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, 20172021

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

Securities registered pursuant to Section 12(b) of the Act:
10 S. Wacker Drive, Suite 2500
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
6.25% Notes due 2023OFSSGThe Nasdaq Global Select Market
5.95% Notes due 2026OFSSIThe Nasdaq Global Select Market
Chicago, Illinois 60606
(Address of principal executive office)

(847) 734-2000
(Registrant’s telephone number, including area code)

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, 2017August 5, 2021 was 13,334,851.13,415,235.


OFS CAPITAL CORPORATION

TABLE OF CONTENTS
 
 
Item 1.
Consolidated Statements of Assets and Liabilities as of June 30, 2021 (unaudited) and December 31, 2020
53
 
Consolidated Balance Sheets as of September 30, 2017 (unaudited), and December 31, 2016
5
Consolidated Statements of Operations for the Three and Nine Six Months Ended SeptemberJune 30, 20172021 (unaudited), and 20162020 (unaudited)
64
 
Consolidated Statements of Changes in Net Assets for the NineThree and Six Months Ended SeptemberJune 30, 20172021 (unaudited), and 20162020 (unaudited)
75
 
Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20172021 (unaudited), and 20162020 (unaudited)
87
 
Consolidated Schedules of Investments as of SeptemberJune 30, 20172021 (unaudited), and December 31, 20162020
98
 
2330
Item 2.
4754
Item 3.
6472
Item 4.
6473
 
6574
Item 1.
6574
Item 1A.
6574
Item 2
6575
Item 3.
6576
Item 4.
6576
Item 5.
6676
Item 6.
6777
6878



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,An account, other than the Company, managed by OFS Advisor or an affiliate of at least 90% of our ICTIOFS Advisor
Affiliated FundCertain other funds, including other BDCs and registered investment companies managed by OFS 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 FacilityA 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
Net Loan FeesThe cumulative amount of fees, such as origination fees, 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


TermExplanation or Definition
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
OIDOriginal issue discount
OrderAn exemptive relief order from the SEC to permit us to co-invest in portfolio companies with Affiliated Funds in a manner consistent with our investment platform focused on meetingobjective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions
ParentOFS Capital Corporation
PIKPayment-in-kind, non-cash interest or dividends payable as an addition to the capital needs of middle-market companiesloan or equity security producing the income
Portfolio Company InvestmentA debt or equity investment in 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.United States Small Business Administration
SBICA fund licensed under the SBA small business investment company programSmall 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
SBIC I GPOFS SBIC I GP, LLC
SECU.S.United States 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 February 17, 2021
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, CLO subordinated debt and CLO loan accumulation facility 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
Transaction PriceThe cost of an arm's length transaction occurring in the same security
Unsecured NotesThe combination of the Unsecured Notes Due September 2023, the Unsecured Notes Due April 2025, the Unsecured Notes Due October 2025, the Unsecured Notes Due October 2026 and the Unsecured Notes Due February 2026
Unsecured Notes Due April 2025The Company’s $50.0 million aggregate principal amount of 6.375% notes due April 30, 2025, which were redeemed on March 12, 2021
Unsecured Notes Due February 2026    The Company’s $125.0 million aggregate principal amount of 4.75% notes due February 10, 2026
Unsecured Notes Due October 2025The Company’s $48.5 million aggregate principal amount of 6.5% notes due October 30, 2025, which were redeemed on March 12, 2021
Unsecured Notes Due October 2026The Company's $54.3 million aggregate principal amount of 5.95% notes due October 31, 2026
Unsecured Notes Due September 2023The Company’s $25.0 million aggregate principal amount of 6.25% notes due September 30, 2023



Forward-Looking Statements
This quarterly reportQuarterly 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 investmentinvestments 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 Section 61(a)(2) of the 1940 Act and the impact of such leverage on our net investment income and results of operations;
•competition for investment opportunities;
•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;
•the impact of inflation rates on our business prospects and the prospects of our portfolio companies;
• the impact of any new tax legislation on our investments, our stockholders, and our business;
•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 pandemic; 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
1

by the COVID-19 pandemic, including those caused by variants of the virus, on our ability to continue to effectively manage our business 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;Portfolio Company Investments, including our belief that reverting back to an equal weighting of the Reunderwriting Analysis method and Synthetic Rating Analysis method more accurately captures certain data related to the observed return of market liquidity and the historic correlative relationship between these markets; 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“Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.2020 and in "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and this Quarterly Report on Form 10-Q. 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.Act.
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.
2

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)
June 30,
2021		December 31,
2020
(unaudited)
Assets
Investments, at fair value:
Non-control/non-affiliate investments (amortized cost of $373,780 and $363,628, respectively)$358,471 $328,665 
Affiliate investments (amortized cost of $83,740 and $86,484, respectively)113,493 102,846 
Control investment (amortized cost of $11,057 and $10,911, respectively)12,062 10,812 
Total investments at fair value (amortized cost of $468,577 and $461,023, respectively)484,026 442,323 
Cash35,159 37,708 
Interest receivable1,051 1,298 
Prepaid expenses and other assets2,204 2,484 
Total assets$522,440 $483,813 
Liabilities
Revolving lines of credit$24,050 $32,050 
SBA debentures (net of deferred debt issuance costs of $865 and $1,088, respectively)94,640 104,182 
Unsecured notes (net of deferred debt issuance costs of $5,607 and $4,897 respectively)198,718 172,953 
Interest payable4,088 3,176 
Payable to adviser and affiliates (Note 3)3,352 3,252 
Payable for investments purchased16,363 8,411 
Accrued professional fees597 495 
Other liabilities639 338 
Total liabilities342,447 324,857 
Commitments and contingencies (Note 6)
Net assets
Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively$— $— 
Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,415,235 and 13,409,559 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively134 134 
Paid-in capital in excess of par187,179 187,124 
Total distributable earnings (losses)(7,320)(28,302)
Total net assets179,993 158,956 
Total liabilities and net assets$522,440 $483,813 
Number of shares outstanding13,415,235 13,409,559 
Net asset value per share$13.42 $11.85 

September 30,
2017
December 31,
2016

(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
Interest receivable1,782

1,770
Prepaid expenses and other assets4,229

3,974
Total assets$356,509

$305,030






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
Interest payable395

1,599
Management and incentive fees payable2,400

2,119
Administration fee payable382

435
Accrued professional fees368

477
Other liabilities80

279
Total liabilities167,853

161,252






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
Paid-in capital in excess of par189,278

134,300
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 net assets188,656

143,778






Total liabilities and net assets$356,509

$305,030






Number of shares outstanding13,334,851

9,700,297
Net asset value per share$14.15

$14.82

See Notes to Consolidated Financial Statements.
3

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
20162021202020212020
Investment income










Investment income
Interest income:










Interest income:
Non-control/non-affiliate investments$5,759

$4,355

$15,281

$13,522
Non-control/non-affiliate investments$9,089 $8,233 $17,616 $17,305 
Affiliate investments1,796

1,643

5,382

5,000
Affiliate investments911 1,692 1,815 4,086 
Control investment263

582

1,406

1,413
Control investment221 209 490 405 
Total interest income7,818

6,580

22,069

19,935
Total interest income10,221 10,134 19,921 21,796 
Dividend income:










Payment-in-kind interest and dividend income:Payment-in-kind interest and dividend income:
Non-control/non-affiliate investments77

102

289

264
Non-control/non-affiliate investments275 264 593 525 
Affiliate investments242

343

944

1,166
Affiliate investments80 191 151 460 
Control investments92

83

262

194
Control investmentControl investment101 102 199 187 
Total payment-in-kind interest and dividend incomeTotal payment-in-kind interest and dividend income456 557 943 1,172 
Dividend income:Dividend income:
Affiliate investmentsAffiliate investments— — — 100 
Control investmentControl investment136 — 136 — 
Total dividend income411

528

1,495

1,624
Total dividend income136 — 136 100 
Fee income:










Fee income:
Non-control/non-affiliate investments679

169

1,004

1,164
Non-control/non-affiliate investments603 279 870 764 
Affiliate investments197

48

431

87
Affiliate investments— 8 37 13 
Control investments17

34

135

75
Control investmentControl investment— 3 — 6 
Total fee income893

251

1,570

1,326
Total fee income603 290 907 783 












Total investment income9,122

7,359

25,134

22,885
Total investment income11,416 10,981 21,907 23,851 












Expenses










Expenses
Interest expense1,503

1,320

4,229

3,936
Interest expense4,241 4,931 9,066 9,853 
Management fees1,310

1,120

3,726

3,324
Management feeManagement fee1,876 1,869 3,710 3,888 
Incentive fee1,090

817
 2,249
 2,407
Incentive fee809 215 809 1,098 
Professional fees284

260

840

877
Professional fees489 460 876 1,108 
Administration fee274

255

982

1,009
Administration fee439 500 1,007 1,020 
General and administrative expenses259

290

1,050

923












Total expenses4,720

4,062

13,076

12,476












Other expensesOther expenses327 399 654 746 
Total expenses before incentive fee waiverTotal expenses before incentive fee waiver8,181 8,374 16,122 17,713 
Incentive fee waiver (see Note 3)Incentive fee waiver (see Note 3)— — — (441)
Total expenses, net of incentive fee waiverTotal expenses, net of incentive fee waiver8,181 8,374 16,122 17,272 
Net investment income4,402

3,297

12,058

10,409
 Net investment income3,235 2,607 5,785 6,579 












Net realized and unrealized gain (loss) on investments










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 loss on non-control/non-affiliate investmentsNet realized loss on non-control/non-affiliate investments(10,841)(1,040)(10,750)(10,013)
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxesNet unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes17,866 6,808 19,384 (15,614)
Net unrealized appreciation (depreciation) on affiliate investments(2,901)
(363)
(2,243)
79
Net unrealized appreciation (depreciation) on affiliate investments11,465 (880)13,391 (3,804)
Net unrealized appreciation (depreciation) on control investment65

(66)
1,845

(439)Net unrealized appreciation (depreciation) on control investment716 163 1,104 (1,501)












Net loss on investments(3,227)
(909)
(8,298)
(1,404)
Net gain (loss) on investmentsNet gain (loss) on investments19,206 5,051 23,129 (30,932)
Loss on extinguishment of debtLoss on extinguishment of debt— — (2,299)(149)












Net increase in net assets resulting from operations$1,175

$2,388

$3,760

$9,005
Net increase (decrease) in net assets resulting from operationsNet increase (decrease) in net assets resulting from operations$22,441 $7,658 $26,615 $(24,502)












Net investment income per common share – basic and diluted$0.33

$0.34

$1.00

$1.07
Net investment income per common share – basic and diluted$0.24 $0.19 $0.43 $0.49 
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 dilutedNet increase (decrease) in net assets resulting from operations per common share – basic and diluted$1.67 $0.57 $1.98 $(1.83)
Distributions declared per common share$0.34

$0.34

$1.02

$1.02
Distributions declared per common share$0.22 $0.17 $0.42 $0.51 
Basic and diluted weighted average shares outstanding13,331,690

9,694,353

12,089,895

9,692,634
Basic and diluted weighted average shares outstanding13,411,998 13,392,608 13,410,524 13,384,808 
See Notes to Consolidated Financial Statements.

4
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 StockCommon StockPaid-in capital in excess of parTotal distributable earnings (losses)Total net assets
Number of sharesPar valueNumber of sharesPar value
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 
5
OFS Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(Dollar amounts in thousands)

Preferred StockCommon StockPaid-in capital in excess of parTotal distributable earnings (losses)Total net assets
Number of sharesPar valueNumber of sharesPar value
Balances at January 1, 2021— $— 13,409,559 $134 $187,124 $(28,302)$158,956 
Net increase in net assets resulting from operations:
  Net investment income— — — — — 5,785 5,785 
  Net realized loss on investments— — — — — (10,750)(10,750)
  Loss on extinguishment of debt— — — — — (2,299)(2,299)
  Net unrealized appreciation on investments, net of taxes— — — — — 33,879 33,879 
Distributions to stockholders:
  Common stock issued from reinvestment of stockholder distributions— — 6,376 — 60 — 60 
  Dividends declared— — — — — (5,633)(5,633)
 Common stock repurchased under stock repurchase program— — (700)— (5)— (5)
Net increase for the period ended June 30, 2021— — 5,676 — 55 20,982 21,037 
Balances at June 30, 2021— $— 13,415,235 $134 $187,179 $(7,320)$179,993 
Balances at March 31, 2021— $— 13,411,962 $134 $187,146 $(26,810)$160,470 
Net increase in net assets resulting from operations:
Net investment income— — — — — 3,235 3,235 
Net realized loss on investments— — — — — (10,841)(10,841)
Net unrealized appreciation on investments, net of taxes— — — — — 30,047 30,047 
Distributions to stockholders:
  Common stock issued from reinvestment of stockholder distributions— — 3,273 — 33 — 33 
Dividends declared— — — — — (2,951)(2,951)
Net increase for the period ended June 30, 2021— — 3,273 — 33 19,490 19,523 
Balances at June 30, 2021— $— 13,415,235 $134 $187,179 $(7,320)$179,993 
See Notes to Consolidated Financial Statements.
6

OFS Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(Dollar amounts in thousands)
Six Months Ended June 30,
20212020
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations$26,615 $(24,502)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized loss on investments10,750 10,013 
Loss on extinguishment of debt2,299 149 
Net unrealized (appreciation) depreciation on investments, net of taxes(33,879)20,919 
Amortization of Net Loan Fees(1,521)(760)
Amendment fees collected97 31 
Payment-in-kind interest and dividend income(943)(1,191)
Accretion of interest income on structured finance notes(4,670)(2,626)
Amortization of debt issuance costs888 867 
Amortization of intangible asset111 98 
Purchase and origination of portfolio investments(128,848)(70,914)
Proceeds from principal payments on portfolio investments100,817 56,276 
Proceeds from sale or redemption of portfolio investments10,294 65,528 
Proceeds from distributions received from structured finance notes6,356 3,290 
Changes in operating assets and liabilities:
Interest receivable247 235 
Interest payable912 (396)
Payable to adviser and affiliates100 (1,412)
Receivable for investment sold— (634)
Payable for investments purchased7,952 (9,293)
Other assets and liabilities249 194 
Net cash provided by (used in) operating activities(2,174)45,872 
Cash flows from financing activities
Distributions paid to stockholders(5,573)(6,728)
Borrowings under revolving lines of credit42,400 72,600 
Repayments under revolving lines of credit(50,400)(77,300)
Repayments of SBA debentures(9,765)(16,110)
Redemption of unsecured notes(98,525)— 
Proceeds from unsecured notes offering, net of discounts121,791 — 
Payment of deferred financing costs(298)— 
Repurchases of common stock under Stock Repurchase Program(5)— 
Net cash used in financing activities(375)(27,538)
Net increase (decrease) in cash(2,549)18,334 
   Cash at beginning of period37,708 13,447 
   Cash at end of period$35,159 $31,781 
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest$7,266 $9,383 
Reinvestment of distributions to stockholders60 96 
 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

See Notes to Consolidated Financial Statements.

7
8
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Non-control/Non-affiliate Investments
Debt and Equity Investments
AAdvantage Loyalty IP Ltd. and American Airlines, Inc. (14) (15) (22)Scheduled Passenger Air Transportation
Senior Secured Loan5.50%(L +4.75%)3/10/20214/28/2028$364 $360 $380 0.2 %
Aegion Corporation (15) (22)Water and Sewer Line and Related Structures Construction
Senior Secured Loan5.50%(L +4.75%)4/1/20215/17/2028632 628 628 0.3 
Allen Media, LLC (14) (15)Cable and Other Subscription Programming
Senior Secured Loan5.65%(L +5.50%)3/2/20212/10/20272,919 2,922 2,926 1.6 
All Star Auto Lights, Inc. (4)Motor Vehicle Parts (Used) Merchant Wholesalers
Senior Secured Loan9.00%(L +8.00%)12/19/20198/20/202415,437 15,260 15,437 8.6 
Autokiniton US Holdings, Inc. (14) (15)Automotive Parts and Accessories Stores
Senior Secured Loan5.00%(L +4.50%)3/26/20214/6/20281,714 1,710 1,730 1.0 
A&A Transfer, LLCConstruction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (15)7.75%(L +6.50%)2/7/20202/7/202516,204 16,028 16,141 9.0 
Senior Secured Loan (Revolver) (5)7.75%(L +6.50%)2/7/20202/7/2025427 396 425 0.2 
16,631 16,424 16,566 9.2 
Ball MetalpackMetal Can Manufacturing
Senior Secured Loan9.75%(L +8.75%)6/8/20217/31/20261,250 1,225 1,225 0.7 
Banijay Entertainment S.A.S. (14) (15) (22)Motion Picture and Video Production
Senior Secured Loan3.84%(L +3.75%)4/5/20213/3/2025997 993 995 0.6 
Bass Pro Group, LLC (14) (15)Sporting Goods Stores
Senior Secured Loan5.00%(L +4.25%)2/26/20212/24/20285,719 5,709 5,746 3.2 
8
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

9
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Baymark Health Services, Inc. (15)Outpatient Mental Health & Sub. Abuse Centers
Senior Secured Loan9.50%(L +8.50%)6/10/20216/11/2028$4,962 $4,888 $4,873 2.7 %
Senior Secured Loan (Delayed Draw) (5)n/m (18)(L +8.50%)6/10/20216/11/2028— (37)(44)— 
4,962 4,851 4,829 2.7 %
Connect U.S. Finco LLC (14) (15) (22)Taxi Service
Senior Secured Loan4.50%(L +3.50%)11/20/201912/11/20261,975 1,975 1,980 1.1 
Constellis Holdings, LLC (10)Other Justice, Public Order, and Safety Activities
Common Equity (20,628 common shares)3/27/2020703 342 0.2 
Convergint Technologies Holdings, LLC (15)Security Systems Services (except Locksmiths)
Senior Secured Loan (14)4.50%(L +3.75%)3/18/20213/31/20282,011 2,001 2,022 1.1 
Senior Secured Loan7.50%(L +6.75%)9/28/20183/30/20297,499 7,480 7,601 4.2 
Senior Secured Loan (Delayed Draw) (5) (14)4.50%(L +3.75%)4/6/20213/31/2028320 318 322 0.2 
9,830 9,799 9,945 5.5 
Corel Inc. (15)Software Publishers
Senior Secured Loan5.14%(L +5.00%)3/2/20217/2/20261,301 1,293 1,287 0.7 
Dexko Global Inc. (15)Motor Vehicle Body Manufacturing
Senior Secured Loan9.25%(L +8.25%)1/28/20217/24/20251,460 1,465 1,460 0.8 
DHX Media Ltd. (14) (15) (22)Motion Picture and Video Production
Senior Secured Loan5.00%(L +4.25%)3/19/20213/18/20282,494 2,446 2,488 1.3 
Diamond Sports Group, LLC (14) (15)Television Broadcasting
Senior Secured Loan3.36%(L +3.25%)11/19/20198/24/20261,965 1,967 1,199 — 
Eblens Holdings, Inc. (20)Shoe Store
Subordinated Loan (11)12.00% cash / 1.00% PIKN/A7/13/20171/13/20239,160 9,071 8,438 4.7 
Common Equity (71,250 Class A units) (10)7/13/2017713 114 0.1 
9,160 9,784 8,552 4.8 
9
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

10
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Electrical Components International, Inc.Current-Carrying Wiring Device Manufacturing
Senior Secured Loan (14) (15)4.37%(L +4.25%)4/8/20216/26/2025$2,952 $2,912 $2,923 1.6 %
Senior Secured Loan8.62%(L +8.50%)4/8/20216/26/20263,000 2,614 2,614 1.5 
5,952 5,526 5,537 3.1 
Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4)Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan7.50% cash / 3.50% PIK(L +7.00%)6/30/20176/30/202217,453 17,349 12,432 6.9 
Preferred Equity (238,095 Series B units) (10)6/30/2017300 — — 
Preferred Equity (13,315 Series C units) (10)8/13/201813 — — 
17,453 17,662 12,432 6.9 
Excelin Home Health, LLC (4)Home Health Care Services
Senior Secured Loan11.50%(L +9.50%)10/25/20184/25/20244,250 4,206 4,250 2.4 
GGC Aerospace Topco L.P.Other Aircraft Parts and Auxiliary Equipment Manufacturing
Common Equity (368,852 Class A units) (10)12/29/2017450 84 — 
Common Equity (40,984 Class B units) (10)12/29/201750 3 — 
500 87 — 
Inergex Holdings, LLCOther Computer Related Services
Senior Secured Loan8.00% cash / 1.0% PIK(L +8.00%)10/1/201810/1/202415,260 15,091 15,260 8.4 
Senior Secured Loan (Revolver) (5) (18)n/m (18)(L +7.00%)10/1/201810/1/2024— (15)— — 
15,260 15,076 15,260 8.4 
Intouch Midco Inc. (15) (22)All Other Professional, Scientific, and Technical Services
Senior Secured Loan4.85%(L +4.75%)12/20/20198/24/20252,300 2,241 2,297 1.3 
Ivanti Software, Inc. (14) (15)Software Publishers
Senior Secured Loan5.75%(L +4.75%)3/26/202112/1/20275,986 6,022 6,001 3.3 
I&I Sales Group, LLCMarketing Consulting Services
Senior Secured Loan (15)9.50%(L +8.50%)12/30/20207/10/20255,285 5,203 5,286 2.9 
Senior Secured Loan (Revolver) (5) (18)n/m (18)(L +8.50%)12/30/20207/10/2025— (2)— — 
5,285 5,201 5,286 2.9 
10
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

11
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
JP Intermediate B, LLC (15)Drugs and Druggists' Sundries Merchant Wholesalers
Senior Secured Loan6.50%(L +5.50%)1/14/202111/15/2025$5,919 $5,675 $5,736 3.2 %
KNS Acquisition Corp. (14) (15)Electronic Shopping and Mail-Order Houses
Senior Secured Loan7.00%(L +6.25%)4/16/20214/21/20275,000 4,958 4,998 2.8 
LogMeIn, Inc. (14) (15)Data Processing, Hosting, and Related Services
Senior Secured Loan4.83%(L +4.75%)3/26/20218/31/20274,994 4,991 4,992 2.8 
McGraw Hill Global Education Holdings, LLC (14) (15)All Other Publishers
Senior Secured Loan5.75%(L +4.75%)4/1/202111/1/20241,995 1,994 2,001 1.1 
Micro Holding Corp (14)Internet Publishing and Broadcasting and Web Search Portals
Senior Secured Loan3.60%(L +3.50%)3/26/20219/15/20242,000 2,003 2,007 1.1 
Milrose Consultants, LLC (4) (8)Administrative Management and General Management Consulting Services
Senior Secured Loan7.60%(L +6.60%)7/16/20197/16/202522,574 22,388 23,026 12.7 
Odyssey Logistics and Technology Corporation (14) (15)Freight Transportation Arrangement
Senior Secured Loan5.00%(L +4.00%)4/5/202110/12/20241,995 1,966 1,972 1.1 
Online Tech Stores, LLC (4) (6)Stationary & Office Supply Merchant Wholesaler
Subordinated Loan10.50% cash / 3.0% PIKN/A2/1/20188/1/202319,823 16,160 94 0.1 
Panther BF Aggregator 2 LP (14) (15) (19)Other Commercial and Service Industry Machinery Manufacturing
Senior Secured Loan3.35%(L +3.25%)11/19/20194/30/20261,817 1,817 1,803 1.0 
11
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

12
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Parfums Holding Company, Inc. (14) (15)Cosmetics, Beauty Supplies, and Perfume Stores
Senior Secured Loan4.10%(L +4.00%)6/25/20196/30/2024$1,534 $1,533 $1,530 0.9 %
Pelican Products, Inc.Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan8.75%(L +7.75%)9/24/20185/1/20266,249 6,249 6,249 3.4 
Peraton Inc. (14) (15)Management Consulting Services
Senior Secured Loan4.50%(L +3.75%)4/2/20212/1/2028748 749 752 0.4 
Pike Corp. (14) (15)Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan3.11%(L +3.00%)9/17/20201/21/2028131 131 131 0.1 
PM Acquisition LLC (20)All Other General Merchandise Stores
Common Equity (499 units) (10) (13)9/30/2017499 1,308 0.7 
Quest Software US Holdings Inc. (14) (15)Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan4.44%(L +4.25%)6/25/20195/16/20251,148 1,145 1,149 0.6 
Resource Label Group, LLCCommercial Printing (except Screen and Books)
Senior Secured Loan9.50%(L +8.50%)6/7/201711/26/20234,821 4,795 4,821 2.7 
RPLF Holdings, LLC (10) (13)Software Publishers
Common Equity (254,110 Class A units)1/17/2018492 791 0.4 
RSA Security (15)Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan (14)5.50%(L +4.75%)4/16/20214/27/2028937 928 937 0.5 
Senior Secured Loan8.50%(L +7.75%)4/16/20214/27/20292,670 2,633 2,633 1.5 
Senior Secured Loan (Delayed Draw) (5)n/m (18)(L +4.75%)4/16/20214/27/2028— — — — 
Senior Secured Loan (Delayed Draw) (5)n/m (18)(L +7.75%)4/16/20214/16/2029— — (21)— 
3,607 3,561 3,549 2.0 
12
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

13
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Sentry Centers Holdings, LLC (10) (13)Convention and Trade Show Organizers
Preferred Equity (2,248 Series A units)9/4/2020$51 $— — %
Preferred Equity (1,603 Series B units)9/4/2020160 28 — 
Common Equity (269 units)9/4/20203 — — 
214 28 — 
Signal Parent, Inc. (15)New Single-Family Housing Construction (except For-Sale Builders)
Senior Secured Loan4.25%(L +3.50%)3/25/20214/3/2028851 842 835 0.5 
SourceHOV Tax, Inc.Other Accounting Services
Senior Secured Loan (4)7.50%(L +6.50%)3/16/20203/16/202519,890 19,728 19,733 11.0 
Senior Secured Loan (Revolver) (5) (18)n/m (18)(L +6.50%)5/17/20213/17/2025— (14)(9)— 
19,890 19,714 19,724 11.0 
Southern Technical Institute, LLC (4) (10)Colleges, Universities, and Professional Schools
Equity appreciation rights6/27/2018— 6,120 3.4 
Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,) (15)Child Day Care Services
Senior Secured Loan8.40%(L +8.25%)7/26/20187/30/20266,399 6,318 5,823 3.1 
SSJA Bariatric Management LLC (15)Offices of Physicians, Mental Health Specialists
Senior Secured Loan6.25%(L +5.25%)8/26/20198/26/20249,825 9,762 9,825 5.5 
Senior Secured Loan6.25%(L +5.25%)12/31/20208/26/20241,061 1,052 1,061 0.6 
Senior Secured Loan (Revolver) (5) (18)n/m (18)(L +5.25%)8/26/20198/26/2024— (4)— — 
10,886 10,810 10,886 6.1 
Stancor, L.P. (4)Pump and Pumping Equipment Manufacturing
Preferred Equity (1,250,000 Class A units), 8% PIK (10)8/19/20141,501 1,300 0.7 
Staples, Inc. (14) (15) (22)Business to Business Electronic Markets
Senior Secured Loan5.18%(L +5.00%)6/24/20194/16/20262,945 2,883 2,875 1.6 
13
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%

(1)Equity ownership may be held in shares or units of companies affiliated with the portfolio company.
(2)The majority of investments that bear interest at a variable rate are indexed to LIBOR (L), and reset monthly, quarterly, or semi-annually. Approximately 11% of the Company's LIBOR referenced investments are subject to a reference rate floor at September 30, 2017, with a weighted average reference rate floor of 1.70%. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at September 30, 2017. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.
(3)
Fair value was determined using significant unobservable inputs for all of the Company's investments. See Note 5 for further details.
(4)The negative amount represents the excess of the par value of an unfunded commitment in excess of its fair value.
(5)Investments (or portion thereof) held by OFS SBIC I, LP. All other investments pledged as collateral under the PWB Credit Facility.
(6)Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company's assets, as defined under Section 55 of the 1940 Act, at the time of acquisition of any additional non-qualifying assets. As of September 30, 2017, 97.47% of the Company's assets were qualifying assets.
(7)
Investment was on non-accrual status as of September 30, 2017, meaning the Company has ceased recognizing all or a portion of income on the investment. See Note 2, Non-accrual loans for further details.
(8)
The fair value of the accrued PIK dividend at September 30, 2017 was $-0-. See Note 2, Dividend income for further details.
(9)The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The reported interest rate of 9.26% at September 30, 2017, includes additional interest of 0.7% per annum as specified under the contractual arrangement among the Company and the co‑lenders.
(10)Non-income producing.






14
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
SeptemberJune 30, 20172021
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
STS Operating, Inc.Industrial Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (14) (15)5.25%(L +4.25%)5/16/201812/11/2024$622 $621 $616 0.3 %
Senior Secured Loan9.00%(L +8.00%)5/15/20184/30/20269,073 9,070 8,933 5.0 
9,695 9,691 9,549 5.3 
Sunshine Luxembourg VII SARL (14) (15) (22)Pharmaceutical Preparation Manufacturing
Senior Secured Loan4.50%(L +3.75%)11/20/201910/1/20261,975 1,975 1,985 1.1 
Tailwind Smith Cooper Intermediate Corporation (14) (15)Fabricated Pipe and Pipe Fitting Manufacturing
Senior Secured Loan5.11%(L +5.00%)2/23/20215/28/20262,587 2,544 2,584 1.4 
Tank Holding Corp. (14) (15)Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan3.60%(L +3.50%)6/24/20193/26/20261,965 1,971 1,955 1.1 
Senior Secured Loan5.75%(L +5.00%)12/18/20203/26/2026891 879 895 0.5 
2,856 2,850 2,850 1.6 
The Escape Game, LLC (4)Other amusement and recreation industries
Senior Secured Loan9.75%(L +8.75%)12/22/201712/31/20212,333 2,329 2,333 1.3 
Senior Secured Loan9.75%(L +8.75%)2/14/202012/22/20227,000 6,979 7,000 3.9 
Senior Secured Loan9.75%(L +8.75%)7/18/201912/22/20227,000 7,000 7,000 3.8 
Senior Secured Loan (Delayed Draw)8.00%(L +7.00%)7/20/201812/31/20214,667 4,665 4,659 2.6 
21,000 20,973 20,992 11.6 
Thryv, Inc. (14) (15)Directory and Mailing List Publishers
Senior Secured Loan9.50%(L +8.50%)2/18/20213/1/20262,314 2,257 2,351 1.3 
Truck Hero, Inc. (14) (15)Truck Trailer Manufacturing
Senior Secured Loan4.50%(L +3.75%)4/1/20211/31/2028748 747 749 0.4 
TruGreen Limited PartnershipLandscaping Services
Senior Secured Loan9.25%(L +8.50%)5/13/202111/2/20284,500 4,639 4,639 2.6 
14
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2021
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
United Biologics Holdings, LLC (4) (10)Medical Laboratories
Preferred Equity (151,787 units)4/16/2013$9 $12 — %
Warrants (29,374 units)7/26/20123/5/2022 (12)82 5 — 
91 17 — 
United Natural Foods (14) (15) (22)General Line Grocery Merchant Wholesalers
Senior Secured Loan3.60%(L +3.50%)6/9/202010/22/2025283 273 283 0.2 
West Corporation (14) (15)All Other Telecommunications
Senior Secured Loan4.50%(L +3.50%)2/26/202110/10/2024887 872 862 0.5 
Total Debt and Equity Investments$307,467 $306,248 $290,226 161.0 %
Structured Finance Note Investments (9) (16) (22)
Apex Credit CLO 2020 Ltd. (7)
Subordinated Notes13.26%11/16/202011/19/203111,080 9,268 9,534 5.3 
Apex Credit CLO 2021 Ltd (7)
Subordinated Notes14.53%5/28/20217/18/20348,630 7,267 7,288 4.0 
Dryden 53 CLO, LTD. (7)
Income Notes23.16%10/26/20201/15/20312,700 1,704 1,780 1.0 
Subordinated Notes23.13%10/26/20201/15/20312,159 1,363 1,424 0.8 
4,859 3,067 3,204 1.8 
Dryden 76 CLO, Ltd. (7)
Subordinated Notes16.20%9/27/201910/20/20322,750 2,215 2,385 1.3 
Elevation CLO 2017-7, Ltd. (7)
Subordinated Notes12.38%2/6/20197/15/203010,000 6,577 5,678 3.2 
Flatiron CLO 18, Ltd. (7)
Subordinated Notes19.14%1/2/20194/17/20319,680 7,111 7,369 4.1 
Madison Park Funding XXIII, Ltd. (7)
Subordinated Notes23.28%1/8/20207/27/204710,000 6,468 7,402 4.1 
15
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2021
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Madison Park Funding XXIX, Ltd. (7)
Subordinated Notes17.08%12/22/202010/18/2047$9,500 $7,256 $7,373 4.1 %
Monroe Capital MML CLO X, Ltd.
Mezzanine bond - Class E10.82%(L +8.85%)8/7/20208/20/20311,000 943 1,007 0.6 
Park Avenue Institutional Advisers CLO Ltd 2021-1
Mezzanine bond - Class E8.74%(L +7.30%)1/26/20211/20/20341,000 972 997 0.6 
Octagon Investment Partners 39, Ltd. (7)
Subordinated Notes18.62%1/23/202010/20/20307,000 4,966 5,182 2.9 
Redding Ridge 4 (7)
Subordinated Notes17.77%3/4/20214/15/20301,300 1,152 1,168 0.6 
Regatta II Funding
Mezzanine bond - Class DR213.83%(L +6.95%)6/5/20201/15/2029800 716 789 0.4 
THL Credit Wind River 2019‐3 CLO Ltd (7)
Subordinated Notes10.68%4/5/20194/15/20317,000 5,680 4,806 2.7 
Trinitas CLO VIII (7)
Subordinated Notes22.57%3/4/20217/20/20315,200 3,205 3,360 1.9 
Wellfleet CLO 2018-2 (7)
Subordinated Notes21.08%3/4/202110/20/20311,000 669 703 0.4 
Total Structured Finance Note Investments$90,799 $67,532 $68,245 38.0 %
Total Non-control/Non-affiliate Investments$398,266 $373,780 $358,471 199.0 %
Affiliate Investments
3rd Rock Gaming Holdings, LLC (20)Software Publishers
Senior Secured Loan (6)8.50% cash / 1.0% PIK(L +7.50%)3/13/20183/12/202319,305 17,333 6,975 3.9 
Common Equity (2,547,250 units) (10) (13)3/13/20182,547 — — 
19,305 19,880 6,975 3.9 
16
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2021
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
Chemical Resources Holdings, Inc. (20)Custom Compounding of Purchased Resins
Senior Secured Loan (4) (8)8.77%(L +7.27%)1/25/20191/25/2024$13,743 $13,648 $13,956 7.8 %
Common Equity (1,832 Class A shares) (10) (13)1/25/20191,814 3,400 1.9 
13,743 15,462 17,356 9.7 
Contract Datascan Holdings, Inc. (4) (20)Office Machinery and Equipment Rental and Leasing
Preferred Equity (3,061 Series A shares), 10% PIK8/5/20155,849 2,787 1.5 
Common Equity (11,273 shares) (10)6/28/2016104 41 — 
5,953 2,828 1.5 
DRS Imaging Services, LLC (20)Data Processing, Hosting, and Related Services
Common Equity (1,135 units) (10) (13)3/8/20181,135 1,259 0.7 
Master Cutlery, LLC (4) (10) (20)Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan (6) (11)13.00%N/A4/17/20157/20/20227,123 4,725 687 0.4 
Preferred Equity (3,723 Series A units), 8% PIK4/17/20153,483 — — 
Common Equity (15,564 units)4/17/2015— — — 
7,123 8,208 687 0.4 
NeoSystems Corp. (4) (20)Other Accounting Services
Preferred Equity (521,962 convertible shares), 10% PIK8/14/20141,985 3,255 1.8 
Pfanstiehl Holdings, Inc. (4) (20) (21)Pharmaceutical Preparation Manufacturing
Common Equity (400 Class A shares)1/1/2014217 49,236 27.4 
Professional Pipe Holdings, LLC (19)Plumbing, Heating, and Air-Conditioning Contractors
Senior Secured Loan9.75% cash / 1.50% PIK(L +10.25%)3/23/20183/23/20235,742 5,692 5,518 3.1 
Common Equity (1,414 Class A units) (10)3/23/20181,414 849 0.5 
5,742 7,106 6,367 3.6 
TalentSmart Holdings, LLC (20)Professional and Management Development Training
Common Equity (1,595 Class A shares) (10) (13)10/11/20191,595 1,011 0.6 
17
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2021
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above Index (2)Initial Acquisition DateMaturityPrincipal AmountAmortized CostFair Value (3)Percent of Net Assets
TRS Services, LLC (4) (10) (20)Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
Preferred Equity (2,088,305 Class A units), 11% PIK12/10/2014$572 $867 0.5 %
Common Equity (3,000,000 units) (10)12/10/2014— — — 
572 867 0.5 
TTG Healthcare, LLC (20)Diagnostic Imaging Centers
Senior Secured Loan (4)8.50%(L +7.50%)3/1/201911/28/202519,505 19,318 19,612 10.9 
Preferred Equity ( 2,309 Class B units) (10) (13)3/1/20192,309 4,040 2.2 
19,505 21,627 23,652 13.1 
Total Affiliate Investments$65,418 $83,740 $113,493 63.2 %
Control Investment
MTE Holding Corp. (4) (19)Travel Trailer and Camper Manufacturing
Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.)11.00% cash / 5.00% PIK(L +15.00%)11/25/201511/25/20217,988 7,988 7,988 4.4 
Common Equity (554 shares)11/25/20153,069 4,074 2.3 
7,988 11,057 12,062 6.7 
Total Control Investment$7,988 $11,057 $12,062 6.7 %
Total Investments$471,672 $468,577 $484,026 268.9 %

(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)Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L) at June 30, 2021, and reset monthly, quarterly, or semi-annually. Variable-rate loans with an aggregate cost of $339,970 include LIBOR reference rate floor provisions of generally 0.75% to 1.75%; at June 30, 2021, the reference rate on such instruments was generally below the stated floor provisions. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at June 30, 2021. 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)Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's investments and are considered Level 3 under GAAP. See Note 5 for further details.
(4)Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company.
(5)Subject to unfunded commitments. See Note 6 for further details.
(6)Investment was on non-accrual status as of June 30, 2021, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details.
(7)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.
18
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)
June 30, 2021
(Dollar amounts in thousands)

(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 table below provides additional details as of June 30, 2021:
Portfolio CompanyReported Interest RateInterest Rate per Credit AgreementAdditional Interest per Annum
Chemical Resources Holdings, Inc.8.77%7.50%1.27%
Milrose Consultants, LLC7.60%7.00%0.60%

(9)The rate disclosed is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amount and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized. Maturity date represents the contractual maturity date of the structured finance notes. Projected cash flows, including the projected amount and timing of terminal principal payments which may be projected to occur prior to the contractual maturity date, were utilized in deriving the effective yield of the investments.
(10)Non-income producing.
(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 June 30, 2021:
(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:
Portfolio CompanyInvestment 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%
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 SecuredSubordinated Loan
0% to 13.00%
13.00% to 0%
13.00%
United Biologics Holdings, LLC
Senior Secured Loan
0% or 2.00%
14.00% or 12.00%
2.00%13.00%

(12)Represents expiration date of the warrants.
(13)Investment held by a wholly-owned subsidiary subject to income tax. See Note 2, Income taxes, for further details.
(14)The PIK provision is reset at the beginning of each interest period equal to the excess of reference rate over the reference rate floor of 1.00%. The PIK interest rate in the schedule represents the current PIK interest rate in effect.
(12)Represents expiration date of the warrants.
(13)All or portion of investment held by a wholly-owned subsidiary of the Company 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 5 for further details.
(15)Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any 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 subordinated debt investments.
(17)Reserved.
(18)Not meaningful as there is no outstanding balance on the revolver. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income.
(19)The Company holds at least one seat on the portfolio company’s board of directors.
(20)The Company has an observer seat on the portfolio company’s board of directors.
(21)Portfolio company represents greater than 5% of total assets at June 30, 2021.
(22)Non-qualifying assets under Section 55(a) of the 1940 Act. As defined under Section 55 of the 1940 Act, qualifying assets must represent at least 70% of the Company's assets at the time of acquisition of any additional non-qualifying assets. As of June 30, 2021, approximately 85% of the Company's assets were qualifying assets.

See Notes to Consolidated Financial Statements.

19
15
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments
December 31, 20162020
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Non-control/Non-affiliate Investments
All Star Auto Lights, Inc. (4)Motor Vehicle Parts (Used) Merchant Wholesalers
Senior Secured Loan8.50%(L +7.50%)12/19/20198/20/2024$14,293 $14,167 $13,581 8.5 %
A&A Transfer, LLCConstruction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (15)8.25%(L +6.50%)2/7/20202/7/202516,632 16,427 16,798 10.6 
Senior Secured Loan (Revolver) (5)n/m (18)(L +6.50%)2/7/20202/7/2025— (35)(21)— 
16,632 16,392 16,777 10.6 
Bass Pro Group, LLC (14) (15)Sporting Goods Stores
Senior Secured Loan5.75%(L +5.00%)6/24/20199/25/20242,954 2,907 2,968 1.9 
BayMark Health Services, Inc.Outpatient Mental Health and Substance Abuse Centers
Senior Secured Loan9.25%(L +8.25%)3/22/20183/1/20254,000 3,976 4,000 2.5 
Community Intervention Services, Inc. (4) (6) (11)Outpatient Mental Health and Substance Abuse Centers
Subordinated  Loan7.00% cash / 6.00% PIKN/A7/16/20151/16/202110,225 7,639 105 0.1 
Confie Seguros Holdings II Co.Insurance Agencies and Brokerages
Senior Secured Loan8.73%(L +8.50%)7/7/201511/1/20259,678 9,544 9,302 5.9 
Connect U.S. Finco LLC (14) (15)Taxi Service
Senior Secured Loan5.50%(L +4.50%)11/20/201912/11/20261,985 1,976 1,997 1.3 
Constellis Holdings, LLC (10)Other Justice, Public Order, and Safety Activities
Common Equity (20,628 common shares)3/27/2020703 676 0.4 
Convergint Technologies Holdings, LLCSecurity Systems Services (except Locksmiths)
Senior Secured Loan7.50%(L +6.75%)9/28/20182/2/20263,481 3,437 3,390 2.1 
Custom Truck One Source (14) (15)Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing
Senior Secured Loan4.40%(L +4.25%)9/30/20204/18/2025497 496 499 0.3 
20
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

16
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Diamond Sports Group, LLC (14) (15)Television Broadcasting
Senior Secured Loan3.40%(L +3.25%)11/19/20198/24/2026$1,975 $1,977 $1,758 1.1 %
DuPage Medical Group (15)Offices of Physicians, Mental Health Specialists
Senior Secured Loan7.75%(L +7.00%)8/22/20178/15/202510,098 10,159 10,098 6.4 
Eblens Holdings, Inc. (20)Shoe Store
Subordinated  Loan (11)12.00% cash / 1.00% PIKN/A7/13/20171/13/20239,114 9,035 4,368 2.7 
Common Equity (71,250 Class A units) (10)7/13/2017713 — — 
9,114 9,748 4,368 2.7 
Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4)Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan7.50% cash / 3.50% PIK(L +7.50%)6/30/20176/30/202217,150 17,055 12,668 8.0 
Preferred Equity (238,095 Series B units) (10)6/30/2017300 — — 
Preferred Equity (13,315 Series C units) (10)8/13/201813 — — 
17,150 17,368 12,668 8.0 
Excelin Home Health, LLCHome Health Care Services
Senior Secured Loan11.50%(L +9.50%)10/25/20184/25/20244,250 4,199 4,250 2.7 
GGC Aerospace Topco L.P.Other Aircraft Parts and Auxiliary Equipment Manufacturing
Senior Secured Loan9.75%(L +9.50%)12/29/20179/8/20245,000 4,931 4,102 2.6 
Common Equity (368,852 Class A units) (10)12/29/2017450 166 0.1 
Common Equity (40,984 Class B units) (10)12/29/201750 7 — 
5,000 5,431 4,275 2.7 
Inergex Holdings, LLCOther Computer Related Services
Senior Secured Loan8.00%(L +7.00%)10/1/201810/1/202416,422 16,265 15,913 9.9 
Senior Secured Loan (Revolver) (5)n/m (18)(L +7.00%)10/1/201810/1/2024— (18)87 0.1 
16,422 16,247 16,000 10.0 
Institutional Shareholder Services, Inc.Administrative Management and General Management Consulting Services
Senior Secured Loan8.75%(L +8.50%)3/4/20193/5/20276,244 6,099 6,244 3.9 
Intouch Midco Inc. (15)All Other Professional, Scientific, and Technical Services
Senior Secured Loan4.90%(L +4.75%)12/20/20198/24/20251,980 1,921 1,905 1.2 
21
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
                 

17
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
I&I Sales Group, LLCMarketing Consulting Services
Senior Secured Loan (15)9.50%(L +8.50%)12/30/20207/10/2025$5,325 $5,232 $5,232 3.3 %
Senior Secured Loan (Revolver) (5)n/m (18)(L +8.50%)12/30/20207/10/2025— (3)(3)— 
5,325 5,229 5,229 3.3 
Milrose Consultants, LLC (4) (8)Administrative Management and General Management Consulting Services
Senior Secured Loan7.62%(L +6.62%)7/16/20197/16/202522,574 22,404 22,485 14.0 
My Alarm Center, LLC (10)Security Systems Services (except Locksmiths)
Preferred Equity (335 Class Z units) (13)9/12/2018325 97 0.1 
Preferred Equity (1,485 Class A units), 8% PIK (4) (13)7/14/20171,571 — — 
Preferred Equity (1,198 Class B units) (4)7/14/20171,198 — — 
Common Equity (64,149 units) (4) (13)7/14/2017— — — 
3,094 97 0.1 
Online Tech Stores, LLC (4) (6)Stationery and Office Supplies Merchant Wholesalers
Subordinated Loan13.50% PIKN/A2/1/20188/1/202318,360 16,129 2,426 1.5 
Panther BF Aggregator 2 LP (14) (15) (19)Other Commercial and Service Industry Machinery Manufacturing
Senior Secured Loan3.65%(L +3.50%)11/19/20194/30/20261,939 1,925 1,936 1.2 
Parfums Holding Company, Inc.Cosmetics, Beauty Supplies, and Perfume Stores
Senior Secured Loan (14) (15)4.23%(L +4.00%)6/25/20196/30/20241,537 1,536 1,530 1.0 
Senior Secured Loan9.75%(L +8.75%)11/16/20176/30/20255,171 5,202 5,171 3.3 
6,708 6,738 6,701 4.3 
Pelican Products, Inc.Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan8.75%(L +7.75%)9/24/20185/1/20266,055 6,059 5,994 3.8 
Pike Corp. (14) (15)Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan3.14%(L +3.00%)9/17/20207/24/2026469 469 469 0.3 
22
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

18
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
PM Acquisition LLC (20)All Other General Merchandise Stores
Senior Secured Loan11.50% cash / 2.50% PIKN/A9/30/201710/29/2021$4,780 $4,753 $4,780 3.0 %
Common Equity (499 units) (10) (13)9/30/2017499 280 0.2 
4,780 5,252 5,060 3.2 
Quest Software US Holdings Inc. (14) (15)Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan4.46%(L +4.25%)6/25/20195/16/20251,970 1,955 1,942 1.2 
Resource Label Group, LLCCommercial Printing (except Screen and Books)
Senior Secured Loan9.50%(L +8.50%)6/7/201711/26/20234,821 4,789 4,812 3.0 
Rocket Software, Inc. (15)Software Publishers
Senior Secured Loan8.46%(L +8.25%)11/20/201811/28/20266,275 6,190 6,241 3.9 
RPLF Holdings, LLC (10) (13)Software Publishers
Common Equity (254,110 Class A units)1/17/2018492 605 0.4 
Sentry Centers Holdings, LLC (10) (13)Other Professional, Scientific, and Technical Services
Preferred Equity (2,248 Series A units)9/4/202051 47 — 
Preferred Equity (1,603 Series B units)9/4/2020160 160 0.1 
Common Equity (269 units)9/4/20203 3 — 
214 210 0.1 
SkyMiles IP Ltd. and Delta Air Lines, Inc. (14) (15)Scheduled Passenger Air Transportation
Senior Secured Loan4.75%(L +3.75%)9/15/202010/20/2027500 495 520 0.3 
SourceHOV Tax, Inc. (4) (8)Other Accounting Services
Senior Secured Loan7.61%(L +6.11%)3/16/20203/16/202519,892 19,742 19,988 12.6 
Southern Technical Institute, LLC (4) (10)Colleges, Universities, and Professional Schools
Equity appreciation rights6/27/2018— 4,295 2.7 
23
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

19
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.)Child Day Care Services
Senior Secured Loan8.50%(L +8.25%)7/26/20187/30/2026$5,216 $5,178 $4,656 2.9 %
SSJA Bariatric Management LLC (15)Offices of Physicians, Mental Health Specialists
Senior Secured Loan6.00%(L +5.00%)8/26/20198/26/20249,875 9,803 9,647 6.1 
Senior Secured Loan6.25%(L +5.25%)12/31/20208/26/20241,067 1,056 1,042 0.7 
Senior Secured Loan (Revolver) (5)n/m (18)(L +5.00%)8/26/20198/26/2024— (5)15 — 
10,942 10,854 10,704 6.8 
Stancor, L.P. (4)Pump and Pumping Equipment Manufacturing
Preferred Equity (1,250,000 Class A units), 8% PIK (10)8/19/20141,501 1,281 0.8 
Staples, Inc. (14) (15)Business to Business Electronic Markets
Senior Secured Loan5.21%(L +5.00%)6/24/20194/16/20262,960 2,891 2,875 1.8 
STS Operating, Inc.Industrial Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (14) (15)5.25%(L +4.25%)5/16/201812/11/2024625 626 601 0.4 
Senior Secured Loan9.00%(L +8.00%)5/15/20184/30/20269,073 9,070 8,578 5.4 
9,698 9,696 9,179 5.8 
Sunshine Luxembourg VII SARL (14) (15)Pharmaceutical Preparation Manufacturing
Senior Secured Loan5.00%(L +4.00%)11/20/20199/25/20261,980 1,988 1,992 1.3 
Tank Holding Corp. (15)Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan (14)5.50%(L +4.00%)6/24/20193/26/20261,975 1,981 1,942 1.2 
Senior Secured Loan3.40%(L +3.25%)12/18/20203/26/2026896 882 882 0.6 
2,871 2,863 2,824 1.8 
The Escape Game, LLC (4)Other amusement and recreation industries
Senior Secured Loan9.75%(L +8.75%)7/18/201912/22/20227,000 6,973 6,647 4.2 
Senior Secured Loan9.75%(L +8.75%)12/22/201712/31/20212,333 2,329 2,216 1.4 
Senior Secured Loan8.00%(L +7.00%)7/20/201812/31/20214,667 4,665 4,463 2.8 
Senior Secured Loan (Delayed Draw)9.75%(L +8.75%)7/20/201812/22/20227,000 7,000 6,647 4.2 
21,000 20,967 19,973 12.6 
24
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
                 

20
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 20162020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Truck Hero, Inc. (15)Truck Trailer Manufacturing
Senior Secured Loan9.25%(L +8.25%)5/30/20174/21/2025$8,174 $8,118 $8,174 5.1 %
United Biologics Holdings, LLC (4) (10)Medical Laboratories
Preferred Equity (151,787 units)4/16/20139 26 — 
Warrants (29,374 units)7/26/20123/5/2022 (12)82 12 — 
91 38 — 
United Natural Foods (14) (15)General Line Grocery Merchant Wholesalers
Senior Secured Loan4.40%(L +4.25%)6/9/202010/22/2025286 275 284 0.2 
Wastebuilt Environmental Solutions, LLC (4)Industrial Supplies Merchant Wholesalers
Senior Secured Loan10.25%(L +8.75%)10/11/201810/11/20247,000 6,908 5,476 3.4 
Weight Watchers International, Inc. (14) (15)Diet and Weight Reducing Centers
Senior Secured Loan5.50%(L +4.75%)6/10/202011/29/2024477 477 479 0.3 
Xperi (14) (15)Semiconductor and Related Device Manufacturing
Senior Secured Loan4.15%(L +4.00%)6/1/20206/1/2025433 399 434 0.3 
Total Debt and Equity Investments$306,683 $307,768 $272,240 171.3 %
Structured Finance Note Investments
Apex Credit CLO 2020 (7)
Subordinated Notes14.16% (9)11/16/202011/19/2031 (17)11,080 9,461 (16)10,006 6.3 
Dryden 53 CLO, LTD. (7)
Income Notes16.68% (9)10/26/20201/15/2031 (17)2,700 1,779 1,967 1.2 
Subordinated Notes16.68% (9)10/26/20201/15/2031 (17)2,159 1,423 (16)1,573 1.0 
4,859 3,202 3,540 2.2 
Dryden 76 CLO, Ltd. (7)
Subordinated Notes18.68% (9)9/27/201910/20/2032 (17)2,750 2,282 (16)2,235 1.4 
25
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%

(1)Equity ownership may be held in shares or units of companies affiliated with the portfolio company.
(2)The majority of investments that bear interest at a variable rate are indexed to LIBOR (L) or Prime (P), and reset monthly, quarterly, or semi-annually. Substantially all of the Company's LIBOR referenced investments are subject to a reference rate floor at December 31, 2016, with a weighted average reference rate floor of 1.11%. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, 2016. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision.
(3)
Fair value was determined using significant unobservable inputs for all of the Company's investments. See Note 5 for further details.
(4)The negative fair value is the result of the unfunded commitment being below par.
(5)Investments held by OFS SBIC I LP. All other investments pledged as collateral under the PWB Credit Facility.
(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, meaning the Company has ceased recognizing all or a portion of income on the investment. See Note 2, Non-accrual loans for further details.
(8)
The fair value of the accrued PIK dividend at December 31, 2016 was $-0-. See Note 2, Dividend income for further details.
(9)The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The reported interest rate of 11.33% at December 31, 2016, includes additional interest of 2.08% per annum as specified under the contractual arrangement among the Company and the co‑lenders.
(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, 20162020
(Dollar amounts in thousands)


Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Elevation CLO 2017-7, Ltd. (7)
Subordinated Notes12.32% (9)2/6/20197/15/2030 (17)$10,000 $ 6,955 (16)$6,226 3.9 %
Flatiron CLO 18, Ltd. (7)
Subordinated Notes20.73% (9)1/2/20194/17/2031 (17)9,680 7,265 (16)7,702 4.8 
Madison Park Funding XXIII, Ltd. (7)
Subordinated Notes21.99% (9)1/8/20207/27/2047 (17)10,000 6,654 (16)7,129 4.5 
Madison Park Funding XXIX, Ltd. (7)
Subordinated Notes14.22% (9)12/22/202010/18/2047 (17)9,500 7,529 (16)7,569 4.8 
Monroe Capital MML CLO X, LTD.
Mezzanine bond - Class E9.08%(L +8.85%)8/7/20208/20/2031 (17)863 802 838 0.5 
Octagon Investment Partners 39, Ltd. (7)
Subordinated Notes20.81% (9)1/23/202010/20/2030 (17)7,000 5,173 (16)5,493 3.5 
Park Avenue Institutional Advisers CLO 2017-1
Mezzanine bond - Class D6.44%(L +6.22%)6/5/202011/14/2029 (17)100 83 95 0.1 
Regatta II Funding
Mezzanine bond - Class DR27.19%(L +6.95%)6/5/20201/15/2029 (17)800 695 768 0.5 
THL Credit Wind River 2019‐3 CLO Ltd. (7)
Subordinated Notes14.69% (9)4/5/20194/15/2031 (17)7,000 5,759 (16)4,824 3.0 
Total Structured Finance Note Investments$73,632 $55,860 $56,425 35.5 %
Total Non-control/Non-affiliate Investments$380,315 $363,628 $328,665 206.8 %
26
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 2020
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Affiliate Investments
3rd Rock Gaming Holdings, LLC (20)Software Publishers
Senior Secured Loan (6)8.50% cash / 1.00% PIK(L +7.50%)3/13/20183/12/2023$20,858 $19,570 $9,258 5.8 %
Common Equity (2,547,250 units) (10) (13)3/13/20182,547 — — 
20,858 22,117 9,258 5.8 
Chemical Resources Holdings, Inc. (20)Custom Compounding of Purchased Resins
Senior Secured Loan (4)(8)9.22%(L +7.72%)1/25/20191/25/202413,743 13,630 13,744 8.6 
Common Equity (1,832 Class A shares) (10) (13)1/25/20191,814 3,420 2.2 
13,743 15,444 17,164 10.8 
Contract Datascan Holdings, Inc. (4)(20)Office Machinery and Equipment Rental and Leasing
Preferred Equity (3,061 Series A shares) 10% PIK8/5/20155,849 2,690 1.7 
Common Equity (11,273 shares) (10)6/28/2016104 46 — 
5,953 2,736 1.7 
DRS Imaging Services, LLC (20)Data Processing, Hosting, and Related Services
Common Equity (1,135 units) (10) (13)3/8/20181,135 1,749 1.1 
Master Cutlery, LLC (4) (10)(20)Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan (6)13.00% (11)N/A4/17/20157/20/20226,759 4,764 346 0.2 
Preferred Equity (3,723 Series A units), 8% PIK4/17/20153,483 — — 
Common Equity (15,564 units)4/17/2015— — — 
6,759 8,247 346 0.2 
NeoSystems Corp. (4)(20)Other Accounting Services
Preferred Equity (521,962 convertible shares) 10% PIK8/14/20141,879 2,250 1.4 
Pfanstiehl Holdings, Inc. (4)(20)(21)Pharmaceutical Preparation Manufacturing
Common Equity (400 Class A shares)1/1/2014217 36,221 22.8 
27
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 2020
(Dollar amounts in thousands)

Portfolio Company (1)
Investment Type		IndustryInterest Rate (2)Spread Above
Index (2)		Initial Acquisition DateMaturityPrincipal
Amount		Amortized CostFair Value (3)Percent of
Net Assets
Professional Pipe Holdings, LLC (19)Plumbing, Heating, and Air-Conditioning Contractors
Senior Secured Loan9.75% cash / 1.50% PIK(L +8.75%)3/23/20183/23/2023$6,263 $6,193 $6,086 3.8 %
Common Equity (1,414 Class A units) (10)3/23/20181,414 1,208 0.8 
6,263 7,607 7,294 4.6 
TalentSmart Holdings, LLC (20)Professional and Management Development Training
Common Equity (1,595,238 Class A shares) (10) (13)10/11/20191,595 1,306 0.8 
TRS Services, LLC (4)(20)Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
Preferred Equity (1,937,191 Class A units), 11% PIK12/10/2014— 915 0.6 
Common Equity (3,000,000 units) (10)12/10/2014572 — — 
572 915 0.6 
TTG Healthcare, LLC (20)Diagnostic Imaging Centers
Senior Secured Loan (4)8.50%(L +7.50%)3/1/201911/28/202519,603 19,409 19,530 12.3 
Preferred Equity ( 2,309 Class B units) (10) (13)3/1/20192,309 4,077 2.6 
19,603 21,718 23,607 14.9 
Total Affiliate Investments$67,226 $86,484 $102,846 64.7 %
Control Investment
MTE Holding Corp. (4)(19)Travel Trailer and Camper Manufacturing
Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.)11.00% cash / 5.00% PIK(L +10.00%)11/25/201511/25/20217,842 7,842 7,822 4.9 
Common Equity (554 shares) (10)11/25/20153,069 2,990 1.9 
7,842 10,911 10,812 6.8 
Total Control Investment$7,842 $10,911 $10,812 6.8 %
Total Investments$455,383 $461,023 $442,323 278.3 %
(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.
28
OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued
December 31, 2020
(Dollar amounts in thousands)

(2)Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L), generally between 0.75% and 1.0% at December 31, 2020, and reset monthly, quarterly, or semi-annually. Variable-rate loans with an aggregate cost of $328,736 include LIBOR reference rate floor provisions of generally 0.75% to 1.0% at December 31, 2020, the reference rate on such instruments was generally below the stated floor provisions. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, 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)Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's investments and are considered Level 3 under GAAP. See Note 5 for further details.
(4)Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company.
(5)Subject to unfunded commitments. See Note 6 for further details.
(6)Investment was on non-accrual status as of December 31, 2020, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details.
(7)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 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 table below provides additional details as of December 31, 2020:
Portfolio CompanyReported Interest RateInterest Rate per Credit AgreementAdditional Interest per Annum
Chemical Resources Holdings, Inc.9.17%7.50%1.67%
Milrose Consultants, LLC7.62%7.00%0.62%
SourceHOV Tax, Inc.7.61%7.00%0.61%
(9)The rate disclosed is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amount and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized.
(10)Non-income producing.
(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, 2020:
Portfolio CompanyInvestment Type
Range of PIK

Option
Range of Cash

Option
Maximum PIK

Rate Allowed
Community Intervention Services, Inc.Subordinated Loan0% 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 Loan0% or 2.00%1.00%10.50% or % 8.50%2.00%
United Biologics Holdings, LLCSenior Secured Loan0% or 2.00%14.00%13.00% or 12.00%2.001.00%
Master Cutlery, LLC%Subordinated Loan0% to 13.00%13.00% to 0%13.00%

(13)Represents expiration date of the warrants.

(12)Represents expiration date of the warrants.
(13)All or portion of investment held by a wholly-owned subsidiary of the Company 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 5 for further details.
(15)Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot 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 subordinated debt investments.
(17)Maturity date represents the contractual maturity date of the Structured Finance Notes. Projected cash flows, including the projected amount and timing of terminal principal payments which may be projected to occur prior to the contractual maturity date, were utilized in deriving the effective yield of the investments.
(18)Not meaningful as there is no outstanding balance on the revolver. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income.
(19)The Company holds at least one seat on the portfolio company’s board of directors.
(20)The Company has an observer seat on the portfolio company’s board of directors.
(21)Portfolio company represents greater than 5% of total assets at December 31, 2020.

See Notes to Consolidated Financial Statements.

29
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, and that primarily invests in Structured Finance Notes. Additionally, OFS Advisor provides sub-advisory services to CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust and CIM Real Assets & Credit Fund, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.
The Company may make investments directly or through one of its subsidiaries: SBIC I LP, itsOFSCC-FS or OFSCC-MB.
SBIC I LP is an investment company subsidiary licensed under the SBASBA's small business investment company program. The Company is limited to 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 is repaying over time its outstanding SBA debentures prior to their scheduled maturity dates.
In April 2017,OFSCC-FS, an indirect wholly owned subsidiary of the Company, issued 3,625,000 sharesis a special-purpose vehicle formed in April 2019 for the purpose of acquiring senior secured loan investments. OFSCC-FS has debt financing through its common stock inBNP Facility, which provides OFSCC-FS with borrowing capacity of up to $150,000.
OFSCC-MB is 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 exercisewholly-owned subsidiary taxed under subchapter C of the over-allotment option. OFS Advisor paid all of the underwriting discountsCode 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,generally holds the Company's net asset value per share at the time of the Offering. All payments made by OFS Advisorequity investments in connection with the Offeringportfolio companies that 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. Certain amounts inas of and for the prior period financial statements have been reclassified to conform to the current year presentation.periods presented. 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, 2016.2020. 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.Company's consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Investments:Reclassifications: The Company applies fair value accountingCertain prior period amounts have been reclassified to conform to the current period presentation 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)consolidated financial statements and the lowest priority is given to unobservable valuation inputs (Level 3). The availabilityaccompanying notes thereto. Reclassifications did not impact net increase in net assets resulting from operations, total assets, total liabilities or total net assets, or consolidated statements of observable inputs can vary significantlychanges in net assets and is affected by many factors, including the typeconsolidated statements of product, whether the product is new to the market, whether the product is traded on an active exchange or in the secondary market, and 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.cash flows classifications.
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
30
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
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.
New Accounting Standards: due to credit risk. The following table discusses ASUs issued byamount of loss due to credit risk from debt investments, if borrowers completely fail to perform according to the FASB adoptedterms of the contracts, and the collateral or yetother security for those instruments proved to be adopted byof no value to the Company, during 2017:is equal to the sum of the Company's recorded investment in debt instruments and the unfunded loan commitments disclosed in Note 6.
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 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 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 Corporation 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.
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, 2017.1, 2021. 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
Effective January 1, 2020, OFS Capital Corporation and Subsidiaries

NotesAdvisor agreed to Financial Statements
(Dollar amounts in thousands, except per share data)


Thefurther reduce the base management fee attributable to all of the OFSCC-FS Assets, without regard to the Company’s asset coverage. The agreement reduced the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is payable quarterly in arrearsrenewable on an annual basis and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. This agreement was $1,310 and $3,726renewed for the three and nine months ended September 30, 2017, respectively and $1,120 and $3,324, for the three and nine months ended September 30, 2016.2021 calendar year on February 16, 2021.
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 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 to the Company during the three months ended June 30, 2017.
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,“catch-
31
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
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 intois party to a license agreement with OFSAM under which OFSAM has agreed to grantgranted 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, 2021, affiliates of OFS Advisor held 3,037,349 shares of common stock, which is approximately 23% of the Company's outstanding shares of common stock.
32
OFS Capital Corporation and $982Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Expenses recognized under agreements with OFS Advisor and OFS Services and distributions paid to affiliates for the three and ninesix months ended SeptemberJune 30, 2017, respectively. For the three2021 and nine months ended September 30, 2016, administration fee expense was $255 and $1,009, respectively. 2020, are presented below:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Base management fees$1,876 $1,869 $3,710 $3,888 
Incentive fees:
Income Incentive Fee809 215 809 1,098 
Incentive fee waiver— — — (441)
Administration fee expense439 500 1,007 1,020 
Distributions paid to affiliates668 503 1,276 1,510 
Note 4. Investments
As of SeptemberJune 30, 2017,2021, the Company had loans to 3761 portfolio companies, of which 76%95% were senior secured loans and 24%5% were subordinated loans, at fair value, as well as equity investments in 178 of these portfolio companies. The Company also held an equity investmentinvestments in three14 portfolio companies in which it did not hold a debt investment.investment and 16 investments in Structured Finance Notes. At SeptemberJune 30, 2017,2021, the Company's investments consisted of the following:
Percentage of TotalPercentage of Total
Amortized Cost Percentage of Net Assets Fair Value Percentage of Net AssetsAmortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Senior secured debt investments(1)$196,477

104.1% $194,153
 102.9%$331,982 70.8 %184.4 %$317,648 65.6 %176.5 %
Subordinated debt investments70,768

37.5
 62,942
 33.4
Subordinated debt investments37,944 8.1 21.1 17,207 3.6 9.6 
Preferred equity28,492

15.1
 28,499
 15.1
Preferred equity16,232 3.5 9.0 12,289 2.5 6.8 
Common equity and warrants6,321

3.4
 11,036
 5.8
Total302,058

160.1% 296,630
 157.2%
Common equity, warrants and otherCommon equity, warrants and other14,887 3.2 8.3 68,637 14.2 38.1 
Total debt and equity investments Total debt and equity investments401,045 85.6 222.8 415,781 85.9 231.0 
Structured Finance NotesStructured Finance Notes67,532 14.4 37.5 68,245 14.1 37.9 
Total investmentsTotal investments$468,577 100.0 %260.3 %$484,026 100.0 %268.9 %
In July, 2017, the Company's senior secured(1)    Includes debt investment with a cost basis of $6,701, and preferred equity investments, with an aggregate cost basis of $247,typically referred to as unitranche, 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,which the Company recognized cumulative unrealized losseshas entered into contractual arrangements with co‑lenders whereby, subject to certain conditions, the Company has agreed to receive its principal payments after the repayment 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 investments, with an amortizedcertain co‑lenders pursuant to a payment waterfall. Amortized cost and fair value of $3,935these investments were $36,036 and $4,038, respectively, were domiciled$36,982, respectively.
33
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in the United States. thousands, except per share data)
Geographic composition is determined by the location of the corporate headquarters of the portfolio company. TheAs of June 30, 2021 and December 31, 2020, the Company's investment portfolio was domiciled as follows:
June 30, 2021December 31, 2020
Amortized CostFair ValueAmortized CostFair Value
United States of America$390,122 $404,749 $399,278 $380,004 
Canada5,980 6,072 1,921 1,905 
Cayman Islands1
67,532 68,245 55,860 56,425 
France993 995 — — 
Luxembourg1,975 1,980 1,976 1,997 
Switzerland1,975 1,985 1,988 1,992 
Total investments$468,577 $484,026 $461,023 $442,323 
(1) Cayman Island investments represent Structured Finance Notes held by the Company. These investments generally represent beneficial interests in underlying portfolios of debt investments in companies domiciled in the United States of America.
As of June 30, 2021, the industry compositionscomposition of the Company’s investment portfolio werewas as follows:
Percentage of TotalPercentage of Total
Amortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Administrative and Support and Waste Management and Remediation ServicesAdministrative and Support and Waste Management and Remediation Services
Convention and Trade Show OrganizersConvention and Trade Show Organizers$214 — %0.1 %$28 — %— %
Landscaping ServicesLandscaping Services4,639 1.0 2.6 4,639 1.0 2.6 
Security Systems Services (except Locksmiths)Security Systems Services (except Locksmiths)9,799 2.1 %5.4 9,945 2.1 5.6 
Arts, Entertainment, and RecreationArts, Entertainment, and Recreation
Other Amusement and Recreation IndustriesOther Amusement and Recreation Industries20,973 4.5 11.7 20,992 4.3 11.7 
ConstructionConstruction
Electrical Contractors and Other Wiring Installation ContractorsElectrical Contractors and Other Wiring Installation Contractors17,793 3.8 9.9 12,563 2.6 7.0 
New Single-Family Housing Construction (except For-Sale Builders)New Single-Family Housing Construction (except For-Sale Builders)842 0.2 0.5 835 0.2 0.5 
Plumbing, Heating, and Air-Conditioning ContractorsPlumbing, Heating, and Air-Conditioning Contractors7,106 1.5 3.9 6,367 1.3 3.5 
Water and Sewer Line and Related Structures ConstructionWater and Sewer Line and Related Structures Construction628 0.1 0.3 628 0.1 0.3 
Education ServicesEducation Services
Colleges, Universities, and Professional SchoolsColleges, Universities, and Professional Schools— — — 6,120 1.3 3.4 
Professional and Management Development TrainingProfessional and Management Development Training1,595 0.3 0.9 1,011 0.2 0.6 
Finance and InsuranceFinance and Insurance
   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




  

 

  
Security Systems Services (except Locksmiths)
$15,129

5.0%
8.0% $14,960
 5.0% 7.9%
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
Construction





 
 
 
Health Care and Social AssistanceHealth Care and Social Assistance
Child Day Care ServicesChild Day Care Services6,318 1.3 3.5 5,823 1.2 3.2 
Diagnostic Imaging CentersDiagnostic Imaging Centers21,627 4.6 12.0 23,652 4.8 13.1 
Home Health Care ServicesHome Health Care Services4,206 0.9 2.3 4,250 0.9 2.3 
Medical LaboratoriesMedical Laboratories91 — 0.1 17 — — 
Offices of Physicians, Mental Health SpecialistsOffices of Physicians, Mental Health Specialists10,810 2.3 6.0 10,886 2.2 6.0 
30
34
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)


Percentage of TotalPercentage of Total
Amortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Outpatient Mental Health and Substance Abuse Centers$4,851 1.0 %2.7 %$4,829 1.0 %2.7 %
Information
All Other Publishers1,994 0.4 1.1 2,001 0.4 1.1 
All Other Telecommunications872 0.2 0.5 862 0.2 0.5 
Cable and Other Subscription Programming2,922 0.6 1.6 2,926 0.6 1.6 
Data Processing, Hosting, and Related Services6,126 1.3 3.4 6,251 1.3 3.5 
Directory and Mailing List Publishers2,257 0.5 1.3 2,351 0.5 1.3 
Internet Publishing and Broadcasting and Web Search Portals2,003 0.4 1.1 2,007 0.4 1.1 
Motion Picture and Video Production3,439 0.7 1.9 3,483 0.7 1.9 
Software Publishers27,687 5.9 15.4 15,054 3.1 8.4 
Television Broadcasting1,967 0.4 1.1 1,199 0.2 0.7 
Manufacturing
Commercial Printing (except Screen and Books)4,795 1.0 2.7 4,821 1.0 2.7 
Current-Carrying Wiring Device Manufacturing5,526 1.2 3.1 5,537 1.1 3.1 
Custom Compounding of Purchased Resins15,462 3.3 8.6 17,356 3.6 9.6 
Other Aircraft Parts and Auxiliary Equipment Manufacturing500 0.1 0.3 87 — — 
Fabricated Pipe and Pipe Fitting Manufacturing2,544 0.5 1.4 2,584 0.5 1.4 
Metal Can Manufacturing1,225 0.3 0.7 1,225 0.3 0.7 
Motor Vehicle Body Manufacturing1,465 0.3 0.8 1,460 0.3 0.8 
Other Commercial and Service Industry Machinery Manufacturing1,817 0.4 1.0 1,803 0.4 1.0 
Pharmaceutical Preparation Manufacturing2,192 0.5 1.2 51,221 10.5 28.5 
Pump and Pumping Equipment Manufacturing1,501 0.3 0.8 1,300 0.3 0.7 
Travel Trailer and Camper Manufacturing11,057 2.4 6.1 12,062 2.5 6.7 
Truck Trailer Manufacturing747 0.2 0.4 749 0.2 0.4 
Unlaminated Plastics Profile Shape Manufacturing9,099 1.9 5.1 9,099 1.9 5.1 
Other Services (except Public Administration)
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance572 0.1 0.3 867 0.2 0.5 
Professional, Scientific, and Technical Services
Administrative Management and General Management Consulting Services22,388 4.8 12.4 23,026 4.7 12.8 
All Other Professional, Scientific, and Technical Services2,241 0.5 1.2 2,297 0.5 1.3 
Management Consulting Services749 0.2 0.4 752 0.2 0.4 
Marketing Consulting Services5,201 1.1 2.9 5,286 1.1 2.9 
Other Accounting Services21,699 4.6 12.1 22,979 4.7 12.8 
35
    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

31
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)


Percentage of TotalPercentage of Total
Amortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Other Computer Related Services$15,076 3.2 %8.4 %$15,260 3.2 %8.5 %
Public Administration
Other Justice, Public Order, and Safety Activities703 0.2 0.4 342 0.1 0.2 
Real Estate and Rental and Leasing
Office Machinery and Equipment Rental and Leasing5,953 1.3 3.3 2,828 0.6 1.6 
Retail Trade
Automotive Parts and Accessories Stores1,710 0.4 1.0 1,730 0.4 1.0 
Cosmetics, Beauty Supplies, and Perfume Stores1,533 0.3 0.9 1,530 0.3 0.9 
Electronic Shopping and Mail-Order Houses4,958 1.1 2.8 4,998 1.0 2.8 
Shoe store9,784 2.1 5.4 8,552 1.8 4.8 
Sporting Goods Stores5,709 1.2 3.2 5,746 1.2 3.2 
All Other General Merchandise Stores499 0.1 0.3 1,308 0.3 0.7 
Transportation and Warehousing
Freight Transportation Arrangement1,966 0.4 1.1 1,972 0.4 1.1 
Scheduled Passenger Air Transportation360 0.1 0.2 380 0.1 0.2 
Taxi Service1,975 0.4 1.1 1,980 0.4 1.1 
Wholesale Trade
Business to Business Electronic Markets2,883 0.6 1.6 2,875 0.6 1.6 
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers4,706 1.0 2.6 4,698 1.0 2.6 
Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers16,424 3.5 9.1 16,566 3.4 9.2 
Drugs and Druggists' Sundries Merchant Wholesalers5,675 1.2 3.2 5,736 1.2 3.2 
General Line Grocery Merchant Wholesalers273 0.1 0.2 283 0.1 0.2 
Industrial Machinery and Equipment Merchant Wholesalers9,691 2.1 5.4 9,549 2.0 5.3 
Motor Vehicle Parts (Used) Merchant Wholesalers15,260 3.3 8.5 15,437 3.2 8.6 
Sporting and Recreational Goods and Supplies Merchant Wholesalers8,208 1.8 4.6 687 0.1 0.4 
Stationary & Office Supply Merchant Wholesaler16,160 3.4 9.0 94 — 0.1 
    Total debt and equity investments$401,045 85.5 %222.8 %$415,781 85.9 %231.0 %
Structured Finance Notes67,532 14.5 37.5 68,245 14.1 37.9 
Total investments$468,577 100.0 %260.3 %$484,026 100.0 %268.9 %
36
    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%
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
As of December 31, 2016,2020, the Company had loans to 3949 portfolio companies, of which 74%95% were senior secured loans and 26%5% were subordinated loans, at fair value, as well as equity investments in 1710 of these portfolio companies. The Company also held an equity investment in two13 portfolio companies in which it did not hold a debt interest.
investment, as well as 12 investments in Structured Finance Notes. At December 31, 2016,2020, investments consisted of the following:
Percentage of TotalPercentage of Total
Amortized Cost Percentage of Net Assets Fair Value Percentage of Net AssetsAmortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Senior secured debt investments$182,315
 126.8% $180,955
 125.9%Senior secured debt investments$325,647 70.6 %204.9 %$306,304 69.2 %192.7 %
Subordinated debt investments66,591
 46.3
 63,410
 44.1
Subordinated debt investments45,409 9.8 28.6 15,067 3.4 9.5 
Preferred equity23,293
 16.2
 23,721
 16.5
Preferred equity18,648 4.0 11.7 11,543 2.6 7.3 
Common equity and warrants7,108
 4.9
 13,541
 9.4
Common equity, warrants and otherCommon equity, warrants and other15,459 3.4 9.7 52,984 12.0 33.3 
Total debt and equity investments Total debt and equity investments405,163 87.8 %254.9 %385,898 87.2 %242.8 %
Structured Finance NotesStructured Finance Notes55,860 12.2 35.1 56,425 12.8 35.5 
Total$279,307
 194.2% $281,627
 195.9%Total$461,023 100.0 %290.0 %$442,323 100.0 %278.3 %
At December 31, 2016, all but one (domiciled in Canada) of the Company’s investments, with an amortized cost and fair value of $3,923 and $3,923, respectively, were domiciled in the United States. Geographic composition is determined by the location of the corporate headquarters of the portfolio company. TheAs of December 31, 2020, the industry compositions of the Company’s portfoliodebt and equity investments 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 TotalPercentage of Total
Amortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Administrative and Support and Waste Management and Remediation Services
Convention and Trade Show Organizers$214 — %0.1 %$210 — %0.1 %
Security Systems Services (except Locksmiths)6,531 1.4 4.1 3,487 0.8 2.2 
Arts, Entertainment, and Recreation
Other Amusement and Recreation Industries20,967 4.5 13.3 19,973 4.5 12.6 
Construction
Electrical Contractors and Other Wiring Installation Contractors17,837 3.9 11.2 13,137 3.0 8.3 
Plumbing, Heating, and Air-Conditioning Contractors7,607 1.7 4.8 7,294 1.6 4.6 
Education Services
Colleges, Universities, and Professional Schools— — — 4,295 1.0 2.7 
Professional and Management Development Training1,595 0.3 1.0 1,306 0.3 0.8 
Finance and Insurance
Insurance Agencies and Brokerages9,544 2.1 6.0 9,302 2.1 5.9 
Health Care and Social Assistance
Child Day Care Services5,178 1.1 3.3 4,656 1.1 2.9 
Diagnostic Imaging Centers21,718 4.8 13.8 23,607 5.3 14.9 
Home Health Care Services4,199 0.9 2.6 4,250 1.0 2.7 
Medical Laboratories91 — 0.1 38 — — 
Offices of Physicians, Mental Health Specialists21,013 4.6 13.2 20,802 4.7 13.1 
Outpatient Mental Health and Substance Abuse Centers11,615 2.5 7.3 4,105 0.9 2.6 
32
37
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)


Percentage of TotalPercentage of Total
Amortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Information
Data Processing, Hosting, and Related Services$1,135 0.2 %0.7 %$1,749 0.4 %1.1 %
Software Publishers28,799 6.3 18.2 16,104 3.6 10.0 
Television Broadcasting1,977 0.4 1.2 1,758 0.4 1.1 
Manufacturing
Commercial Printing (except Screen and Books)4,789 1.0 3.0 4,812 1.1 3.0 
Custom Compounding of Purchased Resins15,444 3.3 9.7 17,164 3.9 10.8 
Other Aircraft Parts and Auxiliary Equipment Manufacturing5,431 1.2 3.4 4,275 1.0 2.7 
Other Commercial and Service Industry Machinery Manufacturing1,925 0.4 1.2 1,936 0.4 1.2 
Pharmaceutical Preparation Manufacturing2,205 0.5 1.4 38,213 8.7 24.1 
Pump and Pumping Equipment Manufacturing1,501 0.3 0.9 1,281 0.3 0.8 
Semiconductor and Related Device Manufacturing399 0.1 0.3 434 0.1 0.3 
Travel Trailer and Camper Manufacturing10,911 2.4 6.9 10,812 2.4 6.8 
Truck Trailer Manufacturing8,118 1.8 5.1 8,174 1.8 5.1 
Unlaminated Plastics Profile Shape Manufacturing8,922 1.9 5.6 8,818 2.0 5.5 
Other Services (except Public Administration)
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance572 0.1 0.4 915 0.2 0.6 
Diet and Weight Reducing Centers477 0.1 0.3 479 0.1 0.3 
Professional, Scientific, and Technical Services
Administrative Management and General Management Consulting Services28,503 6.3 18.0 28,729 6.6 18.2 
All Other Professional, Scientific, and Technical Services1,921 0.4 1.2 1,905 0.4 1.2 
Marketing Consulting Services5,229 1.1 3.3 5,229 1.2 3.3 
Other Accounting Services21,621 4.7 13.7 22,238 5.0 14.0 
Other Computer Related Services16,247 3.5 10.2 16,000 3.6 10.1 
Public Administration
Other Justice, Public Order, and Safety Activities703 0.2 0.4 676 0.2 0.4 
Real Estate and Rental and Leasing
Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing496 0.1 0.3 499 0.1 0.3 
Office Machinery and Equipment Rental and Leasing5,953 1.3 3.7 2,736 0.6 1.7 
Retail Trade
Cosmetics, Beauty Supplies, and Perfume Stores6,738 1.5 4.2 6,701 1.5 4.2 
38
    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%
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 TotalPercentage of Total
Amortized CostAmortized CostNet AssetsFair ValueFair ValueNet Assets
Shoe Store9,748 2.1 6.1 4,368 1.0 2.7 
Sporting Goods Stores$2,907 0.6 %1.8 %$2,968 0.7 %1.9 %
All Other General Merchandise Stores5,252 1.1 3.3 5,060 1.1 3.2 
Transportation and Warehousing
Scheduled Passenger Air Transportation495 0.1 0.3 520 0.1 0.3 
Taxi Service1,976 0.4 1.2 1,997 0.5 1.3 
Wholesale Trade
Business to Business Electronic Markets2,891 0.6 1.8 2,875 0.6 1.8 
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers1,955 0.4 1.2 1,942 0.4 1.2 
Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers16,392 3.6 10.3 16,777 3.8 10.6 
General Line Grocery Merchant Wholesalers275 0.1 0.2 284 0.1 0.2 
Industrial Machinery and Equipment Merchant Wholesalers9,696 2.1 6.1 9,179 2.1 5.8 
Industrial Supplies Merchant Wholesalers6,908 1.5 4.3 5,476 1.2 3.4 
Motor Vehicle Parts (Used) Merchant Wholesalers14,167 3.1 8.9 13,581 3.1 8.5 
Sporting and Recreational Goods and Supplies Merchant Wholesalers8,247 1.8 5.2 346 0.1 0.2 
Stationery and Office Supplies Merchant Wholesalers16,129 3.5 10.1 2,426 0.5 1.5 
Total debt and equity investments$405,163 87.9 %254.9 %$385,898 87.2 %242.8 %
Structured Finance Notes55,860 12.1 35.1 56,425 12.8 35.5 
Total investments$461,023 100.0 %290.0 %$442,323 100.0 %278.3 %
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 $38,218 and $7,756, respectively, at June 30, 2021, and $48,102 and $12,135 respectively, at December 31, 2020.
On April 5, 2021, the Company sold its subordinated debt investment in Community Intervention Services, Inc. for $91. During the six months ended June 30, 2021, the Company recognized a realized loss of $7,548, of which $7,534 was recognized as an unrealized loss as of December 31, 2020.
On June 11, 2021, My Alarm Center, LLC’s bankruptcy plan became effective and our equity interests were cancelled. For the six months ended June 30, 2021, the Company recognized a realized loss of $3,094, of which $2,997 was recognized as an unrealized loss as of December 31, 2020.
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 into 20,628 shares of common 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.

39
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
Note 5. Fair Value of Financial Instruments
The Company’s investments are valuedcarried at fair value as determined in good faith by Company management under the supervision, and review and approval of the 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 that market participants would use in pricing anthe subject 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 fair values based on 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 atSenior securities with a fair value of $6,562 and $895 were categorized astransferred from Level 3 based upon the lowest level of significant input to the valuations.There were no transfers among Level 1, 2 and 3 forduring the three and ninesix months ended SeptemberJune 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 consistent2021, respectively. Senior securities 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 management 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 and 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 $5,736 and $-0- were transferred from Level 2 to Level 3 during the Company's debt investments is the discounted cash flow method. However, if there is deterioration in credit quality orthree and six months ended June 30, 2021, respectively. Senior securities with 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 $-0- and $2,915 were transferred 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. 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$4,256 and $-0- were transferred from Level 3 to Level 2 during the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach.three and six months ended June 30, 2020, respectively.
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 Financial Statements
(Dollar amounts in thousands, except per share data)


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. In estimating the enterprise value of 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 realizable value of any collateral, financing transactions subsequent to the acquisition of the investment and anticipated financing transactions after the valuation date.
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, which 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 present the Company's investment portfolio measured at fair value on a recurring basis as of June 30, 2021, and December 31, 2020.
SecurityLevel 1Level 2Level 3Fair Value at June 30, 2021
Debt investments$— $66,139 $268,716 $334,855 
Equity investments— — 80,926 80,926 
Structured Finance Notes— — 68,245 68,245 
$— $66,139 $417,887 $484,026 
40
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
SecurityLevel 1Level 2Level 3Fair Value at December 31, 2020
Debt investments$— $22,226 $299,145 $321,371 
Equity investments— — 64,527 64,527 
Structured Finance Notes— — 56,425 56,425 
$— $22,226 $420,097 $442,323 
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, 2017,2021 and December 31, 2016.2020. 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)
Debt investments:







Senior secured$126,310

Discounted cash flow
Discount rates
 6.18% - 17.65% (11.52%)
 11,841

Enterprise value
EBITDA multiple
 7.50x - 7.50x (7.50x)
 







Subordinated48,897

Discounted cash flow
Discount rates
 11.06% - 25.00% (15.05%)
 5,322

Enterprise value
EBITDA multiple
 7.25x - 7.81x (7.47x)
 







Equity investments:







Preferred equity22,855

Enterprise value
EBITDA multiples
 5.00x - 13.48x (7.16x)
Common equity and warrants10,324

Enterprise value
EBITDA multiples
 4.72x - 9.40x (5.65x)
(1)Excludes $56,002, $8,723,Fair Value at June 30, 2021Valuation techniqueUnobservable inputsRange
(Weighted average)
Debt investments:
Senior secured$220,384  Discounted cash flowDiscount rates5.27% - 14.74% (9.18%)
Senior secured19,407  Market approachRevenue multiples0.52x - 0.70x (0.58x)
Senior secured11,718 Market approachTransaction Price
Subordinated16,426 Discounted cash flowDiscount rates17.49% - 20.69% (19.13%)
Subordinated94 Market approachEBITDA multiples3.86x - 3.86x (3.86x)
Subordinated687 Market approachRevenue multiples0.27x - 0.27x (0.27x)
Structured Finance Notes
Subordinated notes (3)
65,452 Discounted cash flowDiscount rates8.00% - 17.50% (13.41%)
Constant Default Rate(1)
0.00% - 2.00% (1.78%)
Constant Default Rate(2)
2.00% - 2.00% (2.00%)
Recovery rate60.00% - 60.00% (60.00%)
Mezzanine debt2,793 Discounted cash flowDiscount Margin7.25% - 8.70% (7.81%)
Constant Default Rate(1)
0.00% - 3.00% (1.65%)
Constant Default Rate(2)
2.00% - 3.00% (2.36%)
Recovery rate60.00% - 60.00% (60.00%)
Equity investments:
Preferred equity11,382 Market approachEBITDA multiples6.50x - 8.00x (7.30x)
Preferred equity907 Market approachRevenue multiples0.15x - 3.00x (0.95x)
Common equity, warrants and $6,356, of senior secured debt investments, subordinated debt investments,other68,545 Market approachEBITDA multiples3.75x - 12.27x (8.11x)
Common equity, warrants and equity investments, respectively, valued at Transaction Prices.other92 Market approachRevenue multiples0.15x - 3.25x (3.08x)
$417,887 

(1) Constant default rates for the next six months.
(2) Constant default rates following the next six months.
(3) The cash flows utilized in the discounted cash flow calculations assume liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices, and redeployment of proceeds at the issuing CLO's assumed reinvestment rate.
36
41
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Fair Value at December 31, 2020Valuation techniqueUnobservable inputsRange
(Weighted average)
Debt investments:
Senior secured$256,042 Discounted cash flowDiscount rates6.30% - 24.43% (10.18%)
Senior secured12,668 Market approachEBITDA multiples8.50x - 8.50x (8.50x)
Senior secured9,257 Market approachRevenue multiples0.86x - 0.86x (0.86x)
Senior secured6,111 Market approachTransaction Price
Subordinated7,822 Discounted cash flowDiscount rates17.83% - 17.83% (17.83%)
Subordinated6,794 Market approachEBITDA multiples7.05x - 9.10x (7.78x)
Subordinated451 Market approachRevenue multiples0.10x - 0.20x (0.18x)


 Fair Value at December 31, 2016 (1) Valuation technique Unobservable inputs Range
(Weighted average)
Debt investments:       
Senior secured$149,128
 Discounted cash flow Discount rates  6.70% - 18.71% (12.07%)
 15,901
 Enterprise value EBITDA multiples  7.25x - 7.50x (7.31x)
        
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 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)Structured Finance Notes:Excludes $15,926, $12,382,
 Subordinated notes(1)
54,724 Discounted cash flowDiscount rates15.00% - 19.50% (17.79%)
Constant default rate0.00% - 2.00% (1.63%)
Constant default rate after 6 months2.00% - 2.00% (2.00%)
Recovery rate60.00% - 60.00% (60.00%)
Mezzanine debt1,701 Discounted cash flowDiscount Margin7.25% - 9.45% (8.58%)
Constant default rate0.00% - 2.00% (1.01%)
Constant default rate after 9 months2.00% - 3.00% (2.49%)
Recovery rate60.00% - 60.00% (60.00%)
Equity investments:
Preferred equity10,395 Market approachEBITDA multiples4.73x - 8.50x (7.37x)
Preferred equity1,148 Market approachRevenue multiples0.20x - 1.56x (0.96x)
Common equity and $499 of senior secured debt investments, subordinated debt investments,warrants52,969 Market approachEBITDA multiples3.75x - 11.50x (8.10x)
Common equity and equity investments, respectively, valued at Transaction Prices.warrants15 Market approachRevenue multiples0.20x - 1.56x (0.47x)
$420,097 
(1) 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.

42
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, 20172021 and SeptemberJune 30, 2016.
2020.

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
Six Months Ended June 30, 2021
Senior
Secured Debt
Investments		Subordinated
Debt
Investments		Preferred EquityCommon Equity, Warrants and OtherStructured Finance NotesTotal
Level 3 assets, January 1, 2021$284,078 $15,067 $11,543 $52,984 $56,425 $420,097 
Net realized loss on investments(321)(7,548)(3,093)— — (10,962)
Net unrealized appreciation on investments3,672 9,605 3,734 15,653 148 32,812 
Amortization of Net Loan Fees1,061 43 — — 46 1,150 
Accretion of interest income on structured-finance notes— — — — 4,670 4,670 
Capitalized PIK interest and dividends679 222 105 — — 1,006 
Amendment fees(97)— — — — (97)
Purchase and origination of portfolio investments53,718 — — — 21,912 75,630 
Proceeds from principal payments on portfolio investments(81,523)(91)— — (8,600)(90,214)
Sale and redemption of portfolio investments(8,863)(91)— — — (8,954)
Proceeds from distributions received from portfolio investments— — — — (6,356)(6,356)
Transfers out of Level 3(895)— — — — (895)
Level 3 assets, June 30, 2021$251,509 $17,207 $12,289 $68,637 $68,245 $417,887 
43
 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


38
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)


Six Months Ended June 30, 2020
Senior
Secured Debt
Investments		Subordinated
Debt
Investments		Preferred EquityCommon Equity, Warrants and OtherStructured Finance NotesTotal
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 
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, 2021 and 2020, 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,
20212020
Senior secured debt investments$2,796 $(22,112)
Subordinated debt investments2,071 (7,590)
Preferred equity737 (2,666)
Common equity, warrants and other15,653 5,986 
Structured Finance Notes160 (3,707)
Net unrealized appreciation (depreciation) on investments held$21,417 $(30,089)
44
OFS Capital Corporation and $(904), respectively. Subsidiaries
GAAP requires
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Other Financial Assets and Liabilities
The Company provides disclosure of the fair value of financial instruments for which it is practical to estimate such value and the methods and significant assumptions used to estimate fair value. It excludes from this requirement nonfinancial assets and liabilities. Accordingly, the required fair value disclosures provide only a partial estimate of the fair value of the Company. The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments. The PWB Credit Facility and BNP Facility are variable rate instruments and fair value is approximately book value.
The following table sets forth carrying values and fair values of the Company’s debt as of June 30, 2021 and December 31, 2020:
As of June 30, 2021As of December 31, 2020
DescriptionCarrying ValueFair ValueCarrying ValueFair Value
PWB Credit Facility$— $— $600 $600 
BNP Facility24,050 24,050 31,450 31,450 
Unsecured Notes Due September 202324,269 25,500 24,106 25,100 
Unsecured Notes Due April 2025— — 48,891 48,800 
Unsecured Notes Due October 2025— — 47,339 47,069 
Unsecured Notes Due February 2026121,685 123,149 — — 
Unsecured Notes Due October 202652,764 54,977 52,617 51,066 
SBA-guaranteed debentures94,640 99,857 104,182 116,172 
Total debt, at fair value$317,408 $327,533 $309,185 $320,257 
The following tables present the fair value measurements of the Company's SBA-guaranteed debentures are carried at costdebt and with their longer maturity dates,indicate the fair value hierarchy of the significant unobservable inputs utilized by the Company to determine such fair values as of June 30, 2021 and December 31, 2020:
June 30, 2021
DescriptionLevel 1Level 2
Level 3 (1)
Total
PWB Credit Facility$— $— $— $— 
BNP Facility— — 24,050 24,050 
Unsecured Notes Due September 202325,500 — — 25,500 
Unsecured Notes Due February 2026— — 123,149 123,149 
Unsecured Notes Due October 202654,977 — — 54,977 
SBA-guaranteed debentures— — 99,857 99,857 
Total debt, at fair value$80,477 $— $247,056 $327,533 
December 31, 2020
DescriptionLevel 1Level 2
Level 3 (1)
Total
PWB Credit Facility$— $— $600 $600 
BNP Facility— — 31,450 31,450 
Unsecured Notes Due September 202325,100 — — 25,100 
Unsecured Notes Due April 202548,800 — — 48,800 
Unsecured Notes Due October 202547,069 — — 47,069 
Unsecured Notes Due October 202651,066 — — 51,066 
SBA-guaranteed debentures— — 116,172 116,172 
Total debt, at fair value$172,035 $— $148,222 $320,257 
(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 of September 30, 2017,
45
OFS Capital Corporation and December 31, 2016, the fair value of the Company’s SBA debentures using Level 3 inputs is estimated at $153,265 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:2021:
Name of Portfolio Company Investment Type September 30, 2017
BCC Software, LLC
Senior Secured Revolver
$1,094
TRS Services, LLC
Senior Secured Loan
500
Carolina Lubes, Inc. Senior Secured Loan 2,920




$4,514
Name of Portfolio CompanyInvestment TypeCommitment
A&A Transfer, LLCSenior Secured Loan (Revolver)$1,709 
Convergint TechnologiesSenior Secured Loan (Delayed Draw)101 
I&I Sales Group, LLCSenior Secured Loan (Revolver)156 
Inergex Holdings, LLCSenior Secured Loan (Revolver)2,813 
Baymark Health Services, Inc.Senior Secured Loan (Delayed Draw)2,481 
RSA SecuritySenior Secured Loan (Delayed Draw)1,898 
SourceHOV Tax, Inc.Senior Secured Loan (Revolver)1,196 
SSJA Bariatric Management LLCSenior Secured Loan (Revolver)667 
$11,021 
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, 2017.2021.
Additionally, the Company is subject to periodic inspection by regulators to assess compliance with applicable BDC regulations related to being a BDC and 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 yet 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$219,541 and $247,512$223,795 in assets at SeptemberJune 30, 2017,2021 and December 31, 2016,2020, respectively, which accounted for approximately 70%42% and 81%46% of the Company’s total consolidated assets, respectively. The SBICThese assets can notcannot be pledged under any debt obligation of the Company. As of June 30, 2021, SBIC I LP had outstanding debentures totaling $95,505.

BNP Facility: Under the BNP Facility maturing on June 20, 2024, OFSCC-FS has up to $150,000 of available credit, subject to borrowing base requirements, of which $24,050 was drawn as of June 30, 2021. The effective interest rate on the BNP Facility was 6.06% at June 30, 2021. The unused commitment under the BNP Facility was $125,950 as of June 30, 2021.
PWB Credit Facility: Under its PWB Credit Facility maturing February 28, 2023, the Company has up to $25,000 of available credit, subject to borrowing base requirements, of which $-0- was drawn as of June 30, 2021. The effective interest rate on the PWB Credit Facility was 5.02% at June 30, 2021. As of June 30, 2021 the unused commitment under the PWB Credit Facility was $25,000.
On February 17, 2021, the Company amended the BLA to among other things: (i) increase the maximum amount available from $20,000 to $25,000; (ii) decrease the interest rate floor from 5.25% per annum to 5.00% per annum; (iii) modify certain financial performance covenants; and (iv) extend the maturity date from February 28, 2021 to February 28, 2023.
Unsecured Notes: As of June 30, 2021, the Company had outstanding Unsecured Notes with an aggregate outstanding principal of $204,325. The weighted average effective interest rate on the Unsecured Notes was 5.90% at June 30, 2021.
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
39
46
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
unsecured as to which the Company subsequently grants a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility.

Interest expense for the three and six months ended June 30, 2021 and 2020 on the Company's outstanding borrowings is presented below:

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
SBA Debentures$761 $1,114 $1,595 $2,338 
PWB Credit Facility13 702 53 991 
Unsecured Notes3,024 2,590 6,526 5,205 
BNP Facility443 525 892 1,319 
Total interest expense$4,241 $4,931 $9,066 $9,853 
Average dollar borrowings$336,929 $359,640 $344,005 $364,867 
Weighted average interest rate5.05 %5.26 %5.31 %5.23 %
Interest expense includes the stated interest on the outstanding balance, commitment fees on undrawn amounts, and the amortization of deferred financing costs.
The following table shows the Company’sscheduled maturities of the principal balances of the Company's outstanding borrowings as of June 30, 2021:
 Payments due by period
TotalLess than
year		1-3 years (1)4-5 years (1)After 5
years (1)
PWB Credit Facility$— $— $— $— $— 
Unsecured Notes204,325 — 25,000 125,000 54,325 
SBA Debentures95,505 — 7,000 88,505 — 
BNP Facility24,050 — — 24,050 — 
Total$323,880 $— $32,000 $237,555 $54,325 
(1)The SBA debentures payable as of September 30, 2017, and December 31, 2016:
      SBA debentures outstanding
Pooling Date Maturity Date Fixed Interest Rate September 30, 2017 December 31, 2016
September 19, 2012 September 1, 2022 3.049% $14,000
 $14,000
September 25, 2013 September 1, 2023 4.448
 7,000
 7,000
March 26, 2014 March 1, 2024 3.995
 5,000
 5,000
September 24, 2014 September 1, 2024 3.819
 4,110
 4,110
September 24, 2014 September 1, 2024 3.370
 31,265
 31,265
March 25, 2015 March 1, 2025 2.872
 65,920
 65,920
September 23, 2015 September 1, 2025 3.184
 22,585
 22,585
SBA debentures outstanding     149,880
 149,880
Unamortized debt issuance costs     (2,752) (3,037)
SBA debentures outstanding, net of unamortized deferred debt issuance costs   $147,128
 $146,843
The Company received exemptive relief from the SEC effective November 26, 2013, which permits the Company to exclude SBA guaranteed debentures from the definition of senior securities in the statutory 200% asset coverage ratio under the 1940 Act, allowing for greater capital deployment.
The effective interest rate on the SBA debentures, which includes amortization of deferred debt issuance costs, was 3.43% as of September 30, 2017. Interest expense on the SBA debentures was $1,295 and $3,846 for the three and nine months ended September 30, 2017, respectively, which includes amortization of debt issuance costs of $95 and $286, respectively. Interest expense on the SBA debentures was $1,295 and $3,860 for the three and nine months ended September 30, 2016, respectively, which includes amortization of debt issuance costs of $95 and $286, respectively.
The weighted-average fixed cash interest rate on the SBA debentures as of September 30, 2017, and December 31, 2016 was 3.18%.
PWB Credit Facility: On November 5, 2015, the Company entered into a BLA with Pacific Western Bank, as lender, to provide the Company with the PWB Credit Facility, a $15,000 senior secured revolving credit facilityare scheduled to mature on November 6, 2017.between September 2022 and September 2025. The PWB Credit Facility is available for general corporate purposes including investment funding. The maximum availability of the PWB Credit Facility is equalUnsecured Notes are scheduled to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing basemature between September 2023 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.October 2026.
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.
47
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.
The average dollar amount of borrowings outstanding during the three and nine months ended September 30, 2017, was $11,073 and $5,823, respectively. The effective interest rate, which includes amortization of deferred debt issuance costs, as of September 30, 2017, was 5.44% based maximum amount available under the PWB Credit Facility. Deferred debt issuance

40
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)


costs, net of accumulated amortization, was $240 and $256 as of September 30, 2017 and December 31, 2016, respectively. Amortization of debt issuance costs was $47 and $117 for the three and nine months ended September 30, 2017, respectively. Availability under the PWB Credit Facility as of September 30, 2017, was $17,900 based on the stated advance rate of 50% under 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 incentive fees, and a statutory asset coverage test. The BLA also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change in investment advisor, and the occurrence of a material adverse change in our financial condition. As of September 30, 2017, the Company was in compliance with the applicable covenants.
Note 8. Federal Income Tax
The Company has elected to be taxed as a RIC under Subchapter M of the Code. Maintenance of its status as a RIC, requires the Company requires annual distributions to its stockholders at least 90% of its ICTI, as defined by the Code. Additionally, to avoid a 4% excise tax on undistributed earnings the Company must distribute each calendar year the sum of (i) 98% of its ordinary income for such calendar year (ii) 98.2% of its net capital gains for the one-year period ending October 31 of that calendar year, and (iii) any income recognized, but not distributed, in preceding years and on which the Company paid no federal income tax. Maintenance of the Company's RIC status also requires adherence to certain source of income and asset diversification requirements.
The Company has met the required distribution, source of income and asset diversification requirements as of September 30, 2017, and intends to continue to meet these requirements. Accordingly, there is no liability for federal income taxes at the Company level. The Company’s ICTI differs from the net increase in net assets resulting from operations primarily due to differences in income recognition on the unrealized appreciation/depreciation of investments, income from Company’s equity investments in pass-through entities, PIK dividends that have not yet been declared and paid by underlying portfolio companies, capital gains and losses and the net creation or utilization of capital loss carryforwards.
The determination of the tax attributes of the Company’s 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. If the tax characteristics of the Company’s $12,362 distributions paid during 2017 were determined as of September 30, 2017, approximately $3,314 would have represented return of capital to its stockholders.
The Company records reclassifications to its capital accounts related to permanent differences between GAAP and tax treatment related to goodwill amortization, excise taxes, and other permanent differences; and temporary differences between GAAP and tax treatment of realized gains and losses, income arising from Company’s equity investments in pass-through entities, PIK dividends, 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)
The tax-basis cost of investments and associated tax-basis gross unrealized appreciation (depreciation) inherent in the fair value of investments as of September 30, 2017, and December 31, 2016, were as follows:
 September 30, 2017 December 31, 2016
Tax-basis amortized cost of investments$294,310
 $273,414
Tax-basis gross unrealized appreciation on investments19,361
 19,554
Tax-basis gross unrealized depreciation on investments(17,041) (11,341)
Tax-basis net unrealized appreciation on investments2,320
 8,213
Fair value of investments$296,630
 $281,627

41
OFS Capital Corporation and Subsidiaries

Notes to 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, 20172021 and 2016:2020:
Three Months Ended June 30,Six Months Ended
June 30,
2021202020212020
Per share operating performance:
Net asset value per share at beginning of period$11.96 $9.71 $11.85 $12.46 
Net investment income (4)
0.24 0.19 0.43 0.49 
Net realized loss on non-control/non-affiliate investments (4)
(0.81)(0.08)(0.80)(0.75)
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes (4)
1.34 0.52 1.44 (1.17)
Net unrealized appreciation (depreciation) on affiliate investments (4)
0.85 (0.07)1.00 (0.28)
Net unrealized appreciation (depreciation) on control investment (4)
0.05 0.01 0.08 (0.11)
Loss on extinguishment of debt (4)
— — (0.17)(0.01)
  Total from operations1.67 0.57 1.98 (1.83)
Distributions(0.22)(0.17)(0.42)(0.51)
Issuance of common stock (10)
0.01 (0.01)0.01 (0.02)
Net asset value per share at end of period$13.42 $10.10 $13.42 $10.10 
Per share market value, end of period$9.96 $4.52 $9.96 $4.52 
Total return based on market value (1)(9)
15.9 %15.2 %45.6 %(54.5)%
Total return based on net asset value (2)(9)
14.7 %7.9 %18.4 %(8.9)%
Shares outstanding at end of period13,415,235 13,399,694 13,415,235 13,399,694 
Weighted average shares outstanding13,411,998 13,392,608 13,410,524 13,384,808 
Ratio/Supplemental Data (in thousands except ratios)
Average net asset value (3)
$170,232 $132,690 $166,473 $144,002 
Net asset value at end of period$179,993 $135,397 $179,993 $135,397 
Net investment income$3,235 $2,607 $5,785 $6,579 
Ratio of total expenses, net to average net assets (5)(7)
19.2 %25.2 %19.4 %24.0 %
Ratio of total expenses and loss on extinguishment of debt to average net assets(5)(11)
19.2 %25.2 %20.7 %24.1 %
Ratio of net investment income to average net assets (5)(8)
7.6 %7.9 %7.0 %9.1 %
Ratio of loss on extinguishment of debt to average net assets(9)
— %— %1.4 %0.1 %
Portfolio turnover (6)
12.7 %1.6 %25.3 %15.0 %
(1)Calculated as ending market value less beginning market value, adjusted for distributions reinvested at prices based on the Company’s dividend reinvestment plan for the respective distributions.
(2)Calculated as ending net asset value less beginning net asset value, adjusted for distributions reinvested at the Company’s dividend reinvestment plan for the respective distributions.
(3)Based on the average of the net asset value at the beginning and end of the indicated period and if applicable the preceding calendar quarters.
(4)Calculated on the average share method.
(5)Annualized.
(6)Portfolio turnover rate is calculated using the lesser of period-to-date sales, Structured Finance Note distributions and principal payments or period-to-date purchases over the average of the invested assets at fair value.
(7)Ratio of total expenses before incentive fee waiver to average net assets was 24.6% for the six months ended June 30, 2020.
(8)Ratio of net investment income before incentive fee waiver to average net assets was 8.5% for the six months ended June 30, 2020.
48
 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%
(1)Calculation is ending market value less beginning market value, adjusting for distributions reinvested at prices obtained in the Company’s distribution reinvestment plan for the respective distributions.
(2)Calculation is ending net asset value less beginning net asset value, adjusting for distributions reinvested at the Company’s quarter-end net asset value for the respective distributions.
(3)Based on net asset values as the end of the indicated and 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.
(4)The components of 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 per share would represent a return of capital.
(5)Annualized.
(6)Portfolio turnover rate is calculated using the lesser of period-to-date sales and principal payments or period-to-date purchases over the average of the invested assets at fair value.
(7)The issuance of common stock on a per share basis reflects the incremental net asset value change as a result of the Offering.

42
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
(9)Not annualized.

(10)Common stock issued through DRIP.
(11)Ratio of total expenses and loss on extinguishment of debt before incentive fee waiver to average net assets was 24.7% for the six months ended June 30, 2020.

(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. Distributions9. Capital 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 $123,913, and consolidated cash and cash equivalentsat June 30, 2021 includes $52,245$15,747 held by SBIC I LP, of which $12,078 was not available for distribution to the Company with the prior consent of the SBA. Net Assets of OFSCC-FS were $89,133, and consolidated cash at SeptemberJune 30, 2017.2021 includes $5,875 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, 20172021 and 2016:2020:
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 DeclaredRecord DatePayment DateAmount
Per Share		Cash
Distribution		DRIP Shares
Issued		DRIP Shares
Value
Six Months Ended June 30, 2020
March 11, 2020March 24, 2020March 31, 2020$0.34 $4,484 15,693 $64 
May 4, 2020June 23, 2020June 30, 20200.17 2,244 7,165 32 
$0.51 $6,728 $22,858 $96 
Six Months Ended June 30, 2021
March 2, 2021March 24, 2021March 31, 2021$0.20 $2,655 3,103 $27 
May 11, 2021June 23, 2021June 30, 20210.22 2,918 3,273 33 
$0.42 $5,573 $6,376 $60 
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. On May 4, 2020, the Company’s distributions paid during 2017 were determined as of September 30, 2017, approximately $0.27 per share ofBoard extended the Company’s distributions represented a return of capitalStock Repurchase Program for an additional two-year period ending May 22, 2022, or until the approved dollar amount has been used to its stockholders, respectively.








repurchase shares.
43
49
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
The following table summarizes shares of common stock repurchased under the Stock Repurchase Program during the six months ended June 30, 2021 and 2020, respectively.
Period
Total Number
of Shares Purchased
Cost of Shares PurchasedAverage Price Paid Per Share
Six Months Ended June 30, 2020
January 1, 2020 through March 31, 2020— $— $— 
April 1, 2020 through June 30, 2020— $— $— 
Six Months Ended June 30, 2021
January 1, 2021 through March 31, 2021700 $5 $6.70 
April 1, 2021 through June 30, 2021— $— $— 
50


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

44
OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)


Note 10. Consolidated Schedule of Investments In and Advances To Affiliates
Period Ended June 30, 2021
Name of Portfolio CompanyInvestment Type (1)Net Realized Gain (Loss)Net change in unrealized appreciation/(depreciation)Interest & PIK InterestDividendsFeesTotal Income (2)December 31, 2020, Fair ValueGross
Additions (3)		Gross
Reductions (4)		June 30, 2021, Fair Value (5)
Control Investment
MTE Holding Corp.Subordinated Loan$— $20 $689 $— $— $689 $7,822 $218 $(52)$7,988 
Common Equity— 1,084 — 136 — 136 2,990 1,084 — 4,074 
— 1,104 689 136 — 825 10,812 1,302 (52)12,062 
Total Control Investment— 1,104 689 136 — 825 10,812 1,302 (52)12,062 
Affiliate Investments
3rd Rock Gaming Holdings, LLCSenior Secured Loan— (46)14 — — 14 9,258 13 (2,296)6,975 
Common Equity (6)— — — — — — — — — — 
— (46)14 — — 14 9,258 13 (2,296)6,975 
Chemical Resources Holdings, Inc.Senior Secured Loan— 194 644 — — 644 13,744 212 13,956 
Common Equity (6)— (20)— — — — 3,420 — (20)3,400 
— 174 644 — — 644 17,164 212 (20)17,356 
Contract Datascan Holdings, Inc.Preferred Equity (7)— 97 — — — — 2,690 97 — 2,787 
Common Equity (6)— (5)— — — — 46 — (5)41 
— 92 — — — — 2,736 97 (5)2,828 
DRS Imaging Services, LLCCommon Equity (6)— (490)— — — — 1,749 — (490)1,259 
Master Cutlery, LLCSubordinated Loan (6)— 380 — — — — 346 380 (39)687 
Preferred Equity (6)— — — — — — — — — — 
Common Equity (6)— — — — — — — — — — 
— 380 — — — — 346 380 (39)687 
NeoSystems Corp.Preferred Equity (7)— 899 — 106 — 106 2,250 1,005 — 3,255 
Pfanstiehl Holdings, IncCommon Equity— 13,015 — — — — 36,221 13,015 — 49,236 
51
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)
                 
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
  Common Equity —

(1,108) 84

6,083

—

(1,108)
4,975
    —

(1,121) 373

9,893

—

(1,130)
8,763
                 
Strategic Pharma Solutions, Inc. Senior Secured Loan —

(39) 904

8,383

67

(8,450)
—
  Preferred Equity(6)(7) 3,617

(1,111) 81

3,026

81

(3,107)
—
    3,617

(1,150) 985

11,409

148

(11,557)
—
                 
TRS Services, Inc. Senior Secured Loan —

206
 825

9,549

304

(359)
9,494
  Preferred Equity (Class AA units)(6)(7) —

—
 41

354

41




395
  Preferred Equity (Class A units)(6)(7) —

695
 204

1,707

899




2,606
  Common Equity (6) —

—
 —

—

—

—

—
    —

901
 1,070

11,610

1,244

(359)
12,495
                 
Total Affiliate Investments   4,491

(2,243) 6,757

81,708

21,267

(29,248)
73,727
Total Control and Affiliate Investments   $4,491

$(398) $8,560

$108,408

$23,290

$(47,274)
$84,424

(1)Principal balance of debt investments, interest rate detail, maturity date, dividend rate on preferred equity investments, and industry classification are shown in the consolidated schedule of investments.
(2)Represents the total amount of interest, fees or dividends included in income for the nine months ended September 30, 2017.
(3)Gross additions include increases in cost basis resulting from a new portfolio investment, PIK interest, fees and dividends, and accretion of OID. Gross additions also include net increases in unrealized net appreciation or decreases in unrealized depreciation.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if any. Gross reductions also include net decreases in 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)
Period Ended June 30, 2021
Name of Portfolio CompanyInvestment Type (1)Net Realized Gain (Loss)Net change in unrealized appreciation/(depreciation)Interest & PIK InterestDividendsFeesTotal Income (2)December 31, 2020, Fair ValueGross
Additions (3)		Gross
Reductions (4)		June 30, 2021, Fair Value (5)
Professional Pipe Holdings, LLCSenior Secured Loan$— $(67)$358 $— $— $358 $6,086 $65 $(633)$5,518 
Common Equity (6)— (359)— — — — 1,208 — (359)849 
— (426)358 — — 358 7,294 65 (992)6,367 
TalentSmart Holdings, LLCCommon Equity (6)— (295)— — — — 1,306 — (295)1,011 
TRS Services, Inc.Preferred Equity (6)— (48)— — — — 915 — (48)867 
Common Equity (6)— — — — — — — — — — 
— (48)— — — — 915 — (48)867 
TTG Healthcare, LLCSenior Secured Loan— 173 844 — 37 881 19,530 180 (98)19,612 
Preferred Equity (6)— (37)— — — — 4,077 — (37)4,040 
— 136 844 — 37 881 23,607 180 (135)23,652 
Total Affiliate Investments— 13,391 1,860 106 37 2,003 102,846 14,967 (4,320)113,493 
Total Control and Affiliate Investments$— $14,495 $2,549 $242 $37 $2,828 $113,658 $16,269 $(4,372)$125,555 
(1)Principal balance, interest rate and maturity of debt investments, and ownership detail for equity investments are presented 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.
(2)Represents the total amount of interest, fees or dividends included in income for the six months ended June 30, 2021, during which an investment was included in the Control Investment or Affiliate Investment categories.
(3)Gross additions include increases in cost basis of investments resulting from a new portfolio investment, PIK interest, fees and dividends; accretion of OID, and net increases in unrealized appreciation or decreases in net depreciation.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if any, and net decreases in net unrealized appreciation or net increases in net 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.
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OFS Capital Corporation and Subsidiaries


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 12.11. Subsequent Events Not Disclosed Elsewhere
On October 31, 2017,August 3, 2021, the Company’s Board declared a distribution of $0.34$0.24 per share for the fourththird quarter of 2017,2021, payable on December 29, 2017,September 30, 2021 to stockholders of record as of September 23, 2021.
COVID-19
The Company evaluated events subsequent to June 30, 2021 through August 5, 2021. The Company is continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts its portfolio companies, employees, due diligence and underwriting processes, and financial markets. The U.S. capital markets experienced extreme volatility and disruption following the outbreak of the COVID-19 pandemic, which appear to have subsided and returned to pre-COVID-19 levels. Nonetheless, certain economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a prolonged period of world-wide economic downturn.
On March 27, 2020, the U.S. government enacted the CARES Act, which contains provisions intended to mitigate the adverse economic effects of the coronavirus pandemic. On December 15, 2017.

27, 2020, the U.S. government enacted the December 2020 COVID Relief Package. Additionally, on March 11, 2021, the U.S. government enacted the American Rescue Plan, which included additional funding to mitigate the adverse economic effects of the COVID-19 pandemic. It is uncertain whether, or to what extent, our portfolio companies will be able to benefit from the CARES Act, the December 2020 COVID Relief Package, the American Rescue Plan, or any other subsequent legislation intended to provide financial relief or assistance. As a result of this disruption and the pressures on their liquidity, certain of its portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by the Company, subject to availability under the terms of such loans.
The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend to a large extent on future developments regarding the duration and severity of the coronavirus, effectiveness of vaccination deployment and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control. An extended period of global supply chain and economic disruption could materially affect its business, results of operations, access to sources of liquidity and financial condition. Given the fluidity of the situation, the Company cannot estimate the long-term impact of COVID-19 on its business, future results of operations, financial position, or cash flows at this time.
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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, 2016.2020.
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, 2021March 31, 2021
Net asset value per common share$13.42 $11.96 
Three Months EndedSix Months Ended June 30,
June 30, 2021March 31, 202120212020
Net investment income per common share$0.24 $0.19 $0.43 $0.49 
Net increase (decrease) in net assets resulting from operations per common share1.67 0.31 1.98 (1.83)
Distributions paid per common share0.22 0.2 0.42 0.51 
Net investment income per share increased $0.05 from the SEC permittingprior quarter primarily due to an approximate $0.08 increase in net interest margin—total interest income less interest expense—per share due to higher interest income, which accounted for $0.03 of the BDCincrease, and lower interest expense, which accounted for $0.05 of the increase. The growth in interest income was principally attributable to do so. On October 12, 2016, we received exemptive reliefour investments in Structured Finance Notes, which contributed $0.03 to the increase in net interest margin per share, resulting from the SECdeployment of $21.9 million into these investments in the first half of the year. The remainder of the increase in interest income is attributable to permit usaccelerations of Net Loan Fees from loan prepayments. Our prior quarter net investment income included interest costs of approximately $564,000, or $0.04 per share, incurred for both the newly issued $125.0 million of Unsecured Notes Due February 2026 and the $98.5 million of redeemed Unsecured Notes Due April 2025 and October 2025. The increase in net interest margin during the quarter ended June 30, 2021 was partially offset by increases in management and incentive fees of $0.04 per share.
As of June 30, 2021 and December 31, 2020, floating rate loans at fair value, excluding Structured Finance Notes, were 97% and 96% of our debt portfolio, respectively, and fixed rate loans at fair value were 3% and 4% of this portfolio, respectively. Structured Finance Notes generally do not carry a stated rate of interest, but the loan portfolios underlying these investments are generally variable rate debt. The weighted average yield on debt and Structured Finance Notes investments, declined to co-invest8.91% as of June 30, 2021 from 9.01% as of March 31, 2021, due to our continued focus on lower-yielding, first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile. As of June 30, 2021, approximately 93% of our debt is fixed rate and bears a weighted-average interest cost of 5.07%.
During the three months ended June 30, 2021, our portfolio experienced net gains of $19.2 million, or $1.43 per share, principally due to a $18.3 million, or a6.8%, improvement in portfolio companies with certain other funds managed by OFS Advisor (“Affiliated Funds”)the fair values of our directly originated debt and equity investments. The net appreciation in our directly originated investments was primarily attributable to a manner consistent with$12.1 million improvement on our investment objective, positions, policies, strategies and restrictionscommon equity in Pfanstiehl Holdings, Inc., as well as regulatorya $3.5 million improvement on our subordinated debt investment in Eblens Holdings, Inc., in each case, as a result of improved operating results. Pfanstiehl Holdings, Inc., a a global manufacturer of high-purity pharmaceutical ingredients, accounted for 10.2% of our portfolio at fair value, and 27.4% of our consolidated net assets as of June 30, 2021. We also experienced net appreciation of $0.7 million in our Structured Finance Note investments, due to the increase in the value of our Apex Credit CLO 2020 Ltd. and Madison Park Funding XXIII, Ltd. investments. The fair value of our investments in broadly syndicated loans were relatively unchanged, consistent with major syndicated loan indices.
Since OFS Advisor implemented its business continuity plan in mid-March 2020, OFS Advisor's entire team has effectively transitioned to remote work and we are currently capable of maintaining our normal functionality to complete our operational requirements.
OFS Advisor has 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, 2021, we provided revolving and delayed draw term facilities with total commitments of $6.0 million to four portfolio
54

companies and amended a senior secured loan, which resulted in an increased spread. As of June 30, 2021, we have unfunded commitments of $11.0 million to eight portfolio companies. During the three months ended June 30, 2021, we purchased Structured Finance Notes for an aggregate cost of $15.7 million and completed $44.6 million in Portfolio Company Investments.
At June 30, 2021, our asset coverage ratio of 179% was within minimum asset coverage requirements under the 1940 Act, and we remained in compliance with all applicable financial thresholds under our outstanding debt. As of June 30, 2021, we had an unused commitment of $25.0 million under our PWB Credit Facility, as well as an unused commitment of $125.9 million under our BNP Facility, both subject to a borrowing base and other pertinent factors, subject tocovenants. Based on our portfolio's fair value and our equity capital at June 30, 2021, we could access these available lines of credit for $129.0 million and remain in compliance with certain conditions (the “Order”). Pursuantour asset coverage requirements. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and expect to continue to selectively deploy capital in new investment opportunities in this challenging environment.
On August 3, 2021, the Board declared a distribution of $0.24 per share for the third quarter of 2021, payable on September 30, 2021 to stockholders of record as of September 23, 2021.
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 overreachingterminate 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 investment in any such portfolio company.
We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of the COVID-19 pandemic on our financial condition, results of operations or cash flows in the future. However, to the extent our portfolio companies continue to be adversely impacted by us orthe COVID-19 pandemic, our stockholders onfuture net investment income, financial condition, results of operations and the partfair value of any person concernedour portfolio investments may be materially adversely impacted.
We are also subject to financial risks, including changes in market interest rates. As of June 30, 2021, approximately $345 million (principal amount) of our debt investments bore interest at variable rates, which are generally LIBOR-based, and (2) the transaction is consistentmany of which are subject to reference-rate 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, primarily in the second quarter of 2020. 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 our portfolio investments, a decrease in our operating expenses, including with respect to our Income Incentive Fee, or a decrease in the interest rate of our stockholders and is consistent withfloating interest rate liabilities indexed to LIBOR. As of June 30, 2021, the majority of our variable rate debt investments are subject to the base rate floor, partially mitigating the impact of the recent decrease in LIBOR on our gross investment objective and strategies.income.
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):
  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)
December 31, 2020.
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, principally through adjustments to the weights given the various methodologies we utilize to estimate discount rates, greater use of pandemic-adjusted forward-looking information, and shortening the evaluation periods used to assess the market depth and liquidity associated with Indicative Prices. These adjustments resulted from observed decreases in the historic correlation between observable inputs utilized on our valuation
55

models. However, as of December 31, 2020, we had reverted all of our total assets were carried on the consolidated balance sheets at fair value. As discussed more fully in “Item 1.–Financial Statements–Note 2” GAAP requires usmethodologies to categorizetheir pre-pandemic weightings as financial assets and liabilities carried at fair value according to a three-level valuation hierarchy. The hierarchy gives the highest priority to quoted, active market prices for identical assets and liabilities (Level 1)markets stabilized and the lowest priority to valuation techniques that require significant management judgment because one or more of the significant inputs are unobservable in thecorrelations between observable market place (Level 3). All of our assets carried at fair value are classified as Level 3; we typically do not hold equity securities or other instruments that are actively traded on an exchange.
As described in “Item 1.–Financial Statements–Note 5”, we follow a process, under the supervision and review of the Board, to determine these unobservable inputs used to calculate the fair values of our investments. The most significant unobservable inputs in these fair value measurements are the discount rates, EBITDA multiples and projected cash flows contractually due from the investment.
We consider a variety of factors in our determination of the discount rate to be applied to an investment including, among other things, investment type, LIBOR swap rate, indicative yields from independent third-party sources and the yield on our investment relative to indicative yields at the time of our investment (initial and subsequent investments) in the portfolio company.
We also consider a variety of factors in our determination of the EBITDA multiple to be applied to an investment including, among other things, the actual EBITDA multiple for the last arms-length transaction, the ratio of the portfolio company’s EBITDA multiple to the average of EBITDA multiples on comparable public companies ("Comparable Multiples"), and the change 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.

returned.
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, 20172021 (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 TypeInvestment TypeFair Value at June 30, 2021Range of Fair Value
Low-endHigh-end
Debt investments:  
    
  
    Debt investments:   
Senior Secured $126,310

11.52%
$128,711

$123,162

N/A

N/A
Senior securedSenior secured$305,930 $302,945 $309,024 
Senior secured (valued at Transaction Prices)Senior secured (valued at Transaction Prices)11,718 11,718 11,718 
Subordinated $48,897

15.05%
$49,843

$47,395

N/A

N/A
Subordinated17,207 16,701 17,713 
          
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:Structured Finance Notes:
Subordinated notesSubordinated notes65,452 $63,588 67,318 
Mezzanine debtMezzanine debt2,793 2,746 2,840 
          
Equity investments:          Equity investments:
Preferred equity $22,855

7.16x
N/A

N/A

$25,316

$19,441
Preferred equity12,289 10,877 13,648 
Common equity and warrants $10,324

5.65x
N/A

N/A

$10,441

$8,042
Common equity, warrants and otherCommon equity, warrants and other68,637 64,369 74,436 
$484,026 $472,944 $496,697 
The table above presentsSEC issued a final rule in 2020 modifying Rule 2a-5 under the 1940 Act to establish requirements for determining fair value in good faith for purposes of the 1940 Act. We are evaluating the impact of adopting Rule 2a-5 on the consolidated financial statements and intend 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 includedcomply with the new rule’s requirements on or before the compliance date 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.September 2022.
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”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.
•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, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments. 
    Effective January 1, 2020, OFS Advisor agreed to further reduce the base management fee attributable to all of the OFSCC-FS Assets, without regard to the Company’s asset coverage. The agreement reduced the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. This agreement was renewed for the 2021 calendar year on February 16, 2021.
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The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On August 4, 2020, we received the Order, which superseded a previous order we received on October 12, 2016 and provides us with greater flexibility to enter into co-investment transactions with Affiliated Funds. We are generally permitted to co-invest with Affiliated Funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
    In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, we were permitted, subject to the satisfaction of certain conditions, to co-invest in our existing portfolio companies with certain affiliates, even if such other funds had not previously invested in such existing portfolio company. Without this order, affiliated funds would not be able to participate in such co-investments with us unless the affiliated funds had previously acquired securities of the portfolio company in a co-investment transaction with us. Although the conditional exemptive order expired on December 31, 2020, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extent that any BDC with an investment strategy similarexisting co-investment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the Company.same terms and conditions described therein.

    Conflicts may arise when we make an investment in conjunction with an investment being made by an Affiliated Account, or in a transaction where an Affiliated Account has already made an investment. Investment opportunities are, from time to time, appropriate for more than one account in the same, different or overlapping securities of a portfolio company’s capital structure. Conflicts arise in determining the terms of investments, particularly where these accounts may invest in different types of securities in a single portfolio company. Potential conflicts arise when addressing, among other things, questions as to whether payment obligations and covenants should be enforced, modified or waived, or whether debt should be restructured, modified or refinanced. 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 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, 2020.
Portfolio Composition and Investment Activity
Portfolio Composition
As of SeptemberJune 30, 2017,2021, the fair value of our debt investment portfolio totaled $257.1$334.9 million in 3761 portfolio companies, of which 76%95% and 24%5% were senior secured loans and subordinated loans, respectively, and approximately $39.5 million inrespectively. As of June 30, 2021, we had equity investments atin 22 portfolio companies with a fair value of approximately $80.9 million. We also have sixteen investments in 17 portfolio companies 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 $68.2 million. We had unfunded commitments of $4.5$11.0 million to threeeight portfolio companies at SeptemberJune 30, 2017.2021. Set forth in the tables and charts below is selected information with respect to our portfolio as of SeptemberJune 30, 2017,2021 and December 31, 2016.
The following table summarizes the composition of our investment portfolio as of September 30, 2017, and December 31, 2016 (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
(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 and $21,226 at September 30, 2017, respectively, and $28,945 and $29,276, at December 31, 2016, respectively
The following table shows the portfolio composition by geographic region at amortized cost and fair value and as a percentage of total investments; the geographic composition is determined by the location of the portfolio companies' corporate headquarters (dollar amounts 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%
As of September 30, 2017, our investment portfolio’s three largest industries by fair value, were (1) Manufacturing, (2) Professional, Scientific, and Technical Services, and (3) Other Services (except Public Administration), totaling approximately 47.9% of the investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1–Financial Statements–Note 4".2020.
The following table presents our debt investment portfolio by investment sizeeach wholly owned legal entity within the consolidated group as of SeptemberJune 30, 2017,2021, and December 31, 20162020 (dollar amounts in thousands):
June 30, 2021December 31, 2020
Amortized CostFair ValueAmortized CostFair Value
OFS Capital Corporation (Parent)$172,281 $160,426 $190,627 $172,249 
SBIC I LP176,405 203,295 191,192 190,573 
OFSCC-FS109,785 109,776 67,781 68,037 
OFSCC-MB10,106 10,529 11,423 11,464 
Total investments$468,577 $484,026 $461,023 $442,323 
57

 Amortized Cost Fair Value
 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Up to $4,000$27,410
 10.2% $34,547
 13.9% $28,373
 11.0% $41,419
 17.0%
$4,001 to $7,00056,065
 21.0
 57,996
 23.3
 62,004
 24.1
 55,342
 22.6
$7,001 to $10,00079,287
 29.7
 78,446
 31.5
 64,609
 25.1
 80,735
 33.0
$10,001 to $13,00035,193
 13.2
 34,549
 13.9
 47,448
 18.5
 37,593
 15.4
Greater than $13,00069,290
 25.9
 43,368
 17.4
 54,661
 21.3
 29,276
 12.0
Total$267,245
 100.0% $248,906
 100.0% $257,095
 100.0% $244,365
 100.0%
    Portfolio Yields

The weighted average yield on total investments(1) was 8.36% and 8.56% at June 30, 2021 and December 31, 2020, respectively. The following table displays the composition of our performing debt investment and Structured Finance Note portfolio by yield range and its weighted average yieldyields as of SeptemberJune 30, 2017,2021, and December 31, 2016:2020:
June 30, 2021December 31, 2020
 September 30, 2017 December 31, 2016
 
Senior
Secured
 Subordinated Total 
Senior
Secured
 Subordinated Total
Weighted Average Yield (1)
 Debt Debt Debt Debt Debt Debt
Yield RangeYield RangeSenior
Secured		SubordinatedStructured FinanceSenior
Secured		SubordinatedStructured Finance
DebtDebtNotesTotalDebtDebtNotesTotal
Less than 8% 11.4% —% 8.7% 8.7% 11.4% 9.5%Less than 8%45.5 %— %— %35.8 %29.5 %— %1.4 %24.0 %
8% - 10% 32.4
 —
 24.5
 7.7
 —
 5.6
8% - 10%40.9 — 1.4 32.5 52.0 — 1.4 42.2 
10% - 12% 32.4
 9.4
 26.8
 32.6
 11.9
 27.0
10% - 12%10.5 — 9.8 9.9 13.5 — — 10.9 
12% - 14% 7.7
 54.2
 19.0
 30.9
 58.1
 38.2
12% - 14%3.1 53.2 24.5 8.9 3.4 53.6 12.5 7.0 
Greater than 14% 16.1
 36.4
 21.0
 20.1
 18.6
 19.7
Greater than 14%— 46.8 64.3 12.9 1.6 46.4 84.7 15.9 
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Total100.0 %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 (2)
Weighted average yield - performing debt and Structured Finance Note investments (2)
8.08 %14.06 %16.52 %9.77 %8.92 %14.88 %16.56 %10.27 %
Weighted average yield - total debt and Structured Finance Note investments (3)
Weighted average yield - total debt and Structured Finance Note investments (3)
7.66 %6.32 %16.52 %8.91 %8.38 %5.53 %16.56 %9.15 %
(1) The weightedWeighted average yield on our performing debttotal 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 total investment portfolio, including assets in non-accrual status as of the balance sheet date.
(2) 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 assets ondebt investments in non-accrual basisstatus as of the balance sheet date. Including assets on non-accrual, the
(3) 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 investment portfolio was 11.17% and 11.72%, at September 30, 2017 and December 31, 2016.Structured Finance Note investments, including debt investments in non-accrual status as of the balance sheet date.
The weighted average yield on performing portfolio company debt securities, including Structured Finance Notes, decreased to 9.77% at June 30, 2021 from 12.08%10.27% at December 31, 2016 to 11.50% at September 30, 2017,2020, primarily due to the deployment of cash during8.0% weighted average yield on new debt investments and Structured Finance Notes. During the six months ended SeptemberJune 30, 2017, including partial deployment of proceeds received from our April 2017 follow-on public offering, into $46.12021, we purchased approximately $75.3 million ofin debt securities, primarily in lower-yielding, first lien senior secured debt investmentsloans to larger borrowers, with a weighted average yield of 9.2%6.4%. The weighted average yield on total debt, including Structured Finance Notes, decreased to 8.91% at SeptemberJune 30, 2017. 2021 from 9.15% at December 31, 2020.
As of June 30, 2021 and December 31, 2020, floating rate loans at fair value, excluding Structured Finance Notes, were 97% and 96% of our debt portfolio, respectively, and fixed rate loans at fair value were 3% and 4% of this portfolio, respectively.
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.
As
58

Portfolio Company Investments
The following table summarizes the composition of Septemberour Portfolio Company Investments as of June 30, 2017,2021 and December 31, 2016, floating rate loans at2020 (dollar amounts in thousands):
June 30, 2021December 31, 2020
Amortized CostFair ValueAmortized CostFair Value
Senior secured debt investments (1)
$331,982 $317,648 $325,647 $306,304 
Subordinated debt investments37,944 17,207 45,409 15,067 
Preferred equity16,232 12,289 18,648 11,543 
Common equity, warrants and other14,887 68,637 15,459 52,984 
  Total Portfolio Company Investments$401,045 $415,781 $405,163 $385,898 
Total number of portfolio companies75 75 62 62 
(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 were 73%of these investments was $36,036 and $36,982, respectively, at June 30, 2021, and $55,776 and $56,217, respectively, at December 31, 2020.
    At June 30, 2021, 95% and 66% of our debt investmentloan portfolio and total portfolio, respectively, and fixed rateconsisted of senior secured loans, based on fair value. Approximately 76% of our Portfolio Company Investments at fair value are senior securities of the borrower, rather than in the subordinated securities, preferred equity or common equity. We believe the seniority of our debt investments in the borrowers' capital structures may provide greater downside protection against adverse economic changes, including those caused by the COVID-19 pandemic.
As of June 30, 2021, the three largest industries of our Portfolio Company Investments by fair value, were 27%(1) Manufacturing (26.3%), (2) Professional, Scientific, and 34%Technical Services (16.7%), and (3) Wholesale Trade (13.5%), totaling approximately 56.5% of our Portfolio Company Investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1–Financial Statements–Note 4.”
As of June 30, 2021, our common equity in Pfanstiehl Holdings, Inc. based on its fair value of $49.2 million, $49.0 million of which representing an unrealized gain, accounts for 10.2% of our total portfolio at fair value, or 27.4% of total net assets. Since December 31, 2020 and December 31, 2019, Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, has appreciated $13.0 million and $37.3 million, respectively, primarily due to improved operating results, as well as multiple expansion in the pharmaceutical industry.
The following table presents our debt investment portfolio respectively.by investment size as of June 30, 2021 and December 31, 2020 (dollar amounts in thousands):
Amortized CostFair Value
June 30, 2021December 31, 2020June 30, 2021December 31, 2020
Up to $4,000$49,367 13.3 %$30,427 8.2 %$49,644 14.8 %$33,149 10.3 %
$4,001 to $7,00079,557 21.5 72,030 19.4 81,400 24.3 68,939 21.5 
$7,001 to $10,00036,549 9.9 51,874 14.0 35,920 10.7 43,735 13.6 
$10,001 to $13,00010,810 2.9 21,013 5.7 23,318 7.0 33,470 10.4 
Greater than $13,000193,643 52.4 195,711 52.7 144,573 43.2 142,078 44.2 
Total$369,926 100.0 %$371,055 100.0 %$334,855 100.0 %$321,371 100.0 %
59

Investment Activity
The following is a summary of our investmentPortfolio Company Investment activity for the three and ninesix months ended September 30, 2017 and 2016 (in millions).
  Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
  
Debt
Investments
 
Equity
Investments
 
Debt
Investments
 
Equity
Investments
Investments in new portfolio companies $36.9
 $3.6

$95.8

$3.9
Investments in existing portfolio companies 

 







Follow-on investments 0.5
 0.9

12.6

1.4
Delayed draw funding 0.5
 —

1.0

—
Total investments in existing portfolio
           companies
 1.0
 0.9

13.6

1.4
Total investments in new and existing portfolio
companies
 $37.9
 $4.5

$109.4

$5.3
Number of new portfolio company investments 4
 2

13

3
Number of existing portfolio company
investments
 2
 1

11

2
  

  
   
Proceeds/distributions from principal payments/
equity investments
 $35.1
 $—

$86.5
 $—
Proceeds from investments sold or redeemed 5.1
 —

—
 7.5
Total proceeds from principal payments, equity
distributions and investments sold
 $40.2
 $—

$86.5
 $7.5
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, 2017.2021 (dollar amounts in millions):
As of November 3, 2017, we closed $7.0 million of senior secured debt
 Three Months Ended
June 30, 2021		Six Months Ended June 30, 2021
 Debt
Investments		Equity
Investments		Debt
Investments		Equity
Investments
Investments in new portfolio companies$26.5 $— $62.8 $— 
Investments in existing portfolio companies
Follow-on investments18.0 — 44.2 — 
Restructured investments— — — — 
Delayed draw and revolver funding— — — — 
Total investments in existing portfolio companies18.0 — 44.2 — 
Total investments in new and existing portfolio
companies
$44.5 $— $107.0 $— 
Number of new portfolio company investments13 — 31 — 
Number of existing portfolio company
investments
8 — 17 — 
Proceeds/redemptions from principal payments/
equity investments
52.2 — 100.8 — 
Proceeds from investments sold or redeemed9.7 — 10.3 — 
Total proceeds from principal payments, equity
distributions and investments sold
$61.9 $— $111.1 $— 
Notable investments in two new portfolio companies and $6.3 million of senior secured debt investments in four existing portfolio companies during the fourth quarter of 2017.six months ended June 30, 2021, include KNS Acquisition Corp. ($5.0 million senior secured loan), Baymark Health Services, Inc. ($4.9 million senior secured loan), Electrical Components International, Inc. ($5.6 million senior secured loan), and TruGreen Limited Partnership ($4.7 million senior secured loan).

  Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
  
Debt
Investments
 
Equity
Investments
 
Debt
Investments
 
Equity
Investments
Investments in new portfolio companies $14.3
 $—
 $23.3
 $—
Investments in existing portfolio companies 

 

 

 

Follow-on investments 1.2
 —
 11.9
(1)0.8
Refinanced investments —
 —
 3.3
 —
Delayed draw funding 0.9
 —
 0.9
 —
Total investments in existing portfolio
           companies
 2.1
 —
 16.1
 0.8
Total investments in new and existing portfolio
companies
 $16.4
 $—
 $39.4
 $0.8
Number of new portfolio company investments 2
 —
 5
 —
Number of existing portfolio company
investments
 2
 —
 8
 1
         
Proceeds/distributions from principal payments/
equity investments
 $5.5
 $—
 $37.1
 $—
Proceeds from investments sold or redeemed —
 —
 —
 2.1
Total proceeds from principal payments, equity
distributions and investments sold
 $5.5
 $—
 $37.1
 $2.1
(1)Acquired no-cost LLC membership interest in connection with a follow-on debt investment in an existing portfolio company valued at $0.3 million.
During the ninesix months ended SeptemberJune 30, 2016,2021, the weighted-average yield of new debt in Portfolio Company Investment companies was 6.4%.
During the six months ended June 30, 2021, we convertedalso invested $21.9 million in Structured Finance Notes with a $1.8 million portionweighted average annual effective yield of 16.8%.
60

The following is a summary of our subordinatedPortfolio Company Investment activity for the three and six months ended June 30, 2020 (dollar amounts in millions):
 Three Months Ended
June 30, 2020		Six Months Ended
June 30, 2020
 Debt
Investments		Equity
Investments		Debt
Investments		Equity
Investments
Investments in new portfolio companies$2.4 $— $42.3 $— 
Investments in existing portfolio companies
Follow-on investments0.5 — 10.1 0.1 
Restructured investments— — — 0.7 
Delayed draw and revolver funding4.3 — 5.7 — 
Total investments in existing portfolio companies4.8 — 15.8 0.8 
Total investments in new and existing portfolio
companies
$7.2 $— $58.1 $0.8 
Number of new portfolio company investments5 — 10 — 
Number of existing portfolio company
investments
4 1 15 3 
Proceeds/distributions from principal payments/
equity investments
19.1 — 56.3 — 
Proceeds from investments sold or redeemed23.4 — 61.9 3.6 
Total proceeds from principal payments, equity
distributions and investments sold
$42.5 $— $118.2 $3.6 
Notable investments in new portfolio companies during the six months ended June 30, 2020, include A&A Transfer, LLC ($23.7 million senior secured loan and $1.6 million revolver) and SourceHOV Tax, Inc. ($12.8 million senior secured loan).
During the six months ended June 30, 2020, the weighted-average yield of direct debt investments in new portfolio companies was 8.5%.
During the six months ended June 30, 2020, we also invested $12.8 million in Structure Finance Notes with a weighted average annual effective yield of 19.6%.
Non-cash investment activity
On June 11, 2021, My Alarm Center, LLC’s bankruptcy plan became effective and our equity interests were cancelled. For the six months ended June 30, 2021, the Company recognized a realized loss of $3.1 million, of which $3.0 million was recognized as an unrealized loss as of December 31, 2020.
On March 27, 2020, our debt investment in Southern Technical Institute,Constellis Holdings, LLC with a principal amountwas restructured. We converted our non-accrual debt investment into 20,628 shares of $1.8common equity. The fair value of the 20,628 shares of common equity received was $0.7 million, into equity units and warrants valued at $1.8 million. No gain or loss waswhich we recognized as a result of 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 investmentinvestment's cost.
61

Risk Monitoring
We categorize direct investments in the samedebt securities of portfolio company.
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 categorize debt investments into seven risk categories based on relevant information about the ability of borrowers to service their debt. For additional information regarding our risk categories, see “Item 1. Business–Portfolio Review/Risk Monitoring” in our Annual Report on Form 10-K for the year ended December 31, 2016.2020. 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, 2017,2021 and December 31, 20162020 (dollar amounts in thousands):
September 30, 2017 December 31, 2016Debt Investments, at Fair Value
Risk Category
Debt
Investments, at
Fair Value
 
% of Debt
Investments
 
Debt
Investments, at
Fair Value
 
% of Debt
Investments
Risk CategoryJune 30, 2021December 31, 2020
1 (Low Risk)$—
 —% $—
 —%1 (Low Risk)$— — %$— — %
2 (Below Average Risk)3,788
 1.5
 3,810
 1.6
2 (Below Average Risk)— — — — 
3 (Average)221,212
 86.0
 192,078
 78.6
3 (Average)309,149 92.3 263,934 82.2 
4 (Special Mention)26,773
 10.4
 43,084
 17.6
4 (Special Mention)17,950 5.4 45,302 14.1 
5 (Substandard)3,284
 1.3
 5,393
 2.2
5 (Substandard)6,975 2.1 11,684 3.6 
6 (Doubtful)2,038
 0.8
 —
 —
6 (Doubtful)781 0.2 451 0.1 
7 (Loss)—
 —
 —
 —
7 (Loss)— — — — 
$257,095
 100.0% $244,365
 100.0%$334,855 100.0 %$321,371 100.0 %
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. During the six months ended June 30, 2021, debt investments with an aggregate cost and otherfair value of $17.1 million and $16.4 million, respectively, had risk rating upgrades from risk category 4 to risk category 3, and a debt investment activity.with a cost and fair value of $16.1 million and $0.1 million, respectively, had a risk rating downgrade from risk category 5 to risk category 6.
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. No new loans were placed on non-accrual status during the six months ended June 30, 2021. The aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization with an amortized costwas $38.2 million 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$7.8 million, respectively, at June 30, 2017, was restructured2021, and exchanged for a new class of preferred equity securities$48.1 million and common equity securities in July 2017. See "Item 1.–Financial Statements–Note 4" for further information. At$12.1 million, respectively, at December 31, 2016, we had one loan (Community2020. During the six months ended June 30, 2021, Community Intervention Services, Inc.) on, a 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.
PIK and Cash Dividend Accruals
Atloan since September 30, 2017, we had four preferred equity securities (Master Cutlery, LLC, Stancor, L.P., Southern Technical Institute, LLC, and TRS Services, LLC),2016 with an aggregate amortizeda cost and fair value of $10,452 and $3,822, respectively,$7.6 million was sold for which$0.1 million.
Structured Finance Notes
The following table summarizes the fair valuecomposition of the accrued PIK dividend for the three months ended September 30, 2017 was $-0-. In addition, beginningour Structured Finance Notes as of June 30, 2017, the Company discontinued recognition of the cash preferred dividend from its investment in Master Cutlery, LLC. At2021, and December 31, 2016,2020 (in thousands):
June 30, 2021December 31, 2020
Amortized CostFair ValueAmortized CostFair Value
Subordinated notes$64,901 $65,452 $54,280 $54,724 
Mezzanine bonds2,631 2,793 1,580 1,701 
Total Structured Finance Notes$67,532 $68,245 $55,860 $56,425 
As of June 30, 2021, 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 endedweighted average yield on Structured Finance Notes remained stable at 16.52%, compared to 16.56% at December 31, 2016 was $-0-.2020.


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, 2020. The following is a discussion of the key financial measures that management employs in reviewing the performance of our operations.
62
Total Investment Income. We generate revenue in the form of interest income on debt investments and dividend income from our equity investments. Our debt investments typically have a term of three to eight years and bear interest at fixed and floating rates. As of September 30, 2017, floating rate and fixed rate loans comprised 73% and 27%, respectively, of our debt investment portfolio at fair value; however, in accordance with our investment strategy, we expect that over time the proportion of fixed rate loans will continue to increase. In some cases, our investments provide for PIK interest, or PIK dividends (meaning interest or dividends paid in the form of additional principal amount of the loan or equity security instead of in cash). We also generate revenue in the form of management, valuation, and other contractual fees, which is recognized as the related services are rendered. In the general course of business, we receive certain fees from portfolio companies which are non-recurring in nature. Such non-recurring fees include prepayment fees on certain loans repaid prior to their scheduled due date, which are recognized as earned when received, and fees for capital structuring services from certain portfolio companies, which are recognized as earned upon closing of the investment. Net Loan Fees are capitalized, and accreted or amortized over the life of the loan as interest income. When we receive principal payments on a loan in an amount that exceeds its amortized cost, we will also recognize the excess principal payment as income in the period it is received.
Expenses. Our primary operating expenses include interest expense due under our outstanding borrowings, the payment of fees to OFS Advisor under the Investment Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement and other operating costs described below. Additionally, we will pay interest expense on any outstanding debt under any new credit facility or other debt instrument we may enter into. We will bear all other out-of-pocket costs and expenses of our operations and transactions, whether incurred by us directly or on our behalf by a third party, including:
the cost of calculating our net asset value, including the cost of any third-party valuation services;
the cost of effecting sales and repurchases of shares of our common stock and other securities;
fees payable to third parties relating to making investments, including out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments;
transfer agent and custodial fees;
out-of-pocket fees and expenses associated with marketing efforts;
federal and state registration fees and any stock exchange listing fees;
U.S. federal, state and local taxes;
independent directors’ fees and expenses;
brokerage commissions;
fidelity bond, directors’ and officers’ liability insurance and other insurance premiums;
direct costs, such as printing, mailing and long-distance telephone;
fees and expenses associated with independent audits and outside legal costs;
costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; and
other expenses incurred by either OFS Services or us in connection with administering our business.
Net Gain (Loss) on Investments. Net gain (loss) on investments consists of the sum of: (a) realized gains and losses from the sale of debt or equity securities, or the redemption of equity securities; and (b) net unrealized appreciation or depreciation on debt and equity investments. In the period in which a realized gain or loss is recognized, such gain or loss will generally be offset by the reversal of accumulated net unrealized appreciation or depreciation, and the net gain recognized in that period will generally be smaller. The accumulated net unrealized appreciation or depreciation on debt securities is also reversed when those investments are redeemed or paid off prior to maturity. In such instances, the reversal of accumulated unrealized appreciation or depreciation will be reported as a net loss or gain, respectively, and may be partially offset by the acceleration of any premium or discount on the debt security, which is reported in interest income, and any prepayment fees on the debt security, which is reported in fee income.

We do not believe that our historical operating performance is necessarily indicative of our future results of operations that we expect to report in future periods.operations. We are primarily focused on debt investments in middle-market and larger companies in the United States including debt investments and, to a lesser extent, equity investments, including warrants and other minority equity securities and Structured Finance Notes, which differs to some degree from our historical investment concentration, in senior secured loans to middle-marketthat we now also focus on the debt of larger U.S. companies in the United States.and Structured Finance Notes. 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.
The following analysis compares our quarterly results of operations to the preceding quarter, as well as our year-to-date results of operations to the corresponding period in the prior year. We believe a comparison of our current quarterly results to the preceding quarter is more meaningful and transparent than a comparison to the corresponding prior-year quarter as our results of operations are not influenced by seasonal factors the latter comparison is designed to elicit and highlight.
Comparison of the three and nine months ended SeptemberJune 30, 2017,2021 and 2016March 31, 2021 and comparison of the six months ended June 30, 2021 and 2020
Consolidated operating results for the three and nine months ended SeptemberJune 30, 20172021 and 2016,March 31, 2021 and the six months ended June 30, 2021 and 2020 are as follows (in thousands):
Three Months EndedSix Months Ended June 30,
June 30, 2021March 31, 202120212020
Investment income
Interest income:
Cash interest income$6,972 $6,837 $13,809 $18,299 
Net Loan Fee amortization857 573 1430 817 
Accretion of interest income on Structured Finance Notes2,392 2,278 4,670 2,626 
Other interest income— 12 12 54 
Total interest income10,221 9,700 19,921 21,796 
PIK income:
PIK interest income397 440 837 829 
Preferred equity PIK dividends59 47 106 343 
Total PIK income456 487 943 1,172 
Dividend income:
Common and preferred equity cash dividends136 — 136 100 
Total dividend income136 — 136 100 
Fee income:
Syndication fees439 217 656 378 
Prepayment and other fees164 86 251 405 
Total fee income603 304 907 783 
Total investment income11,416 10,491 21,907 23,851 
Total expenses, net8,181 7,941 16,122 17,272 
Net investment income3,235 2,550 5,785 6,579 
Net gain (loss) on investments19,206 3,923 23,129 (30,932)
Loss on extinguishment of debt— (2,299)(2,299)(149)
Net increase (decrease) in net assets resulting from operations$22,441 $4,174 $26,615 $(24,502)
63

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Investment income       
Interest income:       
Cash interest income$6,742

$5,872

$19,592

$17,781
Net Loan Fee amortization518

352

1,187

1,162
PIK interest income485

311

1,134

868
Other interest income73

45

156

124
Total interest income7,818

6,580

22,069

19,935
Dividend income:










Preferred equity cash dividends34

82

99

410
Preferred equity PIK dividends286

396

1,065

1,032
Common equity dividends91

50

331

182
Total dividend income411

528

1,495

1,624
Fee income:










Management, valuation, and other43

69

127

167
Prepayment, structuring, and other fees850

182

1,443

1,159
Total fee income893

251

1,570

1,326
Total investment income9,122

7,359

25,134

22,885
Total expenses4,720

4,062

13,076

12,476
Net investment income4,402

3,297

12,058

10,409
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
Interest and PIK income by debt investment type for the three and nine months ended SeptemberJune 30, 20172021 and 2016,March 31, 2021 and six months ended June 30, 2021 and 2020, is summarized below (in thousands):
Three Months EndedSix Months Ended June 30,
June 30, 2021March 31, 202120212020
Interest income and PIK interest income:
Senior secured debt investments$7,580 $7,202 $14,782 $18,084 
Subordinated debt investments646 660 1,306 1,911 
Structured Finance Notes2,392 2,278 4,670 2,630 
Total interest income and PIK interest income10,618 10,140 20,758 22,625 
  Less Net Loan Fees accelerations(551)(342)(893)(235)
Recurring interest income and PIK interest income$10,067 $9,798 $19,865 $22,390 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Interest income:       
Senior secured debt investments$5,721

$4,979

$16,170

$13,930
Subordinated debt investments2,097

1,601

5,899

6,005
Total interest income$7,818

$6,580

$22,069

$19,935
Investment Income
InterestOther than acceleration of Net Loan Fees (PIK interest income and the accretable yield on Structured Finance Notes) recognized upon the repayment of a loan, we consider our interest income on direct debt investments to portfolio companies to be recurring in nature. Such recurring interest income and PIK interest income increased $0.3 million during the three months ended June 30, 2021 compared to the prior quarter, primarily due to a $10.9 million increase in the average outstanding performing loan balance. Recurring interest income decreased $2.5 million during the six months ended June 30, 2021 compared to the corresponding period in the prior year, primarily due to a $3.1 million decrease in the average outstanding performing loan balance, partly offset by $1.2a $0.6 million increase from a 30 basis point increase in the recurring earned yield.
During the three months ended June 30, 2021, dividend income increased $0.1 million due to a distribution from our equity investment in MTE Holding Corp.
Syndication fees, prepayment fees and the acceleration of Net Loan Fees are considered non-recurring and generally result from periodic transactions rather than from holding portfolio investments. Syndication fees, which are recognized when OFS Advisor sources, structures, and arranges the lending group, and for which we are additionally compensated, increased to $0.4 million for the three months ended SeptemberJune 30, 2017,2021 compared to the three months ended September 30, 2016. The $1.2 million increase was due to a $1.1 million increase primarily attributable to a 19% increase in the average outstanding loan balance, and a $0.2 million increase in Net Loan Fee amortization, offset by a $0.1 million decrease primarily attributable to a 30 basis points decrease in the weighted average yield in our portfolio. Acceleration

of Net Loan Fees of $0.3 million and $0.1 million were included in interest income for the three months ended September 30, 2017 and 2016, respectively.
Interest income increased by $2.1 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. The $2.1 million increase was due to a $2.7 million increase primarily attributable to a 15% increase 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 SeptemberMarch 31, 2021. Total fee income for the six months ended June 30, 2017,2021 compared to the three months ended September 30, 2016,corresponding period in the prior year, increased from $0.8 million to $0.9 million primarily due to an increase in prepayment fees and structuring fees of $0.3 million and $0.4 million, respectively, offset by a $0.1 million decrease in othersyndication fees. We recorded prepayment fees of $0.3 million resulting from $17.5 million of unscheduled principal payments during
Expenses
Operating expenses for the three months ended SeptemberJune 30, 2017. We did not receive any unscheduled principal payments subject to prepayment fees during the three2021 and March 31, 2021 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, 2016.2021 and 2020, are presented below (in thousands):
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 fees and $0.1 million in other fees. We recorded structuring fees of $0.7 million in connection with the closing of $48.7 million of investments during the nine months ended September 30, 2017, compared to structuring fees of $0.2 million in connection with the closing of $15.7 million of investments during the nine months ended September 30, 2016. We recorded prepayment fees of $0.7 million resulting from $45.7 million of unscheduled principal payments during the nine months ended September 30, 2017, compared to prepayment fees of $0.9 million resulting from $24.8 million of unscheduled principal payments we recorded during the nine months ended September 30, 2016.
Expenses
Three Months Ended September 30, Nine Months Ended September 30,Three Months EndedSix Months Ended June 30,
2017 2016 2017 2016June 30, 2021March 31, 202120212020
Interest expense$1,503

$1,320
 $4,229
 $3,936
Interest expense$4,241 $4,825 $9,066 $9,853 
Management fees1,310

1,120
 3,726
 3,324
Management feeManagement fee1,876 1,834 3,710 3,888 
Incentive fee1,090

817
 2,249
 2,407
Incentive fee809 — 809 1,098 
Professional fees284

260
 840
 877
Professional fees489 387 876 1,108 
Administration fee274

255
 982
 1,009
Administration fee439 568 1,007 1,020 
General and administrative expenses259

290
 1,050
 923
General and administrative expenses327 327 654 746 
Total expenses$4,720

$4,062
 $13,076
 $12,476
Total expenses before incentive fee waiverTotal expenses before incentive fee waiver8,181 7,941 16,122 17,713 
Incentive fee waiverIncentive fee waiver— — — (441)
Total expenses, net of incentive fee waiverTotal expenses, net of incentive fee waiver$8,181 $7,941 $16,122 $17,272 
Interest expense for the three and nine months ended SeptemberJune 30, 2017, increased over2021 decreased $0.6 million compared to the preceding quarter, primarily due to interest costs of approximately $564,000 incurred for both the newly issued $125.0 million of Unsecured Notes Due February 2026 and the $98.5 million of redeemed Unsecured Notes Due April 2025 and October 2025. Interest expense for
64

the six months ended June 30, 2021 decreased $0.8 million compared to the corresponding periodsperiod in the prior year, primarily due to an increasea $20.9 million decrease in borrowings under our PWB Credit Facility. Thethe weighted 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.debt balance.
Management fee expense for the three and nine months ended SeptemberJune 30, 2017, increased over2021 remained stable compared to the prior quarter consistent with changes in total assets. Management fee expense for the six months ended June 30, 2021 decreased $0.2 million compared to the corresponding periodsperiod in the prior year consistent with changes in total assets.
The incentive fees earned by OFS Advisor for the three months ended June 30, 2021 increased $0.8 million compared to the prior quarter due to an increase in net interest margin. Pre-incentive fee net investment income did not exceed the performance hurdle for incentives in the three months ended March 31, 2021. Incentive fee expense for the six months ended June 30, 2021 before taking into account the incentive fee waiver during the three months ended March 31, 2020, decreased $0.3 million compared to the corresponding period in the prior year, primarily due to the decrease in net interest margin during the first quarter of 2021.
Professional fees for the three months ended June 30, 2021 increased $0.1 million compared to the prior quarter. Professional fees for the six months ended June 30, 2021 decreased $0.2 million compared to the corresponding period in the prior year due to an increasea decrease in our average total assets, primarily due to a increase in net investment activity, including deployment of funds from the Offering.valuation services.
IncentiveAdministration fee expense increased by $0.3 million for the three months ended SeptemberJune 30, 2017,2021 decreased $0.1 million compared to the prior quarter due to allocations related to year-end administrative services, including audit support during the first quarter of 2021. Administration fee expense for the six months ended June 30, 2021 remained stable with the corresponding period in the prior year.
General and administrative expenses for the three months ended SeptemberJune 30, 2016, due to an increase in pre-incentive fee net investment income compared to2021 remained stable with the prior quarter. General and administrative expenses decreased $0.1 million over 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 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 exceededtax expenses in the second 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

increasecorresponding period 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.prior year.
Net Lossrealized and unrealized gain (loss) on Investmentsinvestments
Net gain (loss), inclusive of realized and unrealized gains (losses), by investment type for the three and nine months ended SeptemberJune 30, 20172021 and 2016, areMarch 31, 2021 and six months ended June 30, 2021 and 2020, were as follows (in thousands):
Three Months EndedSix Months Ended June 30,
June 30, 2021March 31, 202120212020
Senior secured debt$918 $3,880 4,796 $(23,368)
Subordinated debt3,513 (1,442)2,071 (7,590)
Preferred equity(81)721 640 (2,669)
Common equity, warrants and other14,371 1,373 15,744 5,986 
Structured Finance Notes690 (543)147 (3,707)
Deferred income tax benefit (expense)(205)(66)(269)416 
Total net gain (loss) on investments$19,206 $3,923 $23,129 $(30,932)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Senior secured debt$(1,669)
$(368)
$(5,906)
$859
Subordinated debt(2,306)
(193)
(4,660)
(272)
Preferred equity270

(497)
2,949

(4,549)
Common equity and warrants478

149

(681)
2,558
Net loss on investments(3,227)
(909)
$(8,298)
$(1,404)
Three and nine months ended September 30, 2017
We recognized net losses of $1.7 millionNet gain on senior secured debt duringinvestments for the three months ended September 30, 2017, primarily as a result of the negative impact of portfolio company-specific performance factors. In addition, a previously recognized cumulative unrealized loss of $5.0 million at June 30, 2017, on My Alarm Center, LLC was realized during the three2021 and March 31, 2021
Three months ended SeptemberJune 30, 2017 upon restructure2021
Our portfolio experienced net gains of $19.2 million in the senior securedsecond quarter of 2021, principally due to a $18.3 million, or 6.8%, improvement in the fair values of our directly originated debt investment into preferred and common equity interests.
We recognized netinvestments. Net gains for the quarter include realized losses of $5.9$10.8 million primarily on senior secured debt during the nine months ended September 30, 2017, primarily as a resultsale of the negative impact of portfolio company-specific performance factors, including a realized loss of $5.0 million on our senior secured debt investment in My Alarm Center, LLC recognized upon restructuring 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.
We recognized net losses of $2.3 million on subordinated debt during the three months ended September 30, 2017, primarily as a result of the negative impact of portfolio company-specific performance factors, including an unrealized depreciation of $1.2 million recognized on our subordinated debt investment in Community Intervention Services, Inc.,LLC and the write-off of equity interests in My Alarm Center, LLC, which was placed on non-accrual during 2016.were substantially recognized as unrealized losses in prior fiscal years.
We recognizedDuring the three months ended June 30, 2021, our senior secured debt remained stable with the prior quarter and experienced net lossesgains of $4.7$0.9 million.
The net appreciation of $3.5 million on our subordinated debt duringinvestments in the ninesecond quarter of 2021 was primarily attributable to a $3.5 million improvement on our debt investment in Eblens Holdings, Inc. .
The net gains on our common equity in the second quarter of 2021 was primarily attributable to the $12.1 million improvement in Pfanstiehl Holdings, Inc.
65

Three months ended September 30, 2017,March 31, 2021
In the first quarter of 2021, our portfolio experienced net gains of $3.9 million, primarily as a result of performance improvements in our directly originated debt and equity investments, resulting in net unrealized appreciation.
In the first quarter of 2021, the net negative impactappreciation on our senior secured debt investments was primarily attributable to a $1.5 million improvement on our debt investment in Wastebuilt Environmental Solutions LLC. We also experienced general appreciation in our senior secured investments as a result of portfolio company-specific performance factors, including an unrealized depreciationcredit spread tightening observed in the market, leading to a 31 basis point reduction in the weighted average discount rates utilized in our discounted cash flow fair value models.
First quarter 2021 net losses in our subordinated debt investments was principally due to a decrease of $3.4$2.3 million recognized onin the fair value of our subordinated debt investment in Community Intervention Services, Inc., which was placedOnline Tech Stores LLC, resulting from further degradation of performance at that company.
Net gain on non-accrual during 2016.investments for the six months ended June 30, 2021 and 2020
We recognizedSix months ended June 30, 2021
Our portfolio experienced net gains of $0.3$23.1 million on preferred equity investments forduring the threesix months ended SeptemberJune 30, 2017, primarily as2021, principally due to a result of$22.6 million net gain on our directly originated debt and equity investments. During 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 threesix months ended SeptemberJune 30, 2017, was a realized gain of $3.6 million we recognized upon exit of a preferred2021, our common equity investment. We recognized cumulativeinvestment in Pfanstiehl Holdings, Inc. and our subordinated debt investment in Eblens Holdings, Inc. had unrealized appreciation of approximately $3.6$13.0 million on this investment throughand $4.0 million, respectively.
Six months ended June 30, 2017, which resulted in a2020
Our portfolio experienced net gainunrealized losses 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, primarily as a result of the net positive impact from changes to EBITDA multiples used in our valuations as a result of pending transactions, offset by the net negative impact of portfolio company-specific performance factors. Included in net gains of $2.9 million for the nine 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 $1.1 million on this investment through December 31, 2016, which resulted in a net gain of $2.5$20.9 million during the ninesix 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 $0.5 million on common equity and warrant investments for the three months ended September 30, 2017, primarily as a result of the positive impact of portfolio company-specific performance factors.

We recognized net losses of $0.7 million on common equity and warrant investments for the nine months ended September 30, 2017, primarily as a result of the negative impact of portfolio company-specific performance factors. Included in the net loss was a realized gain of $0.9 million from the exit of a common equity investment, for which we had recognized cumulative unrealized appreciation of $0.5 million through December 31, 2016, resulting in a net gain of $0.4 million during the nine months ended September 30, 2017.
Three and nine months ended September 30, 2016
We recognized net losses of $0.4 million on senior secured debt during the three months ended September 30, 2016, primarily as a result of the net impact of portfolio company-specific performance factors, offset by the impact of changes to certain market loan indices, and the impact of certain investments moving closer to their expected exit events.
We recognized net gains of $0.9 million on senior secured debt during the nine months ended September 30, 2016, primarily as a result of the impact of changes to certain market loan indices, and by the impact of portfolio company-specific performance factors, partially offset by the pay-off of certain senior secured debt investments.
We recognized net losses of $0.2 million on subordinated debt during the three months ended September 30, 2016, principally as a result of the net impact of portfolio company-specific performance factors.
We recognized net losses of $0.3 million on subordinated debt during the nine months ended September 30, 2016, principally due to the pay-off of certain subordinated debt investments, offset by the net impact of portfolio company-specific performance factors.
We recognized net losses of $0.5 million on preferred equity investments for the three 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 losses of $4.6 million on preferred equity investments for the nine months ended September 30, 2016, primarily attributable to the net impact of portfolio company-specific performance factors, offset primarily by the impact of certain investments moving closer to their expected exit events.
We recognized net gains of $0.1 million on common equity and warrant investments for the three months ended September 30, 2016,2020, primarily due to the net impactadverse economic effects of certain investments moving closer to their expected exit events, offset by the negative net impactCOVID-19 pandemic on market conditions and the overall economy, and the related declines in quoted loan prices. Additionally, we incurred realized losses of portfolio company-specific performance factors.
We recognized net gains of $2.6$10.0 million, on common equity and warrant investments for the nine months ended September 30, 2016, primarily due to the net impactloss of portfolio company-specific performance factors$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.
Loss on Extinguishment of Debt
During the six months ended June 30, 2021, we prepaid $9.8 million of SBA debentures and redeemed $98.5 million of unsecured notes, and, as a result, we recognized losses on extinguishment of debt of $2.3 million related to the net impactcharge-off of certain investments moving closer to their expected exit events. In addition,deferred borrowing costs on these instruments.
During the six months ended June 30, 2020, we realized gainsprepaid $16.1 million of $2.6 million from the redemption of an equity investment. We held this investment from the first quarter of 2014SBA debentures, and recognized unrealized appreciationlosses on extinguishment of $2.1debt of $0.1 million and $0.5 duringrelated to the years ended December 31, 2015 and 2014, respectively. There was no net gain during the nine months ended September 30, 2016, on this transaction.charge-off of deferred borrowing costs.
Liquidity and Capital Resources
We manage the liquidityAt June 30, 2021, we held cash of $35.2 million, which includes $15.7 million held by SBIC I LP, ("our wholly owned SBIC, Liquidity") separately from our general corporate liquidity ("Corporate Liquidity"). At September 30, 2017, our Corporate Liquidity and our$5.9 million held by OFSCC-FS. Our use of cash held by SBIC Liquidity includesI LP may be restricted by SBA regulation, including limitations on the amount of 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. TransfersSBIC I 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 or regulatory capital of SBIC I LP, and our ability to transfer liquidityrequire the prior approval of the SBA. During the six months ended June 30, 2021, the Parent received a return of capital distribution of $19.1 million from Corporate Liquidity to SBIC LiquidityI LP. The Company is currently limited to follow-on investments in current portfolio companies held through SBIC I LP. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. During the six months ended June 30, 2021, the Parent received $1.9 million in cash distributions from OFSCC-FS. As of June 30, 2021, cash available to be distributed from SBIC I LP and OFSCC-FS were $12.1 million and $-0-, respectively.
At June 30, 2021, we had an unused commitment of $25.0 million under our PWB Credit Facility, as well as an unused commitment of $125.9 million under our BNP Facility, both subject to a borrowing base requirements and other covenants. Based on fair values and equity capital contributionsat June 30, 2021, we could access available lines of credit for $129.0 million and remain in compliance with our asset coverage requirements. As of August 2, 2021, we had cash on hand of approximately $29.6 million. 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.
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" in our Annual Report on Form 10-K for the year ended December 31, 2016. During the nine months ended SeptemberJune 30, 2017, we transferred $3.1 million from from SBIC Liquidity to Corporate Liquidity. At September 30, 2017, $2.5 million cash and cash equivalents were available to transfer from SBIC Liquidity to Corporate Liquidity.2021.
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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.investments and payment of expenses. 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.investment, as well as accreted interest income on Structured Finance Notes, which may not coincide with cash distributions from these investments. 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 includesmay include 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):
 Six Months Ended June 30,
 20212020
Cash from net investment income(1)
$5,925 $4,245 
Net (purchases and originations)/repayments and sales of portfolio investments(1)
(8,099)41,627 
Net cash provided by (used in) operating activities(2,174)45,872 
Distributions paid to stockholders(2)
(5,573)(6,728)
Net payments under lines of credit(8,000)(4,700)
Repayment of SBA debentures(9,765)(16,110)
Proceeds from unsecured notes offering, net of discounts121,791 — 
Redemption of unsecured notes(98,525)— 
Other financing activities(303)— 
Net cash used in financing activities(375)(27,538)
Increase (decrease) in cash$(2,549)$18,334 
  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)
At September 30, 2017, we held(1)    Net (purchases and originations)/repayments and sales of portfolio investments includes purchase and origination of portfolio investments, proceeds from principal payments on portfolio investments, proceeds from sale or redemption of portfolio investments, changes in receivable for investments sold, payable form investments purchased as reported in our statements of cash and cash equivalentsflows, as well as the excess of $53.9 million, an increaseproceeds from distributions received from structured finance notes over accretion of $36.2 million from December 31, 2016.
interest income on structured finance notes. Cash from net investment income includes all other cash flows from operating activities reported in our statements of cash flows. Certain amounts in the prior year have been reclassified to conform with the current year presentation.
Net cash(2)    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.
Cash from net investment income
Cash from net investment income increased $2.2$1.7 million for the ninesix months ended SeptemberJune 30, 2017,2021, compared to the ninesix months ended SeptemberJune 30, 2016. The net increase to net cash from investment income was2020, principally due to ana $1.0 million increase in the excess distributions received from our investments in Structured Finance Notes over the accretion of interest income common dividends, prepaymenton such Structured Finance Note investments.
Net (purchases and structuring fees collected,originations)/repayments and a decrease in cash 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.
Net purchases and originations of portfolio investments excluding cash received from realized gains
During the ninesix months ended SeptemberJune 30, 2017,2021, net purchases and originations of portfolio investments of 8.1 million were primarily due to $114.7$120.9 million of cash we used to purchase portfolio investments, offset by $90.0$117.5 million of cash we received from amortized cost repayments and sales on our portfolio investments. During the ninesix months ended SeptemberJune 30, 2016,2020, net purchases and originations of portfolio investments of $41.6 million were primarily due to $40.2$80.2 million of cash we used to purchase portfolio investments. These cash purchases wereinvestments, offset by $37.1$124.5 million of cash we received from principal paymentsamortized cost repayments and sales on our portfolio investments. See "—Portfolio Composition and Investment Activity–Investment Activity."
Proceeds from common stock offering, net 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 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 millionBorrowings
SBA Debentures
SBIC I LP has aLP’s SBIC license that allowed 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
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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, 2021 and 2015,2020, SBIC I LP had fully drawn the $149.9outstanding debentures of $95.5 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 $75.0and $133.8 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$219.5 million and $247.5$223.8 million in total assets at SeptemberJune 30, 2017,2021 and December 31, 2016,2020, respectively, which accounted for approximately 70%42% 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 pay its outstanding SBA debentures prior to their scheduled maturity dates. 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. During the six months ended June 30, 2021, SBIC I LP prepaid $9.8 million of SBA debentures that were contractually due September 1, 2022 and September 1, 2024. We recognized a loss on extinguishment of debt of $0.1 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 February 17, 2021, we amended the BLA to among other things: (i) increase the maximum amount available from $20.0 million to $25.0 million; (ii) decrease the interest rate floor from 5.25% per annum to 5.00% per annum; (iii) modify certain financial performance covenants; and (iv) extend the maturity date from February 28, 2021 to February 28, 2023.
    As of June 30, 2021, we had no outstanding balance and an unused commitment of $25.0 million under the PWB Credit Facility, 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 was2021, we were in compliance with the applicable covenants under the PWB Credit Facility.
Unsecured Notes
On February 10, 2021, we closed the public offering of $100.0 million aggregate principal amount of our 4.75% notes due 2026, and on March 18, 2021, we closed an additional public offering of $25.0 million aggregate principal amount of our 4.75% notes due 2026 (the "Unsecured Notes Due February 2026"). The total net proceeds to us from the Unsecured Notes Due February 2026, after deducting underwriting fees of $3.2 million and offering expenses of $0.3 million, was approximately $121.5 million. The Unsecured Notes Due February 2026 bear an effective interest rate, including amortization of deferred debt issuance costs, of 5.32%. The Unsecured Notes Due February 2026 will mature on February 10, 2026, and we may redeem the Unsecured Notes Due February 2026 in whole or in part at any time, or from time to time, at our option at par plus a "make-whole" premium, if applicable. The Unsecured Notes Due February 2026 bear interest at a rate of 4.75% per year payable semi-annually in arrears on February 10 and August 10 of each year, commencing on August 10, 2021.
In connection with, and using the proceeds from, the issuance of the Unsecured Notes Due February 2026, on March 12, 2021, we redeemed all $50.0 million in aggregate principal amount of the Unsecured Notes Due April 2025 and all
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$48.5 million in aggregate principal amount of the Unsecured Notes Due October 2025. The Unsecured Notes Due April 2025 and the Unsecured Notes Due October 2025 were redeemed at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from January 31, 2021, through, but excluding, March 12, 2021. We recognized a loss on extinguishment of debt of $2.2 million related to the charge-off of deferred borrowing costs on the redemption of the notes.
    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.
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 $24.1 million was drawn as of June 30, 2021. Borrowings under the BNP Facility bear interest based on LIBOR for the relevant interest period, plus an applicable spread. The effective interest rate on the BNP Facility was 6.06% at June 30, 2021. 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 $125.9 million as of June 30, 2021. As of June 30, 2021, we were in compliance with the applicable covenants.
    On a stand-alone basis, OFSCC-FS held approximately $116.9 million and $72.4 million in total assets at June 30, 2021 and December 31, 2020, respectively, which accounted for approximately 22% and 15% 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, asAs a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our assets, as defined by the 1940 Act, are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States. Conversely, we may invest up to 30% of our portfolio in opportunistic investments not otherwise eligible under BDC regulations. Specifically, as part of this 30% basket, we may consider investments in investment funds that are operating pursuant to certain exceptions to the 1940 Act and in advisers to similar investment funds, as well as in debt or equity of middle-market portfolio companies located outside of the United States and debt and equity of public companies that do not meet the definition of eligible portfolio companies because their market capitalization of publicly traded equity securities exceeds the levels provided for in the 1940 Act. As of June 30, 2021, approximately 85% of our investments were qualifying assets.
BDCs generally will beare required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities (including SBIC I LP’s SBA-guaranteed debt), to total senior securities, which include all of our borrowings (excluding SBA-guaranteed debt) and any outstanding preferred stock, (of which we had none at September 30, 2017), of at least 200% (150% if certain requirements are met). 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.
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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 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.
The following table summarizes shares of common stock repurchased under the Stock Repurchase Program during the six months ended June 30, 2021 (in thousands).
Period
Total Number
of Shares Purchased
Cost of Shares PurchasedAverage Price Paid Per Share
January 1, 2021 through March 31, 2021700 $5 $6.70 
April 1, 2021 through June 30, 2021— $— $— 
    As of June 30, 2021, the aggregate amount outstanding of the senior securities issued by us was $228.4 million, for which our asset coverage was 179%. The Small Business Administration Debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective November 26, 2013. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.
    As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if the Board determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. On June 15, 2021, our stockholders approved a proposal to authorize us, with approval of our Board, to sell or otherwise issue shares of our common stock (during a twelve-month period) at a price below our then-current net asset value per share in one or more offerings, subject to certain limitations (including that the cumulative number of shares sold pursuant to such authority does not exceed 25% of our then outstanding common stock immediately prior to each such sale).
Contractual Obligations and Off-Balance Sheet Arrangements
The following table shows our contractual obligations as of SeptemberJune 30, 20172021 (in thousands):
 Payments due by period
Contractual Obligation (1)
TotalLess than
year		1-3 years (2)4-5 years (2)After 5
years (2)
PWB Credit Facility$— $— $— $— $— 
Unsecured Notes204,325 — 25,000 125,000 54,325 
SBA Debentures95,505 — 7,000 88,505 — 
BNP Facility24,050 — — 24,050 — 
Total(3)
$323,880 $— $32,000 $237,555 $54,325 
(1)Excludes commitments to extend credit to our portfolio companies.
(2)The PWB Credit Facility is scheduled to mature on February 28, 2023. The SBA debentures are scheduled to mature between September 2022 and September 2025. SBIC I LP is repaying over time its outstanding SBA debentures prior to the scheduled maturity dates of its debentures. The Unsecured Notes are scheduled to mature between September 2023 and October 2026. The BNP Facility is scheduled to mature on June 20, 2024.
(3)63% of the outstanding debt is unsecured.
    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.
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Payments due by period
 
Total
Less than
year
1-3 years (2)
3-5 years
After 5
years (2)
Contractual Obligations (1)
 

 

 

 

 
















PWB Credit Facility
$17,100

$—

$17,100

$—

$—
SBA Debentures
149,880

—

—

—

149,880
Total
$166,980

$—

$17,100

$—

$149,880

(1)Excludes commitments to extend credit to our portfolio companies.
(2)The PWB Credit Facility is scheduled to mature on October 31, 2018. The SBA debentures are scheduled to mature between September 2022 and 2025.
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. WeAt June 30, 2021, we had $4.5$11.0 million of totalin unfunded commitments to threeeight portfolio companies. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies at September 30, 2017.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 tax treatment 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 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 directorsBoard 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 August 3, 2021, our Board declared a distribution of $0.24 per share for the tax characteristicsthird quarter of the distributions paid during fiscal 2017 were determined2021, payable on September 30, 2021 to stockholders of record as of September 23, 2021.
    We evaluated events subsequent to June 30, 2017,2021 through August 5, 2021. We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts our portfolio companies, employees, due diligence and underwriting processes, and financial markets. The U.S. capital markets experienced extreme volatility and disruption following the outbreak of the COVID-19 pandemic, which appear to have subsided and returned to
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pre-COVID-19 levels. Nonetheless, certain economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a prolonged period of world-wide economic downturn.
On March 27, 2020, the U.S. government enacted the CARES Act, which contains provisions intended to mitigate the adverse economic effects of the coronavirus pandemic. On December 27, 2020, the U.S. government enacted the December 2020 COVID Relief Package. Additionally, on March 11, 2021, the U.S. government enacted the American Rescue Plan, which included additional funding to mitigate the adverse economic effects of the COVID-19 pandemic. It is uncertain whether, or to what extent, our portfolio companies will be able to benefit from the CARES Act, the December 2020 COVID Relief Package, the American Rescue Plan, or any other subsequent legislation intended to provide financial relief or assistance. As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.
The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend to a large extent on future developments regarding the duration and severity of the coronavirus, effectiveness of vaccination deployment and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition. Given the fluidity of the situation, we cannot estimate that approximately $0.27 per share would represent a returnthe long-term impact of capital.COVID-19 on our business, future results of operations, financial position, or cash flows at this time.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subjectThe economic effects of the COVID-19 pandemic has introduced significant volatility in the financial markets. The U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. In addition, in a prolonged low interest rate environment, including a reduction of LIBOR to financial market risks, including changeszero, our net interest margin will be compressed and adversely affect our operating results. For additional information concerning the COVID-19 pandemic and its potential impact on our business and our operating results, see"Part I, Item 1A. Risk Factors” in interest rates. our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
As of SeptemberJune 30, 2017, 73%2021, 97% 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%2021, 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 5.02% and 6.06%, respectively, as of June 30, 2021.
Assuming that the interim and unaudited consolidated balance sheet as of SeptemberJune 30, 20172021 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 increaseInterest incomeInterest expenseNet change
25$48 $(64)$(16)
50121 (125)(4)
75231 (186)45 
100609 (247)362 
1251,254 (308)946 
Basis point increase
Interest income
Interest expense
Net increase
(decrease)
50
$959

$87

$872
100
1,902

173

1,729
150
2,885

260

2,625
200
3,869

347

3,522
250
4,852

433

4,419
Basis point decrease
Interest income
Interest expense
Net increase
(decrease)
50
$(496)
$—

$(496)
100
(565)
—

(565)
150
(590)
—

(590)
200
(590)
—

(590)
250
(590)
—

(590)
Basis point decrease(1)
Interest incomeInterest expenseNet change
25$(65)$41 $(24)
(1) OurDecreases in LIBOR beyond that presented would not result in a change to interest income or interest expense due to current LIBOR rates and a minimum base rate, or floor, that our debt investments and the PWB Credit Facility contains a 5.0% interest rate floor, and therefore a decline in the Prime Rate would not impact interest expense.contain.
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I
tem
Item 4. Controls and Procedures
Evaluation of Disclosure 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, 2017.2021. 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, 2017,2021, 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, 20172021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 2017.2021. 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, 2016,2020, and in "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K and Quarterly Report on Form 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 risk 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, which2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. The risks previously disclosed in our Annual Report on Form 10-K and Quarterly Report on Form 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.
The interest rates of our loans to our portfolio companies that extend beyond 2021 might be subject to change based on recent regulatory changes, including the decommissioning of LIBOR.
LIBOR is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in loans we extend to portfolio companies such that the interest due to us pursuant to a loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR.
On March 5, 2021, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it will not compel panel banks to contribute to the overnight 1, 3, 6 and 12 months U.S. LIBOR tenors after June 30, 2023 and all other tenors after December 31, 2021. It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. Central banks and regulators in a number of major jurisdictions (for example, United States, United Kingdom, European Union, Switzerland and Japan) have convened working groups to find, and implement the transition to, suitable replacements for interbank offered rates (“IBORs”). To identify a successor rate for U.S. dollar LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the U.S. Federal Reserve Board and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere or, whether the COVID-19 outbreak will have further effect on LIBOR transition plans.
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 value of and/or transferability 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.
Recently, the CLOs we have invested in have included, or have been amended to include, language permitting the CLO investment manager to implement a market replacement rate (like those proposed by the ARRC of the Federal Reserve Board and the Federal Reserve Bank of New York) upon the occurrence of certain material disruption events. However, we cannot ensure that all CLOs in which we are invested will have such provisions, nor can we ensure the CLO investment managers will undertake the suggested amendments when able. We believe that because CLO managers and other CLO market participants have been preparing for an eventual transition away from LIBOR, we do not anticipate such a transition to have a material impact on the liquidity or value of any of our LIBOR-referenced CLO investments. However, because the future of LIBOR at this time is uncertain and the specific effects of a transition away from LIBOR cannot be determined with certainty as of the date of this filing, a transition away from LIBOR could:
74

•    adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked CLO investments;
•    require extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding investments;
•    result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;
•    result in disputes, litigation or other actions with CLO investment managers, regarding the interpretation and enforceability of provisions in our LIBOR-based CLO investments, such as fallback language or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates;
•    require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and
•    cause us to incur additional costs in relation to any of the above factors.
In addition, the effect of a phase out of LIBOR on U.S. senior secured loans, the underlying assets of the CLOs in which we invest, is currently unclear. To the extent that any replacement rate utilized for senior secured loans differs from that utilized for a CLO that holds those loans, the CLO would experience an interest rate mismatch between its assets and liabilities which could have an adverse impact on our net investment income and portfolio returns.
Many underlying corporate borrowers can elect to pay interest based on 1-month LIBOR, 3-month LIBOR and/or other rates in respect of the loans held by CLOs in which we are invested, in each case plus an applicable spread, whereas CLOs generally pay interest to holders of the CLO’s debt tranches based on 3-month LIBOR plus a spread. The 3-month LIBOR currently exceeds the 1-month LIBOR by a historically high amount, which may result in many underlying corporate borrowers electing to pay interest based on 1-month LIBOR. This mismatch in the rate at which CLOs earn interest and the rate at which they pay interest on their debt tranches negatively impacts the cash flows on a CLO’s equity tranche, which may in turn adversely affect our cash flows and results of operations. Unless spreads are adjusted to account for such increases, these negative impacts may worsen as the amount by which the 3-month LIBOR exceeds the 1-month LIBOR increases.
The senior secured loans underlying the CLOs in which we invest typically have floating interest rates. A rising interest rate environment may increase loan defaults, resulting in losses for the CLOs in which we invest. In addition, increasing interest rates may lead to higher prepayment rates, as corporate borrowers look to avoid escalating interest payments or refinance floating rate loans. Further, a general rise in interest rates will increase the financing costs of the CLOs. However, since many of the senior secured loans within CLOs have LIBOR floors, if LIBOR is below the average LIBOR floor, there may not be corresponding increases in investment income resulting in smaller distributions to equity investors in these CLOs.
We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.
Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. The Biden Administration has proposed significant changes to the existing U.S. tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S. tax rules. The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our investors of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three month period ended SeptemberJune 30, 2017,2021, we issued 3,4393,273 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.$32,596.
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.
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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, 2021, no shares of common stock were repurchased on the open market under the Stock Repurchase Program. The following table provides information regarding the Stock Repurchase Program (amount in thousands except shares and per share amounts):
Period
Total Number
of Shares Purchased (1)
Cost of Shares PurchasedAverage Price Paid Per ShareMaximum 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, 2018300 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 
July 1, 2020 through September 30, 2020— — — 9,997 
October 1, 2020 through December 31, 2020— — — 9,997 
January 1, 2021 through March 31, 2021700 5 6.70 9,992 
April 1, 2021 through June 30, 2021— — — 9,992 
(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.

76

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
10.13.18-KForm N-2/A
814-00813(333-166363)		8/10/2017March 18, 2011
3.2
10.2Form 10-KMarch 26, 2013
3.38-KForm N-2/A
814-00813(333-166363)		8/10/2017March 18, 2011
11.1Computation of Per Share Earnings+
14.1
OFS Capital Corporation Code of Ethics
*
14.2
OFS Capital Corporation Code of Business Conduct
*
31.1 *
31.2 *
32.1 †
32.2 †
+Included in the consolidated statements of operations contained in this report
*Filed herewith
†Furnished herewith


77


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, 2017August 6, 2021OFS 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
78
Incorporated by Reference
Exhibit
Number
DescriptionForm and SEC File No.Filing Date with SECFiled with this 10-Q
10.1
Change in terms to the Business Loan Agreement between OFS Capital Corporation and Pacific Western Bank dated August 9, 2017
8-K
814-00813
8/10/2017
10.2
Commercial Guaranty Agreement among OFS Capital Corporation, OFS Capital WM, LLC, and Pacific Western Bank dated August 9, 2017
8-K
814-00813		8/10/2017
11.1Computation of Per Share Earnings+
14.1
OFS Capital Corporation Code of Ethics
*
14.2
OFS Capital Corporation Code of Business Conduct
*
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended
*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended
*
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
†
32.2
Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
†

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


69