) 212
 (512) 2,334
 210
 (1,326)
Amortization of Net Loan Fees590
 43
 
 
 
 633
Accretion of interest income on structured-finance notes
 
 
 
 1,096
 1,096
Capitalized PIK interest and dividends162
 180
 433
 
 
 775
Purchase and origination of portfolio investments64,551
 
 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 2016appreciation (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) $(3,792)
Subordinated debt investments(7,590) 212
Preferred equity(2,666) (1,323)
Common equity, warrants and other5,986
 2,334
Structured Finance Notes(3,707) 210
Net unrealized depreciation on investments held$(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 costdebt 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
DescriptionLevel 1 Level 2 
Level 3 (1)
 Total
PWB Credit Facility$
 $
 $21,100
 $21,100
BNP Facility
 
 30,650
 30,650
Unsecured Notes Due April 202545,800
 
 
 45,800
Unsecured Notes Due October 202545,614
 
 
 45,614
Unsecured Notes Due October 202647,806
 
 
 47,806
SBA-guaranteed debentures
 
 141,135
 141,135
Total debt, at fair value$139,220
 $
 $192,885
 $332,105
 December 31, 2019
DescriptionLevel 1 Level 2 
Level 3 (1)
 Total
PWB Credit Facility$
 $
 $
 $
BNP Facility
 
 56,450
 56,450
Unsecured Notes Due April 202550,600
 
 
 50,600
Unsecured Notes Due October 202549,282
 
 
 49,282
Unsecured Notes Due October 202654,282
 
 
 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 usingat 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 Septemberthe 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 $153,2652019:
 As of June 30, 2020 As of December 31, 2019
DescriptionCarrying Value Fair Value Carrying Value Fair Value
PWB Credit Facility$21,100
 $21,100
 $
 $
BNP Facility30,650
 30,650
 56,450
 56,450
Unsecured Notes Due April 202548,762
 45,800
 48,634
 50,600
Unsecured Notes Due October 202547,215
 45,614
 47,093
 49,282
Unsecured Notes Due October 202652,470
 47,806
 52,325
 54,282
SBA-guaranteed debentures132,203
 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
UnfundedThe Company has the following unfunded commitments to the Company's portfolio companies as of SeptemberJune 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 SeptemberJune 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 allowsSBA debentures issued by SBIC I LP to obtain leverageand 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 SeptemberJune 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 SBICaverage 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 asUnsecured NotesAs of SeptemberJune 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 permits2020, 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 BLAhad 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 ninesix months ended SeptemberJune 30, 2017, was $11,0732020 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 amortizationthe Company subsequently grants a security interest), to the extent of deferred debt issuance costs, asthe value of September 30, 2017, was 5.44% based maximum amount availablethe assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility. Deferred debt issuance

40

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 $117Interest expense for the three and ninesix months ended SeptemberJune 30, 2017, respectively. Availability under the PWB Credit Facility as of September 30, 2017, was $17,900 based2020 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 Facility702

633

991

1,094
Unsecured Notes Due April 2025860

860

1,721

1,720
Unsecured Notes Due October 2025850

866

1,700

1,732
Unsecured Notes Due October 2026880
 
 1,784
 
BNP Facility525

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 rate5.26% 4.98% 5.23% 4.96%
Interest expense includes the stated advance rate of 50% underinterest 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 occurrenceamortization 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’sCompany's distributions is made annually as of the end of its fiscal year based uponon 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 tofor 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 gainscomponents 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 income184

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 SeptemberJune 30, 2017,2020 and December 31, 2016,2019, were as follows:
September 30, 2017 December 31, 2016June 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 investments19,361
 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 investments2,320
 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.
41

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 ninesix months ended SeptemberJune 30, 20172020 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 income0.33
 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 investments0.27



0.37


Net change in unrealized appreciation/depreciation on non-control/non-affiliate investments0.09

(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 period13,334,851
 9,697,210
 13,334,851
 9,697,210
Weighted average shares outstanding13,331,690
 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 operations0.57
 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 period13,399,694
 13,366,461
 13,399,694
 13,366,461
Weighted average shares outstanding13,392,608
 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 isCalculated as ending market value less beginning market value, adjustingadjusted for distributions reinvested at prices obtained inbased on the Company’s distributiondividend reinvestment plan for the respective distributions.
(2)Calculation isCalculated as ending net asset value less beginning net asset value, adjustingadjusted for distributions reinvested at the Company’s quarter-end net asset valuedividend reinvestment plan for the respective distributions.
(3)Based on the average of the net asset values asvalue at the endbeginning 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 ofCalculated 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 issuanceRatio of commontotal 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.

42

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. DistributionsCapital Transactions
Distributions:The Company intends to make distributionsdistribute to its stockholders, on a quarterly basis, of substantially all of its net investment income. In addition, although the Company intends to make distributions ofdistribute at least annually net realized capital gains, net of taxes if any, at least annually, out of assets legally available for such distributions, itdistribution, the Company may in the future decide toalso 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 abilitySBIC I LP's distributions to receivethe 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. Consolidatedwere $103,215, and consolidated cash and cash equivalentsat 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 SeptemberJune 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 ninesix months ended SeptemberJune 30, 20172020 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 sourcetax character of the distributiondistributions is mailed to the Company’s stockholders. If
Stock repurchase program:
The Company maintains a Stock Repurchase Program under which the tax characteristicsCompany may acquire up to $10.0 million of its outstanding common stock. No shares of common stock were repurchased under the Company’s distributions paidStock Repurchase Program during 2017 were determined as of Septemberthe 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.








43

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
                       

44

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 rateand ownership detail maturity date, dividend rate on preferredfor 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 ninesix months ended SeptemberJune 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 includeOID, 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 includeany, 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.

45

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 fourththird 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
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.
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 orderOverview
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 permittingcorresponding quarter in the BDCprior year primarily due to do so. Onan 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 from2026 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”). Pursuanta 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 makeportfolio 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 reasonableportfolio companies will experience financial distress and fairpossibly default on their financial obligations to us and their other capital providers. We also expect that some of our stockholdersportfolio companies may significantly curtail business operations, furlough or lay off employees and do not involve overreaching by us orterminate 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 stockholdersinvestment 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 partan equivalent applicable currency rate), and many of any person concerned and (2) the transaction is consistentwhich are subject to certain floors. In connection with the interestsCOVID-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 stockholdersfloating 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 withguidance 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 objectiveincome, 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 included2" and "Management's Discussion and Analysis - Critical Accounting Policies and Significant Estimates" in "Item 1.–Financial Statements" of this Quarterlyour 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 monthsyear 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 carrieddepth 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 sheetsRefinitiv Market Overall (North America) Loan Index which narrowed to 1.98 points at fair value. As discussed more fullyJune 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 usthe level of the metrics themselves, led to categorize financial assets and liabilities carried atthe transfer of seven instruments with an aggregate amortized cost of $12.7 million from a fair value accordingestimate based on Level 2 NBIP inputs to a three-level valuation hierarchy. The hierarchy gives the highest priorityestimates 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 asestimates 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 consideradjusted 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 factorsdecrease in the historic correlation between market spreads used in our determinationsynthetic 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 multiplelending 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 appliedeach of these methods required adjustment to an investment including, among other things,correspond to the actual EBITDA multiplemarket 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 ratioweighting 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 multipleoverweighting to the average of EBITDA multiples on comparable public companies ("Comparable Multiples"), andreunderwriting analysis more accurately captures the changemarket 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 sensitivityimpact of our fair value measures to reasonably likely changes toif we selected the estimated discount rate and EBITDA multiple inputs used in our debt and equity investment valuationslow or high end of the range of values for all investments at SeptemberJune 30, 20172020 (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 BDCsfunds 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-tradedcorporation 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 similarbeing 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 SeptemberJune 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 companiescompanies. 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 threetwo portfolio companies at SeptemberJune 30, 2017.2020. Set forth in the tables and charts below is selected information with respect to our portfolio as of SeptemberJune 30, 2017,2020 and December 31, 2016.2019.
The following table summarizes the composition of our investment portfolioPortfolio Company Investments as of SeptemberJune 30, 2017,2020, and December 31, 20162019 (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 investments70,768

62,942
 66,591
 63,410
Preferred equity28,492

28,499
 23,293
 23,721
Common equity and warrants6,321

11,036
 7,108
 13,541
 $302,058

$296,630
 $279,307
 $281,627
Total number of portfolio companies40
 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 investments56,985

35,755
 56,731
 43,091
Preferred equity18,621

11,757
 21,925
 17,729
Common equity, warrants and other15,717

32,561
 14,919
 25,777
  Total Portfolio Company Investments$443,587
 $405,732
 $515,545
 $495,321
Total number of portfolio companies65
 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 SeptemberJune 30, 2017,2020, and $68,207 and $67,480, respectively, and $28,945 and $29,276, at December 31, 2016, respectively2019.
The following table shows the portfolio composition by geographic regionApproximately 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 locationare senior securities of the portfolio companies' corporate headquarters (dollar amountsborrower, 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 - US105,586
 34.9
 85,693
 30.7
 92,236
 31.0
 78,186
 27.8
West - US43,190
 14.3
 59,120
 21.2
 48,208
 16.3
 61,219
 21.7
Midwest - US23,523
 7.8
 10,566
 3.8
 28,066
 9.5
 15,788
 5.6
Canada3,935
 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 SeptemberJune 30, 2017,2020, our investment portfolio’sPortfolio 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 LP227,842
 211,941

256,858
 246,371
OFSCC-FS57,439
 55,038

88,458
 88,936
OFSCC-MB11,470
 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 SeptemberJune 30, 2017,2020, and December 31, 20162019 (dollar amounts in thousands):
Amortized Cost Fair ValueAmortized Cost Fair Value
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016June 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 $7,00056,065
 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 $10,00079,287
 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 $13,00035,193
 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 $13,00069,290
 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 SeptemberJune 30, 2017,2020, and December 31, 2016:2019:
 September 30, 2017 December 31, 2016June 30, 2020 December 31, 2019
 
Senior
Secured
 Subordinated Total 
Senior
Secured
 Subordinated Total
Senior
Secured
SubordinatedStructured Finance  
Senior
Secured
SubordinatedStructured Finance 
Weighted Average Yield (1)
 Debt Debt Debt Debt Debt Debt
Weighted Ave. Yield (1)
DebtNotesTotal DebtNotesTotal
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, excludingtotal investment portfolio, including assets onin non-accrual basisstatus 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 ofthe 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 SeptemberJune 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 investmentthis portfolio, respectively.

Investment Activity
The following is a summary of our investmentPortfolio Company Investment activity for the three and ninesix months ended SeptemberJune 30, 2017 and 2016 (in2020 (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 debtNotable investments in two new portfolio companies and $6.3 million of senior secured debt investments in four existing portfolio companies during the fourth quartersix 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
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 the 20,628 common shares of equity received were $0.7 million and $0.7 million, respectively.

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.
DuringNotable investments in new portfolio companies during the ninesix months ended SeptemberJune 30, 2016, we converted a2019, include Chemical Resources Holdings, Inc. ($13.6 million senior secured loan and $1.8 million portionin common equity) and TTG Healthcare, LLC ($11.9 million senior secured loan and $2.3 million preferred equity).
The weighted-average yield of our subordinateddirect debt investmentinvestments 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 amountweighted 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 of13.89% 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 investmentssecurities 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 investmentssecurities of portfolio companies, excluding Structured Finance Notes, by credit risk rating as of SeptemberJune 30, 2017,2020, and December 31, 20162019 (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 degradationChanges 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, withinrealized gains on the categories,sale of investments, as well as changes in risk categories. Debt investments with a cost and otherfair 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 amortizedwas $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 $7,639the 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 classfully 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 loansdebt 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 ninesix months ended SeptemberJune 30, 2017,2020 and 20162019
Consolidated operating results for the three and ninesix months ended SeptemberJune 30, 20172020 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 20162020 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 amortization518

352

1,187

1,162
403

228

817

406
PIK interest income485

311

1,134

868
Other interest income73

45

156

124
19

21

54

97
Total interest income7,818

6,580

22,069

19,935
10,134

12,210

21,796

23,444
PIK income:










PIK interest income393

205

829

366
Preferred equity PIK dividends164

219

343

434
Total PIK income557

424

1,172

800
Dividend income:





















Preferred equity cash dividends34

82

99

410
Preferred equity PIK dividends286

396

1,065

1,032
Common equity dividends91

50

331

182
Common and preferred equity cash dividends

89

100

262
Total dividend income411

528

1,495

1,624


89

100

262
Fee income:





















Management, valuation, and other43

69

127

167
Prepayment, structuring, and other fees850

182

1,443

1,159
Management and syndication

133

378

651
Prepayment and other fees290

44

405

88
Total fee income893

251

1,570

1,326
290

177

783

739
Total investment income9,122

7,359

25,134

22,885
10,981

12,900

23,851

25,245
Total expenses4,720

4,062

13,076

12,476
Total expenses, net8,374

8,040

17,272

15,557
Net investment income4,402

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 investments5,051

(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 ninesix months ended SeptemberJune 30, 20172020 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 20162020 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 investments2,097

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 Notes1,407
 629
 2,630
 1,097
Total interest income and PIK interest income10,527
 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
InterestInvestment Income
We consider our interest income increasedon 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 SeptemberJune 30, 2017,2020, compared to the three months ended SeptemberJune 30, 2016. The $1.2 million increase was2019, primarily due to a $1.1$0.2 million increase primarily attributable to a 19% increasedecrease in the average outstanding performing loan balance, and a $0.2 million increase in Net Loan Fee amortization, offsetas well as by a $0.1$1.7 million decrease primarily attributable toresulting from a 30189 basis pointspoint decrease in the weighted averagerecurring 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 milliongenerally result from periodic transactions rather than from holding portfolio investments and $0.1 millionare 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 incomeadditional compensation declined to $-0- for the three months ended SeptemberJune 30, 2017 and 2016, respectively.
Interest2020, 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 ninesix months ended SeptemberJune 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% increasecorresponding 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, primarilyprior 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 millionthe decrease in othersyndication fees. We recorded prepayment feesSince the onset of $0.3 million resulting from $17.5 million of unscheduled principal payments duringthe 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 SeptemberJune 30, 2017. We did not receive any unscheduled principal payments subject to prepayment fees during2020, 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 SeptemberJune 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.
Expenses2019, 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 20162020 2019 2020 2019
Interest expense$1,503

$1,320
 $4,229
 $3,936
$4,931

$3,645
 $9,853
 $7,100
Management fees1,310

1,120
 3,726
 3,324
Management fee1,869

2,055
 3,888
 3,898
Incentive fee1,090

817
 2,249
 2,407
215

1,245
 1,098
 2,408
Professional fees284

260
 840
 877
460

368
 1,108
 903
Administration fee274

255
 982
 1,009
500

417
 1,020
 854
General and administrative expenses259

290
 1,050
 923
Total expenses$4,720

$4,062
 $13,076
 $12,476
Other expenses399

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 ninesix months ended SeptemberJune 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, primarilyborrowings 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 Facility702
 633
 991
 1,094
Unsecured Notes Due April 2025860
 860
 1,721
 1,720
Unsecured Notes Due October 2025850
 866
 1,700
 1,732
Unsecured Notes Due October 2026880
 
 1,784
 
BNP Facility525
 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 increasedecrease 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 deploymentincome 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 feeFee expense increased by $0.3of $0.4 million for the three months ended September 30, 2017, comparedMarch 31, 2020, which is equal to half the Income Incentive Fee expense we would have incurred for the three months ended SeptemberMarch 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 netour allocable portion of OFS Services’s overhead, primarily related to the increase in the size of the investment income comparedportfolio 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 exceededreversal of an excise tax accrual in the secondfirst 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 $(0.1) million recorded during nine months ended September 30, 2016, which represents the reversal of the accrued Capital Gains Fee at December 31, 2015.2019.
Net Loss on Investmentsrealized and unrealized gain (loss)
Net gain (loss)loss by investment type for the three and ninesix months ended SeptemberJune 30, 20172020 and 2016, are2019, were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 20162020 2019 2020 2019
Senior secured debt$(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 equity270

(497)
2,949

(4,549)(1,016)
137

(2,253)
(1,592)
Common equity and warrants478

149

(681)
2,558
Net loss on investments(3,227)
(909)
$(8,298)
$(1,404)
Common equity, warrants and other6,330

1,722

5,986

1,950
Structured Finance Notes4,499
 (169) (3,707) 210
Total net gain (loss) on investments5,051
 (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 ninesix months ended SeptemberJune 30, 20172020
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 SeptemberJune 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 lossrealized 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 impactpartial 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 restructuringCenexel 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 lossesgains of $2.3$0.1 million on subordinated debt during the three months ended SeptemberJune 30, 2017,2019, primarily as a result of the negativenet positive impact of portfolio company-specific performance factors, including an unrealized depreciationfactors. 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 duringfor the ninesix months ended SeptemberJune 30, 2017,2019 were primarily as a result of the net negative impactunrealized 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 inWe recognized net gainslosses of $2.9$1.6 million on preferred equity securities for the ninesix months ended SeptemberJune 30, 2017, was2019, primarily due to a realized gainloss 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 cumulativeMaverick Healthcare Equity, LLC and unrealized depreciation of $0.3$0.8 million at June 30, 2017, on our preferred equity investmentsinvestment 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 SeptemberJune 30, 2017,2019, primarily as a result of the positive impactunrealized 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 lossesgains of $0.7$2.0 million on common equity and warrant investments for the ninesix months ended SeptemberJune 30, 2017,2019 were primarily as a result of unrealized appreciation of $4.3 million across several portfolio company investments from the negativepositive impact of portfolio company-specific performance factors. Includedfactors,

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, primarilyContract 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 ofnegative portfolio company-specific performance factors.
We recognized net lossesunrealized 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 investmentsStructured Finance Notes for the three months ended SeptemberJune 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 equity2019, 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 duringfor the years ended December 31, 2015 and 2014, respectively. There was no net gain during the ninesix months ended SeptemberJune 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 liquidityAt 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 ourI 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 LiquidityI LP are limited bygenerally 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 abilityPWB 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 contributionsa borrowing base and other covenants. The Parent may make unsecured loans to SBIC I LP. Additionally,LP, the useaggregate 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 ReportPWB Credit Facility had an unused commitment of $36.2 million, subject to a borrowing base and other covenants.
Based on Form 10-Kfair 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 Liquidityhad cash on hand of approximately $23.3 million. We continue to Corporate Liquidity. At September 30, 2017, $2.5 million cashbelieve 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 operationsflows 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 cashCash from net investment income increased $2.2decreased $5.6 million for the ninesix months ended SeptemberJune 30, 2017,2020, compared to the ninesix months ended SeptemberJune 30, 2016. The net increase to net cash from investment income was2019, principally due to an decrease in collected net interest and fee income of $2.3 million and increase in interest income, common dividends, prepaymentexpense paid of $4.1 million, offset by an decrease in fees paid to OFS Advisor and structuring fees collected, andaffiliates of $0.1 million, as well as a decrease in cashother 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 originationsoriginations)/repayments and sales of portfolio investments excluding cash received from realized gains
During the ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 30, 2016,2019, net purchases were due to $40.2$90.2 million of cash we used to purchase portfolio investments. These cash purchases wereinvestments, 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, netNet 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 pricedeferrals of $14.57 per shareinterest payments and the net offering proceedsrescheduling of $14.82 per share, which also representedan amortization payment. Ninety-six percent of our NAV per share atperforming loans as of March 31, 2020 paid interest for the timesecond 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 million2020.
Borrowings
SBA Debentures
SBIC I LP has a SBIC license that allowedallows 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 spreadsspread 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, 2016June 30, 2020 and 2015,2019, SBIC I LP had fully drawn theoutstanding 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 SeptemberJune 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
TheWe 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 portionfunding. 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 increaseborrowing base, which excludes subordinated loan investments (as defined in the maximum amount available underBLA) 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 WMOFSCC-MB, Inc. and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS and ourthe 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 SeptemberJune 30, 2017, the Company was2020, 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 NotesPrincipal 
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 202548,525
 6.50% 7.01% 10/31/2025 1,700
Unsecured Notes Due October 202654,325
 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 SeptemberJune 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 SeptemberJune 30, 20172020 (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 totalin unfunded commitments to threetwo portfolio companies at SeptemberJune 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 characteristicsthird quarter of the distributions paid during fiscal 2017 were determined2020, 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 estimatemake 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 returnmay 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 SeptemberJune 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 SeptemberJune 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 aand BNP Facility have floating interest rate provisionprovisions 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 SeptemberJune 30, 20172020 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 ratesrate 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.
ItemItem 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 SeptemberJune 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 SeptemberJune 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, noNo 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 SeptemberJune 30, 20172020 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 SeptemberJune 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, “ItemItem 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.
ThereOther 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, which2019 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 SeptemberJune 30, 2017,2020, we issued 3,4397,165 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
 DescriptionForm and SEC File No.Filing Date with SECFiled with this 10-Q
10.1 Form 8-K
814-00813
8/10/2017July 2, 2020 
      
10.2 8-K
814-00813
8/10/2017
11.1Computation of Per Share Earnings+
14.1*
14.2  *
      
31.1   *
      
31.2   *
      
32.1   
      
32.2   
+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, 2017July 31, 2020OFS 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
DescriptionForm and SEC File No.Filing Date with SECFiled with this 10-Q
10.1
8-K
814-00813
8/10/2017
10.28-K
814-00813
8/10/2017
11.1Computation of Per Share Earnings+
14.1*
14.2*
31.1*
31.2*
32.1
32.2

80
+Included in the consolidated statements of operations contained in this report
*Filed herewith
Furnished herewith


69