UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

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



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

For the transition period from _______ to _______

Commission file number 814-00813

OFS CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		46-1339639
State or Other Jurisdiction of		I.R.S. Employer Identification No.
Incorporation or Organization

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

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

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	OFS	The Nasdaq Global Select Market
6.25% Notes due 2023	OFSSG	The Nasdaq Global Select Market
6.375% Notes due 2025	OFSSL	The Nasdaq Global Select Market
6.50% Notes due 2025	OFSSZ	The Nasdaq Global Select Market
5.95% Notes due 2026	OFSSI	The Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	ý

Non-accelerated filer	¨	Smaller reporting company	¨

Emerging growth company	¨

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. ¨

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 ~~July 29,~~November 4, 2020 was ~~13,399,694.~~13,406,402.

OFS CAPITAL CORPORATION

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Statements of Assets and Liabilities as of ~~June~~September 30, 2020 (unaudited) and December 31, 2019��	3
	Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 (unaudited) and 2019 (unaudited)	4
	Consolidated Statements of Changes in Net Assets for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 (unaudited) and 2019 (unaudited)	5
	Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2020 (unaudited) and 2019 (unaudited)	7
	Consolidated Schedules of Investments as of ~~June~~September 30, 2020 (unaudited) and December 31, 2019	8
	Notes to Consolidated Financial Statements (unaudited)	32
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5658
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7478
Item 4.	Controls and Procedures	7578

PART II. OTHER INFORMATION		7680
Item 1.	Legal Proceedings	7680
Item 1A.	Risk Factors	7680
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	7784
Item 3.	Defaults Upon Senior Securities	7884
Item 4.	Mine Safety Disclosures	7884
Item 5.	Other Information	7885
Item 6.	Exhibits	7986
SIGNATURES		8087

Defined Terms

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



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



Term	Explanation or Definition
OID	Original issue discount
Order	An exemptive relief order from the SEC to permit us to co-invest in portfolio companies with certain funds managed by OFS Advisor in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions
Parent	OFS Capital Corporation
PIK	Payment-in-kind, non-cash interest or dividends payable as an addition to the loan or equity security producing the income.
Portfolio Company Investment	A debt or equity investment in a portfolio company. Portfolio Company Investments exclude Structured Finance Notes
Prime Rate	United States Prime interest rate
PWB Credit Facility	Senior secured revolving credit facility between the Company and Pacific Western Bank, as lender
Reunderwriting Analysis	A discount rate method based upon a hypothetical recapitalization of the entity given its current operating performance and current market condition
RIC	Regulated investment company under the Code
SBA	U.S. Small Business Administration
SBCAA	Small Business Credit Availability Act
SBIC	A fund licensed under the SBA small business investment company program
SBIC Acquisition	The Company's acquisition of the remaining ownership interests in SBIC I LP and OFS SBIC I GP, LLC on December 4, 2013
SBIC Act	Small Business Investment Act of 1958, as amended
SBIC I LP	OFS SBIC I, LP, a wholly owned SBIC subsidiary of the Company
SEC	U.S. Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Secured Revolver Amendment	The amended Business Loan Agreement with Pacific Western Bank, as lender, dated ~~June 26,~~October 7, 2020
Stock Repurchase Program	The open market stock repurchase program for shares of the Company’s common stock under Rule 10b-18 of the Exchange Act
Structured Finance Notes	CLO mezzanine debt and CLO subordinated debt ~~positions.~~positions
Synthetic Rating Analysis	A discount rate method that assigns a surrogate debt rating to the entity based on known industry standards for assigning such ratings and then estimates the discount rate based on observed market yields for actual rated ~~debt.~~
~~The Order~~	An exemptive relief order from the SEC to permit us to co-invest in portfolio companies with certain funds managed by OFS Advisor in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditionsdebt
Transaction Price	The cost of an arm's length transaction occurring in the same security
Unsecured Notes	The combination of the Unsecured Notes Due September 2023, Unsecured Notes Due April 2025, Unsecured Notes Due October 2025 and Unsecured Notes Due October 2026
Unsecured Notes Due April 2025	The Company’s $50.0 million aggregate principal amount of 6.375% notes due April 30, 2025
Unsecured Notes Due October 2025	The Company’s $46.0 million aggregate principal amount of 6.5% notes due October 30, 2025
Unsecured Notes Due October 2026	The Company's $54.3 million aggregate principal amount of 5.95% notes due October 31, 2026
Unsecured Notes Due September 2023	The Company’s $25.0 million aggregate principal amount of 6.25% notes due September 30, 2023

Forward-Looking Statements

This ~~quarterly report~~Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” ~~“should,~~��should,” “targets,” “projects” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

our ability and experience operating a BDC or an SBIC, or maintaining our tax treatment as a RIC under Subchapter M of the Code;

our dependence on key personnel;

our ability to maintain or develop referral relationships;

our ability to replicate historical results;

the ability of OFS Advisor to identify, invest in and monitor companies that meet our investment criteria;

the belief that the carrying amounts of our financial instruments, such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments and that such financial instruments are held with high credit quality institutions to mitigate the risk of loss due to credit risk;

actual and potential conflicts of interest with OFS Advisor and other affiliates of OFSAM;

constraint on investment due to access to material nonpublic information;

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

our ability to comply with SBA regulations and requirements;

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

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

competition for investment opportunities;

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

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

interest rate volatility, including the decommissioning of LIBOR;

the ability of SBIC I LP to make distributions enabling us to meet RIC requirements;

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

our ability to raise debt or equity capital as a BDC;

the timing, form and amount of any distributions from our portfolio companies;

the impact of a protracted decline in the liquidity of credit markets on our business;

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

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

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

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

uncertain valuations of our portfolio investments, including our belief that ~~overweighting~~reverting back to an equal weighting of the Reunderwriting Analysis method and Synthetic Rating Analysis method more accurately captures certain data related to ~~illiquid private credit during~~ the ~~COVID-19 pandemic;~~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, 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, 2019 and in ~~"Item~~"Part II, Item 1A. Risk Factors" in ~~our~~this Quarterly Report on Form ~~10-Q for the quarter ended March 31, 2020.~~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 Report on Form 10-Q are excluded from the safe harbor protection provided by Section 21E of the Exchange Act.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Assets and Liabilities

(Dollar amounts in thousands, except per share data)


	June 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
Assets
Investments, at fair value:
Non-control/non-affiliate investments (amortized cost of $354,004 and $396,201, respectively)	$	314,305		$	372,535
Affiliate investments (amortized cost of $114,123 and $131,950, respectively)	114,047			135,679
Control investment (amortized cost of $10,714 and $10,520, respectively)	7,410			8,717
Total investments at fair value (amortized cost of $478,841 and $538,671, respectively)	435,762			516,931
Non-control/non-affiliate investments (amortized cost of $359,108 and $396,201, respectively)							$	324,059		$	372,535
Affiliate investments (amortized cost of $114,141 and $131,950, respectively)							124,185			135,679
Control investment (amortized cost of $10,811 and $10,520, respectively)							8,084			8,717
Total investments at fair value (amortized cost of $484,060 and $538,671, respectively)							456,328			516,931
Cash	31,781			13,447			18,297			13,447
Interest receivable	3,114			3,349			2,790			3,349
Receivable for investment sold	634			—
Receivable for investments sold							1,453			—
Prepaid expenses and other assets	4,151			4,461			2,807			4,461
Total assets	$	475,442		$	538,188		$	481,675		$	538,188

Liabilities
Revolving lines of credit	$	51,750		$	56,450		$	24,650		$	56,450
SBA debentures (net of deferred debt issuance costs of $1,567 and $1,904, respectively)	132,203			147,976
Unsecured notes (net of deferred debt issuance costs of $4,403 and $4,798 respectively)	148,447			148,052
SBA debentures (net of deferred debt issuance costs of $1,415 and $1,904, respectively)							127,355			147,976
Unsecured notes (net of deferred debt issuance costs of $5,168 and $4,798 respectively)							172,682			148,052
Interest payable	3,109			3,505			2,055			3,505
Payable to adviser and affiliates (Note 3)	2,694			4,106			2,773			4,106
Payable for investments purchased	971			10,264			1,494			10,264
Accrued professional fees	562			621			426			621
Other liabilities	309			587			328			587
Total liabilities	340,045			371,561			331,763			371,561

Commitments and contingencies (Note 6)

Net assets
Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2020, and December 31, 2019, respectively	$	—		$	—
Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,399,694 and 13,376,836 shares issued and outstanding as of June 30, 2020, and December 31, 2019, respectively	134			134
Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of September 30, 2020, and December 31, 2019, respectively							$	—		$	—
Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,406,402 and 13,376,836 shares issued and outstanding as of September 30, 2020, and December 31, 2019, respectively							134			134
Paid-in capital in excess of par	187,437			187,305			186,979			187,305
Total distributable earnings (losses)	(52,174		)	(20,812		)	(37,201		)	(20,812		)
Total net assets	135,397			166,627			149,912			166,627

Total liabilities and net assets	$	475,442		$	538,188		$	481,675		$	538,188

Number of shares outstanding	13,399,694			13,376,836			13,406,402			13,376,836
Net asset value per share	$	10.10		$	12.46		$	11.18		$	12.46

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Operations (unaudited)

(Dollar amounts in thousands, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2020			2019			2020			2019
Investment income
Interest income:
Non-control/non-affiliate investments	$	8,233		$	9,287		$	17,305		$	17,929		$	8,014		$	10,181		$	25,319		$	28,110
Affiliate investments	1,692			2,660			4,086			4,993			1,708			2,647			5,794			7,640
Control investment	209			263			405			522			201			262			606			784
Total interest income	10,134			12,210			21,796			23,444			9,923			13,090			31,719			36,534
Payment-in-kind interest and dividend income:
Non-control/non-affiliate investments	264			96			525			193			275			96			800			289
Affiliate investments	191			300			460			552			72			347			532			899
Control investment	102			28			187			55			91			28			278			83
Total payment-in-kind interest and dividend income	557			424			1,172			800			438			471			1,610			1,271
Dividend income:
Affiliate investments	—			—			100			173			—			—			100			173
Control investment	—			89			—			89			—			—			—			89
Total dividend income	—			89			100			262			—			—			100			262
Fee income:
Non-control/non-affiliate investments	279			154			764			496			80			285			844			781
Affiliate investments	8			5			13			210			3			6			16			216
Control investment	3			18			6			33			43			6			49			39
Total fee income	290			177			783			739			126			297			909			1,036
Total investment income	10,981			12,900			23,851			25,245			10,487			13,858			34,338			39,103
Expenses
Interest expense	4,931			3,645			9,853			7,100			4,448			4,464			14,301			11,564
Management fee	1,869			2,055			3,888			3,898			1,871			2,164			5,759			6,062
Incentive fee	215			1,245			1,098			2,408			234			1,214			1,332			3,622
Professional fees	460			368			1,108			903			422			510			1,530			1,413
Administration fee	500			417			1,020			854			436			396			1,456			1,250
Other expenses	399			310			746			394			364			257			1,110			651
Total expenses before incentive fee waiver	8,374			8,040			17,713			15,557			7,775			9,005			25,488			24,562
Incentive fee waiver (see Note 3)	—			—			(441		)	—			—			—			(441		)	—
Total expenses, net of incentive fee waiver	8,374			8,040			17,272			15,557			7,775			9,005			25,047			24,562
Net investment income	2,607			4,860			6,579			9,688			2,712			4,853			9,291			14,541

Net realized and unrealized gain (loss)
Net realized loss on non-control/non-affiliate investments	(1,040		)	(90		)	(10,013		)	(894		)
Net realized and unrealized gain (loss) on investments
Net realized gain (loss) on non-control/non-affiliate investments													(33		)	51			(10,046		)	(843		)
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes													4,649			(6,534		)	(10,965		)	(9,506		)
Net unrealized appreciation on affiliate investments													10,120			4,765			6,316			5,305
Net unrealized appreciation (depreciation) on control investment													577			(1,373		)	(924		)	(650		)
Net gain (loss) on investments													15,313			(3,091		)	(15,619		)	(5,694		)
Loss on extinguishment of debt	—			—			(149		)	—			(187		)	—			(336		)	—
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes	6,808			(3,630		)	(15,614		)	(2,972		)
Net unrealized appreciation (depreciation) on affiliate investments	(880		)	1,660			(3,804		)	540
Net unrealized appreciation (depreciation) on control investment	163			553			(1,501		)	723
Net gain (loss)	5,051			(1,507		)	(31,081		)	(2,603		)
Loss on impairment of goodwill													(1,077		)	—			(1,077		)	—
Net increase (decrease) in net assets resulting from operations	$	7,658		$	3,353		$	(24,502	)	$	7,085		$	16,761		$	1,762		$	(7,741	)	$	8,847
Net investment income per common share – basic and diluted	$	0.19		$	0.36		$	0.49		$	0.73		$	0.20		$	0.36		$	0.69		$	1.09
Net increase (decrease) in net assets resulting from operations per common share – basic and diluted	$	0.57		$	0.25		$	(1.83	)	$	0.53		$	1.25		$	0.13		$	(0.58	)	$	0.66
Distributions declared per common share	$	0.17		$	0.34		$	0.51		$	0.68		$	0.17		$	0.34		$	0.68		$	1.02
Basic and diluted weighted average shares outstanding	13,392,608			13,361,193			13,384,808			13,359,338			13,399,767			13,366,515			13,389,830			13,361,757

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets (unaudited)

(Dollar amounts in thousands)


	Preferred Stock			Common Stock											Preferred Stock			Common Stock			Paid-in capital in excess of par		Total distributable earnings (losses)			Total net assets
	Number of shares	Par value		Number of shares	Par value		Paid-in capital in excess of par		Total distributable earnings (losses)			Total net assets			Number of shares	Par value		Number of shares	Par value		Paid-in capital in excess of par		Total distributable earnings (losses)			Total net assets
Balances at January 1, 2019	—	$	—	13,357,337	$	134	$	187,540	$	(12,651	)	$	175,023		—	$	—	13,357,337	$	134	$	187,540	$	(12,651	)	$	175,023
Net increase in net assets resulting from operations:
Net investment income	—	—		—	—		—		9,688			9,688			—	—		—	—		—		14,541			14,541
Net realized loss on investments	—	—		—	—		—		(894		)	(894		)	—	—		—	—		—		(843		)	(843		)
Net unrealized depreciation on investments, net of taxes	—	—		—	—		—		(1,709		)	(1,709		)	—	—		—	—		—		(4,851		)	(4,851		)
Tax reclassifications of permanent differences	—	—		—	—		165		(165		)	—			—	—		—	—		183		(183		)	—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		9,124	—		109		—			109			—	—		14,114	—		167		—			167
Dividends declared	—	—		—	—		—		(9,085		)	(9,085		)	—	—		—	—		—		(13,631		)	(13,631		)
Net increase (decrease) for the period ended June 30, 2019	—	—		9,124	—		274		(2,165		)	(1,891		)
Net increase (decrease) for the period ended September 30, 2019															—	—		14,114	—		350		(4,967		)	(4,617		)
Balances at September 30, 2019															—	$	—	13,371,451	$	134	$	187,890	$	(17,618	)	$	170,406

Balances at June 30, 2019	—	$	—	13,366,461	$	134	$	187,814	$	(14,816	)	$	173,132		—	$	—	13,366,461	$	134	$	187,814	$	(14,816	)	$	173,132

Balances at March 31, 2019	—	$	—	13,361,134	$	134	$	187,604	$	(13,480	)	$	174,258
Net increase in net assets resulting from operations:
Net investment income	—	—		—	—		—		4,860			4,860			—	—		—	—		—		4,853			4,853
Net realized loss on investments	—	—		—	—		—		(90		)	(90		)
Net unrealized appreciation on investments, net of taxes	—	—		—	—		—		(1,417		)	(1,417		)
Net realized gain on investments															—	—		—	—		—		51			51
Net unrealized depreciation on investments, net of taxes															—	—		—	—		—		(3,142		)	(3,142		)
Tax reclassifications of permanent differences	—	—		—	—		146		(146		)	—			—	—		—	—		18		(18		)	—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		5,327	—		64		—			64			—	—		4,990	—		58		—			58
Dividends declared	—	—		—	—		—		(4,543		)	(4,543		)	—	—		—	—		—		(4,546		)	(4,546		)
Net increase for the period ended September 30, 2018	—	—		5,327	—		210		(1,336		)	(1,126		)
Balances at June 30, 2019	—	$	—	13,366,461	$	134	$	187,814	$	(14,816	)	$	173,132
Net increase (decrease) for the period ended September 30, 2019															—	—		4,990	—		76		(2,802		)	(2,726		)
Balances at September 30, 2019															—	$	—	13,371,451	$	134	$	187,890	$	(17,618	)	$	170,406

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets (unaudited)

(Dollar amounts in thousands)



	Preferred Stock			Common Stock			Paid-in capital in excess of par			Total distributable earnings (losses)			Total net assets
	Number of shares	Par value		Number of shares	Par value		Paid-in capital in excess of par			Total distributable earnings (losses)			Total net assets
Balances at January 1, 2020	—	$	—	13,376,836	$	134	$	187,305		$	(20,812	)	$	166,627
Net decrease in net assets resulting from operations:
Net investment income	—	—		—	—		—			9,291			9,291
Net realized loss on investments	—	—		—	—		—			(10,046		)	(10,046		)
Loss on extinguishment of debt	—	—		—	—		—			(336		)	(336		)
Loss on impairment of goodwill	—	—		—	—		—			(1,077		)	(1,077		)
Net unrealized depreciation on investments, net of taxes	—	—		—	—		—			(5,573		)	(5,573		)
Tax reclassifications of permanent differences	—	—		—	—		(454		)	454			—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		29,566	—		128			—			128
Dividends declared	—	—		—	—		—			(9,102		)	(9,102		)
Net increase (decrease) for the period ended September 30, 2020	—	—		29,566	—		(326		)	(16,389		)	(16,715		)
Balances at September 30, 2020	—	$	—	13,406,402	$	134	$	186,979		$	(37,201	)	$	149,912

Balances at June 30, 2020	—	$	—	13,399,694	$	134	$	187,437		$	(52,174	)	$	135,397
Net increase in net assets resulting from operations:
Net investment income	—	—		—	—		—			2,712			2,712
Net realized loss on investments	—	—		—	—		—			(33		)	(33		)
Loss on extinguishment of debt	—	—		—	—		—			(187		)	(187		)
Loss on impairment of goodwill	—	—		—	—		—			(1,077		)	(1,077		)
Net unrealized appreciation on investments, net of taxes	—	—		—	—		—			15,346			15,346
Tax reclassifications of permanent differences	—	—		—	—		(490		)	490			—
Distributions to stockholders:
Common stock issued from reinvestment of stockholder distributions	—	—		6,708	—		32			—			32
Dividends declared	—	—		—	—		—			(2,278		)	(2,278		)
Net increase for the period ended September 30, 2020	—	—		6,708	—		(458		)	14,973			14,515
Balances at September 30, 2020	—	$	—	13,406,402	$	134	$	186,979		$	(37,201	)	$	149,912

Preferred Stock Common Stock
Number of shares Par value Number of shares Par value Paid-in capital in excess of par Total distributable earnings (losses) Total net assets
Balances at January 1, 2020 —
$ —
13,376,836

$ 134

$ 187,305

$ (20,812 )
$ 166,627
Net decrease in net assets resulting from operations:
  Net investment income —
—
—
—
—
6,579
6,579
  Net realized loss on investments —
—
—
—
—
(10,013 ) (10,013 )
  Loss on extinguishment of debt —
—
—
—
—
(149 ) (149 )
  Net unrealized depreciation on investments, net of taxes —
—
—
—
—
(20,919 ) (20,919 )
  Tax reclassifications of permanent differences —
—
—
—
36

(36 )
—
Distributions to stockholders:
  Common stock issued from reinvestment of stockholder distributions —
—
22,858
—
96
—
96
  Dividends declared —
—
—
—
—
(6,824 ) (6,824 )
Net increase (decrease) for the period ended June 30, 2020 —
—
22,858
—
132
(31,362 ) (31,230 )
Balances at June 30, 2020 —
$ —
13,399,694
$ 134
$ 187,437
$ (52,174 ) $ 135,397

Balances at March 31, 2020 —
$ —
13,392,529

$ 134

$ 187,387

$ (57,538 )
$ 129,983
Net increase in net assets resulting from operations:
  Net investment income —
—
—

—

—

2,607

2,607
  Net realized loss on investments —
—
—

—

—

(1,040 )
(1,040 )
  Net unrealized appreciation on investments, net of taxes —
—
—

—

—

6,091

6,091
  Tax reclassifications of permanent differences —
—
—

—

18

(18 )
—
Distributions to stockholders:
  Common stock issued from reinvestment of stockholder distributions —
—
7,165

—

32

—

32
  Dividends declared —
—
—

—

—

(2,276 )
(2,276 )
Net increase for the period ended June 30, 2020 —
—
7,165
—
50
5,364
5,414
Balances at June 30, 2020 —
$ —
13,399,694
$ 134
$ 187,437
$ (52,174 ) $ 135,397

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(Dollar amounts in thousands)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations	$	(24,502	)	$	7,085		$	(7,741	)	$	8,847
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) in operating activities:
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 investments	10,013			894			10,046			843
Net unrealized depreciation on investments	20,919			1,709
Loss on impairment of goodwill							1,077			—
Loss on extinguishment of debt							336			—
Net unrealized depreciation on investments, net of taxes							5,573			4,851
Amortization of Net Loan Fees	(760		)	(406		)	(1,006		)	(788		)
Amendment fees collected	31			100			54			103
Payment-in-kind interest and dividend income	(1,191		)	(800		)	(1,610		)	(1,271		)
Accretion of interest income on structured finance notes	(2,626		)	(1,096		)	(4,141		)	(2,001		)
Amortization of debt issuance costs	1,016			577			1,258			942
Amortization of intangible asset	98			98			152			146
Purchase and origination of portfolio investments	(70,914		)	(128,376		)	(80,990		)	(169,638		)
Proceeds from principal payments on portfolio investments	56,276			9,266			60,071			30,750
Proceeds from sale or redemption of portfolio investments	65,528			30,316			67,409			30,368
Proceeds from distributions received from portfolio investments	3,290			1,157
Proceeds from distributions received from structured finance notes							4,614			1,976
Changes in operating assets and liabilities:
Interest receivable	235			(946		)	559			(511		)
Interest payable	(396		)	(114		)	(1,450		)	(746		)
Payable to adviser and affiliates	(1,412		)	150			(1,333		)	349
Receivable for investment sold	(634		)	(2,003		)	(1,453		)	—
Payable for investments purchased	(9,293		)	38,129			(8,770		)	924
Other assets and liabilities	194			(143		)	(160		)	(493		)
Net cash provided (used) in operating activities	45,872			(44,403		)
Net cash provided by (used in) operating activities							42,495			(95,349		)

Cash flows from financing activities
Distributions paid to stockholders	(6,728		)	(8,976		)	(8,974		)	(13,464		)
Borrowings under revolving lines of credit	72,600			59,000			78,800			128,675
Repayments under revolving lines of credit	(77,300		)	(32,750		)	(110,600		)	(48,200		)
Proceeds from unsecured notes offering, net of discounts							24,250			—
Repayments of SBA debentures	(16,110		)	—			(21,110		)	—
Payment of deferred financing costs	—			(1,636		)	(11		)	(1,857		)
Repurchases of common stock under Stock Repurchase Program	—			(3		)	—			(3		)
Net cash provided (used) by financing activities	(27,538		)	15,635
Net cash provided by (used in) financing activities							(37,645		)	65,151
Net increase (decrease) in cash	18,334			(28,768		)	4,850			(30,198		)
Cash at beginning of period	13,447			38,172			13,447			38,172
Cash at end of period	$	31,781		$	9,404		$	18,297		$	7,974

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	9,383		$	6,637		$	14,494		$	11,368
Reinvestment of distributions to stockholders	96			109			128			167

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost			Fair Value (3)			Percent of Net Assets		Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost			Fair Value (3)			Percent of Net Assets
Non-control/Non-affiliate Investments
Debt and Equity Investments
All Star Auto Lights, Inc. (4)	Motor Vehicle Parts (Used) Merchant Wholesalers															Motor Vehicle Parts (Used) Merchant Wholesalers
Senior Secured Loan		8.50%	(L +7.50%)	12/19/2019	8/20/2024	$	14,365	$	14,222		$	13,667		10.1	%		8.50%	(L +7.50%)	12/19/2019	8/20/2024	$	14,328	$	14,194		$	13,633		9.1	%

American Bath Group, LLC (15)	Plastics Plumbing Fixture Manufacturing
American Bath Group, LLC (14) (15)																Plastics Plumbing Fixture Manufacturing
Senior Secured Loan		5.00%	(L +4.00%)	6/24/2019	9/30/2023	1,481		1,477			1,457			1.1			5.00%	(L +4.00%)	6/24/2019	9/30/2023	1,478		1,473			1,479			1.0

A&A Transfer, LLC	Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers															Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (15)		8.25%	(L +6.50%)	2/7/2020	2/7/2025	17,064		16,828			16,872			12.5			8.25%	(L +6.50%)	2/7/2020	2/7/2025	16,848		16,628			17,091			11.5
Senior Secured Loan (Revolver) (5)		8.25%	(L +6.50%)	2/7/2020	2/7/2025	2,136		2,096			2,112			1.6			n/m (18)	(L +6.50%)	2/7/2020	2/7/2025	—		(38		)	31			—
						19,200		18,925			18,984			14.1							16,848		16,590			17,122			11.5
Bass Pro Group, LLC (14) (15)	Sporting Goods Stores															Sporting Goods Stores
Senior Secured Loan		6.07%	(L +5.00%)	6/24/2019	9/25/2024	2,970		2,915			2,869			2.1			5.75%	(L +5.00%)	6/24/2019	9/25/2024	2,962		2,911			2,942			2.0

Baymark Health Services, Inc.	Outpatient Mental Health & Sub. Abuse Centers															Outpatient Mental Health & Sub. Abuse Centers
Senior Secured Loan		10.21%	(L +8.25%)	3/22/2018	3/1/2025	4,000		3,973			3,803			2.8			9.25%	(L +8.25%)	3/22/2018	3/1/2025	4,000		3,975			3,951			2.6

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

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

Carolina Lubes, Inc.	Automotive Oil Change and Lubrication Shops															Automotive Oil Change and Lubrication Shops
Senior Secured Loan (4) (8)		9.10%	(L +7.67%)	8/23/2017	8/23/2022	19,981		19,908			19,451			14.4			8.64%	(L +7.64%)	8/23/2017	8/23/2022	19,840		19,773			19,609			13.2
Senior Secured Loan (Revolver) (5)		0.25% (18)	(L +7.67%)	8/23/2017	8/23/2022	—		(6		)	(77		)	(0.1	)		n/m (18)	(L +7.25%)	8/23/2017	8/23/2022	—		(6		)	(34		)	—
						19,981		19,902			19,374			14.3							19,840		19,767			19,575			13.2
Community Intervention Services, Inc. (4) (6) (11)																Outpatient Mental Health and Substance Abuse Centers
Subordinated Loan																	7.0% cash / 6.0% PIK	N/A	7/16/2015	1/16/2021	10,071		7,639			—			—

Confie Seguros Holdings II Co.																Insurance Agencies and Brokerages
Senior Secured Loan																	8.66%	(L +8.50%)	7/7/2015	11/1/2025	9,678		9,537			8,951			6.0

Connect U.S. Finco LLC (14) (15)																Taxi Service
Senior Secured Loan																	5.50%	(L +4.50%)	11/20/2019	12/11/2026	1,990		1,981			1,934			1.3

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

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

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

Constellis Holdings, LLC (10)	Other Justice, Public Order, and Safety Activities													Other Justice, Public Order, and Safety Activities
Common Equity (20,628 common shares)				3/27/2020				703		707		0.5					3/27/2020			$	703	$	696	0.5	%

Convergint Technologies Holdings, LLC	Security Systems Services (except Locksmiths)													Security Systems Services (except Locksmiths)
Senior Secured Loan															7.50%	(L +6.75%)	9/28/2018	2/2/2026	3,481	3,439		3,287		2.2

Custom Truck One Source (14) (15)														Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing
Senior Secured Loan		7.50%	(L +6.75%)	9/28/2018	2/2/2026	3,481		3,434		3,271		2.4			4.40%	(L +4.25%)	9/30/2020	4/18/2025	500	499		497		0.3

Davis Vision, Inc.	Direct Health and Medical Insurance Carriers													Direct Health and Medical Insurance Carriers
Senior Secured Loan		7.75%	(L +6.75%)	10/31/2019	12/1/2025	405		395		395		0.3			7.75%	(L +6.75%)	10/31/2019	12/1/2025	405	396		405		0.3

Diamond Sports Group, LLC (14) (15)	Television Broadcasting													Television Broadcasting
Senior Secured Loan		3.43%	(L +3.25%)	11/19/2019	8/24/2026	1,985		1,987		1,625		1.2			3.40%	(L +3.25%)	11/19/2019	8/24/2026	1,980	1,982		1,554		1.0

DuPage Medical Group (15)	Offices of Physicians, Mental Health Specialists													Offices of Physicians, Mental Health Specialists
Senior Secured Loan		7.75%	(L +7.00%)	8/22/2017	8/15/2025	10,098		10,163		9,488		7.0			7.75%	(L +7.00%)	8/22/2017	8/15/2025	10,098	10,162		9,916		6.6

Eblens Holdings, Inc.	Shoe Store													Shoe Store
Subordinated Loan (11)		12.0% cash / 1.0% PIK	N/A	7/13/2017	1/13/2023	9,056		9,015		8,723		6.4			12.50% cash / 1.50% PIK	N/A	7/13/2017	1/13/2023	9,086	9,029		5,351		3.6
Common Equity (71,250 Class A units) (10)				7/13/2017				713		534		0.4					7/13/2017			713		—		—
						9,056		9,728		9,257		6.8							9,086	9,742		5,351		3.6
Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4)														Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan															6.75% cash / 4.25% PIK	N/A	6/30/2017	6/30/2022	16,998	16,887		13,960		9.3
Preferred Equity (238,095 Series B units) (10)																	6/30/2017			300		—		—
Preferred Equity (13,315 Series C units) (10)																	8/13/2018			13		—		—
																			16,998	17,200		13,960		9.3
Excelin Home Health, LLC														Home Health Care Services
Senior Secured Loan															11.50%	(L +9.50%)	10/25/2018	4/25/2024	4,250	4,195		4,250		2.8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

GGC Aerospace Topco L.P.	Other Aircraft Parts and Auxiliary Equipment Manufacturing													Other Aircraft Parts and Auxiliary Equipment Manufacturing
Senior Secured Loan		9.75%	(L +8.75%)	12/29/2017	9/8/2024	5,000		4,922		4,204		3.1			9.75%	(L +8.75%)	12/29/2017	9/8/2024	$	5,000	$	4,926	$	4,456	2.9	%
Common Equity (368,852 Class A units) (10)				12/29/2017				450		196		0.1					12/29/2017				450		231		0.2
Common Equity (40,984 Class B units) (10)				12/29/2017				50		8		—					12/29/2017				50		9		—
						5,000		5,422		4,408		3.2							5,000		5,426		4,696		3.1
Inergex Holdings, LLC	Other Computer Related Services													Other Computer Related Services
Senior Secured Loan		8.00%	(L +7.00%)	10/1/2018	10/1/2024	16,506		16,329		15,348		11.3			8.00%	(L +7.00%)	10/1/2018	10/1/2024	16,464		16,296		15,368		10.2
Senior Secured Loan (Revolver) (5)		8.07%	(Prime + 7.00%)	10/1/2018	10/1/2024	1,406		1,386		1,308		1.0			8.00%	(Prime + 7.00%)	10/1/2018	10/1/2024	469		450		438		0.3
						17,912		17,715		16,656		12.3							16,933		16,746		15,806		10.5
Institutional Shareholder Services, Inc.	Administrative Management and General Management Consulting Services													Administrative Management and General Management Consulting Services
Senior Secured Loan		9.57%	(L +8.50%)	3/4/2019	3/5/2027	6,244		6,087		5,927		4.4			8.72%	(L +8.50%)	3/4/2019	3/5/2027	6,244		6,093		6,046		4.0

Intouch Midco Inc. (15)	All Other Professional, Scientific, and Technical Services													All Other Professional, Scientific, and Technical Services
Senior Secured Loan		4.93%	(L +4.75%)	12/20/2019	8/24/2025	1,990		1,925		1,767		1.3			4.90%	(L +4.75%)	12/20/2019	8/24/2025	1,985		1,923		1,830		1.2

Milrose Consultants, LLC (4) (8)	All Other Business Support Services													Administrative Management and General Management Consulting Services
Senior Secured Loan		7.18%	(L +6.18%)	7/16/2019	7/16/2025	11,500		11,428		11,340		8.4			7.74%	(L +6.74%)	7/16/2019	7/16/2025	19,167		19,041		19,049		12.7

My Alarm Center, LLC (10)														Security Systems Services (except Locksmiths)
Preferred Equity (335 Class Z units) (13)																	9/12/2018				$	325	$	1,136	0.8	%
Preferred Equity (1,485 Class A units), 8% PIK (4) (13)																	7/14/2017				1,571		229		0.2
Preferred Equity (1,198 Class B units) (4)																	7/14/2017				1,198		5		—
Common Equity (64,149 units) (4) (13)																	7/14/2017				—		—		—
																					3,094		1,370		1.0
Online Tech Stores, LLC (4) (6)														Stationary & Office Supply Merchant Wholesaler
Subordinated Loan															13.50% PIK	N/A	2/1/2018	8/1/2023	18,058		16,129		7,093		4.7

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

OnSite Care, PLLC (4) (8)	Home Health Care Services												Home Health Care Services
Senior Secured Loan		8.73%	(L +7.73%)	8/10/2018	8/10/2023	9,528	9,447		9,404		6.9			8.70%	(L +7.70%)	8/10/2018	8/10/2023	$	9,516	$	9,441	$	9,516	6.3	%

Panther BF Aggregator 2 LP (14) (15)	Other Commercial and Service Industry Machinery Manufacturing												Other Commercial and Service Industry Machinery Manufacturing
Senior Secured Loan		3.68%	(L +3.50%)	11/19/2019	4/30/2026	1,985	1,969		1,898		1.4			3.65%	(L +3.50%)	11/19/2019	4/30/2026	1,980		1,965		1,934		1.3

Parfums Holding Company, Inc.	Cosmetics, Beauty Supplies, and Perfume Stores												Cosmetics, Beauty Supplies, and Perfume Stores
Senior Secured Loan (15)		5.25%	(L +4.25%)	6/25/2019	6/30/2024	1,537	1,536		1,458		1.1
Senior Secured Loan (14) (15)														4.26%	(L +4.00%)	6/25/2019	6/30/2024	1,537		1,536		1,507		1.0
Senior Secured Loan		9.75%	(L +8.75%)	11/16/2017	6/30/2025	6,320	6,331		6,044		4.5			9.75%	(L +8.75%)	11/16/2017	6/30/2025	6,320		6,332		6,289		4.2
						7,857	7,867		7,502		5.6							7,857		7,868		7,796		5.2
Pelican Products, Inc.	Unlaminated Plastics Profile Shape Manufacturing												Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan														8.75%	(L +7.75%)	9/24/2018	5/1/2026	6,055		6,059		5,835		3.9

Pike Corp. (14) (15)													Electrical Contractors and Other Wiring Installation Contractors
Senior Secured Loan		8.75%	(L +7.75%)	9/24/2018	5/1/2026	6,055	6,059		5,389		4.0			3.15%	(L +3.00%)	9/17/2020	7/24/2026	500		500		497		0.3

PM Acquisition LLC	All Other General Merchandise Stores												All Other General Merchandise Stores
Senior Secured Loan		11.50% cash / 2.5% PIK	N/A	9/30/2017	10/29/2021	4,876	4,833		4,397		3.2			11.50% cash / 2.5% PIK	N/A	9/30/2017	10/29/2021	4,828		4,793		4,615		3.1
Common Equity (499 units) (10) (13)				9/30/2017			499		47		—					9/30/2017				499		165		0.1
						4,876	5,332		4,444		3.2							4,828		5,292		4,780		3.2
Quest Software US Holdings Inc. (15)	Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Quest Software US Holdings Inc. (14) (15)													Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
Senior Secured Loan		5.01%	(L +4.25%)	6/25/2019	5/16/2025	1,980	1,963		1,909		1.4			4.51%	(L +4.25%)	6/25/2019	5/16/2025	1,975		1,959		1,939		1.3

Resource Label Group, LLC													Commercial Printing (except Screen and Books)
Senior Secured Loan														9.50%	(L +8.50%)	6/7/2017	11/26/2023	4,821		4,786		4,549		3.1

Rocket Software, Inc. (15)													Software Publishers
Senior Secured Loan														8.51%	(L +8.25%)	11/20/2018	11/28/2026	6,275		6,186		5,959		4.0

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

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

RPLF Holdings, LLC (10) (13)	Software Publishers													Software Publishers
Common Equity (254,110 Class A units)				1/17/2018				254		331		0.2					1/17/2018			$	254	$	418	0.3	%

Sentry Centers Holdings, LLC (10) (13)	Other Professional, Scientific, and Technical Services													Convention and Trade Show Organizers
Common Equity (5,000 Series C units)				3/31/2014				500		200		0.1
Preferred Equity (2,248 Series A units)																	9/4/2020		—	51		47		—
Preferred Equity (1,603 Series B units)																	9/4/2020		—	160		160		0.1
Common Equity (269 units)																	9/4/2020		—	3		3		—
																			—	214		210		0.1
SkyMiles IP Ltd. and Delta Air Lines, Inc. (14) (15)														Scheduled Passenger Air Transportation
Senior Secured Loan															4.75%	(L +3.75%)	9/15/2020	9/16/2027	500	495		504		0.3

SourceHOV Tax, Inc. (4) (8)	Other Accounting Services													Other Accounting Services
Senior Secured Loan		7.87%	(L +6.37%)	3/16/2020	3/17/2025	12,915		12,826		12,739		9.5			7.87%	(L +6.37%)	3/16/2020	3/17/2025	12,915	12,832		13,172		8.9

Southern Technical Institute, LLC (4) (6) (10)	Colleges, Universities, and Professional Schools
Subordinated Loan		6.00% PIK	N/A	6/27/2018	12/31/2021	1,660		—		1,153		0.9
Southern Technical Institute, LLC (4) (10)														Colleges, Universities, and Professional Schools
Equity appreciation rights				6/27/2018				—		957		0.7					6/27/2018			—		3,356		2.2
						1,660		—		2,110		1.6
Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.,)	Child Day Care Services													Child Day Care Services
Senior Secured Loan		8.56%	(L +8.25%)	7/26/2018	7/30/2026	5,216		5,176		4,896		3.6			8.47%	(L +8.25%)	7/26/2018	7/30/2026	5,216	5,180		4,948		3.3

SSJA Bariatric Management LLC (15)	Offices of Physicians, Mental Health Specialists													Offices of Physicians, Mental Health Specialists
Senior Secured Loan		6.00%	(L +5.00%)	8/26/2019	8/26/2024	9,975		9,892		9,196		6.8			6.00%	(L +5.00%)	8/26/2019	8/26/2024	9,975	9,897		9,605		6.5
Senior Secured Loan (Revolver) (5)		5.00%	(L +4.00%)	8/26/2019	8/26/2024	667		661		615		0.5			5.25%	(L +4.00%)	8/26/2019	8/26/2024	667	662		642		0.4
						10,642		10,553		9,811		7.3							10,642	10,559		10,247		6.9
Stancor, L.P. (4)	Pump and Pumping Equipment Manufacturing													Pump and Pumping Equipment Manufacturing
Preferred Equity (1,250,000 Class A units), 8% PIK (10)				8/19/2014				1,501		1,236		0.9					8/19/2014			1,501		1,220		0.8

Staples, Inc. (14) (15)														Business to Business Electronic Markets
Senior Secured Loan															5.25%	(L +5.00%)	6/24/2019	4/16/2026	2,967	2,895		2,768		1.8

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

STS Operating, Inc.	Industrial Machinery and Equipment Merchant Wholesalers													Industrial Machinery and Equipment Merchant Wholesalers
Senior Secured Loan (15)		5.25%	(L +4.25%)	5/16/2018	12/11/2024	629		628		583		0.4
Senior Secured Loan (14) (15)															5.25%	(L +4.25%)	5/16/2018	12/11/2024	$	627	$	626	$	599	0.4	%
Senior Secured Loan		9.00%	(L +8.00%)	5/15/2018	4/30/2026	9,073		9,070		8,274		6.1			9.00%	(L +8.00%)	5/15/2018	4/30/2026	9,073		9,070		8,461		5.6
						9,702		9,698		8,857		6.5							9,700		9,696		9,060		6.0
Sunshine Luxembourg VII SARL (14) (15)	Pharmaceutical Preparation Manufacturing													Pharmaceutical Preparation Manufacturing
Senior Secured Loan		5.32%	(L +4.25%)	11/20/2019	9/25/2026	1,990		1,999		1,912		1.4			4.47%	(L +4.25%)	11/20/2019	9/25/2026	1,985		1,994		1,978		1.3

Tank Holding Corp. (15)	Unlaminated Plastics Profile Shape Manufacturing
Tank Holding Corp. (14) (15)														Unlaminated Plastics Profile Shape Manufacturing
Senior Secured Loan		4.94%	(L +3.50%)	6/24/2019	3/26/2026	1,985		1,992		1,866		1.4			4.93%	(L +3.50%)	6/24/2019	3/26/2026	1,980		1,987		1,960		1.3

The Escape Game, LLC (4)	Other amusement and recreation industries													Other amusement and recreation industries
Senior Secured Loan		9.75%	(L +8.75%)	12/22/2017	12/22/2022	7,000		6,965		6,504		4.8			9.75%	(L +8.75%)	12/22/2017	12/22/2022	7,000		6,969		6,549		4.4
Senior Secured Loan		9.75%	(L +8.75%)	2/14/2020	12/31/2020	2,333		2,313		2,168		1.6			9.75%	(L +8.75%)	2/14/2020	12/31/2020	2,333		2,323		2,183		1.5
Senior Secured Loan		8.00%	(L +7.00%)	7/18/2019	12/31/2020	4,667		4,656		4,549		3.4			8.00%	(L +7.00%)	7/18/2019	12/31/2020	4,667		4,661		4,392		2.9
Senior Secured Loan (Delayed Draw)		9.75%	(L +8.75%)	7/20/2018	12/22/2022	7,000		7,000		6,504		4.8			9.75%	(L +8.75%)	7/20/2018	12/22/2022	7,000		7,000		6,549		4.4
						21,000		20,934		19,725		14.6							21,000		20,953		19,673		13.2
Transdigm Inc. (15)	Administrative Management and General Management Consulting Services
Senior Secured Loan		2.43%	(L +2.25%)	6/10/2020	5/30/2025	499		476		451		0.3

Truck Hero, Inc. (15)	Truck Trailer Manufacturing													Truck Trailer Manufacturing
Senior Secured Loan		9.25%	(L +8.25%)	5/30/2017	4/21/2025	7,014		6,993		6,538		4.8			9.25%	(L +8.25%)	5/30/2017	4/21/2025	7,014		6,987		6,915		4.6

United Biologics Holdings, LLC (4) (10)	Medical Laboratories													Medical Laboratories
Preferred Equity (151,787 units)				4/16/2013				9		36		—					4/16/2013				9		30		—
Warrants (29,374 units)				7/26/2012	3/5/2022 (12)			82		22		—					7/26/2012	3/5/2022 (12)			82		14		—
								91		58		—									91		44		—
United Natural Foods (14) (15)														General Line Grocery Merchant Wholesalers
Senior Secured Loan															4.40%	(L +4.25%)	6/9/2020	10/22/2025	478		460		468		0.3

Wastebuilt Environmental Solutions, LLC (4)														Industrial Supplies Merchant Wholesalers
Senior Secured Loan															10.25%	(L +8.75%)	10/11/2018	10/11/2024	7,000		6,901		5,402		3.6

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

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

Weight Watchers International, Inc. (14) (15)	Diet and Weight Reducing Centers													Diet and Weight Reducing Centers
Senior Secured Loan		5.50%	(L +4.75%)	6/10/2020	11/29/2024	492		492		492		0.4			5.50%	(L +4.75%)	6/10/2020	11/29/2024	$	485	$	485	$	485	0.3	%

Xperi (14) (15)	Semiconductor and Related Device Manufacturing													Semiconductor and Related Device Manufacturing
Senior Secured Loan		4.17%	(L +4.00%)	6/1/2020	6/1/2025	520		475		475		0.4			4.15%	(L +4.00%)	6/1/2020	6/1/2025	514		471		502		0.3

Total Debt and Equity Investments						$	318,232	$	318,750	$	284,275	210.0	%						$	321,583	$	322,848	$	291,528	194.5	%

Structured Finance Note Investments
Dryden 76 CLO, Ltd. (7)
Subordinated Notes		18.24% (9)		9/27/2019	10/20/2032 (17)	2,750		2,346 (16)		2,013		1.5			19.80% (9)		9/27/2019	10/20/2032 (17)	2,750		2,320 (16)		2,038		1.4

Elevation CLO 2017-7, Ltd. (7)
Subordinated Notes		13.10% (9)		2/6/2019	7/15/2030 (17)	10,000		7,210 (16)		5,343		3.9			12.26% (9)		2/6/2019	7/15/2030 (17)	10,000		7,165 (16)		5,754		3.8

Flatiron CLO 18, Ltd. (7)
Subordinated Notes		19.58% (9)		1/2/2019	4/17/2031 (17)	9,680		7,218 (16)		6,433		4.8			21.27% (9)		1/2/2019	4/17/2031 (17)	9,680		7,306 (16)		6,839		4.6

Madison Park Funding XXIII, Ltd. (7)
Subordinated Notes		20.74% (9)		1/8/2020	7/27/2047 (17)	10,000		6,792 (16)		6,371		4.7			19.45% (9)		1/8/2020	7/27/2047 (17)	10,000		6,819 (16)		6,743		4.5

Monroe Capital MML CLO X, LTD.
Mezzanine bond - Class E															9.08% (9)	(L +8.85%)	8/7/2020	8/20/2031 (17)	863		799		797		0.5

Octagon Investment Partners 39, Ltd. (7)
Subordinated Notes		18.92% (9)		1/23/2020	10/20/2030 (17)	7,000		5,206 (16)		4,668		3.4			21.01% (9)		1/23/2020	10/20/2030 (17)	7,000		5,277 (16)		4,904		3.3

Park Avenue Institutional Advisers CLO 2017-1
Mezzanine bond - Class D															6.48% (9)	(L +6.22%)	6/5/2020	11/14/2029 (17)	100		82		89		0.1

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


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

Regatta II Funding
Mezzanine bond - Class DR2		13.56% (9)	(L +6.95%)	6/5/2020	1/15/2029 (17)	800		673		704		0.5			7.23% (9)	(L +6.95%)	6/5/2020	1/15/2029 (17)	$	800	$	685	$	720	0.5	%

THL Credit Wind River 2019‐3 CLO Ltd (7)
Subordinated Notes		13.19% (9)		4/5/2019	4/15/2031 (17)	7,000		5,729 (16)		4,412		3.3			15.73% (9)		4/5/2019	4/15/2031 (17)	7,000		5,807 (16)		4,647		3.1

Total Structured Finance Note Investments						$	47,330	$	35,254	$	30,030	22.2	%						$	48,193	$	36,260	$	32,531	21.8	%

Total Non-control/Non-affiliate Investments						$	365,562	$	354,004	$	314,305	232.2	%						$	369,776	$	359,108	$	324,059	216.3	%
Affiliate Investments
3rd Rock Gaming Holdings, LLC	Software Publishers													Software Publishers
Senior Secured Loan (6)		8.50% cash / 1.0% PIK	(L +7.50%)	3/13/2018	3/12/2023	21,231		20,993		12,916		9.5			8.50% cash / 1.0% PIK	(L +7.50%)	3/13/2018	3/12/2023	21,285		20,993		11,664		7.8
Common Equity (2,547,250 units) (10) (13)				3/13/2018				2,547		—		—					3/13/2018				2,547		—		—
						21,231		23,540		12,916		9.5							21,285		23,540		11,664		7.8
Chemical Resources Holdings, Inc.	Custom Compounding of Purchased Resins													Custom Compounding of Purchased Resins
Senior Secured Loan (4) (8)		9.33%	(L +7.83%)	1/25/2019	1/25/2024	13,743		13,611		13,459		9.9			9.22%	(L +7.72%)	1/25/2019	1/25/2024	13,743		13,620		13,857		9.2
Common Equity (1,832 Class A shares) (10) (13)				1/25/2019				1,813		2,111		1.6					1/25/2019				1,813		2,475		1.7
						13,743		15,424		15,570		11.5							13,743		15,433		16,332		10.9
Contract Datascan Holdings, Inc. (4)	Office Machinery and Equipment Rental and Leasing													Office Machinery and Equipment Rental and Leasing
Subordinated Loan		12.00%	N/A	8/5/2015	2/5/2021	8,022		8,005		7,557		5.6			12.00%	N/A	8/5/2015	2/5/2021	8,022		8,012		7,706		5.1
Preferred Equity (3,061 Series A shares), 10% PIK				8/5/2015				5,848		2,572		1.9					8/5/2015				5,848		2,523		1.7
Common Equity (11,273 shares) (10)				6/28/2016				104		51		—					6/28/2016				104		36		—
						8,022		13,957		10,180		7.5							8,022		13,964		10,265		6.8
DRS Imaging Services, LLC	Data Processing, Hosting, and Related Services													Data Processing, Hosting, and Related Services
Senior Secured Loan (4) (8)		10.17%	(L +9.17%)	3/8/2018	11/20/2023	10,664		10,604		10,336		7.6			10.12%	(L +9.12%)	3/8/2018	11/20/2023	10,626		10,570		10,626		7.1
Common Equity (1,135 units) (10) (13)				3/8/2018				1,135		1,356		1.0					3/8/2018				1,135		1,694		1.1
						10,664		11,739		11,692		8.6							10,626		11,705		12,320		8.2

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets		Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Master Cutlery, LLC (4) (6) (10)	Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan (11)		13.00%	N/A	4/17/2015	7/31/2020	$	6,340	$	4,764	$	—	—	%
Master Cutlery, LLC (4) (10)														Sporting and Recreational Goods and Supplies Merchant Wholesalers
Subordinated Loan (6) (11)															13.00%	N/A	4/17/2015	7/20/2022	$	6,546	$	4,764	$	—	—	%
Preferred Equity (3,723 Series A units), 8% PIK				4/17/2015				3,483		—		—					4/17/2015				3,483		—		—
Common Equity (15,564 units)				4/17/2015				—		—		—					4/17/2015				—		—		—
						6,340		8,247		—		—							6,546		8,247		—		—
NeoSystems Corp. (4)	Other Accounting Services													Other Accounting Services
Preferred Equity (521,962 convertible shares), 10% PIK				8/14/2014				1,785		2,250		1.7					8/14/2014				1,831		2,250		1.5

Pfanstiehl Holdings, Inc. (4)	Pharmaceutical Preparation Manufacturing													Pharmaceutical Preparation Manufacturing
Subordinated Loan		10.50%	N/A	1/1/2014	9/27/2024	3,788		3,788		3,788		2.8			10.50%	N/A	1/1/2014	9/27/2024	3,788		3,788		3,788		2.5
Common Equity (400 Class A shares)				1/1/2014				217		24,051		17.8					1/1/2014				217		31,932		21.3
						3,788		4,005		27,839		20.6							3,788		4,005		35,720		23.8
Professional Pipe Holdings, LLC	Plumbing, Heating, and Air-Conditioning Contractors													Plumbing, Heating, and Air-Conditioning Contractors
Senior Secured Loan		9.75% cash / 1.50% PIK	(L +8.75%)	3/23/2018	3/23/2023	7,153		7,076		6,654		4.9			8.90% cash / 1.50% PIK	(L +8.75%)	3/23/2018	3/23/2023	7,180		7,111		6,849		4.6
Common Equity (1,414 Class A units) (10)				3/23/2018				1,414		1,150		0.8					3/23/2018				1,414		1,011		0.7
						7,153		8,490		7,804		5.7							7,180		8,525		7,860		5.3
TalentSmart Holdings, LLC	Professional and Management Development Training													Professional and Management Development Training
Senior Secured Loan (4)		8.50%	(L +6.75%)	10/11/2019	10/11/2024	9,875		9,727		8,438		6.2			8.50%	(L +6.75%)	10/11/2019	10/11/2024	9,813		9,674		9,901		6.6
Senior Secured Loan (Revolver) (5) (18)		8.50%	(L +6.75%)	10/11/2019	10/11/2024	500		493		427		0.3
Senior Secured Loan (Revolver) (5)															8.50%	(L +6.75%)	10/11/2019	10/11/2024	500		493		504		0.3
Common Equity (1,595 Class A shares) (10) (13)				10/11/2019				1,595		840		0.6					10/11/2019				1,595		900		0.6
						10,375		11,815		9,705		7.1							10,313		11,762		11,305		7.5
TRS Services, LLC (4) (10)	Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance													Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
Preferred Equity (2,088,305 Class A units), 11% PIK				12/10/2014				279		706		0.5					12/10/2014				279		811		0.5
Common Equity (3,000,000 units)				12/10/2014				572		—		—					12/10/2014				572		—		—
						—		851		706		0.5							—		851		811		0.5

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(Dollar amounts in thousands)


Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets		Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
TTG Healthcare, LLC	Diagnostic Imaging Centers													Diagnostic Imaging Centers
Senior Secured Loan (4)		10.00%	(L +9.00%)	3/1/2019	3/1/2024	$	12,103	$	11,961	$	11,897	8.8	%		10.00%	(L +9.00%)	3/1/2019	3/1/2024	$	12,103	$	11,969	$	12,194	8.1	%
Preferred Equity ( 2,309 Class B units) (10) (13)				3/1/2019				2,309		3,488		2.6					3/1/2019				2,309		3,464		2.3
						12,103		14,270		15,385		11.4							12,103		14,278		15,658		10.4

Total Affiliate Investments						$	93,419	$	114,123	$	114,047	84.1	%						$	93,606	$	114,141	$	124,185	82.7	%
Control Investment
MTE Holding Corp. (4)	Travel Trailer and Camper Manufacturing													Travel Trailer and Camper Manufacturing
Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.)		9.50% cash / 4.5% PIK	(L +8.50%)	11/25/2015	11/25/2020	7,651		7,645		7,410		5.5			11.00% cash / 5.00% PIK	(L +8.50%)	11/25/2015	11/25/2021	7,742		7,742		7,626		5.1
Common Equity (554 shares)				11/25/2015				3,069		—		—
Common Equity (554 shares) (10)																	11/25/2015				3,069		458		0.3
						7,651		10,714		7,410		5.5							7,742		10,811		8,084		5.4
Total Control Investment						$	7,651	$	10,714	$	7,410	5.5	%						$	7,742	$	10,811	$	8,084	5.4	%

Total Investments						$	466,632	$	478,841	$	435,762	321.8	%						$	471,124	$	484,060	$	456,328	304.4	%


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

(2)

Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L) at ~~June~~September 30, 2020, and reset monthly, quarterly, or semi-annually. Variable-rate loans with an aggregate cost of ~~$338,417~~$342,661 include LIBOR reference rate floor provisions of generally 0.75% to 1.75%; at ~~June~~September 30, 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 ~~June~~September 30, 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 ~~can not~~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~~September 30, 2020, meaning the Company has ~~ceased~~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.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued (unaudited)

~~June~~September 30, 2020

(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~~September 30, 2020:


Portfolio Company	Reported Interest Rate	Interest Rate per Credit Agreement	Additional Interest per Annum	Reported Interest Rate	Interest Rate per Credit Agreement	Additional Interest per Annum
Carolina Lubes, Inc.	9.10%	8.68%	0.42%	8.64%	8.25%	0.39%
Chemical Resources Holdings, Inc.	9.33%	7.50%	1.83%	9.22%	7.50%	1.72%
DRS Imaging Services, LLC	10.17%	9.00%	1.17%	10.12%	9.00%	1.12%
Milrose Consultants, LLC	7.18%	6.50%	0.68%	7.74%	7.00%	0.74%
OnSite Care, PLLC	8.73%	7.25%	1.48%	8.70%	7.25%	1.45%
SourceHOV Tax, Inc.	7.87%	7.00%	0.87%	7.87%	7.00%	0.87%

(9)

The rate disclosed is anthe estimated effective yield, ~~historically~~generally established at ~~the time~~purchase and re-evaluated upon receipt of ~~the most recent distribution,~~distributions, and based upon ~~the projection of the amount~~projected amounts and timing of future distributions ~~in addition to~~and the ~~estimated~~projected amount and timing of terminal principal payments at ~~that time. Effective yields for~~ the ~~Company's Structured Finance Note investments are monitored and evaluated at each reporting date.~~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 ~~June~~September 30, 2020:



Portfolio Company	Investment Type	Range of PIK Option	Range of Cash Option	Maximum PIK Rate Allowed
Community Intervention Services, Inc.	Subordinated Loan	0% orto 6.00%	13.00% orto 7.00%	6.00%
Eblens Holdings, Inc.	Subordinated Loan	0% or ~~1.00%~~1.50%	~~13.00%~~14.00% or ~~12.00%~~12.50%	~~1.00%~~1.50%
Master Cutlery, LLC	Senior Secured Loan	0% to 13.00%	13.00% to 0%	13.00%


(12)	Represents expiration date of the warrants.


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


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


(15)	Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP ~~Credit~~ Facility and ~~can not~~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)	Maturity date represents the contractual maturity date of the structured finance notes. ~~Expected maturity and~~Projected cash flows, ~~not~~including the projected amount and timing of terminal principal payments which may be projected to occur prior to the contractual maturity ~~and cash flows,~~date, were utilized in deriving the effective yield of the investments.


(18)	~~Commitment fee~~Not meaningful as there is no outstanding balance on the revolver. The Company earns unfunded commitment fees on undrawn ~~funds.~~revolving lines of credit balances, which are reported in fee income.

See Notes to Consolidated Financial Statements.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2019

(Dollar amounts in thousands)



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

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

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

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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)


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

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

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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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

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

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

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

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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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

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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)


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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company (1) Investment Type	Industry	Interest Rate (2)	Spread Above Index (2)	Initial Acquisition Date	Maturity	Principal Amount		Amortized Cost		Fair Value (3)		Percent of Net Assets
Staples, Inc. (14) (15)	Business to Business Electronic Markets
Senior Secured Loan		6.69%	(L +5.00%)	6/24/2019	4/16/2026	$	1,990	$	1,920	$	1,960	1.1	%

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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

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

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

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

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

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

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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



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

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


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

(2)

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


(3)	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 (or a portion thereof) are held to support the SBA debentures and ~~can not~~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, 2019, meaning the Company has ~~ceased~~suspended recognition of all or a portion of income on the investment. See Note 4 for further details.


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


(8)	The 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, 2019:



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

(9)

The rate disclosed is anthe estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon ~~the current projection of the amount~~projected amounts and timing of future distributions ~~in addition to~~ the ~~estimated~~projected amount and timing of terminal principal ~~payments. Effective yields for the Company's Structured Finance Note investments are monitored and evaluated~~payments at ~~each reporting date.~~time of estimation. The estimated yield and investment cost may ultimately not be realized.


(10)	Non-income producing.

OFS Capital Corporation and Subsidiaries

Consolidated Schedule of Investments - Continued

December 31, 2019

(Dollar amounts in thousands)



Portfolio Company	Investment Type	Range of PIK Option	Range of Cash Option	Maximum PIK Rate Allowed
Community Intervention Services, Inc.	Subordinated Loan	0% or 6.00%	13.00% or 7.00%	6.00%
Eblens Holdings, Inc.	Subordinated Loan	0% or 1.00%	13.00% or 12.00%	1.00%
Master Cutlery, LLC	Senior Secured Loan	0% to 13.00%	13.00% to 0%	13.00%
TRS Services, LLC	Senior Secured Loan	0% or 1.00%	12.65% or 1.00%	1.00%


(12)	Represents expiration date of the warrants.


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


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


(15)	Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP ~~Credit~~ Facility and ~~can not~~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 Structured Finance Note investments.


(17)	Maturity date represents the contractual maturity date of the structured finance notes. ~~Expected maturity and~~Projected cash flows, ~~not~~including the projected amount and timing of terminal principal payments which may be projected to occur prior to the contractual maturity ~~and cash flows,~~date, were utilized in deriving the effective yield of the investments.


(18)	~~Commitment fee~~Not meaningful as there is no outstanding balance on the revolver. The Company earns unfunded commitment fees on undrawn ~~funds.~~revolving lines of credit balances, which are reported in fee income.

See Notes to Financial Statements.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 1. Organization

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

The Company’s investment objective is to provide stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments. OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company.

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

The Company may make investments directly or through one of its subsidiaries: SBIC I LP, OFSCC-FS or OFSCC-MB.

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

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

OFSCC-MB is a wholly-owned subsidiary taxed under subchapter C of the Code and generally holds the Company's equity investments ~~of the Company~~in portfolio companies that are taxed as pass-through entities.

Note 2. Summary of Significant Accounting Policies

Basis of presentation: The Company is an investment company as defined in the accounting and reporting guidance under ASC Topic 946, Financial Services–Investment Companies. The accompanying interim consolidated financial statements of the 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 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 as of and for the periods presented. ~~Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation.~~ These consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

Significant Accounting Policies: The following information supplements the description of significant accounting policies contained in Note 2 to the Company's consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Reclassifications:Certain prior period amounts have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying 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 changes in net assets and consolidated statements of 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 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.

Concentration of credit risk: Aside from its debt instruments, including investments in Structured Finance Notes of CLOs, financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during the year, the Company may exceed the federally insured limits. The Company

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

places cash deposits only with high credit quality institutions which OFS Advisor believes will mitigate the risk of loss due to credit risk. The amount of loss due to credit risk from debt investments if borrowers fail to perform according to the terms of

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

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

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

Goodwill: The decline in the price of the Company’s common stock and the level at which it continues to trade relative to the broader stock indices for the BDC industry, led management to conclude in the third quarter of 2020 that an impairment in the value of the Company’s goodwill was more likely than not. Moreover, the discount at which the Company’s stock traded to its net asset value resulted in management's conclusion on the impairment of goodwill equal to the full amount of its carrying value of $1,077 was appropriate.

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, initially 154 months ended September 30, 2026. Accumulated amortization recognized through June 30, 2020 was $1,284. The Company changed its estimate on the useful life to terminate on December 31, 2025. The Company recognized $54 for the three months ended September 30, 2020, which equates to $216 annually, and which the Company currently anticipates recognizing on a quarterly basis through December 31, 2025.

New accounting pronouncement issued: In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 840): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates (e.g., LIBOR) that are expected to be discontinued. ASU 2020-04 allows, among other things, certain contract modifications, such as those within the scope of Topic 310 on receivables, to be accounted as a continuation of the existing contract. This ASU was effective upon the issuance and its optional relief can be applied through December 31, 2022. The Company will consider this optional guidance prospectively, if applicable.

Note 3. Related Party Transactions

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

OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to the Company and OFS Advisor is free to furnish similar services to other entities, including other funds affiliated with OFS Advisor, so long as its services to the Company are not impaired. OFS Advisor also serves as the investment adviser or collateral manager to CLO funds and other companies, including HPCI 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 but including assets purchased with borrowed amounts and assets owned by any consolidated entity) at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the quarter. OFS Advisor has elected to exclude the value of the intangible asset and goodwill resulting from the SBIC Acquisition from the base management fee calculation.

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The incentive fee has two parts. The first part ("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 (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.

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

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

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

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

The second part 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), 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.

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 agreed to irrevocably waive the receipt of $441 in Income Incentive Fees (based on net investment income) related to net investment income, that it would otherwise be entitled to receive under the Investment Advisory Agreement for the three months ended 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 is equal to half the Income Incentive Fee expense the Company would have incurred for the three months ended March 31, 2020. The voluntary fee waiver did not include Capital Gain Fees, which was $0 for the three months ended March 31, 2020.

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

Administration Agreement: OFS Services 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 the 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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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.

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

Distributions paid to affiliates and expenses recognized under agreements with OFS Advisor and OFS Services for the three and nine months ended September 30, 2020 and 2019 are presented below:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020			2019
Base management fees	$	1,871	$	2,164	$	5,759		$	6,062
Incentive fees:
Income Incentive Fee	234		1,214		1,332			3,622
Incentive fee waiver	—		—		(441		)	—
Administration fee expense	436		396		1,456			1,250
Distributions paid to affiliates	501		1,002		2,004			3,005

Note 4. Investments

As of September 30, 2020, the Company had loans to 56 portfolio companies, of which 91% were senior secured loans and 9% were subordinated loans, at fair value, as well as equity investments in 14 of these portfolio companies. The Company also held equity investments in nineportfolio companies in which it did not hold a debt investment and nine investments in Structured Finance Notes. At September 30, 2020, the Company's investments consisted of the following:



			Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Senior secured debt investments ⁽¹⁾	$	356,599	73.7	%	237.9	%	$	336,960	73.8	%	224.7	%
Subordinated debt investments	57,103		11.8		38.1		31,564		6.9		21.1
Preferred equity	18,878		3.9		12.6		11,875		2.6		7.9
Common equity, warrants and other	15,220		3.1		10.2		43,398		9.5		28.9
Total debt and equity investments	447,800		92.5		298.8		423,797		92.8		282.6
Structured Finance Notes	36,260		7.5		24.2		32,531		7.2		21.8
Total investments	$	484,060	100.0	%	323.0	%	$	456,328	100.0	%	304.4	%

(1)

Includes debt investments, typically referred to as unitranche, in which the Company has 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 certain co‑lenders pursuant to a payment waterfall. Amortized cost and fair value of these investments were $82,880 and $83,413, respectively.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

~~Distributions paid to affiliates and expenses recognized under agreements with OFS Advisor and OFS Services for the three and six months ended June 30, 2020 and 2019 are presented below:~~

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Base management fees $ 1,869

$ 2,055

$ 3,888

$ 3,898
Incentive fees:
Income Incentive Fee 215
1,245
1,098
2,408
Incentive fee waiver —

—

(441 )
—
Administration fee expense 500
417
1,020
854
Distributions paid to affiliates 501

1,002

1,503

2,004

~~Note 4. Investments~~

As of June 30, 2020, the Company had loans to 57 portfolio companies, of which 90% were senior secured loans and 10% were subordinated loans, at fair value, as well as equity investments in 14 of these portfolio companies. The Company also held equity investments in eight~~portfolio companies in which it did not hold a debt investment and eight investments in Structured Finance Notes. At June 30, 2020, the Company's investments consisted of the following:~~

Percentage of Total Percentage of Total
Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets
Senior secured debt investments ⁽¹⁾
$ 352,264

73.6 % 260.2 % $ 325,659
74.7 % 240.5 %
Subordinated debt investments 56,985

11.9
42.1
35,755
8.2
26.4
Preferred equity 18,621

3.9
13.8
11,757
2.7
8.7
Common equity, warrants and other 15,717

3.3
11.6
32,561
7.5
24.0
Total debt and equity investments 443,587
92.7
327.7
405,732
93.1
299.6
Structured Finance Notes 35,254
7.3
26.0
30,030
6.9
19.5
Total investments $ 478,841

100.0 % 353.7 % $ 435,762
100.0 % 319.1 %


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

As of June 30, 2020, the Company had international domiciled debt investments, all denominated in US dollars, with an amortized cost and fair value of $5,910 and $5,563, respectively, and debt and equity investments with an amortized cost and fair value of $437,677 and $400,169 domiciled in the United States. Geographic composition is determined by the location of the corporate headquarters of the portfolio company. ~~The~~As of September 30, 2020, the Company's investment portfolio was domiciled as follows:



	September 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
United States of America	$	441,902	$	418,055	$	505,235	$	484,946
Canada	1,923		1,830		3,559		3,605
Cayman Islands¹	36,260		32,531		23,127		21,610
Ireland	—		—		1,897		1,906
Luxembourg	1,981		1,934		2,843		2,843
Switzerland	1,994		1,978		2,010		2,021
Total investments	$	484,060	$	456,328	$	538,671	$	516,931

(1) Cayman Island investments represent Structured Finance Notes held by the Company. These investments generally hold underling portfolios of investments in companies domiciled in the United States of America.

As of September 30, 2020, the industry ~~compositions~~composition of the Company’s ~~debt and equity~~ investment portfolio was as follows:


			Percentage of Total						Percentage of Total						Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets		Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Administrative and Support and Waste Management and Remediation Services
Convention and Trade Show Organizers													$	214	—	%	0.1	%	$	210	—	%	0.1	%
Security Systems Services (except Locksmiths)	$	6,528	1.5	%	4.8	%	$	4,740	1.2	%	3.5	%	6,533		1.3	%	4.4		4,657		1.0		3.2
Arts, Entertainment, and Recreation
Other Amusement and Recreation Industries	20,934		4.7		15.5		19,725		4.9		14.5		20,953		4.3		14.0		19,673		4.3		13.2
Construction
Electrical Contractors and Other Wiring Installation Contractors	16,971		3.8		12.5		14,822		3.7		10.9		17,700		3.7		11.8		14,457		3.2		9.6
Plumbing, Heating, and Air-Conditioning Contractors													8,525		1.8		5.7		7,860		1.7		5.2
Education Services
Colleges, Universities, and Professional Schools													—		—		—		3,356		0.7		2.2
Professional and Management Development Training													11,762		2.4		7.8		11,305		2.5		7.5
Finance and Insurance
Direct Health and Medical Insurance Carriers													396		0.1		0.3		405		0.1		0.3
Insurance Agencies and Brokerages													9,537		2.0		6.4		8,951		2.0		6.0
Health Care and Social Assistance
Child Day Care Services													5,180		1.1		3.5		4,948		1.1		3.3
Diagnostic Imaging Centers													14,278		2.9		9.5		15,658		3.4		10.4
Home Health Care Services													13,636		2.8		9.1		13,766		3.0		9.1
Medical Laboratories													91		—		0.1		44		—		—
Offices of Physicians, Mental Health Specialists													20,721		4.3		13.8		20,163		4.4		13.5
Outpatient Mental Health and Substance Abuse Centers													11,614		2.4		7.7		3,951		0.9		2.6
Information

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


		Percentage of Total			Percentage of Total			Percentage of Total			Percentage of Total
	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets
Plumbing, Heating, and Air-Conditioning Contractors	8,490	1.9	6.3	7,804	1.9	5.8
Education Services
Colleges, Universities, and Professional Schools	—	—	—	2,110	0.5	1.6
Professional and Management Development Training	11,815	2.7	8.7	9,705	2.4	7.2
Finance and Insurance
Direct Health and Medical Insurance Carriers	395	0.1	0.3	395	0.1	0.3
Insurance Agencies and Brokerages	9,530	2.1	7.0	8,268	2.0	6.1
Health Care and Social Assistance
Child Day Care Services	5,176	1.2	3.8	4,896	1.2	3.6
Diagnostic Imaging Centers	14,270	3.2	10.5	15,385	3.8	11.4
Home Health Care Services	13,638	3.1	10.1	13,623	3.4	10.1
Medical Laboratories	91	—	0.1	58	—	—
Offices of Physicians, Mental Health Specialists	20,716	4.7	15.3	19,299	4.8	14.3
Outpatient Mental Health and Substance Abuse Centers	11,612	2.6	8.6	3,803	0.9	2.8
Information
Data Processing, Hosting, and Related Services	11,739	2.6	8.7	11,692	2.9	8.6	11,705	2.4	7.8	12,320	2.7	8.2
Software Publishers	29,969	6.8	22.2	19,180	4.7	14.2	29,980	6.2	19.9	18,041	4.0	12.1
Television Broadcasting	1,987	0.4	1.5	1,625	0.4	1.2	1,982	0.4	1.3	1,554	0.3	1.0
Manufacturing
Commercial Printing (except Screen and Books)	4,784	1.1	3.5	4,346	1.1	3.2	4,786	1.0	3.2	4,549	1.0	3.0
Custom Compounding of Purchased Resins	15,424	3.5	11.4	15,570	3.8	11.5	15,433	3.2	10.3	16,332	3.6	10.9
Other Aircraft Parts and Auxiliary Equipment Manufacturing	5,422	1.2	4.0	4,408	1.1	3.3	5,426	1.1	3.6	4,696	1.0	3.1
Other Commercial and Service Industry Machinery Manufacturing	1,969	0.4	1.5	1,898	0.5	1.4	1,965	0.4	1.3	1,934	0.4	1.3
Pharmaceutical Preparation Manufacturing	6,004	1.4	4.4	29,751	7.3	21.9	5,999	1.2	4.0	37,698	8.3	25.2
Plastics Plumbing Fixture Manufacturing	1,477	0.3	1.1	1,457	0.4	1.1	1,473	0.3	1.0	1,479	0.3	1.0
Pump and Pumping Equipment Manufacturing	1,501	0.3	1.1	1,236	0.3	0.9	1,501	0.3	1.0	1,220	0.3	0.8
Semiconductor and Related Device Manufacturing	475	0.1	0.4	475	0.1	0.4	471	0.1	0.3	502	0.1	0.3
Travel Trailer and Camper Manufacturing	10,714	2.4	7.9	7,410	1.8	5.5	10,811	2.2	7.2	8,084	1.8	5.4
Truck Trailer Manufacturing	6,993	1.6	5.2	6,538	1.6	4.8	6,987	1.4	4.7	6,915	1.5	4.6
Unlaminated Plastics Profile Shape Manufacturing	8,051	1.8	5.9	7,255	1.8	5.4	8,046	1.7	5.4	7,795	1.7	5.2
Other Services (except Public Administration)
Automotive Oil Change and Lubrication Shops	19,902	4.5	14.7	19,374	4.8	14.3	19,767	4.1	13.2	19,575	4.3	13.2
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance							851	0.2	0.6	811	0.2	0.5
Diet and Weight Reducing Centers							485	0.1	0.3	485	0.1	0.3
Professional, Scientific, and Technical Services
Administrative Management and General Management Consulting Services							25,134	5.2	16.8	25,095	5.5	16.8
All Other Professional, Scientific, and Technical Services							1,923	0.4	1.3	1,830	0.4	1.2
Other Accounting Services							14,663	3.0	9.8	15,422	3.4	10.3
Other Computer Related Services							16,746	3.5	11.2	15,806	3.5	10.6
Public Administration
Other Justice, Public Order, and Safety Activities							703	0.1	0.5	696	0.2	0.5
Real Estate and Rental and Leasing
Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing							499	0.1	0.3	497	0.1	0.3
Office Machinery and Equipment Rental and Leasing							13,964	2.9	9.3	10,265	2.2	6.8
Retail Trade
Cosmetics, Beauty Supplies, and Perfume Stores							7,868	1.6	5.2	7,796	1.7	5.2

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Percentage of Total Percentage of Total
Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
851

0.2

0.6
706
0.2
0.5
Diet and Weight Reducing Centers
492

0.1
0.4
492

0.1
0.4
Professional, Scientific, and Technical Services

Administrative Management and General Management Consulting Services
17,991

4.1

13.3
17,718

4.4
13.1
All Other Professional, Scientific, and Technical Services
1,925

0.4
1.4
1,767

0.4
1.3
Other Accounting Services
14,611

3.3

10.8
14,989
3.7
11.1
Other Computer Related Services
17,715

4.0

13.1
16,656
4.0
12.3
Other Professional, Scientific, and Technical Services
500

0.1

0.4
200
—
0.1
Public Administration

Other Justice, Public Order, and Safety Activities
703

0.2

0.5
707
0.2
0.5
Real Estate and Rental and Leasing

Office Machinery and Equipment Rental and Leasing
13,957

3.1

10.3
10,180
2.5
7.5
Retail Trade

Cosmetics, Beauty Supplies, and Perfume Stores 7,867

1.8
5.8
7,502

1.8
5.5
Shoe store
9,728

2.2

7.2
9,257

2.3
6.8
Sporting Goods Stores
2,915

0.7
2.2
2,869

0.7
2.1
All Other General Merchandise Stores
5,332

1.2

3.9
4,444

1.1
3.3
Transportation and Warehousing

Taxi Service
1,986

0.4
1.5
1,884

0.5
1.4
Wholesale Trade

Business to Business Electronic Markets
3,390

0.8

2.5
3,065

0.8
2.3
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
1,963

0.4
1.4
1,909

0.5
1.4
Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
18,924

4.3
14.0
18,984

4.7
14.0
Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers
489

0.1
0.4
482

0.1
0.4
General Line Grocery Merchant Wholesalers
480

0.1
0.4
480

0.1
0.4
Industrial Machinery and Equipment Merchant Wholesalers
9,698

2.2

7.2
8,857

2.1
6.5
Industrial Supplies Merchant Wholesalers
6,895

1.6

5.1
4,945

1.2
3.7
Motor Vehicle Parts (Used) Merchant Wholesalers
14,222

3.2
10.5
13,667

3.4
10.1
Sporting and Recreational Goods and Supplies Merchant Wholesalers
8,247

1.9

6.1
—
—
—
Stationary & Office Supply Merchant Wholesaler 16,129

3.6
11.9
7,124

1.8
5.3

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

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


			Percentage of Total						Percentage of Total						Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets		Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Shoe store													9,742		2.0		6.5		5,351		1.2		3.6
Sporting Goods Stores													2,911		0.6		1.9		2,942		0.6		2.0
All Other General Merchandise Stores													5,292		1.1		3.5		4,780		1.0		3.2
Transportation and Warehousing
Scheduled Passenger Air Transportation													495		0.1		0.3		504		0.1		0.3
Taxi Service													1,981		0.4		1.3		1,934		0.4		1.3
Wholesale Trade
Business to Business Electronic Markets													2,895		0.6		1.9		2,768		0.6		1.8
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers													1,959		0.4		1.3		1,939		0.4		1.3
Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers													16,590		3.4		11.1		17,122		3.8		11.5
General Line Grocery Merchant Wholesalers													460		0.1		0.3		468		0.1		0.3
Industrial Machinery and Equipment Merchant Wholesalers													9,696		2.0		6.5		9,060		2.0		6.0
Industrial Supplies Merchant Wholesalers													6,901		1.4		4.6		5,402		1.2		3.6
Motor Vehicle Parts (Used) Merchant Wholesalers													14,194		2.9		9.5		13,633		3.0		9.1
Sporting and Recreational Goods and Supplies Merchant Wholesalers													8,247		1.7		5.5		—		—		—
Stationary & Office Supply Merchant Wholesaler													16,129		3.3		10.8		7,093		1.6		4.7
Total debt and equity investments	$	443,587	100.0	%	327.6	%	$	405,732	100.0	%	299.7	%	$	447,800	92.2	%	298.7	%	$	423,797	92.9	%	282.7	%
Structured Finance Notes	35,254		—		26.0	%	30,030		—		19.5	%	36,260		7.8		24.2		32,531		7.1		21.7
Total investments	$	478,841	100.0	%	353.6	%	$	435,762	100.0	%	319.2	%	$	484,060	100.0	%	322.9	%	$	456,328	100.0	%	304.4	%

As of December 31, 2019, the Company had loans to 79 portfolio companies, of which 90% were senior secured loans and 10% were subordinated loans, at fair value, as well as equity investments in 15 of these portfolio companies. The Company also held an equity investment in six portfolio companies in which it did not hold a debt investment, as well as four investments in Structured Finance Notes. At December 31, 2019, investments consisted of the following:



			Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Senior secured debt investments	$	421,970	78.3	%	253.2	%	$	408,724	79.1	%	245.3	%
Subordinated debt investments	56,731		10.5		34.0		43,091		8.3		25.9
Preferred equity	21,925		4.1		13.2		17,729		3.4		10.6
Common equity, warrants and other	14,919		2.8		9.0		25,777		5.0		15.5
Total debt and equity investments	515,545		95.7	%	309.4	%	495,321		95.8	%	297.3	%
Structured Finance Notes	23,126		4.3		14.0		21,610		4.2		12.9
Total	$	538,671	100.0	%	323.4	%	$	516,931	100.0	%	310.2	%

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

At December 31, 2019, the Company had international domiciled debt investments, all denominated in US dollars, with an amortized cost and fair value of $10,309 and $10,374, respectively, and debt and equity investments with an amortized cost and fair value of $505,232 and $484,945, respectively, domiciled in the United States. The industry compositions of the Company’s debt and equity investment portfolio were as follows:


			Percentage of Total						Percentage of Total						Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets		Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Administrative and Support and Waste Management and Remediation Services
Convention and Trade Show Organizers													$	500	0.1	%	0.3	%	$	1,490	0.3	%	0.9	%
Security Systems Services (except Locksmiths)	$	8,158	1.6	%	4.9	%	$	7,224	1.5	%	4.3	%	8,158		1.5		4.9		7,224		1.4		4.3
Temporary Help Services	13,866		2.7		8.3		13,742		2.8		8.2		13,866		2.6		8.3		13,742		2.7		8.2
Arts, Entertainment, and Recreation
Other Amusement and Recreation Industries	18,611		3.6		11.2		18,592		3.8		11.2		18,611		3.5		11.2		18,592		3.6		11.2
Construction
Electrical Contractors and Other Wiring Installation Contractors	16,520		3.2		9.9		14,639		3.0		8.8		16,520		3.1		9.9		14,639		2.8		8.8
Plumbing, Heating, and Air-Conditioning Contractors	8,422		1.6		5.1		9,583		1.9		5.8		8,422		1.6		5.1		9,583		1.9		5.8
Education Services
Colleges, Universities, and Professional Schools	—		—		—		—		—		—		—		—		—		—		—		—
Professional and Management Development Training	11,574		2.2		6.9		11,575		2.3		6.9		11,574		2.1		6.9		11,575		2.2		6.9
Finance and Insurance
Direct Health and Medical Insurance Carriers	395		0.1		0.2		405		0.1		0.2		395		0.1		0.2		405		0.1		0.2
Insurance Agencies and Brokerages	11,487		2.2		6.9		11,386		2.3		6.8		11,487		2.1		6.9		11,386		2.2		6.8
Health Care and Social Assistance
All Other Outpatient Care Centers													2,001		0.4		1.2		2,015		0.4		1.2
Child Day Care Services													8,126		1.5		4.9		8,266		1.6		5.0
Diagnostic Imaging Centers													14,247		2.6		8.6		14,191		2.7		8.5
Freestanding Ambulatory Surgical and Emergency Centers													2,950		0.5		1.8		2,976		0.6		1.8
General Medical and Surgical Hospitals													2,612		0.5		1.6		2,632		0.5		1.6
Home Health Care Services													16,627		3.1		10.0		16,236		3.1		9.7
Medical Laboratories													91		—		0.1		22		—		—
Offices of Physicians, Mental Health Specialists													20,047		3.6		12.0		19,945		3.8		12.0
Outpatient Mental Health and Substance Abuse Centers													11,609		2.2		7.0		4,000		0.8		2.4
Residential Intellectual and Developmental Disability Facilities													2,991		0.6		1.8		3,006		0.6		1.8
Information
Data Processing, Hosting, and Related Services													11,805		2.2		7.1		11,900		2.3		7.1
Internet Publishing and Broadcasting and Web Search Portals													1,969		0.4		1.2		1,992		0.4		1.2
Software Publishers													41,054		7.5		24.5		38,373		7.3		22.9
Television Broadcasting													1,997		0.4		1.2		1,997		0.4		1.1

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


		Percentage of Total			Percentage of Total				Percentage of Total						Percentage of Total
	Amortized Cost	Amortized Cost	Net Assets	Fair Value	Fair Value	Net Assets	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
All Other Outpatient Care Centers	2,001	0.4	1.2	2,015	0.4	1.2
Child Day Care Services	8,126	1.6	4.9	8,266	1.7	5.0
Diagnostic Imaging Centers	14,247	2.8	8.6	14,191	2.9	8.5
Freestanding Ambulatory Surgical and Emergency Centers	2,950	0.6	1.8	2,976	0.6	1.8
General Medical and Surgical Hospitals	2,612	0.5	1.6	2,632	0.5	1.6
Home Health Care Services	16,627	3.2	10.0	16,236	3.3	9.7
Medical Laboratories	91	—	0.1	22	—	—
Offices of Physicians, Mental Health Specialists	20,047	3.9	12.0	19,945	4.0	12.0
Outpatient Mental Health and Substance Abuse Centers	11,609	2.3	7.0	4,000	0.8	2.4
Residential Intellectual and Developmental Disability Facilities	2,991	0.6	1.8	3,006	0.6	1.8
Information
Data Processing, Hosting, and Related Services	11,805	2.3	7.1	11,900	2.4	7.1
Internet Publishing and Broadcasting and Web Search Portals	1,969	0.4	1.2	1,992	0.4	1.2
Software Publishers	41,054	8.0	24.5	38,373	7.7	22.9
Television Broadcasting	1,997	0.4	1.2	1,997	0.4	1.1
Wired Telecommunications Carriers	1,972	0.4	1.2	1,980	0.4	1.2	1,972		0.4		1.2		1,980		0.4		1.2
Manufacturing
Commercial Printing (except Screen and Books)	4,778	0.9	2.9	4,591	0.9	2.8	$	4,778	0.9	%	2.9	%	$	4,591	0.9	%	2.8	%
Custom Compounding of Purchased Resins	15,405	3.0	9.2	16,408	3.3	9.8	15,405		2.9		9.2		16,408		3.2		9.8
Motor Vehicle Body Manufacturing	1,970	0.4	1.2	1,997	0.4	1.2	1,970		0.4		1.2		1,997		0.4		1.2
Other Aircraft Parts and Auxiliary Equipment Manufacturing	5,412	1.0	3.2	4,213	0.9	2.5	5,412		1.0		3.2		4,213		0.8		2.5
Other Commercial and Service Industry Machinery Manufacturing	2,229	0.4	1.3	2,262	0.5	1.4	2,229		0.4		1.3		2,262		0.4		1.4
Pharmaceutical and Medicine Manufacturing	853	0.2	0.5	853	0.2	0.5	853		0.2		0.5		853		0.2		0.5
Pharmaceutical Preparation Manufacturing	7,931	1.5	4.8	19,694	4.0	11.8	7,931		1.5		4.8		19,694		3.8		11.8
Plastics Plumbing Fixture Manufacturing	1,484	0.3	0.9	1,498	0.3	0.9	1,484		0.3		0.9		1,498		0.3		0.9
Pump and Pumping Equipment Manufacturing	1,501	0.3	0.9	1,607	0.3	1.0	1,501		0.3		0.9		1,607		0.3		1.0
Travel Trailer and Camper Manufacturing	10,520	2.0	6.3	8,717	1.7	5.2	10,520		2.0		6.3		8,717		1.7		5.2
Truck Trailer Manufacturing	6,990	1.4	4.2	6,690	1.4	4.0	6,990		1.3		4.2		6,690		1.3		4.0
Unlaminated Plastics Profile Shape Manufacturing	10,046	1.9	6.0	9,959	2.0	6.0	10,046		1.9		6.0		9,959		1.9		6.0
Other Services (except Public Administration)
Automotive Oil Change and Lubrication Shops	20,165	3.9	12.1	20,458	4.0	12.3	20,165		3.6		12.1		20,458		3.9		12.3
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance	19,106	3.7	11.5	18,265	3.7	11.0	19,106		3.4		11.5		18,265		3.5		11.0
Communication Equipment Repair and Maintenance							4,493		0.8		2.7		4,512		0.9		2.7
Professional, Scientific, and Technical Services
Administrative Management and General Management Consulting Services							17,496		3.2		10.5		17,492		3.4		10.5
Advertising Agencies							1,987		0.4		1.2		2,001		0.4		1.2
All Other Professional, Scientific, and Technical Services							1,925		0.4		1.2		1,925		0.4		1.2
Other Accounting Services							1,698		0.3		1.0		2,250		0.4		1.4
Other Computer Related Services							18,242		3.4		10.9		18,353		3.6		11.0
Testing Laboratories							1,987		0.4		1.2		2,004		0.4		1.2
Public Administration
Other Justice, Public Order, and Safety Activities							9,846		1.8		5.9		407		0.1		0.2
Public Finance Activities							1,941		0.4		1.2		2,007		0.4		1.2
Real Estate and Rental and Leasing
Office Machinery and Equipment Rental and Leasing							13,698		2.5		8.2		14,342		2.8		8.6

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

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


			Percentage of Total						Percentage of Total						Percentage of Total						Percentage of Total
	Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets		Amortized Cost		Amortized Cost		Net Assets		Fair Value		Fair Value		Net Assets
Retail Trade
Cosmetics, Beauty Supplies, and Perfume Stores													$	6,419	1.2	%	3.9	%	$	6,363	1.2	%	3.8	%
Shoe Store													9,675		1.8		5.8		9,917		1.9		6.0
Sporting Goods Stores													1,921		0.4		1.2		1,983		0.4		1.2
Supermarkets and Other Grocery (except Convenience) Stores													1,081		0.2		0.6		1,094		0.2		0.7
All Other General Merchandise Stores													5,402		1.0		3.2		5,020		1.0		3.0
Transportation and Warehousing
General Warehousing and Storage													13,790		2.6		8.3		14,165		2.7		8.5
Taxi Service													1,990		0.4		1.2		1,990		0.4		1.2
Wholesale Trade
Business to Business Electronic Markets													3,920		0.7		2.4		3,960		0.8		2.4
Computer and Computer Peripheral Equipment and Software Merchant Wholesalers													3,955		0.7		2.4		3,976		0.8		2.4
Industrial Machinery and Equipment Merchant Wholesalers													9,700		1.8		5.8		9,662		1.9		5.8
Industrial Supplies Merchant Wholesalers													6,883		1.3		4.1		6,584		1.3		4.0
Motor Vehicle Parts (Used) Merchant Wholesalers													13,119		2.4		7.9		13,119		2.5		7.9
Other Grocery and Related Products Merchant Wholesalers													1,995		0.4		1.2		2,003		0.4		1.2
Sporting and Recreational Goods and Supplies Merchant Wholesalers													8,247		1.5		4.9		255		—		0.2
Stationery and Office Supplies Merchant Wholesalers													16,113		3.0		9.7		14,559		2.8		8.7
Total debt and equity investments	$	515,545	100.0	%	309.4	%	$	495,321	100.0	%	297.3	%	$	515,545	95.7	%	309.4	%	$	495,321	95.8	%	297.3	%
Structured Finance Notes	23,126		—		14.0	%	21,610		—		12.9	%	23,126		4.3		14.0		21,610		4.2		12.9
Total investments	$	538,671	100.0	%	323.4	%	$	516,931	100.0	%	310.2	%	$	538,671	100.0	%	323.4	%	$	516,931	100.0	%	310.2	%

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

On September 4, 2020, the Company's equity investment in Sentry Centers Holdings, LLC was restructured, pursuant to which the Company converted its 500 Series C units into 269 shares of common equity. In addition, the Company invested $160 in a capital raise and received Series A and Series B preferred units. Accordingly, during the three months ended September 30, 2020, the Company recognized a realized loss of $446.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

On September 30, 2020, the Company's debt investment in Southern Technical Institute, LLC was restructured, pursuant to which the Company received proceeds of $529, in full satisfaction of contractually due interest of $215 and principal of $1,660. This investment was carried at a cost of $-0-. Accordingly, during the three and nine months ended September 30, 2020, the Company fully recognized a realized gain of $314 as the investment was carried at cost as of December 31, 2019. As of September 30, 2020, the Company holds equity appreciation rights with a cost and fair value of $-0- and $3,356, respectively.

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

Note 5. Fair Value of Financial Instruments

The Company’s investments are ~~valued~~carried at fair value as determined by the ~~Company's~~ Board. These fair values are determined in accordance with a documented valuation policy and a consistently applied valuation 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 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Level 2: 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 3: 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 judgment or estimation by management. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's 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. The Company generally categorizes its investment portfolio into Level 2 and 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. ~~The Company observed significant declines in market liquidity due to the COVID-19 pandemic that~~

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

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

~~disqualified certain NBIP as Level 2 inputs.~~ Senior securities with a fair value of ~~$-0-~~$3,585 and ~~2,915 were transfered from Level 2 to Level 3 during the three and six months ended June 30, 2020, respectively, while senior securities with a fair value of $4,256 and $-0-~~$599 were transferred from Level 3 to Level 2 during the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. Senior securities with a fair value of ~~$14,219~~$0 and $628 were ~~transfered~~transferred from Level 3 to Level 2 during the three and ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019, respectively.

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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



Security	Level 1		Level 2		Level 3		Fair Value at September 30, 2020
Debt investments	$	—	$	23,547	$	344,977	$	368,524
Equity investments	—		—		55,273		55,273
Structured Finance Notes	—		—		32,531		32,531
	$	—	$	23,547	$	432,781	$	456,328



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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following tables provide quantitative information about valuation techniques and the Company’s significant inputs to the Company’s Level 3 fair value measurements as of ~~June~~September 30, 2020 and December 31, 2019. In addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The table below provides information on the significant Level 3 inputs as they relate to the Company’s fair value measurements.

Fair Value at June 30, 2020

Valuation technique

Unobservable inputs

Range
(Weighted average)

Fair Value at September 30, 2020

Valuation technique

Unobservable inputs

Range
(Weighted average)

Debt investments:

Senior secured

268,196

Discounted cash flow

Discount rates

6.69% - 24.01% (11.31%)

287,788

Discounted cash flow

Discount rates

7.28% - 24.42% (10.43%)

Senior secured

25,138

Market approach

EBITDA multiples

7.75x - 9.00x (7.91x)

13,961

Market approach

EBITDA multiples

8.50x - 8.50x (8.50x)

Senior secured

12,917

Market approach

Revenue multiples

2.00x - 2.00x (1.60x)

11,664

Market approach

Revenue multiples

1.27x - 1.27x (1.27x)

Subordinated

28,631

Discounted cash flow

Discount rates

6.88% - 23.51% (18.24%)

19,120

Discounted cash flow

Discount rates

10.92% - 24.50% (19.61%)

Subordinated

7,124

Market approach

EBITDA multiples

7.82x - 7.82x (7.82x)

12,444

Market approach

EBITDA multiples

3.87x - 7.5x (5.94x)

Subordinated

—

Market approach

Revenue multiples

0.10x - 0.15x (0.25x)

—

Market approach

Revenue multiples

0.10x - 0.18x (0.14x)

Structured Finance Notes⁽³⁾:

Structured Finance Notes

Subordinated notes(3)

29,240

Discounted cash flow

Discount rates

18.50% - 25.00% (21.34%)

30,925

Discounted cash flow

Discount rates

20.00% - 24.50% (21.92%)

Constant Default Rate⁽¹⁾

2.00% - 2.00% (2.00%)

Constant Default Rate⁽¹⁾

2.00% - 2.00% (2.00%)

Constant Default Rate⁽²⁾

3.00% - 3.00% (3.00%)

Constant Default Rate⁽²⁾

3.00% - 3.00% (3.00%)

Recovery Rate

60.00% - 60.00% (60.00%)

Recovery Rate

60.00% - 60.00% (60.00%)

Mezzanine debt

790

Discounted cash flow

Discount rates

9.25% - 9.50% (9.47%)

1,606

Discounted cash flow

Discount rates

8.60% - 10.50% (9.79%)

Constant Default Rate⁽¹⁾

2.00% - 2.00% (2.00%)

Constant Default Rate⁽¹⁾

0.00% - 2.00% (1.01%)

Constant Default Rate⁽²⁾

3.00% - 3.00% (3.00%)

Constant Default Rate⁽²⁾

3.00% - 3.00% (3.00%)

Recovery Rate

60.00% - 60.00% (60.00%)

Recovery Rate

60.00% - 60.00% (60.00%)

Equity investments:

Preferred equity

9,582

Market approach

EBITDA multiples

6.50x - 15.00x (7.16x)

10,827

Market approach

EBITDA multiples

6.50x - 8.50x (7.29x)

Preferred equity

706

Market approach

Revenue multiples

0.15x - 0.75x (0.75x)

1,048

Market approach

Revenue multiples

0.18x - 1.42x (0.87x)

Preferred equity

1,469

Market approach

Recurring monthly revenue

38.00x - 38.00x (38.00x)

Common equity, warrants and other

32,361

Market approach

EBITDA multiples

3.25x - 15.00x (8.61x)

Common equity, warrants and other

200

Market approach

Revenue multiples

0.15x - 4.00x (1.03x)

43,382

Market approach

EBITDA multiples

3.75x - 11.00x (7.98x)

Common equity, warrants and other

—

Market approach

Recurring monthly revenue

38.00x - 38.00x (38.00x)

Market approach

Revenue multiples

0.18x - 1.42x (0.39x)

416,354

432,781

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

(2) Constant default rates for the ~~twelve~~nine months following the next ~~eighteen~~nine 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 ~~on all assets currently in default and all assets below specified fair value thresholds.~~

at the issuing CLO's assumed reinvestment rate.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)



	Fair Value at December 31, 2019		Valuation technique	Unobservable inputs	Range (Weighted average)
Debt investments:
Senior secured	$	295,835	Discounted cash flow	Discount rates	5.64% - 17.42% (11.17%)
Senior secured	15,031		Market approach	EBITDA multiples	8.09x - 13.22x (13.08x)
Senior secured	23,193		Market approach	Transaction Price
Subordinated	35,371		Discounted cash flow	Discount rates	6.38% - 18.86% (14.32%)
Subordinated	7,464		Market approach	EBITDA multiples	4.75x - 6.35x (6.35x)
Subordinated	255		Market approach	Revenue multiple

Structured Finance Notes:
Subordinated Notes⁽²⁾	21,610		Discounted cash flow	Discount rates	14.50% - 19.50% (17.16%)
				Constant default rate⁽¹⁾	1.26% - 1.40% (1.33%)
				Recovery rate	69.30% - 70.00% (69.70%)

Equity investments:
Preferred equity	13,185		Market approach	EBITDA multiples	6.25x - 13.22x (4.96x)
Preferred equity	2,424		Market approach	Revenue multiples	0.23x - 9.58x (9.58x)
Preferred equity	2,120		Market approach	Recurring monthly revenue	40.00x - 40.00x (40.00x)
Common equity, warrants and other	22,788		Market approach	EBITDA multiples	4.50x - 13.22x (13.03x)
Common equity, warrants and other	1,489		Market approach	Revenue multiples	0.23x - 7.00x (7.00x)
Common equity, warrants and other	1,500		Transaction Price
	$	442,265

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

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

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

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following tables present changes in investments measured at fair value using Level 3 inputs for the ~~six~~nine months ended ~~June~~September 30, 2020 and ~~June~~September 30, 2019.


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

Net realized loss on investments	(9,217		)	—			—			—		—			(9,217		)
Net realized gain (loss) on investments																		(9,396		)	—			51			(497		)	—			(9,842		)
Net unrealized appreciation (depreciation) on investments	(10,855		)	(7,590		)	(2,668		)	5,986		(3,707		)	(18,834		)	(5,039		)	(11,895		)	(2,808		)	17,320			(2,211		)	(4,633		)
Amortization of Net Loan Fees	642			—			—			—		—			642			854			16			—			—			—			870
Accretion of interest income on structured-finance notes	—			—			—			—		2,626			2,626			—			—			—			—			4,141			4,141
Capitalized PIK interest and dividends	586			255			341			—		—			1,182			859			375			388			—			—			1,622
Amendment fees																		(9		)	(22		)	—			—			—			(31		)
Purchase and origination of portfolio investments	48,678			—			—			95		12,791			61,564			57,261			—			160			95			13,605			71,121
Proceeds from principal payments on portfolio investments	(50,158		)	—			—			—		—			(50,158		)	(54,157		)	—			—			—			—			(54,157		)
Sale and redemption of portfolio investments	(9,696		)	—			(3,645		)	—		—			(13,341		)	(9,717		)	—			(3,645		)	—			—			(13,362		)
Proceeds from distributions received from portfolio investments	—			—			—			—		(3,290		)	(3,290		)	—			—			—			—			(4,614		)	(4,614		)
Conversion from debt investment to equity investment (Note 4)	(703		)	—			—			703		—			—			(703		)	—			—			703			—			—
Transfers in to Level 3	2,915			—			—			—		—			2,915
Transfers out of Level 3																		(599		)	—			—			—			—			(599		)

Level 3 assets, June 30, 2020	$	306,251		$	35,755		$	11,757		$	32,561	$	30,030		$	416,354
Level 3 assets, September 30, 2020																		$	313,413		$	31,564		$	11,875		$	43,398		$	32,531		$	432,781

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


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

Net realized gain (loss) on investments	6			—		(900		)	—		—			(894		)	186			—			(900		)	—		—			(714		)
Net unrealized appreciation (depreciation) on investments	(3,570		)	212		(512		)	2,334		210			(1,326		)	(7,551		)	(709		)	1,885			3,025		(1,172		)	(4,522		)
Amortization of Net Loan Fees	590			43		—			—		—			633			724			64			—			—		—			788
Accretion of interest income on structured-finance notes	—			—		—			—		1,096			1,096			—			—			—			—		2,001			2,001
Capitalized PIK interest and dividends	162			180		433			—		—			775			338			274			659			—		—			1,271
Amendment fees																	—			(90		)	—			—		—			(90		)
Purchase and origination of portfolio investments	64,551			—		2,309			1,813		20,921			89,594			90,782			—			2,309			1,813		23,341			118,245
Proceeds from principal payments on portfolio investments	(9,266		)	—		—			—		—			(9,266		)	(30,750		)	—			—			—		—			(30,750		)
Sale and redemption of portfolio investments	(30,316		)	—		—			—		—			(30,316		)	(30,316		)	—			—			—		—			(30,316		)
Proceeds from distributions received from portfolio investments	—			—		—			—		(1,157		)	(1,157		)	—			—			—			—		(1,976		)	(1,976		)
Transfers out of Level 3	(14,219		)	—		—			—		—			(14,219		)	(628		)	—			—			—		—			(628		)

Level 3 assets, June 30, 2019	$	326,955		$	44,975	$	15,943		$	22,774	$	21,070		$	431,717
Level 3 assets, September 30, 2019																	$	341,802		$	44,079		$	18,566		$	23,465	$	22,194		$	450,106

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


	Six Months Ended June 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Senior secured debt investments	$	(22,112	)	$	(3,792	)	$	(15,145	)	$	(7,993	)
Subordinated debt investments	(7,590		)	212			(11,899		)	(709		)
Preferred equity	(2,666		)	(1,323		)	(2,801		)	1,074
Common equity, warrants and other	5,986			2,334			18,310			3,025
Structured Finance Notes	(3,707		)	210			(2,212		)	(1,172		)
Net unrealized depreciation on investments held	$	(30,089	)	$	(2,359	)	$	(13,747	)	$	(5,775	)

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Other Financial Assets and Liabilities

~~GAAP requires~~The Company provides disclosure of the fair value of financial instruments for which it is practical to estimate such value. 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 September 30, 2020 and December 31, 2019:



	As of September 30, 2020				As of December 31, 2019
Description	Carrying Value		Fair Value		Carrying Value		Fair Value
PWB Credit Facility	$	—	$	—	$	—	$	—
BNP Facility	24,650		24,650		56,450		56,450
Unsecured Notes Due September 2023	24,035		24,500		—		—
Unsecured Notes Due April 2025	48,826		46,260		48,634		50,600
Unsecured Notes Due October 2025	47,277		45,749		47,093		49,282
Unsecured Notes Due October 2026	52,544		48,262		52,325		54,282
SBA-guaranteed debentures	127,355		142,003		147,976		155,562
Total debt, at fair value	$	324,687	$	331,424	$	352,478	$	366,176

The following tables present the fair value measurements of the Company's debt and indicate the fair value hierarchy of the significant unobservable inputs utilized by the Company to determine such fair values as of ~~June~~September 30, 2020 and December 31, 2019:


	June 30, 2020								September 30, 2020
Description	Level 1		Level 2		Level 3⁽¹⁾		Total		Level 1		Level 2		Level 3⁽¹⁾		Total
PWB Credit Facility	$	—	$	—	$	21,100	$	21,100	$	—	$	—	$	—	$	—
BNP Facility	—		—		30,650		30,650		—		—		24,650		24,650
Unsecured Notes Due September 2023									24,500		—		—		24,500
Unsecured Notes Due April 2025	45,800		—		—		45,800		46,260		—		—		46,260
Unsecured Notes Due October 2025	45,614		—		—		45,614		45,749		—		—		45,749
Unsecured Notes Due October 2026	47,806		—		—		47,806		48,262		—		—		48,262
SBA-guaranteed debentures	—		—		141,135		141,135		—		—		142,003		142,003
Total debt, at fair value	$	139,220	$	—	$	192,885	$	332,105	$	164,771	$	—	$	166,653	$	331,424



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

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

~~The following are the carrying values and fair values of the Company’s debt as of June 30, 2020 and December 31, 2019:~~

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following table sets forth the carrying values and fair values of the Company’s debt as of September 30, 2020 and December 31, 2019:



	As of September 30, 2020				As of December 31, 2019
Description	Carrying Value		Fair Value		Carrying Value		Fair Value
PWB Credit Facility	$	—	$	—	$	—	$	—
BNP Facility	24,650		24,650		56,450		56,450
Unsecured Notes Due September 2023	24,035		24,500		—		—
Unsecured Notes Due April 2025	48,826		46,260		48,634		50,600
Unsecured Notes Due October 2025	47,277		45,749		47,093		49,282
Unsecured Notes Due October 2026	52,544		48,262		52,325		54,282
SBA-guaranteed debentures	127,355		142,003		147,976		155,562
Total debt, at fair value	$	324,687	$	331,424	$	352,478	$	366,176

Note 6. Commitments and Contingencies

The Company has the following unfunded commitments to portfolio companies as of ~~June~~September 30, 2020:


Name of Portfolio Company	Investment Type	Commitment		Investment Type	Commitment
A&A Transfer, LLC				Senior Secured Loan (Revolver)	$	2,136
Carolina Lubes, Inc.	Senior Secured Loan (Revolver)	$	2,920	Senior Secured Loan (Revolver)	2,920
Inergex Holdings, LLC	Senior Secured Loan (Revolver)	1,406		Senior Secured Loan (Revolver)	2,344
		$	4,326		$	7,400

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 ~~June~~September 30, 2020.

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

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide for general 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 SBA debentures issued by SBIC I LP and other SBA regulations generally restrict assets held by SBIC I LP. On a stand-alone basis, SBIC I LP held ~~$236,907~~$239,575 and $249,576 in assets at ~~June~~September 30, 2020, and December 31, 2019, respectively, which accounted for approximately 50% and 49% of the Company’s total consolidated assets, respectively. The average dollar amount of borrowings outstanding during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, were ~~$139,081~~$136,130 and $149,880, respectively. These assets ~~can not~~cannot be pledged under any debt obligation of the Company.

~~On March 1,~~During the nine months ended September 30, 2020, SBIC I LP prepaid ~~$16,110~~$21,110 of SBA debentures that were contractually due September 1, 2023, March 1, 2024 and September 1, 2024. The Company recognized ~~a loss~~losses on extinguishment of debt of ~~$149~~$236 related to the charge-off of deferred borrowing costs on the prepaid debentures. As of ~~June~~September 30, 2020, SBIC I LP had outstanding SBA debentures of ~~$133,770.~~$128,770.

BNP Facility: OFSCC-FS has up to $150,000 of available credit, subject to borrowing base requirements, under the BNP Facility maturing on June 20, 2024, of which ~~$30,650~~$24,650 was drawn as of ~~June~~September 30, 2020. The effective interest rate on the BNP Facility was ~~5.55%~~6.66% at ~~June~~September 30, 2020. The average dollar amount of borrowings outstanding during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, were ~~$49,688~~$43,675 and ~~$-0-,~~$9,879, respectively. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS, which were $58,057, or 12%, of the Company's total consolidated assets at June 30, 2020. The unused commitment under the BNP Facility was $119,350 as of June 30, 2020.

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

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

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

substantially all of the assets held by OFSCC-FS, which were $64,785, or 13%, of the Company's total consolidated assets at September 30, 2020. The unused commitment under the BNP Facility was $125,350 as of September 30, 2020.

PWB Credit Facility:The Company has up to $50,000 of available credit, subject to borrowing base requirements, under its PWB Credit Facility maturing February 28, 2021, of which $-0- was drawn as of September 30, 2020. The average dollar amount of borrowings outstanding during the nine months ended September 30, 2020 and 2019, were $20,237 and $35,158, respectively. The effective interest rate on the PWB Credit Facility was 5.62% at September 30, 2020. As of September 30, 2020 the unused commitment under the PWB Credit Facility was $50,000.

In June and July 2020, the BLA was amended to, among other things: modify certain financial performance covenants and reduce the total commitment from $100,000 to $50,000. The Company recognized a loss on extinguishment of debt of $100 related to the charge-off of deferred borrowing costs on the commitment reduction.

On October 7, 2020, the BLA was amended to reduce the total commitment under the PWB Credit Facility from $50,000 to $20,000. In October 2020, the Company expects to recognize a loss on extinguishment of debt of $42 related to the charge-off of deferred borrowing costs on this commitment reduction.

Unsecured Notes: As of ~~June~~September 30, 2020, the Company had Unsecured Notes with an aggregate outstanding principal of ~~$152,850.~~$177,850. The average dollar amount of borrowings under the Unsecured Notes outstanding during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, were ~~$152,850~~$154,036 and $98,525, respectively. The weighted average effective interest rate on the Unsecured Notes was ~~6.78%~~6.89% at ~~June~~September 30, 2020.

In September 2020, the Company closed the public offering of the Unsecured Notes Due September 2023. The total net proceeds to the Company from the Unsecured Notes Due September 2023, after deducting underwriting discounts of $750 and estimated offering expenses of $226, were approximately $24,024. The Unsecured Notes Due September 2023 will mature on September 30, 2023 and bear an effective interest rate, including amortization of deferred debt issuance costs, of 7.54%. The Unsecured Notes Due September 2023 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after September 30, 2021 at the redemption price of 100% of the aggregate principal amount thereof plus accrued and unpaid interest. The indenture governing the Unsecured Notes Due September 2023 contains covenants substantially identical to the other Unsecured Notes.

The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all current and future unsecured indebtedness of the Company. Because the Unsecured Notes are not secured by any of the Company's assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which 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~~nine months ended ~~June~~September 30, 2020 and 2019 on the Company's outstanding borrowings is presented below:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2020			2019			2020			2019
SBA Debentures	$	1,114		$	1,280		$	2,338		$	2,548		$	1,068		$	1,295		$	3,406		$	3,843
PWB Credit Facility	702			633			991			1,094			285			802			1,276			1,896
Unsecured Notes Due April 2025	860			860			1,721			1,720
Unsecured Notes Due October 2025	850			866			1,700			1,732
Unsecured Notes Due October 2026	880			—			1,784			—
Unsecured Notes													2,662			1,726			7,867			5,178
BNP Facility	525			6			1,319			6			433			641			1,752			647
Total interest expense	$	4,931		$	3,645		$	9,853		$	7,100		$	4,448		$	4,464		$	14,301		$	11,564

Average dollar borrowings	$	359,640		$	282,608		$	364,867		$	277,337		$	332,733		$	325,127		$	354,078		$	293,442
Weighted average interest rate	5.26		%	4.98		%	5.23		%	4.96		%	5.36		%	4.93		%	5.36		%	4.92		%

Interest expense includes the stated interest on the outstanding balance, commitment fees on undrawn amounts, and the amortization of deferred financing costs.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

The following table shows the scheduled maturities of the principal balances of the Company's outstanding borrowings as of September 30, 2020:



	Payments due by period
	Total		Less than year		1-3 years (1)		4-5 years (1)		After 5 years (1)
PWB Credit Facility	$	—	$	—	$	—	$	—	$	—
Unsecured Notes	177,850		—		25,000		50,000		102,850
SBA Debentures	128,770		—		14,000		114,770		—
BNP Facility	24,650		—		—		24,650		—
Total	$	331,270	$	—	$	39,000	$	189,420	$	102,850


(1)	The SBA debentures are scheduled to mature between September 2022 and September 2025. The Unsecured Notes are scheduled to mature between October 2023 and October 2026.

Note 8. Federal Income Tax

The Company has elected to be taxed as a RIC under Subchapter M of the Code. The determination of the tax attributes of the Company's distributions is made annually as of the end of its fiscal year based on its ICTI and distributions for the full year.

The Company records reclassifications to its capital accounts for permanent and temporary differences between the GAAP and tax treatment of components of income and the bases of assets and liabilities.

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


	June 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
Tax-basis amortized cost of investments	$	474,836		$	531,781		$	478,907		$	531,781
Tax-basis gross unrealized appreciation on investments	29,961			24,326			41,994			24,326
Tax-basis gross unrealized depreciation on investments	(69,035		)	(39,176		)	(64,573		)	(39,176		)
Tax-basis net unrealized depreciation on investments	(39,074		)	(14,850		)	(22,579		)	(14,850		)
Fair value of investments	$	435,762		$	516,931		$	456,328		$	516,931

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 9. Financial Highlights

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2020			2019			2020			2019
Per share operating performance:
Net asset value per share at beginning of period	$	9.71		$	13.04		$	12.46		$	13.10		$	10.10		$	12.95		$	12.46		$	13.10
Net investment income ⁽⁴⁾	0.19			0.36			0.49			0.73			0.20			0.36			0.69			1.09
Net realized loss on non-control/non-affiliate investments ⁽⁴⁾	(0.08		)	(0.01		)	(0.75		)	(0.07		)	—			—			(0.74		)	(0.06		)
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes ⁽⁴⁾													0.35			(0.49		)	(0.82		)	(0.72		)
Net unrealized appreciation on affiliate investments ⁽⁴⁾													0.75			0.36			0.47			0.40
Net unrealized appreciation (depreciation) on control investment ⁽⁴⁾													0.04			(0.10		)	(0.07		)	(0.05		)
Loss on extinguishment of debt⁽⁴⁾	—			—			(0.01		)	—			(0.01		)	—			(0.03		)	—
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments ⁽⁴⁾	0.52			(0.27		)	(1.17		)	(0.22		)
Net unrealized appreciation (depreciation) on affiliate investments ⁽⁴⁾	(0.07		)	0.12			(0.28		)	0.04
Net unrealized appreciation (depreciation) on control investment ⁽⁴⁾	0.01			0.05			(0.11		)	0.05
Total from investment operations	0.57			0.25			(1.83		)	0.53
Loss on impairment of goodwill ⁽⁴⁾													(0.08		)	—			(0.08		)	—
Total from operations													1.25			0.13			(0.58		)	0.66
Distributions	(0.17		)	(0.34		)	$	(0.51	)	(0.68		)	(0.17		)	(0.34		)	(0.68		)	(1.02		)
Issuance of common stock⁽⁹⁾	(0.01		)	—			$	(0.02	)	—
Issuance of common stock⁽¹⁰⁾													—			—			(0.02		)	—
Net asset value per share at end of period	$	10.10		$	12.95		$	10.10		$	12.95		$	11.18		$	12.74		$	11.18		$	12.74

Per share market value, end of period	$	4.52		$	12.00		$	4.52		$	12.00		$	4.71		$	11.61		$	4.71		$	11.61
Total return based on market value ^(1)(10)	15.2		%	5.0		%	(54.5		)%	19.8		%
Total return based on net asset value ^(2)(10)	7.9		%	2.1		%	(8.9		)%	4.6		%
Total return based on market value ⁽¹⁾⁽⁹⁾													8.0		%	(0.4		)%	(50.9		)%	19.3		%
Total return based on net asset value ⁽²⁾⁽⁹⁾													14.7		%	1.3		%	4.5		%	5.9		%
Shares outstanding at end of period	13,399,694			13,366,461			13,399,694			13,366,461			13,406,402			13,371,451			13,406,402			13,371,451
Weighted average shares outstanding	13,392,608			13,361,193			13,384,808			13,359,338			13,399,767			13,366,515			13,389,830			13,361,757
Ratio/Supplemental Data (in thousands except ratios)
Average net asset value ⁽³⁾	$	132,690		$	173,708		$	144,002		$	174,146		$	142,655		$	171,769		$	145,480		$	173,211
Net asset value at end of period	$	135,397		$	173,132		$	135,397		$	173,132		$	149,912		$	170,406		$	149,912		$	170,406
Net investment income	$	2,607		$	4,860		$	6,579		$	9,688		$	2,712		$	4,853		$	9,291		$	14,541
Ratio of total expenses, net to average net assets ⁽⁵⁾⁽⁷⁾	25.2		%	18.5		%	24.0		%	17.9		%	21.8		%	21.0		%	23.0		%	18.9		%
Ratio of total expenses, and losses on impairment of goodwill and extinguishment of debt to average net assets⁽⁵⁾													22.7		%	—		%	23.9		%	—		%
Ratio of net investment income to average net assets ⁽⁵⁾⁽⁸⁾	7.9		%	11.2		%	9.1		%	11.1		%	7.6		%	11.3		%	8.5		%	11.2		%
Ratio of goodwill impairment loss to average net assets⁽⁹⁾													0.8		%	—		%	0.7		%	—		%
Ratio of loss on extinguishment of debt to average net assets⁽⁹⁾													0.1		%	—		%	0.2		%	—		%
Portfolio turnover ⁽⁶⁾	1.6		%	4.0		%	15.0		%	9.3		%	1.6		%	4.5		%	17.3		%	13.9		%


(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 ~~quarter.~~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.

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


(7)	Ratio of total expenses before incentive fee waiver to average net assets was ~~24.6%~~23.4% for the ~~six~~nine months ended ~~June~~September 30, 2020.


(8)	Ratio of net investment income before incentive fee waiver to average net assets was ~~8.5%~~8.1% for the ~~six~~nine months ended ~~June~~September 30, 2020.


(9)	~~Common stock issued through DRIP.~~Not annualized.


(10)	~~Not annualized.~~Common stock issued through DRIP.

~~OFS Capital Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

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

Note 10. Capital Transactions

Distributions: The Company intends to distribute to stockholders, on a quarterly basis, substantially all of its net investment income. In addition, although the Company intends to distribute at least annually net realized capital gains, net of taxes if any, out of assets legally available for such distribution, the Company may also retain such capital gains for 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 be affected by SBIC I LP's distributions to the Company, which are governed by SBA regulations and currently require the prior approval of the SBA. In addition, distributions from OFSCC-FS to the Company are restricted by the terms and conditions of the BNP Facility. Net assets of SBIC I LP were ~~$103,215,~~$111,773, and consolidated cash at ~~June~~September 30, 2020 includes ~~$22,710~~$5,102 held by SBIC I LP, of which ~~$1,648~~$4,889 was available for distribution to the ~~Company.~~Company with the prior consent of the SBA. Net Assets of OFSCC-FS were ~~$26,293,~~$38,516, and consolidated cash at ~~June~~September 30, 2020 includes ~~$780~~$945 held by OFSCC-FS, of which $-0- was available for distribution to the Company.

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


Date Declared	Record Date	Payment Date	Amount Per Share		Cash Distribution		DRIP Shares Issued		DRIP Shares Value			Record Date	Payment Date	Amount Per Share		Cash Distribution		DRIP Shares Issued		DRIP Shares Value
Six Months Ended June 30, 2019
Nine Months Ended September 30, 2019											Nine Months Ended September 30, 2019
March 5, 2019	March 22, 2019	March 29, 2019	$	0.34	$	4,497	3,797		$	45		March 22, 2019	March 29, 2019	$	0.34	$	4,497	3,797		$	45
April 30, 2019	June 21, 2019	June 28, 2019	0.34		4,479		5,327		64			June 21, 2019	June 28, 2019	0.34		4,479		5,327		64
August 2, 2019												September 23, 2019	September 30, 2019	0.34		4,488		4,990		58
			$	0.68	$	8,976	$	9,124	$	109				$	1.02	$	13,464	$	14,114	$	167
Six Months Ended June 30, 2020
Nine Months Ended September 30, 2020											Nine Months Ended September 30, 2020
March 11, 2020	March 24, 2020	March 31, 2020	$	0.34	$	4,484	15,693		$	64		March 24, 2020	March 31, 2020	$	0.34	$	4,484	15,693		$	64
May 4, 2020	June 23, 2020	June 30, 2020	0.17		2,244		7,165		32			June 23, 2020	June 30, 2020	0.17		2,244		7,165		32
July 28, 2020												September 23, 2020	September 30, 2020	0.17		2,246		6,708		32
			$	0.51	$	6,728	$	22,858	$	96				$	0.68	$	8,974	$	29,566	$	128

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 tax character of distributions is mailed to the Company’s stockholders.

Stock repurchase program:

The Company maintains a Stock Repurchase Program under which the Company may acquire up to $10.0 million of its outstanding common stock. No shares of common stock were repurchased under the Stock Repurchase Program during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

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


		Period Ended June 30, 2020																							Period Ended September 30, 2020
Name of Portfolio Company	Investment Type (1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/(depreciation)			Interest & PIK Interest		Dividends		Fees		Total Income (2)		December 31, 2019, Fair Value		Gross Additions (3)		Gross Reductions (4)			June 30, 2020, Fair Value (5)		Investment Type (1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/(depreciation)			Interest & PIK Interest		Dividends		Fees		Total Income (2)		December 31, 2019, Fair Value		Gross Additions (3)		Gross Reductions (4)			September 30, 2020, Fair Value (5)
Control Investment
MTE Holding Corp.	Subordinated Loan	$	—	$	(248	)	$	592	$	—	$	6	$	598	$	7,464	$	194	$	(248	)	$	7,410	Subordinated Loan	$	—	$	(129	)	$	884	$	—	$	49	$	933	$	7,464	$	291	$	(129	)	$	7,626
	Common Equity	—		(1,253		)	—		—		—		—		1,253		—		(1,253		)	—		Common Equity	—		(795		)	—		—		—		—		1,253		—		(795		)	458
		—		(1,501		)	592		—		6		598		8,717		194		(1,501		)	7,410			—		(924		)	884		—		49		933		8,717		291		(924		)	8,084

Total Control Investment		—		(1,501		)	592		—		6		598		8,717		194		(1,501		)	7,410			—		(924		)	884		—		49		933		8,717		291		(924		)	8,084
Affiliate Investments
3rd Rock Gaming Holdings, LLC	Senior Secured Loan	—		(7,000		)	578		—		—		578		20,099		67		(7,250		)	12,916		Senior Secured Loan	—		(8,252		)	572		—		—		572		20,099		70		(8,505		)	11,664
	Common Equity (6)	—		(1,044		)	—		—		—		—		1,044		—		(1,044		)	—		Common Equity (6)	—		(1,044		)	—		—		—		—		1,044		—		(1,044		)	—
		—		(8,044		)	578		—		—		578		21,143		67		(8,294		)	12,916			—		(9,296		)	572		—		—		572		21,143		70		(9,549		)	11,664

Chemical Resources Holdings, Inc.	Senior Secured Loan	—		(306		)	684		—		—		684		13,746		19		(306		)	13,459		Senior Secured Loan	—		83			1,024		—		—		1,024		13,746		111					13,857
	Common Equity (6)	—		(551		)	—		—		—		—		2,662		—		(551		)	2,111		Common Equity (6)	—		(187		)	—		—		—		—		2,662		—		(187		)	2,475
		—		(857		)	684		—		—		684		16,408		19		(857		)	15,570			—		(104		)	1,024		—		—		1,024		16,408		111		(187		)	16,332

Contract Datascan Holdings, Inc.	Subordinated Loan	—		(453		)	530		—		—		530		8,000		10		(453		)	7,557		Subordinated Loan	—		(311		)	783		—		—		783		8,000		17		(311		)	7,706
	Preferred Equity (7)	—		(3,348		)	250		—		—		250		5,671		249		(3,348		)	2,572		Preferred Equity (7)	—		(3,397		)	250		—		—		250		5,671		250		(3,398		)	2,523
	Common Equity (6)	—		(620		)	—		—		—		—		671		—		(620		)	51		Common Equity (6)	—		(635		)	—		—		—		—		671		—		(635		)	36
		—		(4,421		)	780		—		—		780		14,342		259		(4,421		)	10,180			—		(4,343		)	1,033		—		—		1,033		14,342		267		(4,344		)	10,265

DRS Imaging Services, LLC	Senior Secured Loan	—		(167		)	603		—		—		603		10,569		11		(244		)	10,336		Senior Secured Loan	—		157			884		—		—		884		10,569		172		(115		)	10,626
	Common Equity (6)	—		25			—		—		—		—		1,331		25		—			1,356		Common Equity (6)	—		363			—		—		—		—		1,331		363					1,694
		—		(142		)	603		—		—		603		11,900		36		(244		)	11,692			—		520			884		—		—		884		11,900		535		(115		)	12,320

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

NeoSystems Corp.	Preferred Equity (7)	—		(87		)	87		—		—		87		2,250		87		(87		)	2,250		Preferred Equity (7)	—		(133		)	133		—		—		133		2,250		133		(133		)	2,250

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


		Period Ended June 30, 2020																							Period Ended September 30, 2020
Name of Portfolio Company	Investment Type (1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/(depreciation)			Interest & PIK Interest		Dividends		Fees		Total Income (2)		December 31, 2019, Fair Value		Gross Additions (3)		Gross Reductions (4)			June 30, 2020, Fair Value (5)		Investment Type (1)	Net Realized Gain (Loss)		Net change in unrealized appreciation/(depreciation)			Interest & PIK Interest		Dividends		Fees		Total Income (2)		December 31, 2019, Fair Value		Gross Additions (3)		Gross Reductions (4)			September 30, 2020, Fair Value (5)
Pfanstiehl Holdings, Inc	Subordinated Loan	$	—	$	19		$	177	$	—	$	—	$	177	$	3,788	$	21	$	(21	)	$	3,788	Subordinated Loan	$	—	$	19		$	168	$	—	$	—	$	168	$	3,788	$	21	$	(21	)	$	3,788
	Common Equity	—		12,072			—		100		—		100		11,979		12,072		—			24,051		Common Equity	—		19,953			100		100		—		200		11,979		19,953		—			31,932
		—		12,091			177		100		—		277		15,767		12,093		(21		)	27,839			—		19,972			268		100		—		368		15,767		19,974		(21		)	35,720

Professional Pipe Holdings, LLC	Senior Secured Loan	—		(584		)	431						431		7,170		68		(584		)	6,654		Senior Secured Loan	—		(424		)	643						643		7,170		103		(424		)	6,849
	Common Equity (6)	—		(1,263		)	—		—		—		—		2,413		—		(1,263		)	1,150		Common Equity (6)	—		(1,402		)	—		—		—		—		2,413		—		(1,402		)	1,011
		—		(1,847		)	431		—		—		431		9,583		68		(1,847		)	7,804			—		(1,826		)	643		—		—		643		9,583		103		(1,826		)	7,860

TalentSmart Holdings, LLC	Senior Secured Loan	—		(1,289		)	445		—		—		445		9,833		19		(1,414		)	8,438		Senior Secured Loan	—		227			668		—		—		668		9,833		256		(188		)	9,901
	Senior Secured Loan (Revolver)	—		(66		)	21		—		—		21		242		251		(66		)	427		Senior Secured Loan (Revolver)	—		11			33		—		—		33		242		262					504
	Common Equity (6)	—		(755		)	—		—		—		—		1,500		95		(755		)	840		Common Equity (6)	—		(695		)	—		—		—		—		1,500		95		(695		)	900
		—		(2,110		)	466		—		—		466		11,575		365		(2,235		)	9,705			—		(457		)	701		—		—		701		11,575		613		(883		)	11,305

TRS Services, Inc.	Senior Term Loan	—		(8		)	81		—		7		88		14,623		9		(14,632		)	—		Senior Term Loan	—		(8		)	81		—		7		88		14,623		9		(14,632		)	—
	Preferred Equity (Class AA units) (7)	—		(2		)	6		—		—		6		547		5		(552		)	—		Preferred Equity (Class AA units) (7)	—		(2		)	6		—		—		6		547		5		(552		)	—
	Preferred Equity (Class A units) (6)	—		706			—		—		—		—		3,095		706		(3,095		)	706		Preferred Equity (Class A units) (6)	—		811			—		—		—		—		3,095		811		(3,095		)	811
	Common Equity (6)	—		—			—		—		—		—		—		—		—			—		Common Equity (6)	—		—			—		—		—		—		—							—
		—		696			87		—		7		94		18,265		720		(18,279		)	706			—		801			87		—		7		94		18,265		825		(18,279		)	811

TTG Healthcare, LLC	Senior Secured Loan	—		108			653		—		6		659		11,767		130		—			11,897		Senior Secured Loan	—		397			981		—		9		990		11,767		427		—			12,194
	Preferred Equity (6)	—		1,064			—		—		—		—		2,424		1,064		—			3,488		Preferred Equity (6)	—		1,040			—		—		—		—		2,424		1,040		—			3,464
		—		1,172			653		—		6		659		14,191		1,194		—			15,385			—		1,437			981		—		9		990		14,191		1,467		—			15,658

Total Affiliate Investments		—		(3,804		)	4,546		100		13		4,659		135,679		14,908		(36,540		)	114,047			—		6,316			6,326		100		16		6,442		135,679		24,098		(35,592		)	124,185
Total Control and Affiliate Investments		$	—	$	(5,305	)	$	5,138	$	100	$	19	$	5,257	$	144,396	$	15,102	$	(38,041	)	$	121,457		$	—	$	5,392		$	7,210	$	100	$	65	$	7,375	$	144,396	$	24,389	$	(36,516	)	$	132,269


(1)	Principal balance, interest rate and maturity of debt investments, and ownership detail for equity investments are ~~shown~~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 nine months ended September 30, 2020, during which an investment was included in the Control Investment or Affiliate Investment categories.


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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)


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


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


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


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


(6)	Non-income producing.


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

OFS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

Note 12. Subsequent Events Not Disclosed Elsewhere

On ~~July 28,~~November 3, 2020, the Board declared a distribution of ~~$0.17~~$0.18 per share for the ~~third~~fourth quarter of 2020, payable on ~~September 30,~~December 31, 2020 to stockholders of record as of ~~September 23,~~December 24, 2020.

On October 7, 2020, the Company executed an amendment to its BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $50,000 to $20,000. In October 2020, the Company expects to recognize a loss on extinguishment of debt of $42 related to the charge-off of deferred borrowing costs on this commitment reduction.

COVID-19

The Company evaluated events subsequent to ~~June~~September 30, 2020 through ~~July 30,~~November 5, 2020. On March 11, 2020, the World Health Organization declared the novel coronavirus as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to the COVID-19 pandemic. The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The ~~global impact~~COVID-19 pandemic and the preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions, and overall economic and financial market instability both globally and in the United States. Such effects will likely continue for the duration of the ~~outbreak has been rapidly evolving~~pandemic, which is uncertain, and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions have created, and continue to create, disruption in global supply chains and adversely impact a number of industries.for some period thereafter. The outbreak could have a continued adverse impact on economic and market conditions on a global scale. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic. Nevertheless, the ongoing COVID-19 pandemic presents material uncertainty and risks with respect to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Further, the operational and financial performance of the portfolio companies in which the Company makes investments have been, and may continue to be, significantly impacted by the COVID-19 pandemic, which in turn has, and may continue to have, an impact on the valuation of the Company’s investments.

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

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

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. 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, 2019.

Overview

Key performance metrics are presented below:

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



	September 30, 2020		December 31, 2019
Net asset value per common share	$	11.18	$	12.46


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020			2019		2020		2019		2020			2019
Net investment income per common share	$	0.19	$	0.36	$	0.49		$	0.73	$	0.20	$	0.36	$	0.69		$	1.09
Net increase (decrease) in net assets resulting from operations per common share	0.57		0.25		(1.83		)	0.53		1.25		0.13		(0.58		)	0.66
Distributions paid per common share	0.17		0.34		0.51			0.68		0.17		0.34		0.68			1.02

Net investment income per share declined ~~$0.17~~$0.16 from the corresponding quarter in the prior year primarily due to an ~~approximately~~approximate $0.24 decline in net interest margin—total interest income less interest expense—per share. Weighted average yield on debt and Structured Finance Notes for the three months ended ~~June~~September 30, 2020, declined to ~~9.01%~~8.99% from ~~11.10%~~10.51% in the ~~second~~ quarter ~~ending June~~ended September 30, 2019, due to the Company's continuing shift to lower-yielding, first lien senior secured loans of larger borrowers, ~~and~~as well as the placement of our loans to Online Tech Stores, LLC and 3rd Rock Gaming Holding, LLC, with an aggregate cost of $37.1 million, on non-accrual status during the six months ended June 30, 2020. These factors adversely impacted the weighted-average yield by 1.1% and net interest margin by $0.08 per share compared to the prior year quarter. Our weighted-average interest costs increased to 5.26% from 4.98%, principally due to borrowings under our Unsecured Notes Due October 2026 and the BNP Facility, as well as an increase in uninvested cash, which reduced net interest margin by $0.10 per share. As of June 30, 2020, approximately 85% of our debt is fixed rate.status. The decline in net interest margin was partially offset by declines in management and incentive fees of $0.10 per share as a result of the ~~decline~~declines in our net interest margin and the fair value of our portfolio. For the three months ended September 30, 2020, our weighted-average interest costs increased to 5.36% from 4.93% in the quarter ended September 30, 2019, principally due to borrowings under our Unsecured Notes Due October 2026 and the BNP Facility, as well as ~~the unrealized losses on~~an increase in uninvested cash. As of September 30, 2020, approximately 93% of our ~~portfolio.~~debt is fixed rate.

Our portfolio experienced net gains of ~~$5.1~~$15.3 million, or ~~$0.38~~$1.14 per share, during the three months ended ~~June~~September 30, 2020, principally on the strength of improvement in the fair values of ~~$9.0~~$10.3 million, or 3.2%, on our directly originated debt and equity investments. We also had net appreciation of $5.0 million in our Structured Finance Note ~~investments~~ and ~~our~~broadly syndicated loan investments, ~~acquired~~due in part, to the ~~broadly syndicated market, due to increased~~continued increase in liquidity in the broadly syndicated market. ~~Our directly originated loans experienced net depreciation of $1.9 million, or 0.6%, such loans were generally mixed in their results.~~ The net appreciation in our directly originated loans included a decrease in the fair value of our debt investment in 3rd Rock Gaming Holding, LLC of $4.2 million and well as six other directly originated loans which declined an aggregate of $3.0 million. The net appreciation in our directly originated loansinvestments was primarily due to our investment in the common equity of Pfanstiehl Holdings, Inc., a pharmaceutical ingredients manufacturer, which appreciated ~~$6.9~~$7.9 million in the quarter as a result of performance improvements and expansion of the valuation multiple. ~~In addition to Pfansteihl~~Excluding Pfanstiehl Holdings, Inc., our equity appreciation rights in Southern Technical Institute, LLC increased $1.0 million in value as the company emerged from operational and regulatory issues it experienced in the prior year. Management believes, with continued operational improvements, our investment in the subordinated debt of Southern Technical Institute, LLC can be restored to accrual status in the near term. Excluding Pfansteihl Holdings, Inc. and Southern Technical Institute, LLC, the remainder of or equity investments experienced net ~~depreciation~~appreciation of ~~$2.6~~$3.3 million, led by ~~Contact Datascan~~Southern Technical Institute, LLC, which appreciated $2.4 million. These investment valuation increases were partially offset by a decrease in the fair value of our subordinated debt investment in Eblens Holdings, Inc.~~, which declined $1.5 million on weakening performance principally caused by~~ of $3.4 million. Despite the ~~impact of~~continued recovery from the ~~COVID-19 pandemic on the retail sector, a market they serve. Despite this second~~first quarter, ~~recovery,~~ our portfolio ~~is down $30.1~~declined $13.7 million, or ~~$2.2~~$1.0 per share, for the ~~six~~nine months ended ~~June~~September 30, ~~2020, or $43.1 million in the aggregate.~~2020.

Since OFS Advisor implemented its business continuity plan in mid-March 2020, the entire team has effectively transitioned to remote work and we are currently capable of maintaining our normal functionality to complete our operational requirements.

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

company's ~~second~~third quarter 2020 interest ~~or amortization payments~~payment until the ~~third~~fourth quarter of ~~2020.~~2020, and amended three debt investments that resulted in increased all-in interest rates. However, ~~96%~~98% of our performing loans as of ~~March 31,~~June 30, 2020, satisfied their ~~second~~third quarter 2020 interest payments. As of ~~June~~September 30, 2020, we have unfunded commitments of ~~$4.3~~$7.4 million. We ~~continue to~~ believe new loan activity in the market in which we operate ~~has slowed~~is below historical levels and we ~~continue to observe~~observed a decrease in origination and underwriting ~~activity.~~activity during the second and third quarters; however, the number of deals currently being reviewed and

evaluated has increased to its highest level since the beginning of the COVID-19 pandemic. During the three months ended ~~June~~September 30, 2020, we purchased ~~five~~three broadly syndicated loans and a Structured Finance Note for an aggregate cost of ~~$2.4~~$2.3 million ~~however, there have been no~~and completed a $7.6 million add-on in a Portfolio Company ~~Investments directly originated since March 16, 2020.~~Investment.

At ~~June~~September 30, 2020, our asset coverage ratio of 174% was ~~166%~~within minimum asset coverage requirements under the 1940 Act, and we remained in compliance with all applicable financial thresholds under our outstanding ~~debt and our minimum asset coverage requirements under the 1940 Act.~~debt. On June 26, 2020, we amended the PWB Credit Facility to provide greater flexibility with ~~current~~ financial covenants and thresholds. On October 7, 2020, we executed an amendment to our BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $50.0 million to $20.0 million. As of ~~June~~September 30, 2020, we had an unused commitment of ~~$78.9~~$50.0 million under our PWB Credit Facility, as well as an unused commitment of ~~$119.4~~$125.4 million under our BNP Facility, both subject to a borrowing base and other covenants. Based on fair values and equity capital at ~~June~~September 30, 2020, we could access these available lines of credit for ~~$68~~$100 million and remain in compliance with our asset coverage requirements. We continue to believe that we have sufficient levels of liquidity to support our existing portfolio companies and will continue to selectively deploy capital in new investment opportunities in this challenging environment. ~~On July 29, 2020, we executed an amendment to our BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100 million to $50 million.~~ As of ~~July 29,~~November 5, 2020, after giving effect to the reduction, our PWB Credit Facility had an unused commitment of ~~$36.2~~$20.0 million, subject to a borrowing base and other covenants.

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 operations of our portfolio companies, we expect that certain portfolio companies will experience financial distress and possibly default on their financial obligations to us and their other capital providers. We also expect that some of our portfolio companies may significantly curtail business operations, furlough or ~~lay off~~lay-off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis. These developments would likely result in a decrease in the value of our investment in any such portfolio company.

We are also subject to financial risks, including changes in market interest rates. As of ~~June~~September 30, 2020, approximately ~~$341~~$346 million (principal amount) of our debt ~~portfolio~~ investments bore interest at variable rates, which are generally ~~are~~ LIBOR-based, ~~(or based on an equivalent applicable currency rate),~~ and many of which are subject to ~~certain~~reference-rate floors. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has ~~decreased.~~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 ~~any~~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 floating interest rate liabilities ~~tied~~indexed to LIBOR. As of ~~June~~September 30, 2020, the majority of our variable rate debt investments are subject to the base rate floor, ~~therefore,~~ partially ~~reducing~~mitigating the impact ~~from~~of the recent decrease in LIBOR ~~over the past three months~~ on our gross investment income.

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

Critical Accounting Policies and Significant Estimates

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. For descriptions of our revenue recognition and fair value policies, see "Item 8. Financial Statements - Notes to Financial Statements - Note 2" and "Management's Discussion and Analysis - Critical Accounting Policies and Significant Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2019.

Fair value estimates. Our approach to fair value estimates was significantly adjusted in response to the economic uncertainty associated with the spread of the COVID-19 pandemic. Our use of NBIP includes an assessment of whether a sufficient number of market quotations are available or whether a sufficient number of indicative prices from pricing services

or brokers or dealers have been received, and whether the depth of the markets from which those quotes were received is sufficient to transact at those prices in amounts approximating our positions in such assets. Moreover, these assessments are generally based on a 90-day moving average of our depth and liquidity metrics. The 90-day moving average generally counters the effects of intermittent quoting activity observed ~~and~~at month- and quarter-ends, irregular quoting activity that tends to artificially inflate our market depth and liquidity metrics. We observed significant declines in market liquidity beginning in the middle of March and concluded the 90-day moving average was not representative of current market conditions given the significant market dislocation during this period. Accordingly, we adjusted our depth and liquidity assessment to one based on a 5-day moving average of the metrics in our liquidity assessments as of March 31, 2020, and partially reverted, utilizing a ~~30-day~~60-day moving average, in our ~~June~~September 30, 2020, assessments, as liquidity ~~partially returned~~continued to return to the loan market. One measure of liquidity in the broadly syndicated loan market is the average bid-ask spread on the Refinitiv Market Overall (North America) Loan Index which narrowed to ~~1.98~~1.53 points at ~~June~~September 30, 2020, from 3.41 points at March 31, 2020, but has not yet returned to its long-term historic average of 1.0. These changes to our depth and liquidity metrics, as well as changes in the level of the metrics themselves, led to the transfer of ~~seven~~three instruments with an aggregate amortized cost of ~~$12.7~~$3.6 million from a fair value estimate based on models and Level 23 inputs to estimates based on NBIP inputs to estimates based on models and Level 3 inputs ~~at March 31, 2020, of which~~for the three ~~investments with an aggregate amortized cost of $4.4 million reverted back to fair value estimates based on Level 2 NBIP inputs.~~months ended September 30, 2020.

We also adjusted our Level 3 fair value models throughout this period of heightened economic uncertainty. Our processes included assessments of the impact of the COVID-19 pandemic on the financial condition, results of operations or cash flows of our portfolio companies. Initially, such forward-looking assessments were ~~fragmentary,~~fragmentary; however as such forward-looking estimates became more reliable, such information was directly incorporated into our fair value models. In circumstances in which reliable forward-looking information was unavailable, we considered the market impact on performance-metric multiples and related impact on enterprise values. Additionally, management observed a decrease in the historic correlation between market spreads used in our synthetic debt rating method and those used in our reunderwriting analysis. These market spreads, though highly correlated before the ~~on-set~~on set of COVID-19, relate to different segments of the lending market primarily on the basis of borrower size. The synthetic debt rating method is based on market spreads for larger borrowers with rated debt, while the reunderwring analysis market spreads are used for what are considered middle-market borrowers. Management concluded, given the break-down in this relationship, the relative weight given to each of these methods required adjustment to correspond to the market most closely associated with the subject investment. Accordingly, we decreased the weighting for the synthetic debt rating method and increased the weighting for the reunderwriting analysis in the current period year, from a weighting of 50/50 to a weighting of 10/90, at March 31, 2020, and partially ~~reverting~~reverted to generally 25/75 at June 30, 2020. We ~~believe~~believed the overweighting to the reunderwriting analysis during this period more accurately ~~captures~~captured the market in which these instruments are exchanged. As of September 30, 2020, we have fully reverted to an equal weighting of these models as we have observed a return, in all significant respects, of the historic correlative relationship between these markets.

The following table illustrates the impact of our fair value measures if we selected the low or high end of the range of values for all investments at ~~June~~September 30, 2020 (dollar amounts in thousands):


Investment Type	Fair Value at June 30, 2020		Range of Fair Value				Fair Value at September 30, 2020		Range of Fair Value
Investment Type	Fair Value at June 30, 2020		Low-end		High-end		Fair Value at September 30, 2020		Low-end		High-end
Debt investments:
Senior secured	$	325,659	$	318,380	$	332,791	$	336,960	$	331,668	$	342,307
Subordinated	35,755		34,090		37,073		31,564		29,486		33,725

Structured Finance Notes:
Subordinated notes	29,240		$	27,023	31,455		30,925		$	28,914	32,936
Mezzanine debt	790		770		809		1,606		1,564		1,648

Equity investments:
Preferred equity	11,757		10,544		12,925		11,875		10,555		13,005
Common equity, warrants and other	32,561		28,731		36,179		43,398		39,635		47,330
	$	435,762	$	419,538	$	451,232	$	456,328	$	441,822	$	470,951

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 but including assets purchased with borrowed amounts and including assets owned by any consolidated entity) as well as an incentive fee based on our investment performance. See “Item 1–Financial Statements–Note 3”.

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

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

OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to us and OFS Advisor is free to furnish similar services to other entities, including other funds affiliated with OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to CLO funds and other assets, including 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 corporation that qualifies as a real estate investment trust. Additionally, OFS Advisor serves as sub-adviser to CIM Real Assets & Credit Fund, a newly organized externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.

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

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On ~~October 12, 2016,~~August 4, 2020, we received ~~the Order~~exemptive relief from the SEC to permit us to co-invest in portfolio companies with certain other funds, including other BDCs and registered investment companies, ~~and private funds~~ managed by OFS Advisor ~~or any adviser that controls, is controlled by, or is under common control with, OFS Advisor and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended,~~(the “Affiliated Funds”) in a manner consistent with our investment ~~strategy~~objective, positions, policies, strategies and restrictions as well as ~~applicable law, including the terms~~regulatory requirements and other pertinent factors, subject to compliance with certain conditions ~~of the Order.~~(the “Order”). The Order 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. Pursuant to the Order, we are generally permitted to ~~participate in a co-investment transaction~~co-invest with Affiliated Funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors ~~makes~~make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the ~~transaction,~~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. On July 8, 2020, we received a notice from the SEC related to the new co-investment application that we and certain affiliates filed, which, if granted, would supersede the Order and would permit us greater flexibility to enter into co-investment transactions. The notice period ends on August 3, 2020, and, unless there is a request for a hearing, we expect our new exemptive order to be issued after the notice period ends.

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

Conflicts may arise when we make an investment in conjunction with an investment 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, 2019.

Portfolio Composition and Investment Activity

Portfolio Composition

As of ~~June~~September 30, 2020, the fair value of our debt investment portfolio totaled ~~$361.4~~$368.5 million in 5756 portfolio companies, of which ~~90%~~91% and ~~10%~~9% were senior secured loans and subordinated loans, ~~respectively, and approximately $44.3 million in~~respectively. As of September 30, 2020, we had equity investments atin 23 portfolio companies with a fair value ~~in 22 portfolio companies.~~of approximately $55.3 million. We also have ~~eight~~nine investments in Structured Finance Notes with a fair value of ~~$30.0~~$32.5 million. We had unfunded commitments of ~~$4.3~~$7.4 million to ~~two~~three portfolio companies at ~~June~~September 30, 2020. Set forth in the tables and charts below is selected information with respect to our portfolio as of ~~June~~September 30, 2020 and December 31, 2019.

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

June 30, 2020 December 31, 2019
Amortized Cost Fair Value Amortized Cost Fair Value
Senior secured debt investments ⁽¹⁾
$ 352,264

$ 325,659
$ 421,970
$ 408,724
Subordinated debt investments 56,985

35,755
56,731
43,091
Preferred equity 18,621

11,757
21,925
17,729
Common equity, warrants and other 15,717

32,561
14,919
25,777
Total Portfolio Company Investments $ 443,587
$ 405,732
$ 515,545
$ 495,321
Total number of portfolio companies 65
65
85
85

~~(1)~~

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

Approximately 80% 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 structure may provide greater downside protection against the impact of the COVID-19 pandemic.

As of June 30, 2020, our Portfolio Company Investment's three largest industries by fair value, were (1) Manufacturing (19.8%), (2) Wholesale Trade (14.7%), and (3) Health Care and Social Assistance (14.1%, totaling approximately 48.5% of the investment portfolio. We have limited exposure to the Retail Trade industry (5.9%) which has been significantly impacted by the COVID-19 pandemic.~~For a full summary of our investment portfolio by industry, see “Item 1–Financial Statements–Note 4."~~

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


	June 30, 2020				December 31, 2019				September 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
OFS Capital Corporation (Parent)	$	182,090	$	159,117	$	181,980	$	169,230	$	175,926	$	152,578	$	181,980	$	169,230
SBIC LP	227,842		211,941		256,858		246,371
SBIC I LP									235,639		232,218		256,858		246,371
OFSCC-FS	57,439		55,038		88,458		88,936		61,525		61,090		88,458		88,936
OFSCC-MB	11,470		9,666		11,375		12,394		10,970		10,442		11,375		12,394
Total investments	$	478,841	$	435,762	$	538,671	$	516,931	$	484,060	$	456,328	$	538,671	$	516,931

Portfolio Yields

The ~~following table presents our debt investment portfolio by investment size as of June~~weighted average yield on total investments¹ was 8.39% and 9.59% at September 30, 2020 and December 31, 2019, ~~(dollar amounts in thousands):~~

Amortized Cost Fair Value
June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019
Up to $4,000 $ 35,605
8.7 % $ 77,809
16.3 % $ 35,042
9.7 % $ 75,033
16.6 %
$4,001 to $7,000 60,878
14.9
71,558
14.9
57,448
15.9
68,806
15.2
$7,001 to $10,000 75,922
18.6
95,567
20.0
93,009
25.7
77,978
17.3
$10,001 to $13,000 77,755
19.0
54,273
11.3
59,228
16.4
53,903
11.9
Greater than $13,000 159,089
38.8
179,494
37.5
116,687
32.3
176,095
39.0
Total $ 409,249
100.0 % $ 478,701
100.0 % $ 361,414
100.0 % $ 451,815
100.0 %

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


	June 30, 2020								December 31, 2019								September 30, 2020								December 31, 2019
	Senior Secured		Subordinated		Structured Finance				Senior Secured		Subordinated		Structured Finance
Weighted Ave. Yield ⁽¹⁾	Debt				Notes		Total		Debt				Notes		Total
Yield Range																	Senior Secured		Subordinated		Structured Finance				Senior Secured		Subordinated		Structured Finance
Yield Range																	Debt				Notes		Total		Debt				Notes		Total
Less than 8%	18.6	%	—	%	—	%	15.6	%	20.1	%	—	%	—	%	17.3	%	15.0	%	—	%	—	%	12.6	%	20.1	%	—	%	—	%	17.3	%
8% - 10%	53.8		—		—		45.2		21.5		—		—		18.5		62.2		—		4.3		52.5		21.5		—		—		18.5
10% - 12%	24.8		13.3		—		21.8		48.8		8.6		—		42.7		20.2		13.3		—		17.8		48.8		8.6		—		42.7
12% - 14%	1.3		59.8		38.8		8.8		8.4		38.3		25.1		12.0		1.2		59.6		19.8		7.1		8.4		38.3		25.1		12.0
Greater than 14%	1.5		26.9		61.2		8.6		1.2		53.1		74.9		9.5		1.4		27.1		75.9		10.0		1.2		53.1		74.9		9.5
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Weighted average yield - performing debt and Structured Finance Note investments ⁽¹⁾⁽²⁾	9.15	%	12.98	%	17.12	%	10.14	%	9.80	%	13.52	%	15.13	%	10.40	%	9.05	%	12.97	%	17.62	%	10.10	%	9.80	%	13.52	%	15.13	%	10.40	%
Weighted average yield - total debt and Structured Finance Note investments ⁽²⁾⁽³⁾	8.60	%	6.48	%	17.12	%	9.01	%	9.57	%	10.57	%	15.13	%	9.94	%	8.51	%	6.49	%	17.62	%	8.99	%	9.57	%	10.57	%	15.13	%	9.94	%

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

~~(2)~~(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 and 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 10.10% at September 30, 2020 from 10.40% at December 31, 2019, primarily due to the recent decrease in LIBOR, offset by the 11.4% weighted average yield on new debt investments and Structured Finance Notes. The weighted average yield on total debt, including Structured Finance Notes, decreased to 8.99% at September 30, 2020 from 9.94% at December 31, 2019, primarily due to the change to non-accrual status of our investments ~~was 8.52%~~in Online Tech Stores, LLC and ~~9.59% at June~~3rd Rock Gaming Holding, LLC.

As of September 30, 2020, and December 31, 2019, ~~respectively. Weighted average yield on total investments is computed as (a) the sum~~floating rate loans at fair value were 88% and 93% 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~~portfolio, excluding Structured Finance Notes, ~~divided by (b) amortized cost~~respectively, and fixed rate loans at fair value were 12% and 7% of ~~our total investment~~this portfolio, ~~including assets in non-accrual status as of the balance sheet date.~~ respectively.

The weighted average yield of our investments is not the same as a return on investment for our stockholders, but rather the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yield will remain at its current level.

Portfolio Company Investments

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

AsPortfolio Company Investments as of ~~June~~September 30, 2020 and December 31, 2019 ~~floating rate loans~~(dollar amounts in thousands):



	September 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Senior secured debt investments ⁽¹⁾	$	356,599	$	336,960	$	421,970	$	408,724
Subordinated debt investments	57,103		31,564		56,731		43,091
Preferred equity	18,878		11,875		21,925		17,729
Common equity, warrants and other	15,220		43,398		14,919		25,777
Total Portfolio Company Investments	$	447,800	$	423,797	$	515,545	$	495,321
Total number of portfolio companies	65		65		85		85

(1)

Includes debt investments in which we have entered into contractual arrangements with co‑lenders whereby, subject to certain conditions, we have agreed to receive our principal payments after the repayment of certain co‑lenders pursuant to a payment waterfall. The aggregate amortized cost and fair value of these investments was $82,880 and $83,413, respectively, at September 30, 2020, and $66,300 and $65,337, respectively, at December 31, 2019.

Approximately 80% of our Portfolio Company Investments at fair value ~~were 87% and 93%~~are senior securities of the borrower, rather than in the subordinated securities, preferred equity or common equity. We believe the seniority of our debt ~~portfolio, excluding Structured Finance Notes, respectively, and fixed rate loans at~~investments in the borrowers' capital structures may provide greater downside protection against the impact of the COVID-19 pandemic.

As of September 30, 2020, the three largest industries of our Portfolio Company Investments by fair value, were ~~13%~~(1) Manufacturing (21.5%), (2) Health Care and 7%Social Assistance (13.8%), and (3) Professional, Scientific, and Technical Services (13.7%), totaling approximately 49.1% of ~~this~~the investment portfolio. We have limited exposure to the Retail Trade industry (4.9%), which has been significantly impacted by the COVID-19 pandemic.For a full summary of our investment portfolio ~~respectively.~~by industry, see “Item 1–Financial Statements–Note 4."

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



	Amortized Cost								Fair Value
	September 30, 2020				December 31, 2019				September 30, 2020				December 31, 2019
Up to $4,000	$	35,578	8.6	%	$	77,809	16.3	%	$	34,702	9.4	%	$	75,033	16.6	%
$4,001 to $7,000	60,870		14.7		71,558		14.9		65,175		17.7		68,806		15.2
$7,001 to $10,000	76,075		18.4		95,567		20.0		67,664		18.4		77,978		17.3
$10,001 to $13,000	66,259		16.0		54,273		11.3		55,136		15.0		53,903		11.9
Greater than $13,000	174,920		42.3		179,494		37.5		145,847		39.5		176,095		39.0
Total	$	413,702	100.0	%	$	478,701	100.0	%	$	368,524	100.0	%	$	451,815	100.0	%

Investment Activity

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


	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
	Debt Investments		Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments
Investments in new portfolio companies	$	2.4	$	—	$	42.3	$	—	$	1.5	$	—	$	43.8	$	—
Investments in existing portfolio companies
Follow-on investments	0.5		—		10.1		0.1		7.6		—		17.7		0.1
Restructured investments	—		—		—		0.7		—		0.2		—		0.9
Delayed draw and revolver funding	4.3		—		5.7		—		—		—		5.7		—
Total investments in existing portfolio companies	4.8		—		15.8		0.8		7.6		0.2		23.4		1.0
Total investments in new and existing portfolio companies	$	7.2	$	—	$	58.1	$	0.8	$	9.1	$	0.2	$	67.2	$	1.0
Number of new Portfolio Company Investments	5		—		10		—
Number of existing Portfolio Company Investments	4		1		15		3
Number of new portfolio company investments									3		—		13		—
Number of existing portfolio company investments									1		3		16		6

Proceeds/distributions from principal payments/ equity investments	19.1		—		56.3		—
Proceeds/redemptions from principal payments/ equity investments									3.8		—		60.1		—
Proceeds from investments sold or redeemed	23.4		—		61.9		3.6		1.9		—		63.8		3.6
Total proceeds from principal payments, equity distributions and investments sold	$	42.5	$	—	$	118.2	$	3.6	$	5.7	$	—	$	123.9	$	3.6

Notable investments in new portfolio companies during the ~~six~~nine months ended ~~June~~September 30, 2020, include A&A Transfer, LLC ($23.7 million senior secured loan and $1.6 million revolver) and SourceHOV Tax, Inc. ($12.8 million senior secured loan).

The weighted-average yield of ~~direct~~new debt ~~investments~~ in ~~new portfolio~~Portfolio Company Investment companies during the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~8.5%~~8.4%.

We also invested ~~$12.8~~$13.6 million in ~~Structure~~Structured Finance Notes with a weighted average annual effective yield of ~~19.6%~~18.9% during the ~~six~~nine months ended ~~June~~September 30, 2020.

Non-cash investment activity

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


	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019				Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
	Debt Investments		Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments		Debt Investments		Equity Investments
Investments in new portfolio companies	$	40.8	$	—	$	72.3	$	4.1	$	25.5	$	—	$	97.7	$	4.1
Investments in existing portfolio companies
Follow-on investments	13.0		—		22.8		—		13.2		—		36.1		—
Delayed draw and revolver funding	5.4		—		8.2		—		0.2		—		8.4		—
Total investments in existing portfolio companies	18.4		—		31.0		—		13.4		—		44.5		—
Total investments in new and existing portfolio companies	$	59.2	$	—	$	103.3	$	4.1	$	38.9	$	—	$	142.2	$	4.1
Number of new Portfolio Company Investments	22		—		25		2
Number of existing Portfolio Company Investments	7		—		14		—
Number of new portfolio company investments									4		—		29		2
Number of existing portfolio company investments									10		—		24		—

Proceeds/distributions from principal payments/ equity investments	3.3				9.3		$	—	21.5		—		30.8		—
Proceeds from investments sold or redeemed	14.0				30.3		—		0.1		—		30.4		—
Total proceeds from principal payments, equity distributions and investments sold	$	17.3	$	—	$	39.6	$	—	$	21.6	$	—	$	61.2	$	—

Notable investments in new portfolio companies during the ~~six~~nine months ended ~~June~~September 30, 2019, ~~include~~included Chemical Resources Holdings, Inc. ($13.6 million senior secured loan and $1.8 million in common equity) ~~and~~, TTG Healthcare, LLC ($11.9 million senior secured loan and $2.3 million preferred equity). Notable investments in new portfolio companies during the three months ended September 30, 2019 included Milrose Consultants, LLC ($11.5 million senior secured loan) and SSJA Bariatric ($10.1 million senior secured loan).

The weighted-average yield of direct debt investments in new portfolio companies was 8.5% during the ~~six~~nine months ended ~~June~~September 30, ~~2019 was 10.7%.~~2019.

We also invested ~~$20.9~~$23.4 million in ~~Structure~~Structured Finance Notes with a weighted average annual effective yield of ~~13.89%~~15.94% during the ~~six~~nine months ended ~~June~~September 30, 2019.

Our level of investment activity may vary substantially from period to period depending on various factors, including, but not limited to, the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make. We believe new loan activity in the market in which we operate ~~has slowed~~is below historical levels and we ~~have~~ observed a decrease in origination and underwriting ~~activity. The~~activity during the second and third quarters. However, the number of deals currently being reviewed and evaluated has ~~decreased~~increased since the beginning of the year. During the three months ended June 30, 2020, we purchased five broadly syndicated loans for an aggregate cost of $2.4 million, however, there has been no Portfolio Company Investments directly originated since March 16, 2020.COVID-19 pandemic.

Risk Monitoring

We categorize direct investments in the debt securities of portfolio companies into seven risk categories based on relevant information about the ability of borrowers to service their debt. For additional information regarding our risk categories, see “Item 1. Business–Portfolio Review/Risk Monitoring” in our Annual Report on Form 10-K for the year ended December 31, 2019. The following table shows the classification of our debt securities of portfolio companies, excluding Structured Finance Notes, by credit risk rating as of ~~June~~September 30, 2020, and December 31, 2019 (dollar amounts in thousands):


	Debt Investments, at Fair Value								Debt Investments, at Fair Value
Risk Category	June 30, 2020				December 31, 2019				September 30, 2020				December 31, 2019
1 (Low Risk)	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%
2 (Below Average Risk)	3,788		1.0		17,953		4.0		3,788		1.0		17,953		4.0
3 (Average)	286,444		79.3		387,654		85.8		290,014		78.7		387,654		85.8
4 (Special Mention)	64,058		17.7		45,546		10.1		55,965		15.2		45,546		10.1
5 (Substandard)	7,124		2.0		—		—		18,757		5.1		—		—
6 (Doubtful)	—		—		662		0.1		—		—		662		0.1
7 (Loss)	—		—		—		—		—		—		—		—
	$	361,414	100.0	%	$	451,815	100.0	%	$	368,524	100.0	%	$	451,815	100.0	%

Changes in the 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, realized gains on the sale of investments, as well as changes in risk categories. Debt investments with a cost and fair value of ~~$42,969~~$31,053 and ~~$32,075,~~$25,308, respectively, had risk rating downgrades from risk category 3 to risk category 4 during the ~~six~~nine months ended ~~June~~September 30, 2020. ~~A debt investment~~Debt investments with a cost and fair value of ~~$16,129~~$37,122 and ~~$7,124,~~$18,757, respectively, had a risk rating downgrade from risk category 4 to risk category 5 during the ~~six~~nine months ended ~~June 30, 2020. A debt investment with a cost and fair value of $-0- and $1,153, respectively, had a risk rating upgrade from risk category 6 to risk category 4 during the six months ended June~~September 30, 2020.

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. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal, interest and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal. During the ~~six~~nine months ended ~~June~~September 30, 2020, our debt investments in Online Tech Stores, LLC and 3rd Rock Gaming Holding, LLC were placed on non-accrual status due to the reasonable doubt that principal and interest will be ~~collected.~~collected, while our debt investments in Constellis Holdings, LLC and Southern Technical Institute, LLC were restructured and removed from non-accrual status. The aggregate amortized cost and fair value of loans on non-accrual status with respect to all interest and Net Loan Fee amortization was $49,525 and ~~$21,193,~~$18,757, respectively, at ~~June~~September 30, 2020, and ~~$12,403~~$22,249 and ~~$850,~~$662, respectively, at December 31, 2019.

On March 27, 2020, our debt investment in Constellis Holdings, LLC was restructured. We converted our non-accrual debt investment ~~for~~into 20,628 common shares of equity. The cost and fair value of the common shares received were $0.7 million and $0.7 million, respectively as of ~~June~~September 30, ~~2020, respectively.~~2020. We recognized a realized loss on the restructuring of $9.1 million for the ~~six~~nine months ended ~~June~~September 30, 2020, which was fully recognized as unrealized losses as of December 31, 2019.

On September 30, 2020, our debt investment in Southern Technical Institute, LLC was restructured, pursuant to which we received proceeds of $529, in full satisfaction of contractually due interest of $215 and principal of $1,660. The investment was carried at a cost of $-0-. Accordingly, during the three months ended September 30, 2020, we recognized a realized gain of $314. As of September 30, 2020, we hold equity appreciation rights with a cost and fair value of $-0- and $3,356, respectively.

Structured Finance Notes

The following table summarizes the composition of our Structured Finance Notes as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):



	September 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Subordinated notes	$	34,694	$	30,925	$	23,127	$	21,610
Mezzanine bonds	1,566		1,606		—		—
Total Structured Finance Notes	$	36,260	$	32,531	$	23,127	$	21,610

The weighted average yield on Structured Finance Notes increased to 17.62% at September 30, 2020, from 15.13% at December 31, 2019 primarily due to investments of $13.6 million in Structured Finance Notes with a weighted average annual effective yield of 18.9% during the nine months ended September 30, 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" in our Annual Report on Form 10-K for the year ended December 31, 2019. The following is a discussion of the key financial measures that management employs in reviewing the performance of our operations.

We do not believe that our historical operating performance is necessarily indicative of our future results of operations. We are primarily focused on debt investments in middle-market and larger companies in the United States 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 that we now also focus on the debt ~~investments to middle-market~~of larger U.S. companies ~~in the United States~~ and ~~to a lesser extent, equity investments, including warrants and other minority equity securities.~~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 LP is subject to regulation and oversight by SBA. For the reasons described above, the results of operations described below may not necessarily be indicative of the results we expect to report in future periods.

Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, annual comparisons of net increase (decrease) in net assets resulting from operations may not be meaningful.

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

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


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019			2020			2019			2020			2019			2020			2019
Investment income
Interest income:
Cash interest income (including accretion of interest on Structured Finance Notes)	$	9,712	$	11,961		$	20,925		$	22,941		$	9,781		$	12,698		$	30,706		$	35,639
Net Loan Fee amortization	403		228			817			406			142			382			959			788
Other interest income	19		21			54			97			—			10			54			107
Total interest income	10,134		12,210			21,796			23,444			9,923			13,090			31,719			36,534
PIK income:
PIK interest income	393		205			829			366			393			245			1,222			611
Preferred equity PIK dividends	164		219			343			434			45			226			388			660
Total PIK income	557		424			1,172			800			438			471			1,610			1,271
Dividend income:
Common and preferred equity cash dividends	—		89			100			262			—			—			100			262
Total dividend income	—		89			100			262			—			—			100			262
Fee income:
Management and syndication	—		133			378			651			89			122			467			772
Prepayment and other fees	290		44			405			88			37			175			442			264
Total fee income	290		177			783			739			126			297			909			1,036
Total investment income	10,981		12,900			23,851			25,245			10,487			13,858			34,338			39,103
Total expenses, net	8,374		8,040			17,272			15,557
Total expenses, net incentive fee waiver												7,775			9,005			25,047			24,562
Net investment income	2,607		4,860			6,579			9,688			2,712			4,853			9,291			14,541
Net gain (loss) on investments	5,051		(1,507		)	(31,081		)	(2,603		)	15,313			(3,091		)	(15,619		)	(5,694		)
Loss on extinguishment of debt												(187		)	—			(336		)	—
Loss on impairment of goodwill												(1,077		)	—			(1,077		)	—
Net increase (decrease) in net assets resulting from operations	$	7,658	$	3,353		$	(24,502	)	$	7,085		$	16,761		$	1,762		$	(7,741	)	$	8,847

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


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020			2019		2020		2019			2020			2019
Interest income and PIK interest income:
Senior secured debt investments	$	8,167		$	10,386	$	18,084		$	19,933	$	7,583	$	11,013		$	25,667		$	30,946
Subordinated debt investments	953			1,400		1,911			2,780		1,181		1,418			3,092			4,198
Structured Finance Notes	1,407			629		2,630			1,097		1,553		904			4,183			2,001
Total interest income and PIK interest income	10,527			12,415		22,625			23,810		10,317		13,335			32,942			37,145
Plus purchased premiums (less Net Loan Fees) accelerations	(132		)	13		(235		)	12		38		(130		)	(196		)	(118		)
Recurring interest income and PIK interest income	$	10,395		$	12,428	$	22,390		$	23,822	$	10,355	$	13,205		$	32,746		$	37,027

Investment Income

We consider our interest income on direct debt investments to portfolio companies—other than acceleration of Net Loan Fees recognized upon the repayment of a loan—PIK interest income, and the accretable yield on Structured Finance Notes to be recurring in nature. Such recurring interest income and PIK interest income decreased by ~~$1.9~~$2.8 million for the three months ended ~~June~~September 30, 2020, compared to the three months ended ~~June~~September 30, 2019, primarily due to a ~~$0.2~~$1.8 million decrease in the average outstanding performing loan balance, ~~as well as by~~and a ~~$1.7~~$1.0 million decrease resulting from a ~~189~~100 basis point ~~decrease~~reduction in the recurring earned yield on our ~~portfolio.~~portfolio primarily due to declines in LIBOR.

Due to the COVID-19 pandemic and the impact to our borrowers, we experienced a partial shift from cash interest to PIK interest ~~as a result of~~resulting from concessions granted ~~to borrowers~~ to support the borrowers' liquidity. Total PIK income on debt securities was $1.2 million and ~~$0.8~~$0.6 million for the ~~six~~nine months ended ~~June~~September 30, 2020, and ~~June~~September 30, 2019, respectively. During the three months ended ~~June~~September 30, 2020, we amended two loans to ~~extend~~increase the ~~receipt~~PIK rate, and amended one loan to convert third quarter cash interest due of ~~$0.7~~$0.5 million ~~in second quarter~~to PIK interest; however, this interest ~~until July 2020, of which $0.4 million~~ was not recognized in income in the ~~second~~third quarter due to reasonable doubt whether it will be collected. We collected approximately $41,000 in fees related to the aforementioned amendments.

Syndication fees, prepayment fees and the acceleration of Net Loan Fees generally result from periodic transactions rather than from holding portfolio investments and are considered ~~to be~~ non-recurring. Syndication fees, which are recognized when OFS Advisor sources, structures, and arranges the lending group, and for which we were ~~additional compensation~~additionally compensated declined to ~~$-0-~~$0.1 million for the three months ended ~~June~~September 30, 2020, compared to $0.4 million in the first ~~quarter~~six months of ~~2020 due~~2020. This decline is attributable to the ~~drop~~decrease in direct loan originations from approximately $33.4 million in the first ~~quarter~~six months of 2020 to ~~$-0-~~$2.0 million in the ~~second~~third quarter of 2020, primarily due to the impacts of the COVID-19 pandemic. Total fee income for the ~~six~~nine months ended ~~June~~September 30, 2020, compared to the corresponding period in the prior year, remained consistent due to an increase in prepayment fees, which offset ~~the~~a decrease in syndication fees. Since the onset of the COVID-19 pandemic, we have continued to source and screen loan investments, although we have observed a decrease in underwriting and origination activity. During the three months ended June 30, 2020, we purchased five broadly syndicated loans for an aggregate cost of $2.4 million, however, there has been no Portfolio Company Investments directly originated since March 16, 2020.

Expenses

Operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, are presented below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020			2019		2020		2019		2020			2019
Interest expense	$	4,931	$	3,645	$	9,853		$	7,100	$	4,448	$	4,464	$	14,301		$	11,564
Management fee	1,869		2,055		3,888			3,898		1,871		2,164		5,759			6,062
Incentive fee	215		1,245		1,098			2,408		234		1,214		1,332			3,622
Professional fees	460		368		1,108			903		422		510		1,530			1,413
Administration fee	500		417		1,020			854		436		396		1,456			1,250
Other expenses	399		310		746			394		364		257		1,110			651
Total expenses before incentive fee waiver	$	8,374	$	8,040	$	17,713		$	15,557	$	7,775	$	9,005	$	25,488		$	24,562
Incentive fee waiver	—		—		(441		)	—		—		—		(441		)	—
Total expenses, net of incentive fee waiver	$	8,374	$	8,040	$	17,272		$	15,557	$	7,775	$	9,005	$	25,047		$	24,562

Interest expense for the three ~~and six~~ months ended ~~June~~September 30, 2020, remained consistent over the corresponding prior year period. Interest expense for the nine months ended September 30, 2020, increased over the corresponding ~~periods in the~~ prior year period due to an increase in our average borrowings related to the issuance of the Unsecured Notes Due October 2026 and

borrowings under the BNP Facility. Interest expense incurred on our debt during the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, is summarized below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
SBA Debentures	$	1,114	$	1,280	$	2,338	$	2,548	$	1,068	$	1,295	$	3,406	$	3,843
PWB Credit Facility	702		633		991		1,094		285		802		1,276		1,896
Unsecured Notes Due April 2025	860		860		1,721		1,720
Unsecured Notes Due October 2025	850		866		1,700		1,732
Unsecured Notes Due October 2026	880		—		1,784		—
Unsecured Notes									2,662		1,726		7,867		5,178
BNP Facility	525		6		1,319		6		433		641		1,752		647
Total interest expense⁽¹⁾	$	4,931	$	3,645	$	9,853	$	7,100	$	4,448	$	4,464	$	14,301	$	11,564

(1) Interest expense is inclusive of interest on the outstanding balance, commitment fees on undrawn amounts, and the amortization of deferred financing costs.

Management fee expense for the three and nine months ended ~~June~~September 30, 2020, decreased ~~$0.2~~$0.3 million and $0.3 million, respectively, over the corresponding ~~period in the~~ prior year period due to a decrease in ~~our average total assets resulting from a decline in~~ the ~~fair value~~size of our ~~portfolio investments.~~portfolio.

The $1.0 million decrease in incentive fee expense during the three months ended ~~June~~September 30, 2020, and the ~~$1.3~~$2.3 million decrease in incentive fee expense prior to the Income Incentive Fee waiver of $0.4 million during the ~~six~~nine months ended ~~June~~September 30, 2020, compared to the prior year corresponding periods ~~in the prior year was~~were attributable to a decrease in net investment income resulting from a decline in net interest margin. On May 4, 2020, OFS Advisor agreed to irrevocably waive the receipt of ~~$0.4~~

$0.4 million in Income Incentive Fees (based on net investment income) related to net investment income, that it would otherwise be entitled to receive under the Investment Advisory Agreement for the three months ended March 31, 2020. As a result of the voluntary fee waiver, we incurred Income Incentive Fee expense of $0.4 million for the three months ended March 31, 2020, which is equal to half the Income Incentive Fee expense we would have incurred for such period.

The $0.1 million decrease in professional fees for the three months ended ~~March 31, 2020.~~

September 30, 2020, compared to the corresponding prior year period was attributable to a reduction in valuation and accounting services. The $0.1 ~~million and $0.2~~ million increase in professional fees for the ~~three and six~~nine months ended ~~June~~September 30, 2020, ~~respectively,~~ compared to the corresponding ~~periods in the~~ prior year ~~were~~period was attributable to additional costs related to ~~accounting and tax services.~~the prior year audit.

Administration fee expense for the three and ~~six~~nine months ended ~~June~~September 30, 2020, increased ~~$0.1 million~~$40,000 and $0.2 million, respectively, over the corresponding ~~periods in the~~ prior year periods, due to an increase in our allocable portion of OFS Services’s ~~overhead, primarily related to the increase in the size of the investment portfolio~~personnel and ~~services related to fair value determination.~~software costs.

Other expenses for the ~~six~~nine months ended ~~June~~September 30, 2020, increased ~~$0.4~~$0.5 million, over the corresponding ~~period in the~~ prior year period, primarily due to the write-off of deferred offering costs relating to our prior shelf registration and an excise tax accrual, ~~during the during the six months ended June 30, 2020,~~ as well as a reversal of an excise tax accrual in the first quarter of 2019.

Net realized and unrealized gain (loss) on investments

Net ~~loss~~gain (loss) by investment type for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, were as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2020			2019			2020			2019
Senior secured debt	$	(4,637	)	$	(3,254	)	$	(23,368	)	$	(3,383	)	$	7,066		$	(3,981	)	$	(16,428	)	$	(7,364	)
Subordinated debt	(125		)	57			(7,590		)	212			(3,995		)	(921		)	(11,585		)	(709		)
Preferred equity	(1,016		)	137			(2,253		)	(1,592		)
Preferred equity, net of taxes													(88		)	2,396			(2,336		)	804
Common equity, warrants and other	6,330			1,722			5,986			1,950			10,837			797			16,942			2,747
Structured Finance Notes	4,499			(169		)	(3,707		)	210			1,495			(1,382		)	(2,212		)	(1,172		)
Total net gain (loss) on investments	5,051			(1,507		)	(30,932		)	(2,603		)	$	15,315		$	(3,091	)	$	(15,619	)	$	(5,694	)
Loss on extinguishment of debt	—			—			(149		)	—
Total net gain (loss)	$	5,051		$	(1,507	)	$	(31,081	)	$	(2,603	)

Three and ~~six~~nine months ended ~~June~~September 30, 2020

Our portfolio experienced net gains of ~~$5.1~~$15.3 million in the ~~second~~third quarter of 2020 primarily as a result of performance improvements and expansion of the ~~companies'~~ valuation ~~multiples~~multiple at Pfanstiehl Holdings, Inc. ~~and Southern Technical Institute, LLC,~~, which ~~lifted the value of our equity investments in those companies a combined~~appreciated $7.9 ~~million, as well~~million. We also experienced net gains from the return of liquidity to the broadly syndicated loan market, which contributed to the improvement in the fair values of ~~$9.0~~$5.0 million of our Structured Finance Note investments and our ~~loan investments acquired in the~~ broadly syndicated ~~market.~~loan investments. One measure of liquidity in the broadly syndicated loan market is the average bid-ask spread on the Refinitiv Market Overall (North America) Loan Index which narrowed to 1.53 points at September 30, 2020, from 1.98 points at June 30, ~~2020, from 3.41 points at March 31,~~ 2020, but has not yet returned to its long-term historic average of 1.0. These net gains were partially offset by ~~$7.5~~$5.7 million in net unrealized losses ~~principally~~ on our debt ~~and equity~~ investments in ~~Contract Datascan~~Envocore Holding, LLC, Inc., Eblens Holdings, Inc., ~~TalentSmart Holdings, LLC~~ and 3rd Rock Gaming Holding, ~~LLC, as well as other portfolio companies as a result of~~LLC.

During the ~~impact of the COVID-19 pandemic.~~

~~Our~~nine months ended September 30, 2020, our portfolio experienced net ~~unrealized~~ losses of ~~$20.9~~$15.6 million, ~~during the six months ended June 30, 2020,~~ primarily due to the adverse economic effects of the COVID-19 pandemic on market conditions and the overall economy, and the related declines in quoted loan prices that have not yet fully ~~recovered.~~recovered from their pre-pandemic levels. Additionally, we incurred realized losses of $10.0 million, primarily due to the loss of $9.1 million on the restructuring of our debt investment in Constellis Holdings, LLC, which was fully recognized as an unrealized loss as of December 31, 2019.

~~Within~~During the three months ended September 30, 2020, we recognized net gains of $7.1 million on our senior debt investments, primarily as a result of unrealized appreciation of $3.5 million and $3.4 million on broadly syndicated loans and directly originated loans, respectively.

During the three months ended September 30, 2020, we recognized net losses of ~~$4.6~~$4.0 million ~~during the three months ended June 30, 2020,~~on our subordinated debt investments, primarily as a result of unrealized depreciation of ~~$4.2 million and $0.9~~$3.4 million on our ~~senior secured debt~~investment in ~~3rd Rock Gaming Holding, LLC and Talent Smart~~Eblens Holdings, LLC, respectively, offset by net unrealized appreciation of $1.5 million on the remaining senior secured debt investments. We also recognized net realized losses of $1.0 million due to the sale of approximately $25.2 million of loans at cost, for an average price of approximately 96% of par.Inc.

~~Within our subordinated debt investments, we recognized unrealized depreciation of $0.1 million during~~For the three months ended ~~June~~September 30, 2020, ~~primarily as a result of unrealized depreciation of $0.4 million on Contract Datascan Holdings, Inc., offset primarily by unrealized appreciation of $0.3 million on Southern Technical Institute, LLC.~~

~~Within our preferred equity investments,~~ we recognized ~~unrealized depreciation~~net gains of ~~$1.0~~$10.8 million ~~for the three months ended June 30, 2020, primarily as a result of unrealized depreciation of $1.4 million~~ on ~~Contract Datascan Series A units, offset by net unrealized appreciation of $0.4 million on the remaining preferred equity investments.~~

~~Within~~ our common equity, warrants and other investments, ~~we recognized unrealized appreciation of $6.3 million for the three months ended June 30, 2020,~~ primarily as a result of unrealized appreciation of ~~$6.9~~$7.8 million on Pfanstiehl Holdings, Inc.~~, offset by net unrealized depreciation of $0.6~~ and $2.4 million on our ~~remaining common~~ equity ~~warrant and other investments as a result~~appreciation rights in Southern Technical Institute, LLC.

For the three months ended September 30, 2020, we recognized unrealized appreciation of ~~negative portfolio company-specific performance factors.~~

~~Within~~$1.5 million on our Structured Finance Note investments, ~~we recognized unrealized appreciation of $4.5 million for the three months ended June 30, 2020,~~ primarily due to the continued return of liquidity to the broadly syndicated loan ~~market, which underlie these investments.~~market.

Three and ~~six~~nine months ended ~~June~~September 30, 2019

We recognized net losses of ~~$3.3~~$4.0 million on senior secured debt during the three months ended ~~June~~September 30, 2019, primarily as a result of the unrealized depreciation of ~~$2.5~~$4.1 million on Constellis Holdings, LLC and $0.8 million on MAI Holdings, Inc, offset by unrealized appreciation of $0.6 million on TRS Services, LLC. Additional net unrealized losses on senior secured debt of ~~$0.3~~$3.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019, were primarily a result of ~~net negative impact of portfolio company-specific performance factors.~~additional unrealized depreciation on Constellis Holdings, LLC and MAI Holdings, Inc. We also recognized a realized gain of $0.2 million primarily as a result of the partial sale of our investment in Cenexel Clinical Research Holdings, Inc. and the sale of our investment in Davis Vision, Inc.

We recognized net ~~gains~~losses of ~~$0.1~~$0.9 million on subordinated debt during the three months ended ~~June~~September 30, 2019, primarily as a result of unrealized depreciation of $0.9 million on Online Tech Stores, LLC. Net gains of $0.2 million for the nine months ended September 30, 2019 were primarily a result of net positive impact of portfolio company-specific performance factors.

We recognized net gains of $2.4 million on preferred equity investments for the three months ended September 30, 2019, primarily as a result of unrealized appreciation of $2.9 million on TRS Services, LLC Class A units, offset by unrealized depreciation of $0.5 million on Contract Datascan Series A units. We recognized net gains of $0.8 million on preferred equity securities for the nine months ended September 30, 2019, primarily due to unrealized appreciation of $1.7 million on our preferred equity portfolio as a result of net positive impact of portfolio company-specific performance ~~factors. Additional net gains of $0.2 million for the six months ended June 30, 2019 were primarily a result of unrealized appreciation of $0.5 million on Online Tech Stores, LLC.~~

We recognized net gains of $0.1 million on preferred equity investments for the three months ended June 30, 2019, primarily as a result of the net positive impact of portfolio company-specific performance factors. We recognized net losses of $1.6 million on preferred equity securities for the six months ended June 30, 2019, primarily due tofactors, offset by a realized loss of $0.9 million on Maverick Healthcare Equity, ~~LLC and unrealized depreciation of $0.8 million on our investment in TRS Services, LLC Class A units.~~LLC.

We recognized net gains of ~~$1.7~~$0.8 million on common equity and warrant investments for the three months ended ~~June~~September 30, 2019, primarily as a result of unrealized appreciation of ~~$0.7 million and $0.6~~$1.3 million on ~~our investments in~~Pfanstiehl Holdings, Inc. and $0.9 million on Professional Pipe Holdings, LLC, ~~and~~offset by unrealized depreciation of $1.5 million on MTE ~~Holding Corporation respectively. Additional~~Holdings Corp. We recognized net gains of ~~$2.0~~$2.7 million on common equity and warrant investments for the ~~six~~nine months ended ~~June~~September 30, 2019, ~~were~~ primarily ~~a result of~~due to unrealized appreciation of ~~$4.3~~$6.1 million across several portfolio company investments from the positive impact of portfolio company-specific performance factors,

offset primarily by unrealized depreciation of $2.3 million in Contract Datascan Holdings, Inc. as a result of negative portfolio company-specific performance factors.

We recognized unrealized depreciation of ~~$0.2~~$1.4 million on Structured Finance Notes for the three months ended ~~June~~September 30, 2019, and unrealized ~~appreciation~~depreciation of ~~$0.2~~$1.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019, primarily as a result of ~~net positive~~negative impact of mark-to-market adjustments since our investment purchases.

Loss on Impairment of Goodwill

The decline in the price of our common stock and the level at which it continues to trade relative to the broader stock indices for the BDC industry, led us to conclude in the third quarter of 2020 that an impairment in the value of our goodwill was more likely than not. Moreover, the discount at which our stock traded to its net asset value resulted in our conclusion on the impairment of goodwill equal to the full amount of its carrying value of $1.1 million was appropriate. The loss on impairment of goodwill did not impact our third quarter management or incentive fees.

Loss on Extinguishment of Debt

During the nine months ended September 30, 2020, we prepaid $21.1 million of SBA debentures that were contractually due September 1, 2023, March 1, 2024 and September 1, 2024. We recognized losses on extinguishment of debt of $0.24 million related to the charge-off of deferred borrowing costs on the prepaid debentures.

During the three months ended September 30, 2020, the BLA was amended to reduce the total commitment from $100.0 million to $50.0 million. We recognized a loss on extinguishment of debt of $0.1 million related to the charge-off of deferred borrowing costs on the commitment reduction.

Liquidity and Capital Resources

At ~~June~~September 30, 2020, we held cash of ~~$31.8~~$18.3 million, which includes ~~cash of $22.7~~$5.1 million held by SBIC I LP, our wholly owned ~~SBIC.~~SBIC, and $0.9 million held by OFSCC-FS. Our use of cash held by SBIC I LP may be restricted by SBA regulation, including limitations on the amount of cash SBIC I LP can distribute to the Parent. Any such distributions to the Parent from SBIC I LP are generally restricted under SBA regulations to a statutory measure of undistributed accumulated earnings or regulatory capital of SBIC I LP and require the prior approval of the SBA. During the ~~six~~nine months ended ~~June~~September 30, 2020, the Parent received ~~no cash~~ distributions of $8.1 million from SBIC I ~~LP and management currently anticipates a portion of cash held by SBIC I LP at June 30, 2020, will be used in the third quarter of 2020 for the early repayment of SBA debentures.~~LP. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. At June 30, 2020, OFSCC-FS held cash of $0.8 million and had unused commitments under the BNP Facility of $119.4 million, of which $-0- was available for distribution under the terms of the BNP Facility. During the ~~six~~nine months ended ~~June~~September 30, 2020, the Parent received ~~$1.1~~$1.7 million in cash distributions from OFSCC-FS. As of September 30, 2020, cash available to be distributed from SBIC I LP and OFSCC-FS were $4.9 million and $-0-, respectively.

At ~~June~~September 30, 2020, we had an unused commitment of ~~$78.9~~$50.0 million under our PWB Credit Facility, as well as an unused commitment of ~~$119.4~~$125.4 million under our BNP Facility, both subject to a borrowing base requirements and other covenants. The Parent may make unsecured loans to SBIC I LP, the aggregate which cannot exceed $35 million at any given time, and no interest may be charged on the unpaid principal balance. There were no intercompany loans between the Parent and SBIC I LP as of ~~June~~September 30, 2020. On ~~July 29,~~October 7, 2020, we ~~executed an amendment to~~amended our BLA with Pacific Western Bank ~~in order~~ to reduce the total commitment under the PWB Credit Facility from ~~$100~~$50.0 million to ~~$50~~$20.0 million. As of ~~July 29,~~November 5, 2020, after giving effect to the reduction, our PWB Credit Facility had an unused commitment of ~~$36.2~~$20.0 million, subject to a borrowing base requirements and other covenants.

Based on fair values and equity capital at ~~June~~September 30, 2020, we could access available lines of credit for ~~$68~~$100 million and remain in compliance with our asset coverage requirements. As of ~~July 29,~~November 4, 2020, we had cash on hand of approximately ~~$23.3~~$48.5 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.

Sources and Uses of Cash

We generate operating cash flows from net investment income and the net liquidation of portfolio investments, and use cash in our operations in the net purchase of portfolio ~~investments.~~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. As discussed in "Item 1.–Financial Statements–Note 3," we pay OFS Advisor a quarterly incentive fee with respect to our pre-incentive fee net investment income, which ~~includes~~may 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,						Nine Months Ended September 30,
	2020			2019			2020			2019
Cash from net investment income	$	1,619		$	7,239		$	1,614		$	10,270
Net (purchases and originations)/repayments and sales of portfolio investments	44,253			(51,642		)	40,881			(105,619		)
Net cash provided (used) in operating activities	45,872			(44,403		)
Net cash provided by (used in) operating activities							42,495			(95,349		)

Distributions paid to stockholders⁽¹⁾	(6,728		)	(8,976		)	(8,974		)	(13,464		)
Net borrowings under lines of credit	(4,700		)	26,250			(31,800		)	80,475
Repayment of SBA debentures	(16,110		)	—			(21,110		)	—
Other financing	—			(1,639		)
Net cash provided (used) by financing activities	(27,538		)	15,635
Proceeds from unsecured notes offering, net of discounts							24,250			—
Other financing activities							(11		)	(1,860		)
Net cash provided by (used in) financing activities							(37,645		)	65,151
Increase (decrease) in cash	$	18,334		$	(28,768	)	$	4,850		$	(30,198	)


(1)	The determination of the tax attributes of our distributions is made annually as of the end of our fiscal year based upon our ICTI for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our distributions for a full year. See "Item 1–Financial Statements–Note 10."

Cash from net investment income

Cash from net investment income decreased ~~$5.6~~$8.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020, compared to the ~~six~~nine months ended ~~June~~September 30, 2019, principally due to an decrease in collected net interest and fee income of ~~$2.3~~$7.5 million and an increase in interest expense paid of ~~$4.1~~$3.1 million, offset by an decrease in fees paid to OFS Advisor and affiliates of ~~$0.1~~$1.1 million, as well as a decrease in other expenses paid of ~~$0.7~~$0.4 million.

Cash flow from net investment income was reduced by $2.8 million during the nine months ended September 30, 2020 as a result of amendments that converted cash interest to PIK interest, loans that have been placed on non-accrual status and deferrals of interest payments to the fourth quarter of 2020. However, 98% of our performing loans as of September 30, 2020 paid interest for the third quarter of 2020.

Net (purchases and originations)/repayments and sales of portfolio investments

During the ~~six~~nine months ended ~~June~~September 30, 2020, net purchases and originations of portfolio investments of $40.9 million were primarily due to ~~$80.2~~$89.8 million of cash we used to purchase portfolio investments, offset by ~~$124.5~~$130.6 million of cash we received from amortized cost repayments, which includes $41.1 in the full loan repayments on TRS Services, LLC, Performance Team LLC, and Cirrus Medical Staffing, Inc., as well as sales on our portfolio investments. During the ~~six~~nine months ended ~~June~~September 30, 2019, net purchases of $105.6 million were due to ~~$90.2~~$168.7 million of cash we used to purchase portfolio investments, offset by ~~$38.7~~$63.1 million of cash we received from principal payments and sales on our portfolio investments. See "—Portfolio Composition and Investment Activity–Investment Activity."

~~Net cash provided (used) in operating activities~~

Net cash provided (used) in operating activities increased $90.3 million for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, primarily due to the sale of OFSCC-FS securities and an additional $47.0 million increase in principal payments due to loan payoffs. Cash flow provided in operating activities was reduced by $1.0 million as a result of deferrals of interest payments and the rescheduling of an amortization payment. Ninety-six percent of our performing loans as of March 31, 2020 paid interest for the second quarter of 2020.

Borrowings

SBA Debentures

SBIC I LP has a SBIC license that ~~allows~~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 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 spread over U.S. Treasury Notes with ten-year maturities. SBA regulations currently limit the amount that an SBIC may borrow up to a maximum of $150 million when it has at least $75 million in regulatory capital, receives a leverage commitment from the SBA and has been through an examination by the SBA subsequent to licensing. As of ~~June~~September 30, 2020 and 2019, SBIC I LP had outstanding debentures of ~~$133.8~~$128.8 million and $149.9 million, respectively.

On a stand-alone basis, SBIC I LP held ~~$236.9~~$239.6 million, and $249.6 million in total assets at ~~June~~September 30, 2020 and December 31, 2019, respectively, which accounted for approximately 50% and 46% of the Company’s total consolidated assets, respectively.

As part of our plans to focus on lower-yielding, first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile, SBIC I LP intends, over time, to repay its outstanding SBA debentures prior to the scheduled maturity dates of its debentures. Under a plan approved by the SBA, we will only make follow-on investments in current portfolio companies held by SBIC I LP. We believe that investing in more senior loans to larger borrowers is consistent with our view of the private loan market and will reduce our overall leverage on a consolidated basis. ~~On March 1,~~During the nine months ended September 30, 2020, SBIC I LP prepaid ~~$16.1~~$21.1 million of SBA debentures that were contractually due September 1, 2023, March 1, 2024 and September 1, 2024. We recognized ~~a loss~~losses on extinguishment of debt of ~~$0.15~~$0.24 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 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

We are party to a BLA with Pacific Western Bank, as lender, to provide us with a senior secured revolving credit facility, or the PWB Credit Facility, which is available for general corporate purposes including investment funding. The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base, which excludes subordinated loan investments (as defined in the BLA) and as otherwise specified in the BLA. The PWB Credit Facility is guaranteed by OFSCC-MB, Inc. and secured by all of our current and future assets, excluding assets held by SBIC I LP, OFSCC-FS and the Company’s partnership interests in SBIC I LP and OFS SBIC I, GP.

OnIn June ~~26,~~and July 2020, ~~we executed~~ the ~~Secured Revolver Amendment~~BLA was amended to, ~~our PWB Credit Facility. The Secured Revolver Amendment,~~ among other ~~things: (i) reduced~~things, modify certain financial performance covenants and reduce the ~~Minimum Tangible Net Asset Value (as defined in the Secured Revolver Amendment) covenant~~total commitment from ~~$125.0~~$100.0 million to ~~$100.0 million; (ii) reduced the Minimum Quarterly Net Investment Income (as defined in the Secured Revolver Amendment) covenant from $3.0~~$50.0 million. We recognized a loss on extinguishment of debt of $0.1 million to $2.0 million; (iii) increased the Debt/Worth Ratio (as defined in the Secured Revolver Amendment) covenant from 300% to 350%; and (iv) added a new covenant commencing on June 30, 2020, restricting net losses (defined as income after adjustmentsrelated to the ~~investment portfolio for gains and losses, realized and unrealized, also shown as net increase (decrease) in net assets resulting from operations) in more than two quarters during~~charge-off of deferred borrowing costs on the ~~prior four quarters then ended.~~

~~As of June 30, 2020, we had $21.1 million outstanding at a variable interest rate of 5.25% per annum, and an unused~~ commitment ~~of $78.9 million under the PWB Credit Facility.~~reduction. On ~~July 29,~~October 7, 2020, we executed an amendment to our BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from ~~$100~~$50.0 million to ~~$50~~$20.0 million. In October 2020, the Company expects to recognize a loss on extinguishment of debt of $42,000 related to the charge-off of deferred borrowing costs on this commitment reduction.

As of ~~July 29,~~September 30, 2020, we had no outstanding balance and an unused commitment of $50.0 million under the PWB Credit Facility. As of November 5, 2020, after giving effect to the reduction, our PWB Credit Facility had an unused commitment of ~~$36.2~~$20.0 million, subject to a borrowing base and other covenants.

The BLA contains customary terms and conditions, including, without limitation, affirmative and negative covenants such as information reporting requirements, a minimum tangible net asset value, a minimum quarterly net investment income

after incentive fees, a debt/worth ratio and a 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 ~~June~~September 30, 2020, we were in compliance with the applicable covenants under the PWB Credit Facility.

Unsecured Notes

In April 2018, we publicly offered the Unsecured Notes Due April 2025 with aggregate principal of $50.0 million. The total net proceeds to the Company from the Unsecured Notes Due April 2025, after deducting underwriting discounts and offering costs of $1.8 million were $48.2 million. In October and November 2018, the Company publicly offered the Unsecured Notes Due October 2025 with aggregate principal of $48.5 million, which included a partial exercise of the underwriters' overallotment option. The total net proceeds to the Company from the Unsecured Notes Due October 2025, after deducting underwriting discounts and offering expenses of $1.7 million, were $46.8 million. In October and November 2019, we publicly offered the Unsecured Notes Due October 2026 with an aggregate principal of $54.3 million, which included a partial exercise of the underwriters' overallotment option. The total net proceeds to us from the Unsecured Notes Due October 2026, after deducting underwriting discounts and offering costs of ~~$1.9~~$2.0 million were ~~$52.4~~$52.3 million. In September 2020, we publicly offered the Unsecured Notes Due September 2023 with aggregate principal of $25.0 million. The total net proceeds to us from the Unsecured Notes Due September 2023, after deducting underwriting discounts and offering costs of approximately $1.0 million, were approximately $24.0. The issuance of the Unsecured Notes totaled ~~$152.9~~$177.9 million in aggregate principal debt, with net proceeds of ~~$147.4~~$171.4 million to us.

The Unsecured Notes are direct unsecured obligations and rank equal in right of payment with all of our current and future unsecured indebtedness. Because the Unsecured Notes are not secured by any of our assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the PWB Credit Facility.

In order to, among other things, reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase the Unsecured Notes for cash in open market purchases and/or privately negotiated transactions. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity, prospects for future access to capital, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.

~~As of June 30, 2020, the Unsecured Notes had the following terms and balances (amounts in thousands):~~

Unsecured Notes Principal
Stated Interest Rate ⁽¹⁾

Effective Interest Rate ⁽²⁾

Maturity ⁽³⁾

Interest Expense ⁽⁴⁾
Unsecured Notes Due April 2025 $ 50,000
6.375 % 6.88 % 4/30/2025 $ 1,721
Unsecured Notes Due October 2025 48,525
6.50 % 7.01 % 10/31/2025 1,700
Unsecured Notes Due October 2026 54,325
5.95 % 6.49 % 10/31/2026 1,784
Total $ 152,850
$ 5,205


~~(1)~~	~~The weighted-average fixed cash interest rate on the Unsecured Notes as of June 30, 2020 was 6.26%.~~


~~(2)~~	~~The effective interest rate on the Unsecured Notes includes deferred debt issuance cost amortization.~~

~~(3)~~

The Unsecured Notes Due April 2025 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after April 30, 2020. The Unsecured Notes Due October 2025 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after October 31, 2020. The Unsecured Notes Due October 2026 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after October 31, 2021.


~~(4)~~	~~Interest expense includes deferred debt issuance costs amortization.~~

BNP Facility

On June 20, 2019, OFSCC-FS entered into the BNP Facility, which provides for borrowings in an aggregate principal amount up to $150.0 million, of which ~~$30.7~~$24.7 million was drawn as of ~~June~~September 30, 2020. Borrowings under the BNP Facility ~~will~~ bear interest based on LIBOR for the relevant interest period, plus an applicable spread. The effective interest rate on the BNP Facility was ~~5.55%~~6.66% at ~~June~~September 30, 2020. The BNP Facility will mature on the earlier of June 20, 2024 or upon certain other events defined in the credit agreement which result in accelerated maturity. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS. The unused commitment under the BNP Facility was ~~$119.4~~$125.4 million as of ~~June~~September 30, 2020. As of ~~June~~September 30, 2020, we were in compliance with the applicable covenants.

On a stand-alone basis, OFSCC-FS held approximately ~~$58.1~~$64.8 million and $92.5 million in total assets at ~~June~~September 30, 2020 and December 31, 2019, respectively, which accounted for approximately ~~12.2%~~13.4% and 17% of our total consolidated assets, respectively.

Other Liquidity Matters

We expect to fund the growth of our investment portfolio utilizing our current borrowings, follow-on equity offerings, and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act. We cannot assure stockholders that our plans to raise capital will be successful. In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. Consequently, we may not have the funds or the ability to fund new investments or make additional investments in our portfolio companies. The illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.

In addition, as a BDC, we generally will be required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities (including SBIC I LP’s SBA-guaranteed debt), to total senior securities, which include all of our borrowings (excluding SBA-guaranteed debt) and any outstanding preferred stock (of which we had none at ~~June~~September 30, 2020), of at least 150%. We received an exemptive order from the SEC to permit us to exclude the debt of SBIC I LP guaranteed by the SBA from the definition of Senior Securities in the statutory asset coverage ratio under the 1940 Act. This requirement limits the amount that we may borrow. To fund growth in our investment portfolio in the future, we anticipate the need to raise additional capital from various sources, including the equity markets and the securitization or other debt-related markets, which may or may not be available on favorable terms, if at all.

On May 3, 2018, our Board, including a required majority (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as

amended by the SBCAA. As a result, our minimum required asset coverage ratio decreased from 200% to 150%, effective May 3, 2019.

On May 22, 2018, the Board authorized the Stock Repurchase Program under which we could acquire up to $10.0 million of our outstanding common stock through the two-year period ending May 22, 2020. On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period. Under the extended Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. We expect the Stock Repurchase Program to be in place through May 22, 2022, or until the

approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We retire all shares of common stock that we purchased in connection with the Stock Repurchase Program. No shares of common stock were repurchased during the three months ended ~~June~~September 30, 2020.

As of ~~June~~September 30, 2020, the aggregate amount outstanding of the senior securities issued by us was ~~$204.6~~$202.5 million, for which our asset coverage was ~~166%~~174%. 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 23, 2020, 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 ~~June~~September 30, 2020 (in thousands):


	Payments due by period										Payments due by period
Contractual Obligation ⁽¹⁾	Total		Less than year		1-3 years (2)		3-5 years (2)		After 5 years (2)		Total		Less than year		1-3 years (2)		4-5 years (2)		After 5 years (2)
PWB Credit Facility	$	21,100	$	21,100	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Unsecured Notes	152,850		—		—		50,000		102,850		177,850		—		25,000		50,000		102,850
SBA Debentures	133,770		—		14,000		97,185		22,585		128,770		—		14,000		114,770		—
BNP Facility	30,650		—		—		30,650		—		24,650		—		—		24,650		—
Total	$	338,370	$	21,100	$	14,000	$	177,835	$	125,435	$	331,270	$	—	$	39,000	$	189,420	$	102,850


(1)	Excludes commitments to extend credit to our portfolio companies.

(2)

The PWB Credit Facility is scheduled to mature on February 28, 2021. The SBA debentures are scheduled to mature between September 2022 and September 2025. SBIC I LP intends, over time, to repay outstanding SBA debentures prior to the scheduled maturity dates of its debentures. The Unsecured Notes are scheduled to mature between ~~April 2025~~October 2023 and October 2026. The BNP Facility is scheduled to mature on June 20, 2024.

We continue to believe our long-dated financing, with approximately ~~90%~~88% of our total debt contractually maturing in 2024 and beyond, affords us operational flexibility.

We have entered into contracts with third parties under which we have material future commitments—the Investment Advisory Agreement, pursuant to which OFS Advisor has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which OFS Services has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations.

We may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. We had ~~$4.3~~$7.4 million in unfunded commitments to ~~two~~three portfolio companies at ~~June~~September 30, 2020. We continue to believe that we have

sufficient levels of liquidity to support our existing portfolio companies and will meet these unfunded commitments by using our cash on hand or utilizing our available borrowings under the PWB Credit Facility.

Distributions

We are taxed as a RIC under the Code. In order to maintain our status as a RIC, we are required to distribute annually to our stockholders at least 90% of our ICTI, as defined by the Code. Additionally, to avoid a 4% excise tax on undistributed earnings we are required to distribute each calendar year the sum of (i) 98% of our ordinary income for such calendar year (ii) 98.2% of our net capital gains for the one-year period ending October 31 of that calendar year, and (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax. Maintenance of our RIC status also requires adherence to certain source of income and asset diversification requirements. Generally, a RIC is entitled to deduct dividends it pays to its stockholders from its income to determine “taxable income.” Taxable income includes our taxable interest, dividend and fee income, and taxable net capital gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation, as gains or losses are not included in taxable income until they are realized. In addition, gains realized for financial reporting purposes may differ from gains included in taxable income as a result of our election to recognize gains using installment sale treatment, which generally results in the deferment of gains for tax purposes until notes or other amounts, including amounts held in escrow, received as consideration from the sale of

investments are collected in cash. Taxable income includes non-cash income, such as changes in accrued and reinvested interest and dividends, which includes contractual PIK interest, and the amortization of discounts and fees. Cash collections of income resulting from contractual PIK interest and dividends or the amortization of discounts and fees generally occur upon the repayment of the loans or debt securities that include such items. Non-cash taxable income is reduced by non-cash expenses, such as realized losses and depreciation, and amortization expense.

Our ~~board of directors~~Board 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.

Recent Developments

On ~~July 28,~~November 3, 2020, our Board declared a distribution of ~~$0.17~~$0.18 per share for the ~~third~~fourth quarter of 2020, payable on ~~September 30,~~December 31, 2020 to stockholders of record as of ~~September 23,~~December 24, 2020.

We evaluated events subsequent to ~~June~~September 30, 2020 through ~~July 30,~~November 5, 2020. On March 11, 2020, the World Health Organization declared the novel coronavirus as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to the COVID-19 pandemic. The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The ~~global impact~~COVID-19 pandemic and the preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions, and overall economic and financial market instability both globally and in the United States. Such effects will likely continue for the duration of the ~~outbreak has been rapidly evolving~~pandemic, which is uncertain, and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Such actions have created, and may continue to create, disruption in global supply chains and adversely impact a number of industries.for some period thereafter. The outbreak could have a continued adverse impact on economic and market conditions on a global scale. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the ongoing COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risks with respect to the underlying value of our portfolio companies, our business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Further, the operational and financial performance of the portfolio

companies in which we make investments have been, and may continue to be, significantly impacted by the COVID-19 pandemic, which in turn has, and may continue to have, an impact on the valuation of our investments.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Uncertainty with respect to the~~The economic effects of the COVID-19 outbreak has introduced significant volatility in the financial ~~markets,~~markets. The U.S. Federal Reserve and ~~the effect~~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 ~~the volatility could materially impact~~LIBOR to zero, our ~~market risks, including those listed below. We are subject to financial market risks, including changes in~~net interest ~~rates.~~margin will be compressed and adversely affect our operating results. For additional information concerning the COVID-19 outbreak and its potential impact on our business and our operating results, see Part II - Other information, Item 1A. Risk ~~Factors.~~ Factors.

As of ~~June~~September 30, 2020, ~~87%~~88% 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 ~~June~~September 30, 2020, a majority of our floating rate loans were based on a floating LIBOR, subject to its floor.

Our outstanding SBA debentures and Unsecured Notes bear interest at fixed rates. Our PWB Credit Facility and BNP Facility have floating interest rate provisions based on the Prime Rate and LIBOR, respectively, with effective interest rates of ~~5.64%~~5.62% and ~~5.55%~~6.66%, respectively, as of ~~June~~September 30, 2020.

Assuming that the interim and unaudited consolidated balance sheet as of ~~June~~September 30, 2020 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following tables show the annualized impact of hypothetical changes in interest rate indices (in thousands).


Basis point increase	Interest income		Interest expense			Net increase		Interest income		Interest expense			Net change
25	$	359	$	(137	)	$	222	$	16	$	(58	)	$	(42	)
50	1,100		(292		)	808		123		(121		)	2
75	2,470		(447		)	2,023		262		(183		)	79
100	4,125		(656		)	3,469		821		(246		)	575
125	5,832		(919		)	4,913		1,476		(308		)	1,168


Basis point decrease	Interest income			Interest expense		Net decrease			Interest income			Interest expense		Net change
25	$	(353	)	$	111	$	(242	)	$	(518	)	$	63	$	(455	)
50	(353		)	111		(242		)	n/m (1)			n/m (1)		n/m (1)
75	(353		)	111		(242		)	n/m (1)			n/m (1)		n/m (1)
100	(353		)	111		(242		)	n/m (1)			n/m (1)		n/m (1)
125	(353		)	111		(242		)	n/m (1)			n/m (1)		n/m (1)

(1) Not meaningful.

Item 4. Controls and Procedures

Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2020. The term “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the foregoing evaluation of our disclosure controls and procedures as of ~~June~~September 30, 2020, our Chief Executive Officer and 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

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended ~~June~~September 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We, OFS Advisor and OFS Services, are not currently subject to any material pending legal proceedings threatened against us as of ~~June~~September 30, 2020. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition, results of operations or cash flows.

Item 1A. Risk Factors

Investing in our common stock may be speculative and involves a high degree of risk. In addition to the other information contained in this Quarterly Report on Form 10-Q, including our financial statements, and the related notes, schedules and exhibits, you should carefully consider the risk factors described in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, ~~and in~~ ~~"Part II, Item 1A. Risk Factors"~~ ~~in our Quarterly Report in Form 10-Q for the quarter ended March 31, 2020 (the "First Quarter 10-Q"),~~ which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K ~~and First Quarter 10-Q~~ are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Other than the risks described below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019 and First Quarter 10-Q.~~2019. However, the risks below and disclosed in our Annual Report on Form 10-K, ~~and First Quarter 10-Q,~~ may be, and will continue to be, heightened or exacerbated by the COVID-19 pandemic and any worsening of the economic environment. The risks previously disclosed in our Annual Report on Form 10-K ~~and First Quarter 10-Q~~ should be read together with the other information disclosed elsewhere in this Quarterly Report on Form 10-Q and our other reports filed with the SEC.

Events outside of our control, including public health crises such as the COVID-19 pandemic, have and will continue to negatively affect the results of our operations.

Periods of market volatility may continue in response to pandemics, such as the COVID-19 pandemic, or other events outside of our control. These types of events have and will continue to adversely affect our operating results. In December 2019, COVID-19, caused by a novel strain of the coronavirus, surfaced in Wuhan, China. In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization. Shortly thereafter, the President of the United States declared a National Emergency throughout the United States attributable to such outbreak. The outbreak has become increasingly widespread globally and in the United States, including in the markets in which we operate. We have been and continue to assess the effects of the COVID-19 pandemic on our borrowers and are taking steps to help mitigate the adverse consequences to each of their businesses. As a result of the COVID-19 pandemic, we have and may continue to experience difficulty collecting timely interest and principal payments from our borrowers, our asset values have and may continue to decline, and certain of our outstanding loans may need to be extended or restructured. We have held discussions with our borrowers and they have expressed their general concern about the uncertain economic condition. The impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the COVID-19 pandemic or treat its impact, all of which are beyond our control. Though the magnitude of the impact remains to be seen, our borrowers and by extension our operating results will be adversely impacted by the COVID-19 pandemic.

In addition to adverse United States domestic and global macroeconomic effects, including the adverse impacts on our portfolio companies and investment assets, the COVID-19 pandemic has caused, and will continue to cause, a reduction in our ability to access capital through the capital markets and through our credit facilities, and has otherwise adversely impacted, and will continue to impact, the operation of our business. The COVID-19 pandemic has also caused, and will continue to cause, substantial disruption to our employees, investors, business partners, referral sources, borrowers and prospective borrowers through self-isolation, travel limitations, business restrictions, and otherwise. Many areas within the United States have imposed mandatory closures for businesses not deemed to be essential, and it is currently unclear for how long such closures will last. Though all of OFS Advisor's employees are able to work remotely, these closures have nevertheless affected many of our borrowers and many businesses through which we seek new borrowers, resulting in significant declines in new loans and investments. These effects, individually or in the aggregate, have, and will continue to, adversely impact our business, financial condition, operating results and cash flows and such adverse impacts may be material.

Any of the foregoing factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our investment income and damage our results of operations and our liquidity position, possibly to a significant degree. The duration of any such impacts cannot be predicted.

The effects of the outbreak of COVID-19 have negatively affected the global economy, the United States economy and the global financial markets, and have and may continue to disrupt our operations and our borrowers' operations, which have and may continue to adversely impact our business, financial condition and results of operations.

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The United States now has the world’s most reported COVID-19 cases, and all 50 states and the District of Columbia have reported cases of infected individuals. A majority of states, including Illinois, where we are headquartered, have declared states of emergency. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the beginning of the COVID-19 pandemic, more than 55 million people have filed claims for unemployment, and stock markets have experienced increased volatility and, in particular, BDC stocks have significantly declined in value. In response to the COVID-19 pandemic, the Federal Reserve Board has reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused OFS Advisor to modify its business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. OFS Advisor may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

demand for our services may decline, making it difficult to grow assets and income;

if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, loan non-accruals, problem assets, and bankruptcies may increase, resulting in increased charges and reduced income;

collateral for loans may decline in value, which could cause loan losses to increase;

our fair values may continue to decrease if borrowers experience financial difficulties, which will adversely affect our net income;

increased amendments and/or restructuring to the terms or our portfolio company loan agreements, which may increase the amount of PIK interest, and defer the collection of cash interest and/or increase the risk of default;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

as the result of the decline in the Federal Reserve Board’s target federal funds rate, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

reduction in our ability to access the capital markets or credit facilities may cause a distressed liquidity position and result in a decrease or inability to pay dividends.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of our executive officers or directors or key employees of OFS Advisor due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above has and could continue to negatively impact our business, financial condition and results of operations and prospects.

Our investments in Structured Finance Notes are more likely to suffer a loss of all or a portion of their value in the event of a default.

From time to time, we invest in Structured Finance Notes that comprise the equity tranche of CLOs, which are junior in priority of payment and are subject to certain payment restrictions generally set forth in an indenture governing the notes. In addition, Structured Finance Notes generally do not benefit from any creditors’ rights or ability to exercise remedies under the indenture governing the notes. Structured Finance Notes are not guaranteed by another party and are subject to greater risk than the secured notes issued by the CLO. CLOs are typically highly levered, utilizing up to approximately 9-13 times leverage, and therefore Structured Finance Notes are subject to a risk of total loss. There can be no assurance that distributions on the assets held by the CLO will be sufficient to make any distributions or that the yield on the Structured Finance Notes will meet our expectations.

CLOs generally may make payments on Structured Finance Notes only to the extent permitted by the payment priority provisions of an indenture governing the notes issued by the CLO. CLO indentures generally provide that principal payments on Structured Finance Notes may not be made on any payment date unless all amounts owing under secured notes are paid in full. In addition, if a CLO does not meet the asset coverage tests or the interest coverage test set forth in the indenture governing the notes issued by the CLO, cash would be diverted from the Structured Finance Notes to first pay the secured notes in amounts sufficient to cause such tests to be satisfied.

We will have no influence on management of underlying investments managed by non-affiliated third-party CLO collateral managers.

We are not responsible for, and have no influence over, the asset management of the portfolios underlying the Structured Finance Notes we hold as those portfolios are managed by non-affiliated third-party CLO collateral managers. Similarly, we are not responsible for and have no influence over the day-to-day management, administration or any other aspect of the issuers of the individual securities. As a result, the values of the portfolios underlying our Structured Finance Notes could decrease as a result of decisions made by third-party CLO collateral managers.

Due to the COVID-19 pandemic or other disruptions in the economy, we may not be able to increase our dividends and may reduce or defer our dividends and choose to incur US federal excise tax in order preserve cash and maintain flexibility.

As a BDC, we are not required to make any distributions to stockholders other than in connection with our election to be taxed as a RIC under subchapter M of the Code. In order to maintain our tax treatment as a RIC, we must distribute to stockholders for each taxable year at least 90% of our investment company taxable income (i.e., net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses). If we qualify for taxation as a RIC, we generally will not be subject to corporate-level US federal income tax on our investment company taxable income and net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) that we timely distribute to stockholders. We will be subject to a 4% US federal excise tax on undistributed earnings of a RIC unless we distribute each calendar year at least the sum of (i) 98.0% of our ordinary income for the calendar year, (ii) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year, and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which we paid no federal income tax.

Under the Code, we may satisfy certain of our RIC distributions with dividends paid after the end of the current year. In particular, if we pay a distribution in January of the following year that was declared in October, November, or December of the current year and is payable to stockholders of record in the current year, the dividend will be treated for all US federal tax purposes as if it were paid on December 31 of the current year. In addition, under the Code, we may pay dividends, referred to as “spillover dividends,” that are paid during the following taxable year that will allow us to maintain our qualification for taxation as a RIC and eliminate our liability for corporate-level U.S. federal income tax. Under these spillover dividend procedures, we may defer distribution of income earned during the current year until December of the following year. For example, we may defer distributions of income earned during 2020 until as late as December 31, 2021. However, if we choose to pay a spillover dividend, we will still incur the 4% U.S. federal excise tax on some or all of the distribution.

Due to the COVID-19 pandemic or other disruptions in the economy, we anticipate that we may take certain actions with respect to the timing and amounts of our distributions in order to preserve cash and maintain flexibility. For example, we anticipate that we will not be able to increase our dividends. In addition, we may reduce our dividends and/or defer our dividends to the following taxable year. If we defer our dividends, we may choose to utilize the spillover dividend rules discussed above and incur the 4% U.S. federal excise tax on such amounts. To further preserve cash, we may combine these reductions or deferrals of dividends with one or more distributions that are payable partially in our stock as discussed above under the risk factor “We may in the future choose to pay distributions in our own stock, in which case stockholders may be

required to pay tax in excess of the cash they receive” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

We have been, and will continue to be, adversely impacted by the outbreak of COVID-19 and a potential worsening of the pandemic.

The COVID-19 pandemic has caused a sharp global slowdown of economic activity resulting in a recession, a steep increase in unemployment in the U.S., and significant volatility and disruption of financial markets. Health advisors warn that ~~a “second wave”~~“subsequent waves” of the pandemic isare possible if reopening is pursued too soon or in the wrong manner or if measures to contain the COVID-19 pandemic are inadequate, which may negatively affect or exacerbate the global economy, the ~~United States~~U.S. economy and the global financial markets. The pandemic had a significant adverse impact on us during the first ~~quarter~~and second quarters of 2020, ~~continues~~continued to have an adverse impact on us during the ~~second~~third quarter of 2020 and is expected to continue to adversely impact our company beyond ~~second-quarter~~third-quarter 2020. Because the pandemic is unprecedented in recent history, and its severity, duration and future economic consequences are difficult to predict, we cannot predict or assess its future impact on us with any certainty.

Uncertainty relating to the LIBOR calculation process and transition timing may adversely affect the value of any portfolio of LIBOR-indexed, floating-rate debt securities.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of any portfolio of LIBOR-indexed, floating-rate debt securities. Concerns have been publicized that some of the member banks surveyed by the British Bankers' Association (“BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing. Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our potential portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our potential portfolio of LIBOR indexed, floating-rate debt securities.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next several years. As a result of this transition, interest rates on financial instruments tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may

be adversely affected. Further, any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the value of our financial instruments tied to LIBOR rates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate (“SOFR”). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain.

Additionally, on July 12, 2019 the Staff of the SEC’s Division of Corporate Finance, Division of Investment Management, Division of Trading and Markets, and Office of the Chief Accountant issued a statement about the potentially significant effects on financial markets and market participants when LIBOR is discontinued in 2021 and no longer available as a reference benchmark rate. The Staff encouraged all market participants to identify contracts that reference LIBOR and begin transitions to alternative rates. On December 30, 2019, the SEC’s Chairman, Division of Corporate Finance and Office of the Chief Accountant issued a statement to encourage audit committees in particular to understand management’s plans to identify and address the risks associated with the elimination of LIBOR, and, specifically, the impact on accounting and financial reporting and any related issues associated with financial products and contracts that reference LIBOR, as the risks associated with the discontinuation of LIBOR and transition to an alternative reference rate will be exacerbated if the work is not completed in a timely manner.

In addition, on March 25, 2020, the FCA stated that although the central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed, the outbreak of COVID-19 has impacted the timing of many firms’ transition planning, and the FCA will continue to assess the impact of the COVID-19 pandemic on transition timelines and

update the marketplace as soon as possible. It is unclear if after 2021 LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us, or on our overall financial condition or results of operations. If LIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three month period ended ~~June~~September 30, 2020, we issued ~~7,165~~6,708 shares of common stock to stockholders in connection with our DRIP. These issuances were not subject to the registration requirements of the Securities Act. The aggregate value of the shares of our common stock issued under our distribution reinvestment plan was approximately ~~$32,385.~~$31,593.

Issuer Purchases of Equity Securities

On May 22, 2018, the Board authorized the Company to initiate the Stock Repurchase Program under which the Company could acquire up to $10.0 million of its outstanding common stock through the two-year period ending May 22, 2020.

On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period. Under the extended Stock Repurchase Program, the Company is authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. The Company expects the Stock Repurchase Program to be in place through May 22, 2022, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate the Company to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. The Company retires all shares of common stock that it purchases in connection with the Stock Repurchase Program.

During the three months ended ~~June~~September 30, 2020, we repurchased -0- shares of common stock on the open market for under the Stock Repurchase Program. The following table provides information regarding the Stock Repurchase Program (amount in thousands except shares):


Period	Total Number of Shares Purchased ⁽¹⁾	Cost of Shares Purchased		Average Price Paid Per Share		Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Stock Repurchase Program		Total Number of Shares Purchased ⁽¹⁾	Cost of Shares Purchased		Average Price Paid Per Share		Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Stock Repurchase Program
May 22, 2018 through June 30, 2018	—	$	—	$	—	$	10,000	—	$	—	$	—	$	10,000
July 1, 2018 through September 30, 2018	—	$	—	$	—	$	10,000	—	$	—	$	—	$	10,000
October 1, 2018 through December 31, 2018	300	$	3	$	10.29	$	9,997	300	$	3	$	10.29	$	9,997
January 1, 2019 through March 31, 2019	—	$	—	$	—	$	9,997	—	$	—	$	—	$	9,997
April 1, 2019 through June 30, 2019	—	$	—	$	—	$	9,997	—	$	—	$	—	$	9,997
July 1, 2019 through September 30, 2019	—	$	—	$	—	$	9,997	—	$	—	$	—	$	9,997
October 1, 2019 through December 31, 2019	—	$	—	$	—	$	9,997	—	$	—	$	—	$	9,997
January 1, 2020 through March 31, 2020	—	$	—	$	—	$	9,997	—	$	—	$	—	$	9,997
April 1, 2020 through June 30, 2020	—	$	—	$	—	$	9,997	—	$	—	$	—	$	9,997
July 1, 2020 through September 30, 2020								—	$	—	$	—	$	9,997


(1)	Excludes shares purchased on the open market and reissued in order to satisfy the DRIP obligation.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Amendment to Senior Secured Revolving Credit Facility~~

On July 29, 2020, the Company executed an amendment (the “Amendment”) to its BLA with Pacific Western Bank in order to reduce the total commitment under the PWB Credit Facility from $100,000,000 to $50,000,000. The Company expects to benefit from a reduction in the unused commitment fee of 0.50% on any unused portion of the total commitment over $15,000,000. As of July 29, 2020, the Company had $13.8 million outstanding under the PWB Credit Facility. There were no reduction penalties incurred by the Company in connection with the Amendment.

The foregoing description of the Amendment is not complete and is qualified in its entirety by the text of such Amendment, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated by reference herein.

Not applicable.

Item 6. Exhibits

Listed below are the exhibits that are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):



		Incorporated by Reference
Exhibit Number	Description	Form and SEC File No.	Filing Date with SEC	Filed with this 10-Q

4.1	Fourth Supplemental Indenture dated of September 18, 2020 between OFS Capital Corporation and U.S. Bank National Association, as trustee.	Form 8-K 814-00813	September 18, 2020

4.2	Form of 6.25% Notes due 2023 (incorporated by reference to Exhibit 4.1 and Exhibit A therein).	Form 8-K 814-00813	September 18, 2020

10.1	Amendment ~~One~~Three to the Business Loan Agreement between OFS Capital Corporation and Pacific Western Bank dated ~~June 26,~~October 7, 2020	Form 8-K 814-00813	~~July 2,~~October 9, 2020

~~10.2~~	~~Amendment Two to the Business Loan Agreement between OFS Capital Corporation and Pacific Western Bank dated July 29, 2020~~			*

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended			*

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended			*

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			†

32.2	Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			†



*	Filed herewith
†	Furnished herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Dated: ~~July 31,~~November 6, 2020	OFS CAPITAL CORPORATION

	By:	/s/ Bilal Rashid
	Name:	Bilal Rashid
	Title:	Chief Executive Officer

	By:	/s/ Jeffrey A. Cerny
	Name:	Jeffrey A. Cerny
	Title:	Chief Financial Officer

8087



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



Unsecured Notes	Principal		Stated Interest Rate ⁽¹⁾		Effective Interest Rate ⁽²⁾		Maturity ⁽³⁾	Interest Expense ⁽⁴⁾
Unsecured Notes Due April 2025	$	50,000	6.375	%	6.88	%	4/30/2025	$	1,721
Unsecured Notes Due October 2025	48,525		6.50	%	7.01	%	10/31/2025	1,700
Unsecured Notes Due October 2026	54,325		5.95	%	6.49	%	10/31/2026	1,784
Total	$	152,850						$	5,205