OFS 10-K & 10-Q changes, risk factors and insider trading

•Global economic, political and market conditions may adversely affect our business, our ability to accesssecure capital,debt financing, and our results of operations and financial condition, including our revenue growth and profitability.

•Insufficient cash flows may increase our risk of default of our debt obligations, including under our Unsecured NotesNotes, our Natixis Facility and our BNPBanc of California Credit Facility.

•Our investments in private and middle-market portfolio companies are generally considered lower credit quality obligations, are generally illiquid, are risky, and we could lose all or part of our investment.

•If we make subordinated debt investments, the obligors or the portfolio companies may not generate sufficient cash flow to service their debt obligations to us.

Global economic, political and market conditions may adversely affect our business, our ability to accesssecure capital,debt financing, and our results of operations and financial condition, including our revenue growth and profitability.

The uncertain state of the global economy, as well as various social, economic and political tensions in both the United States and around the world (including war, terrorist attacks and other forms of conflict), may contribute to increased market volatility, may have long term effects on the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide. For example, there is currently geopolitical, economic and financial market instability in the United States, the United Kingdom, the European Union and China, and as a result of the ongoing war between Russia and Ukraine.Ukraine and activity in South America.

In addition, the impact of recent shifts in U.S. trade policy has added further uncertainty to global economic conditions. The U.S. government has imposed, and may continue to impose, significant increases in tariffs and other trade restrictions on certain foreign goods imported into the U.S. Some foreign governments, including China, have instituted retaliatory tariffs, on certain U.S. goods. These actions, and the possibility of further changes to international trade agreements, trade policies and immigration policiespolicies, could add to price and wage pressures and may elevate inflation. Any disruptions in the capital markets, as a result of economic, political and market instability (including as a result of the change incurrent U.S. presidential administrations,administration, athe prolonged November 2025 shutdown of U.S. government services,services and the risk of additional shutdowns, strikes, work stoppages, labor shortages, labor disputes, supply chain disruptions and accidents), may increase the spread between the yields realized on risk-free and higher risk securities and can result in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market. These and any other unfavorable economic conditions could increase our funding costs, limit our access to the capital markets and result in a decision by lenders not to extend credit to us.

The current inflationary environment may continue and some economists predict that the U.S. economy may enter an economic recession. The current economic and financial market instability as well as the risk of recession, may lead to financial institutions limiting their lending activity and refinancing transactions. It may become difficult for us to secure appropriate financing to finance the growth of our investments on acceptable economic terms. Market volatility is also likely to result in borrower defaults and/or restructuring of existing credit arrangements. Major public health incidents may lead to significant economic disruption in the economy of the United States and the economies of other nations. Any such disruption or future pandemics, as well as the generally negative economic impact of such events, may have adverse impacts on our business and our results of operations and financial condition. While certain markets have shown signs of stabilizing, market conditions remain uncertain and a period of deterioration and volatility could re-emerge.

Negative economic trends would also increase the likelihood that major financial institutions or other entities having a significant impact on the financial and credit markets may suffer a bankruptcy or insolvency. In addition, certain industries may feel the impact of such negative economic trends more than others. There is a material possibility that economic activity will be volatile or will slow significantly, and some obligors may be significantly and negatively impacted by these negative economic trends. Although the leveraged finance and CLO markets have made significant recoveries from the adverse impact of the credit crisis, thereThere can be no assurance that the leveraged finance and CLO markets will not be adversely impacted by future economic downturns or market volatility.

Overall uncertainty in the global and U.S. economic environment globally and in the United States may adversely affect our business, ability to secure debt financing, results of operations and financial condition, including our revenue growth and profitability. We continuously monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.

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 U.S. 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 we: (i) declare on or before the later of the 15th day of the 9th month following the close of our taxable year oror, in the case of an extension of time for filing our return for the taxable year, the due date for filing such return taking into account such extension; and (ii) pay during the following taxable year (but not later than the date of the first dividend payment of the same type of dividend made after such declaration). Such dividends 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 2025 until as late as December 31, 2026. 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.

OFS Advisor is a wholly owned subsidiary of OFSAM, has no employees of its own and depends upon access to the investment professionals and other resources of OFSC and its affiliates to fulfill its obligations to us under the Investment Advisory Agreement. OFS Advisor also depends upon OFSC to obtain access to deal flow generated by the professionals of OFSC and its affiliates. Under a staffing agreement between OFSC and OFS Advisor, OFSC has agreed to provide OFS Advisor with the following services to enable OFS Advisor to undertake and perform its business activities as an investment adviser: (i) the provision of staff necessary to meet all staffing requirements, including making available experienced investment professionals and access to the senior investment personnel of OFSC and its affiliates; and (ii) the services of certain named members of the investment committee of OFS Advisor. Experienced investment professionals include investment professionals with reasonable industry experience who are responsible for making investment decisions, conducting research and analysis, and managing risks to achieve their clients’ financial goals. Roles and titles of such individuals include, but are not limited to, directors, associates and analysts who evaluate, structure, monitor and review investments of OFS Advisor and its clients, including the Company. Senior investment personnel include investment professionals that have developed a broad network of contacts within the investment community and that have an average of over 25 years of investinginvestment experience, including experience with structuring and investing in CLOs, as well as investing in assets that constitute the underlying assets held by typical CLOs in which the Company will invest. Roles and titles of such individuals include president, chief executive officer, chief financial officer, senior managing director and managing director. To manage potential conflicts of interest that may arise as a result of the staffing agreement, OFS Advisor and its clients, including the Company, have jointly adopted a Code of Ethics that is designed to address potential conflicts of interest and establishes applicable policies, guidelines and procedures that promote ethical practices and conduct by all personnel of OFS Advisor and OFSC and prevent violations of applicable laws, including the Advisers Act and the 1940 Act.

We do not have any internal management capacity or employees. We depend on the diligence, skill and network of business contacts of the OFSC senior professionals to achieve our investment objectives. Our future success will depend, to a significant extent, on the continued service and coordination of the OFSC senior management team, particularly Bilal Rashid, Jeffrey A. Cerny, Glen Ostrander and Kenneth A. Brown (collectively, the “Senior Investment Team”). Each of these individuals is an employee at will of OFSC, and is not subject to an employment contract. In addition, we rely on the services of Richard Ressler, Chairman of the executive committee of OFSAM Holdings and Chairman of the Middle Market Investment Committee of OFS Advisor, Structured Credit Investment Committee of OFS Advisor and Broadly Syndicated Investment Committee of OFS Advisor pursuant to a consulting agreement with Orchard Capital Corporation. The departure of Mr. Ressler, any of the Senior Investment Team, any of the senior managers of OFSC, or of a significant number of its other investment professionals, could have a material adverse effect on our ability to achieve our investment objective. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments.”

We expect that OFS Advisor will continue to evaluate, negotiate, structure, close and monitor our investments in accordance with the terms of the Investment Advisory Agreement. We can offer no assurance, however, that OFSC senior professionals will continue to provide investment advice to us. If these individuals do not maintain their existing relationships with OFSC and its affiliates and do not develop new relationships with other sources of investment opportunities, we may not be able to grow our investment portfolio or achieve our investment objective.objectives. In addition, individuals with whom the OFSC senior professionals have relationships are not obligated to provide us with investment opportunities. Therefore, we can offer no assurance that such relationships will generate investment opportunities for us.

Our ability to achieve our investment objectiveobjectives and to grow will depend on our ability to manage our business. This will depend,This, in turn, will depend on the ability of the Advisor Investment Committees to identify, invest in and monitor companies that meet our investment criteria. The achievement ofAchieving our investment objectives on a cost-effective basis will depend upon the Advisor Investment Committees’ ability to execute our investment process, their ability to provide competent, attentive and efficient services to us and, to a lesser extent, our access to financing on acceptable terms. OFS Advisor has substantial responsibilities under the Investment Advisory Agreement. OFS Advisor’s senior professionals and other personnel of OFS Advisor’s affiliates, including OFSC, may be called upon to provide managerial assistance to our portfolio companies. These activities may distract them or slow our rate of investment. Any failure to manage our business and our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.

Our investments may include contractual PIK interest or PIK dividends, which represents contractual interest or dividends added to a loan balance or equity security and are due at the end of such loan’s or equity security’s term. To the extent PIK interest and PIK dividends constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash. Such risks include:

Many of our portfolio investments take the form of securities that are not publicly traded and their fair value may not be readily determinable. In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act (“Rule 2a-5”), which establishes requirements for good faith determinations of fair value, and addresses both the Board’s and the “valuation designee’s” roles and responsibilities relating to fair valuation. On September 7, 2022, pursuant to Rule 2a-5, our Board designated OFS Advisor, as valuation designee, to perform fair value determinations relating to our investments, for which market quotations are not readily available. In order for the Board to maintain oversight, OFS Advisor implemented the requirements as prescribed in Rule 2a-5. The determination of fair value and, consequently, the amount of unrealized gains and losses in our portfolio, are, to a significant degree, subjective and dependent on a valuation process undertaken by OFS Advisor and overseen by our Board. Valuation of certain investments will also be based, in part, upon third partythird-party valuation models which take into account various unobservable inputs.

Certain factors that may be considered in determining the fair value of our investments include third-party yield benchmarks and comparison to publicly traded securitiessecurities, including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and cash flow, the markets in which the portfolio company does business and other relevant factors. The models, information and/or underlying assumptions utilized by OFS Advisor will not always allow OFS Advisor to correctly capture the fair value of an asset. Because such valuations, and particularly valuations of securities that are not publicly traded, like those we hold, are inherently uncertain, they may fluctuate materially over short periods of time and may be based on estimates. OFS Advisor’s determinations of fair value may differ materially from the values that would have been used if an active public market for these securities existed. OFS Advisor’s determinations of the fair value of our investments have a material impact on our net earnings through the recording of unrealized appreciation or depreciation of investments and may cause our NAV on a given date to understate or overstate, possibly materially, the value that we may ultimately realize on one or more of our investments.

The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. We may pledge up to 100% of our assets and may grant a security interest in all of our assets, other than assets held in OFSCC-FS and SBIC I LP,OFSCC-FS, under the terms of any debt instruments we may enter into with lenders. In addition, under the terms of any credit facility or other debt instrument we enter into, we are likely to be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our equity stake in a leveraged investment. Similarly, any decrease in our revenue or income will cause our net income to decline more sharply than it would havehave, had we not borrowed. Such a decline would also negatively affect our ability to make dividend payments on our common stock or preferred stock, as applicable. Our ability to service our debt will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, because the base management fee payable to OFS Advisor is payable based on our total assets (other than cash and cash equivalents but including assets purchased with borrowed amounts and including assets owned by any consolidated entity), OFS Advisor has a financial incentive to cause us to incur leverage which may not be consistent with our stockholders’ interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the base management fee payable to OFS Advisor.

On May 3, 2018, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the application of a reduced 150% asset coverage ratio to us; therefore, provided certain conditions are met, we became subject to the reduced asset coverage ratio as of May 3, 2019. See “Item 1A. Risk Factors—Risks Related to our Business and Structure—BecauseWe we received the approval of our Board, we becameare subject to 150%reduced asset coverage effectivefor Mayborrowings, 3,which 2019.increases the maximum amount of leverage we may incur.” As of December 31, 2024,2025, our asset coverage ratio was 169%.156%.

Insufficient cash flows may increase our risk of default of our debt obligations, including under our Unsecured NotesNotes, our Natixis Facility and our BNPBanc of California Credit Facility.

Any default under the agreements governing our indebtedness, including under our Unsecured NotesNotes, our Natixis Facility and our BNPBanc of California Credit Facility, that is not waived and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on our other debt obligations. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. Our ability to generate sufficient cash flows in the future is, to some extent, subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure our stockholders that our business will generate cash flows from operations to meet the payment obligations of our debt obligations under our Unsecured NotesNotes, our Natixis Facility and our BNPBanc of California Credit Facility.

The 1940 Act generally prohibits a BDC from incurring indebtedness unless, immediately after such borrowing, it has an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of its assets). However, Section 61(a)(2) of the 1940 Act allows a BDC to increasereduce its asset coverage ratio from 200% to 150% if certain requirements are met, thereby increasing the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met.incur.

On May 3, 2018, our Board approved the application of the reduced asset coverage ratio available to us made available under Section 61(a)(2) of the 1940 Act. As a result, effective May 3, 2019, we were able to increase our leverage up to an amount that reduces our asset coverage ratio from 200% to 150% (i.e., the amount of debt may not exceed 66 2/3% of the value of our assets). Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, our stockholders will experience increased risks of investing in our securities. If the value of our assets increases, then the additional leverage would cause the NAV attributable to our common stock to increase more sharply than it would have had we not increased our leverage. Conversely, if the value of our assets decreases, the additional leverage would cause NAV to decline more sharply than it otherwise would have had we not increased our leverage. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the additional leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not increased our leverage. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique. See “Item 1A. Risk Factors—Risks Related to Our Business and Structure—We may finance our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.”

In addition, the ability of BDCs to increase their leverage will increase the capital available to BDCsthem and thus intensify competition for the investments that we seek to make. This may negatively impact pricing on the investments that we do make and adversely affect our net investment income and results of operations.

A rise in the general level of interest rates typically leads to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates may result in an increase ofin the amount of incentive fees payable to OFS Advisor.

Under Rule 18f-4, BDCs that use derivatives are subject to a value-at-risk leverage limit, a derivatives risk management program andprogram, testing requirements and requirements related to board reporting. These requirements apply unless the BDC qualifies as a “limited derivatives user,” as defined in the rule. Under the rule, a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has, among other things, a reasonable belief,belief at the time it enters into such an agreement,agreement that it will have sufficient cash and cash equivalents to meet all of its obligations with respect to all ofunder its unfunded commitment agreements, in each caseagreements as itthey becomesbecome due. Collectively, these requirements may limit our ability to use derivatives and/or to enter into certain other financial contracts.

Preferred stock, whichstock is another form of leverage,leverage hasand presents the same risks to our common stockholders as borrowings because the dividends on any preferred stock we issue must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common stockholders,stockholders. andAdditionally, preferred stockholders are not subject to any of our expenses or losses and are not entitled to participate in any of our income or appreciation in excess of their stated preference.

A number of entities compete with us to make the types of investments that we plan to make. We compete with public and private funds, other BDCs, commercial and investment banks, commercial finance companies and, to the extent they provide an alternative form of financing, private equity firms and hedge funds. Many of our competitors are substantially larger than we are and have considerably greater financial, technical and marketing resources than we do. For example, some of our competitors may have access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposesimposed on us as a BDC under the 1940 Act or the source of income, asset diversification and distribution requirements we must satisfynecessary to maintain our RIC tax treatment. These characteristicsadvantages could allow our competitors to consider a wider variety of investment instruments, establish more extensive relationships and offer better pricing andor more flexible structuring than we are able to. The competitive pressures we face may have a material adverse effect on our business, financial condition and results of operations. As a result of this competition, we may not be able to take advantage of attractive investment opportunities or make investments that are consistent with our investment objectives.

With respect to the investments we make, we will not seek to compete based primarily on the basis of interest rates we will offer, and we believe that some of our competitors may make loans with interest rates that will be lower than the rates we offer. In the secondary market for acquiring existing loans, we expect to compete generally on the basis of pricing terms. With respect to all investments, we may lose some investment opportunities if we do not match our competitors’the pricing, terms andor structure.structural features offered by our competitors. However, if we do match our competitors’ pricing, terms and structure, we may experience decreased net interest income, lower yields and an increased risk of credit loss. We may also compete for investment opportunities with OFSAM Holdings and its affiliates or accounts managed by OFSAM Holdings’Holdings’s affiliates. Although OFS Advisor will allocate opportunities in accordance with its policies and procedures, allocations to such other accounts will reduce the amount and frequency of opportunities available to us and may not bealign inwith the best interests of us and our stockholders. Moreover, the performance of investmentsany investment will not be known at the time ofallocation allocation.decisions are made.

If we fail to qualify for tax treatment as a RIC for any reasonreason, and certain cure provisions are not applicable, we would become subject to U.S. federal income tax,tax theimposed at corporate rates on all of our taxable income (including our net capital gains). The resulting taxes at corporate rates could substantially reduce our net assets, the amount of income available for distribution to stockholders and the amount of our distributions and the amount of funds available for new investments. Such a failure would have a material adverse effect on us and our stockholders. See “Item 1. Business—Material U.S. Federal Income Tax Considerations—Taxation as a RIC.”

In order for us to maintain our tax treatment as a RIC and to minimize corporate-level taxes, we are required to distributedistribute, on an annual basisbasis, substantially all of our taxable income, which includes income from our subsidiaries and portfolio companies. Distributions from OFSCC-FS to us are restricted by the terms and conditions of the BNPNatixis Facility. If our subsidiaries and portfolio companies are unable to make distributions to us, this may result in the loss of our RIC tax treatment and a consequent imposition of a corporate-level federal income tax on us.

For U.S. federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as OID or market discount, which may arise if we acquire a debt security at a significant discount to par. Such discounts will be included in income before we receive any corresponding cash payments. We also may be required to include certain other amounts in income that we will not receive in cash. Since, in certain cases, we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. Accordingly, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forego new investment opportunities for this purpose. If we are unable to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to U.S. federal income taxes at corporate rates.

We distribute taxable distributions that are payable in cash or shares of our common stock at the election of each stockholder. In accordance with guidance issued by the Internal Revenue Service, a publicly traded RIC should generally be eligible to treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder is permitted to elect to receive his or her distribution either in either cash or in stock of the RIC (even where there is a limitation on the percentage of the distribution payable in cash, provided that the limitation is at least 20%), subject to the satisfaction of certain guidelines. If too many stockholders elect to receive their distributions in cash, each such stockholder would receive a pro rata share of the total cash to be distributed and would receive the remainder of their distribution in shares of stock. If this and certain other requirements are met, for U.S. federal income tax purposes, the amount of the distribution paid in stock generally will be a taxable distribution in an amount equal to the amount of cash that could have been received instead of stock. If we decide to make any distributions consistent with this guidance that are payable in part in our stock, stockholders receiving such distribution would be required to include the full amount of the distribution (whether received in cash, our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly designated as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock received as a dividend in order to pay this tax, it may be subject to transaction fees (e.g., broker fees or transfer agent fees) and, depending on the market price of our stock at the time of the sale, the sales proceeds may be less than the amount included in income with respect to the dividend. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock.

We have elected to be taxed for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. If we meet certain requirements, including source of income, asset diversification and distribution requirements, and if we continue to qualify as a BDC, we will continue to qualify for tax treatment as RIC under the Code and will not have to pay U.S. federal income taxes at corporate rates on income we distribute to our stockholders as dividends, allowing us to substantially reduce or eliminate our U.S. federal tax liability at corporate rates. Because we received the approval of our Board, we are generally required to meet a coverage ratio of total assets to total senior securities, which includes all of our borrowings and any preferred stock we may issue in the future, of at least 150% at the time we issue any debt or preferred stock. See “Item 1A. Risk Factors—Risks Related to our Business and Structure—BecauseWe we received the approval of our Board, we becameare subject to 150%reduced asset coverage effectivefor Mayborrowings, 3,which 2019.increases the maximum amount of leverage we may incur.” This requirement limits the amount that we may borrow. Because we will continue to need capital to grow our investment portfolio, this limitation may prevent us from incurring debt or preferred stock and require us to raise additional equity at a time when it may be disadvantageous to do so. We cannot assure investors that debt and equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted by the terms of any of our outstanding borrowings. In addition, as a BDC, we are generally not permitted to issue common stock priced below NAV without stockholder approval. If additional funds are not available to us, we could be forced to curtail or cease new lending and investment activities, and our NAV could decline.

The Banc of California Credit Facility provides us with a senior secured revolving line of credit of up to $25.0 million, with maximum availability equal to 50% of the aggregate outstanding principal amount of eligible loans included in the borrowing base and otherwise specified in the Banc of California Credit Facility. The Banc of California Credit Facility is guaranteed by OFSCC-MB and secured by all of our and OFSCC-MB’s current and future assets, excluding assets held by OFSCC-FS and SBIC I LP,OFSCC-FS, and our partnership interest in SBIC I LP. The Banc of California Credit Facility contains customary terms and conditions, including, without limitation, affirmative and negative covenants such as information reporting requirements, a minimum tangible NAV, a minimum quarterly net investment income after incentive fees and a maximum ratio of total liabilities divided by NAV. The Banc of California Credit Facility 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. The Banc of California Credit Facility permits us to fund additional investments as long as we are within the conditions set out in the Banc of California Credit Facility. Our continued compliance with these covenants depends on many factors, some of which are beyond our control, and there are no assurances that we will continue to comply with these covenants. Our failure to satisfy these covenants could result in foreclosure by our lender, which would accelerate our repayment obligations under the Banc of California Credit Facility and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders. As of December 31, 2024,2025, the Banc of California Credit Facility had an outstanding balance of $1.0$4.5 million and an unused commitment of $24.0$20.5 million, subject to a borrowing base and other covenants.

Economic recessions or downturns may result in a prolonged period of market illiquidity, which could have a material adverse effect on our business, financial condition and results of operations. During the economic downturn in the United States that began in mid-2007, many commercial banks and other financial institutions stopped lending or significantly curtailed their lending activity. In addition, in an effort to stem losses and reduce their exposure to segments of the economy deemed to be high risk, some financial institutions limited routine refinancing and loan modification transactions and even reviewed the terms of existing facilities to identify bases for accelerating the maturity of existing lending facilities. In the event of a market downturn or recession, it may be difficult for us to obtain desired financing to finance the growth of our investments on acceptable economic terms, or at all.

If we are unable to consummate credit facilities on commercially reasonable terms, or if the banks and financial institutions with whom we have credit facilities enter into receivership, undergo consolidation or become insolvent, our liquidity may be reduced significantly. If we are unable to repay amounts outstanding under any facility we may enter into and are declared in default or are unable to renew or refinance any such facility, it would limit our ability to initiate significant originations or to operate our business in the normal course. These situations may arise due to circumstances that we may be unable to control, such as inaccessibility of the credit markets, a severe decline in the value of the U.S. dollar, an economic downturn or an operational problem that affects third parties or us, and could materially damage our business. Moreover, we are unable to predict when economic and market conditions may be favorable or if adverse conditions in particular sectors of the financial markets could adversely impact our business.

RecentOngoing developments in the banking sector could materially affect the success of our activities and investments.

RecentOngoing developments involving insolvency, closure, receivership or other financial distress or difficulty and related events experienced by certain U.S. and non-U.S. banks (each, a “Distress Event”), have generally caused uncertainty and fear of instability in the global financial system. In addition, eroding market sentiment and speculation of potential future Distress Events have caused other financial institutions -— in particular smaller and/or regional banks -— to experience volatile stock prices and significant losses in their equity value, and there is concern that depositors at these institutions have withdrawn, or may withdraw in the future, significant sums from their accounts at these institutions, potentially triggering the occurrence of additional Distress Events. Notwithstanding intervention by certain U.S. and non-U.S. governmental agencies to protect the uninsured depositors of banks that have recently experienced Distress Events, there is no guarantee that depositors (which depositors could include us and/or our portfolio companies) that have assets in excess of the Federal Deposit Insurance Corporation insurance limit on deposit with a financial institution that experiences a Distress Event will be made whole or, even if made whole, that such deposits will become available for withdrawal or other usage on a timely basis. For example, we regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. If a depository institution fails to return these deposits or is otherwise subject to adverse conditions in the financial or credit markets, our access to invested cash or cash equivalents could be limited which would adversely impact our results of operations or financial condition.

There is a risk that other banks, other lenders, or other financial institutions (including such financial institutions in their respective capacities as brokers, hedging counterparties, custodians, loan servicers, administrators, intermediary or other service providers) may be similarly impacted, and it is uncertain what steps (if any) government or other regulators may take in such circumstances. As a consequence, for example, we may be delayed or prevented from accessing funds or other assets, making any required payments under debt or other contractual obligations, paying distributions or pursuing key strategic initiatives. In addition, such banks’ or other financial institutions’ Distress Events and/or attendant instability could adversely affect, in certain circumstances, the ability of co-lenders, syndicate lendersco-lenders or other parties to undertake and/or execute transactions with us, which in turn may result in fewer investment opportunities being made available to us or being consummated by us, result in shortfalls or defaults under existing investments, or impact our ability to provide additional follow-on support to portfolio companies.

Uncertainty caused by recent bank failures -— and general concern regarding the financial health and outlook for other financial institutions -— could have an overall negative effect on banking systems and financial markets generally. These recent developments may also have other implications for broader economic and monetary policy, including interest rate policy. For the foregoing reasons, there can be no assurances that conditions in the banking sector and in global financial markets will not worsen and/or adversely affect us or our financial performance.

We and our portfolio companies are subject to regulation by laws at the U.S. federal, state and local levels, including those that govern BDCs, RICs, or non-depository commercial lenders. These laws and regulations, including applicable accounting standards,standards asand wellrelated as their interpretation,interpretations, may change from time to time, including as the result of directives from the U.S. President and others in theother executive branch officials and new laws, regulations, accounting standards and interpretations may also come into effect. AsA a result of the 2024 U.S. presidential election, onesingle political party currently controls both the executive and legislative branches of government, which increases the likelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Regulatory changes could result in greater competition from banks and other lenders with whichwhom we compete for lending and other investment opportunities. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. This could impose greater costs on all sectors and on financial services companies in particular and could have a material adverse effect on our business.

In addition, in June 2024, the U.S. Supreme Court reversed its longstanding approach under the Chevron doctrine, which provided for judicial deference to regulatory agencies. As a result of this decision, we cannot be sure whether there willmay be increased challenges to existing agency regulations orand it is unclear how lower courts will apply the decision in the context of other regulatory schemes without more specific guidance from the U.S. Supreme Court. For example, the U.S. Supreme Court's decision could significantly impact regulatory constructs relating to consumer protection, advertising, privacy, artificial intelligence, anti-corruption and anti-money laundering practices and other regulatoryareas regimes with which we are requiredapplicable to comply.our business. Any such regulatory developments could result in uncertainty about and changes in the ways such regulations apply to us,us and our portfolio companies, and may require additional resources to ensure our continued compliance. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a significant adverse effect on our business, financial condition and results of operations.

Legislative or other actions relating to taxes, including changes in how existing tax laws are interpreted or enforced, could have a negative effect on us. The ruleslaws dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. The effect of any changes implemented by the newcurrent U.S. presidential administration, Congress or taxing authorities could be complex and far-reaching, and these laws and regulations and any future laws or regulations or changes thereto could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations. For example, on July 4, 2025, the United States enacted “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (the “Act”), also known as the “One Big Beautiful Bill,” which includes significant amendments to the Code. The Act did not have a material impact on our consolidated financial statements. We also cannot predict with certainty how any future changes in the tax laws might affect us, our investors or our portfolio investments, but new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our investors of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax advisor regarding tax legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our common stock.

The United States has recently enactedenacted, and proposedmay continue to enactenact, significant new tariffs and U.S. relationstrade policy with the rest of the world remainremains uncertain with respect to taxes, trade policiestariffs and tariffs,import/export regulations, especially in response to the current U.S. presidential administration and Congress. ChangesAmong other possible changes, changes in U.S. administrative policy may lead to significant increases in tariffs for imported goods among other possible changes.goods. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us. Although the Supreme Court recently invalidated the tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”), certain tariff rates and obligations established through trade agreements that were negotiated during active IEEPA tariffs remain in effect, and the current administration has announced widely applicable tariffs pursuant to the Trade Act of 1974, effective February 24, 2026. The administration has indicated that it will continue seeking to implement tariffs through other statutory authorities as well. The scope of the Supreme Court's decision may create market uncertainty as it relates to the availability of refunds for prior tariffs and the imposition of new tariffs to replace those imposed under IEEPA.

There may be evidence of global climate change and the long-term effects of it are difficult to predict. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more systems backup, adding to costs, and can contribute to increased systemsystems stresses,stress, including service interruptions.

Regulatory and voluntary initiatives launched by international, federal, state, and regional policymakers and regulatory authorities as well as private actors seeking to reduce greenhouse gas emissions may expose our portfolio companiesinvestments to other types of transition risks, such as: (i) political and policy risks (including changing regulatory incentives, and legal requirements, including with respect to greenhouse gas emissions, that could result in increased costs or changes in business operations); (ii) regulatory and litigation risks (including changing legal requirements that could result in increased permitting, tax and compliance costs, changes in business operations, or the discontinuance of certain operations, and litigation seeking monetary or injunctive relief related tofrom impacts related to climate change); (iii) technology and market risks (including a declining market for investments in industries seen as greenhouse gas intensive or less effective than alternatives in reducing greenhouse gas emissions); (iv) business trend risks (including the increased attention to environmental, social and governance (“ESG”) considerations by our investors in their investment decisions); and (v) potential harm to our reputation if our stockholders believe that we are not adequately or appropriately responding to climate change and/or climate risk management, including through the way in which we operate our business, the composition of our portfolio, our new investments or the decisions we make to continue to conduct or change our activities in response to climate change considerations.

Our Board has the authority, except as otherwise provided in the 1940 Act,authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval.approval, except as provided otherwise in the 1940 Act. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. Under Delaware law, we also cannot be dissolved without prior stockholder approval except by judicial action. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and the price value of our common stock. Nevertheless, any such changes could adversely affect our business and impair our ability to make distributions.

•the belief that the seniority of our debt investments in a borrower’s capital structure may provide greater downside protection against adverse economic changes, including those caused by the impacts of interest rate and inflation rate changes, the ongoing war between Russia and Ukraine, the escalated armed conflict and heightened regional tensions in the Middle East, activity in South America, instability in the U.S. and international banking systems, the agenda of the new U.S. presidential administration, including the potential impact of tariff enactment and tax reductions, trade disputes with other countries, the risk of recession or athe impact of the prolonged shutdown of U.S. government services, and related market volatility on our business, our portfolio companies, our industry and the global economy;

•the impact of the ongoing war between Russia and Ukraine, and general uncertainty surrounding the financial and political stability of the United States, the United Kingdom, the Middle East, the European UnionUnion, South America and China;

•the fluctuation of the fair value of our investments due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value; and

Our NAV per common share increaseddecreased from $12.09 at December 31, 2023 to $12.85 at December 31, 2024,2024 to $9.19 at December 31, 2025, primarily due to net gainslosses on our investment portfolio of $11.7$45.0 million, or $0.87$3.35 per common share. For the year ended December 31, 2024,2025, our aggregate distributions of $1.36$1.19 per common share exceeded our net investment income of $1.25$0.92 per common share.

During the year ended December 31, 2024,2025, net investment income decreased $3.4$4.3 million compared to the prior year. TheDuring decreasethe inyear netended December 31, 2025, total investment income wasdecreased by $7.3 million, primarily due to a decrease in total investmentinterest income of $9.0$4.9 million, partiallywhile offsettotal expenses decreased by $2.9 million, primarily due to a decrease in totalincentive expensesfees of $5.5$2.4 million. See “—Results of Operations” for additional details.

Our weighted-average performing income yield on interest-bearing investments decreasedincreased from 13.9% during the year ended December 31, 2023 to 13.4% during the year ended December 31, 2024.2024 to 13.6% during the year ended December 31, 2025. The decreaseincrease in our income yield was primarily due to aan decreaseincrease in the effective yield of our Structured Finance Security portfolioportfolio, relatedand topartially offset by a decrease in the agingyield of subordinatedour notedebt securities.investments. See “—Portfolio Composition and Investment Activity’ for additional details.

Our total outstanding debt decreased from $302.4 million at December 31, 2023 to $248.4 million at December 31, 2024.2024 to $220.5 million at December 31, 2025, primarily due to decreases in the outstanding debt balances of our BNP Facility and Unsecured Notes. Our weighted-average debt interest costs increased from 6.0%6.4% during the year ended December 31, 20232024 to 6.4%6.6% for the year ended December 31, 2024,2025, primarily due to the full repaymentredemption of ourthe SBA4.75% debenturesUnsecured onNotes MarchDue 1,February 2024,2026 whichand carriedthe issuance of $69.0 million of 7.50% Unsecured Notes Due July 2028 and a low effective interest rate of 3.26%, and an increase in the cost of debt on our BNP Facility. As of December 31, 2024, we had outstanding debt of $126.0$25.0 million contractually8.00% maturingUnsecured inNote FebruaryDue 2026,August which comprised 51% of our total outstanding debt.2029. See “—Liquidity and Capital Resources—Contractual Obligations and Off-Balance Sheet Arrangements” and “—Recent Developments” for additional details.

During the year ended December 31, 2024,2025, our portfolio experienced net gainslosses of $11.7$45.0 million, comprised of net unrealized appreciationdepreciation, net of $28.9deferred million,tax partiallyexpense, offsetof by$32.8 million and net realized losseslosses, net of $17.1tax expense, of $12.2 million. During the year ended December 31, 2024,2025, our net gainunrealized depreciation of $11.7$32.8 million was primarily driven by net unrealized appreciationdepreciation of $18.4$23.0 million inon our common equity investmentinvestments in Pfanstiehl Holdings, Inc., partially offset byand net unrealized depreciation of $6.6$8.9 million on our current non-accrual loans. During the year ended December 31, 2025, our net realized loss was primarily due to net realized losses of $6.9 million and $4.8 million related to the sale of Structured Finance Securities and debt investments, respectively. As of December 31, 2024,2025, our portfolio had non-accrual loans with an aggregate fair value of $20.8$14.4 million, or 9.3%4.2% of our total loan portfolioinvestments at fair value, compared to non-accrual loans with an aggregate fair value of $12.1$20.8 million, or 4.8%5.1% of our total loan portfolioinvestments at fair value, at December 31, 2023.2024.

As of December 31, 2024,2025, our common equity investment in Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounted for 21.8%23.2% of our portfolio at fair value and 51.8%64.5% of our total net assets, respectively. Primarily due to an improvement in financial operating performance duringDuring the year ended December 31, 2024,2025, the fair value of our investment in the common equity of Pfanstiehl Holdings, Inc. increaseddecreased by $18.4$9.9 million, or $1.37$0.74 per common share, to $89.3$79.4 million. The value of this investment is substantially comprised of unrealized appreciation of $89.1$79.2 million. The valuationvaluation’s unobservable inputs incorporate discounts for the minority-interest and illiquid nature of thisthe investmentsecurity; however, the valuation, in accordance with fair value concepts, is based on significantassumptions unobservableapplicable inputs.to an orderly transaction between market participants and does not reflect the impact of a forced sale or entity-specific liquidity constraints. As a result, there can be no assurance that we would be able to realize this value in a timely manner, or at all. A deterioration or improvement in the operating performance of the company or other factors underlying the valuation of this investment could have a material impact on our NAV.

AtAs of December 31, 2024,2025, the aggregate amount outstanding of the senior securities issued by us was $220.5 million, for which our asset coverage ratiowas of156%, 169%exceeding exceeded theour minimum asset coverage requirement of 150% under the 1940 Act,Act. andAs of December 31, 2025, we remained in compliance with all applicable covenants under our outstanding debt facilities. As of December 31, 2024,2025, we had an unused commitmentscommitment of $24.0$20.5 million under our Banc of California Credit Facility and $82.7 million under our BNP Facility, each of which are subject to athe terms of the borrowing base and other covenants. As of December 31, 2024,2025, we had unfunded investment commitments of $18.8$13.2 million to 10fund issuers.outstanding commitments to portfolio companies.

CLO Subordinated Notes and Loan Accumulation Facilities: Interest income on our CLO subordinated note securities is recognized in accordance with ASC Subtopic 325-40, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”), which contemplates estimating an effective yield to expected redemption utilizing estimated future cash flows from the investment. The expected cash flows of the underlying portfolio and to our security are developed utilizing a number of assumptions, including, among others, estimates of default rates, prepayment rates, redemption timing, reinvestment prices, and liquidation-redemption price. These assumptions, and correspondingly the estimated cash flows and accretable yields, are reviewed and updated at each payment date, generally quarterly. These assumed cash flows represent significant estimates and are subject to a reasonable possibility of near-term changes due to economic and credit market conditions, and the effect of these changes could be material. The CompanyWe ultimately may not realize income accreted on CLO subordinated note securities. The valuation of our Structured Finance Securities makes use of similar assumptions, plus a discount rate assumption, to develop estimated cash flows that are discounted to estimated net present value.

An optional redemption feature of a CLO allows a majority of the holders of the CLO subordinated notes issued by the CLO issuer, after the end of a specified non-call period, to cause the redemption of the CLO subordinated notes issued by the CLO with proceeds paid through either the liquidation of the CLO’s assets or through a refinancing with new debt. The optional redemption is effectively a voluntary prepayment of the CLO subordinated notes issued by the CLO prior to the stated maturity of such securities. When the optional redemption feature has been exercised on a CLO subordinated note, distributions received are first recorded as a return of capital until its cost basis is reduced to zero and thereafter recorded as realized gains.gains thereafter. The principal amount of the CLO subordinated notes is not reduced for distributions received until the security is fully redeemed. Commencing on the optional redemption date, we cease accruing income on our CLO subordinated notes that will be redeemed. CLO subordinated notes that have been optionally redeemed are realized when the deal has been fully liquidated and discharged.

Non-accrualNon-Accrual Loans: We review, for placement on non-accrual status, all loans and CLO mezzanine debt investments when they become past due on principal and interest, and/or when there is reasonable doubt that principal or interest will be collected. When a loan is placed on non-accrual status, accrued and unpaid cash interest is reversed. PIK income that has been contractually capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment with corresponding adjustments to unrealized appreciation/depreciation, as applicable. Interest income and Net Loan Fees are no longer recognized as of the date the loan is placed on non-accrual status. Depending upon management’s judgment, interest payments subsequently received on non-accrual investments may be recognized as interest income or applied as a reduction to amortized cost. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal and interest payments or until a restructuring occurs, and, in management’s judgment, it is probable that we will collect all principal and interest from the investment.

Acquisition Cost of Investments: Our middle-market lending activities may involve the acquisition of multiple financial instruments or rights either in an initial transaction, or in subsequent or “follow-on” transactions, including amendments to existing securities. These financial instruments can include loans, preferred and common stock, warrants, or membership interests in limited liability companies. Acquired rights can include fixed or variable fees that can be either guaranteed or contingent upon operating performance of the underlying portfolio companies. Moreover, these fees may be payable in cash or additional securities. The revenue recognized on these instruments is a function of the fee or other consideration allocated to them, including amounts allocated to loan syndication fees at the time of acquisition.

Fair value estimates. As of December 31, 2024,2025, total investments of $409.7$342.0 million, representing approximately 96%99% of our total assets, were carried at fair value on the consolidated statementstatements of assets and liabilities. As discussed more fully in “Item 8. Financial Statements and Supplementary Data—Note 2”, GAAP requires us to categorize fair value measurements according to a three-level valuation hierarchy. The hierarchy gives the highest priority to quoted, active market prices for identical assets and liabilities (Level 1) and the lowest priority to valuation techniques that require significant management judgment because one or more of the significant inputs are unobservable in the market place (Level 3). All of our investments carried at fair value are classified as either Level 2 and Level 3, with 95%96% of our investments classified as Level 3 as of December 31, 2024.2025. In accordance with our investment strategy, we typically do not hold equity securities or other instruments that are actively traded on an exchange (Level 1).

For the years ending December 31, 2024,2025, 20232024 and 2022,2023, OFS Advisor agreed to reduce its base management fee attributable to all of the OFSCC-FS Assets to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets (other than cash and cash equivalents but including assets purchased with borrowed amounts) at the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. OFS Advisor most recently renewed the agreement to reduce its base management fee for the 2025 calendar year on January 8, 2025.

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On August 4, 2020, we received our existing Order, which superseded a previous order that we received on October 12, 2016, and provides us with greater flexibility to enter into co-investment transactions with certain Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions. We are generally permitted to co-invest with Affiliated Funds if, under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that: (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned; (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies; (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing; and (4) the proposed investment by us would not benefit OFS Advisor, the other Affiliated Funds that are participating in the investment, or any affiliated person of any of them (other than parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.

Portfolio Composition. As of December 31, 2024,2025, the fair value of our debt investment portfolio totaled $224.2$179.8 million in 3634 portfolio companies, of which 85%95% and 15%5% were first lien and second lien loans, respectively. We also held equity investments in 15 portfolio companies with a fair value of $108.6$100.6 million and 1814 investments in Structured Finance Securities with a fair value of $76.9$61.6 million. Certain portfolio investments represent a larger percentage of our total assets or net assets and may involve longer expected holding periods or more limited liquidity alternatives than smaller positions, which management and the Board consider in connection with portfolio monitoring and valuation.

(1) Includes unitranche investments (which are loans that combine both senior and subordinated debt, in a first lien position), as of December 31, 2024,2025, with an amortized cost and fair value of $128.1$130.3 million and $119.2$116.3 million, respectively. As of December 31, 2023,2024, the amortized cost and fair value of unitranche investments was $141.3$128.1 million and $131.3$119.2 million, respectively. Unitranche loans generally provide leverage levels comparable to a combination of first lien and second lien or subordinated loans. Investments in “last out” pieces of unitranche loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same unitranche loan with respect to payment of principal and interest.

As of December 31, 2024,2025, the three largest industries of our debt and equity investments by fair value, were (1) Manufacturing (36.7%34.6%), (2) Health Care and Social Assistance (20.1%17.5%) and (3) AdministrativeReal Estate and SupportRental and Waste Management and Remediation ServicesLeasing (6.5%8.0%), totaling approximately 63.3%60.1% of our debt and equity investment portfolio. For a full summary of our investment portfolio by industry, see “Note 4, Investments” to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this report.

During the year ended December 31, 2024,2025, we sold certain Structure Finance Securities for aggregate net proceeds of $20.1$12.0 millionmillion, andresulting recognizedin aan aggregate net realized loss of $3.5$6.9 million.million, of which $1.5 million was recognized in the current year net of reversal for previously recognized unrealized depreciation.

During the year ended December 31, 2024,2025, we restructured our first lien debt investmentsinvestment in AvisonJP YoungIntermediate Inc.B, LLC to, among other things, exchange our first lien debt investmentsinvestment for new first lien debt investments, preferred equity and common equity.equity investments. The cost of the existing first lien debt investmentsinvestment was ascribed to the new investments received in the exchange, and no realized loss was recognized. WeAs of December 31, 2025, these restructured investments had an amortized cost of and fair value of $4.5 million and $1.5 million, respectively. In connection with the completion of the restructuring transaction, we also invested an incremental $0.8$0.3 million in new-issuea new first lien debt.facility.

During the year ended December 31, 2024, dividend income increased $2.3 million compared to the prior year, primarily due to an increase of $2.4 million in cash dividends. The increase in cash dividends was primarily due to non-recurring dividends of $1.9 million from TRS Services, LLC million recognized upon the sale of our preferred equity investmentinvestment, as well as a $0.5 million increase in dividends from our common equity investment in Pfanstiehl Holdings, Inc.

The Income Incentive Fee for the year ended December 31, 2024 decreased $0.9 million compared to the prior year, primarily due to a decrease in our average interest-bearing investment portfolio, at cost, which reduced our net investment income return on net assets during the current year.

Our NAV per common share decreasedincreased from $9.19 at December 31, 2025 to $8.16 at March 31, 2026 to $8.41 at June 30, 2026, due to a net lossgain on investments of $1.03 per common share, loss on extinguishment of debt of $0.01$0.34 per common share, partially offset by our quarterly net investment incomedistribution of $0.18$0.17 per common share exceeding our quarterly distributionnet investment income of $0.17$0.08 per common share.

For the quarter ended MarchJune 31,30, 2026, total investment income decreased from $9.4$8.9 million in the prior quarter to $8.9$6.8 million, primarily due to a decrease in interest income, partially offset by an increase in non-recurringand dividend income. See “—Results of Operations” for additional information.

Our total outstanding debt decreased from $220.5 million at December 31, 2025 to $202.5 million at March 31, 2026. For the quarter ended March 31, 2026, our weighted-average debt interest costs increased2026 to 7.34$185.8 %million comparedat toJune 7.07%30, for the quarter ended December 31, 2025, primarily due to an increase in the weighted average debt interest costs of our Unsecured Notes.2026. The decrease of $18.0$16.7 million in our total outstanding debt during the quarter ended MarchJune 31,30, 2026 was due to the final $16.0 million redemption of the Unsecured Notes Due February 2026 and net paydowns of $2.0 million on our revolving credit facilities. FollowingFor the maturityquarter extensionended June 30, 2026, our weighted-average debt interest costs of our7.41% Bancremained ofstable Californiacompared Creditto Facility7.34% in January 2026,for the finalquarter repaymentended ofMarch our31, Unsecured Notes Due February 2026, and the execution of our Natixis Facility in February 2026, we do not have any debt maturities until February 2028.2026. See “—Results of Operations” and “—Liquidity and Capital Resources” for additional information.

For the quarter ended MarchJune 31,30, 2026, we recognized a net lossgain on investments of $13.9$4.6 million due to net unrealized appreciation, net of taxes, of $10.6 million, partially offset by a net realized loss of $11.3 million and net unrealized depreciation, net of taxes, of $2.6$6.0 million. For the quarter ended MarchJune 31,30, 2026, our net realized and unrealized loss on investmentsappreciation of $13.9$10.6 million was primarily attributabledue to $10.3appreciation of $14.1 million ofon our common equity investment in Pfanstiehl Holdings, Inc. Our net realized andloss unrealizedof losses$6.0 million during the quarter ended June 30, 2026 was primarily related to an aggregate loss of $4.8 million on ourthe sale of Structured Finance Securities. As of MarchJune 31,30, 2026, we had non-accrual loans with an aggregate fair value of $10.9$21.4 million, or 3.5 %7.2% of our total investments at fair value. See “—Portfolio Composition and Investment Activity” for additional information.

As of MarchJune 31,30, 2026, the aggregate amount outstanding of the senior securities issued by us was $202.5$185.8 million, for which our asset coverage ratio was 154%,161%, exceeding the minimum asset coverage requirement of 150% under the 1940 Act. As of MarchJune 31,30, 2026, we remained in compliance with all applicable covenants under our outstanding debt facilities. As of MarchJune 31,30, 2026, we had unused commitments of $6.3$15.0 million under our Banc of California Credit Facility, and $35.3$43.2 million under our Natixis Facility, each of which is subject to a borrowing base and other covenants. As of MarchJune 31,30, 2026, we had unfunded commitments of $7.8$6.0 million to fund outstanding commitments to portfolio companies. See “—Liquidity and Capital Resources” for additional information.

On AprilJuly 28, 2026, the Board declared a distribution of $0.17 per share for the secondthird quarter of 2026, payable on JulyOctober 6,5, 2026 to stockholders of record as of JuneSeptember 19,18, 2026.

The following table illustrates the impact of our fair value measures if we selected the low or high end of the range of estimated values for all investments as of MarchJune 31,30, 2026 (dollar amounts in thousands):

On April 17, 2026 and June 23, 2026, OFS Advisor agreed to waive a portion of its base management fee for the quarterquarters ended March 31, 2026 and June 30, 2026, respectively, attributable to all of the OFSCC-FS Assets to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets (other than cash and cash equivalents, but including assets purchased with borrowed amounts) at the end of the two most recently completed calendar quarters. ThisThese waiverwaivers differsdiffer from prior periods where OFS Advisor had contractually agreed to reduce its base management fee for the entire year at the beginning of the year. As of MarchJune 31,30, 2026, there is no active ongoing fee waiver or reduction agreement in place with OFS Advisor for the remainder of 2026.

OFS Advisor is not entitled to recoup the amount of the base management fee waived or reduced with respect to the OFSCC-FS Assets. The fee waiverwaivers and reductions were provided at OFS Advisor’s discretion; there can be no assurance that similar fee waivers or reductions will be provided in future periods.

As of MarchJune 31,30, 2026, the fair value of our debt investment portfolio totaled $156.6$147.0 million in 3433 portfolio companies, of which approximately 98%97% and 2%3% were first lien and second lien debt investments, respectively. We also had equity investments in 1413 portfolio companies with a fair value of approximately $102.9$116.7 million and 1310 investments in Structured Finance Securities with a fair value of approximately $48.6$34.1 million. As of MarchJune 31,30, 2026, we had unfunded commitments of $7.8$6.0 million to fund outstanding commitments to 12 portfolio companies. Set forth in the tables and charts below is selected information with respect to our portfolio as of MarchJune 31,30, 2026 and December 31, 2025.

The following table presents our ten largest investments by issuer based on fair value as of MarchJune 31,30, 2026 (dollar amounts in thousands):

As of MarchJune 31,30, 2026, our common equity investment in Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounted for 26.1%31.8% and 73.6%84.0% of our total portfolio at fair value and our total net assets, respectively. The value of this investment is substantially comprised of unrealized appreciation of $80.2$94.3 million. The valuation’s unobservable inputs incorporate discounts for the minority-interest and illiquid nature of the security; however, the valuation, in accordance with fair value concepts, is based on assumptions applicable to an orderly transaction between market participants and does not reflect the impact of a forced sale or entity-specific liquidity constraints. As a result, there can be no assurance that we would be able to realize this value in a timely manner, or at all.

The following table presents weighted-average yield metrics for our portfolio as of June 30, 2026 and March 31, 2026 and December 31, 2025:

For the three months ended MarchJune 31,30, 2026, the weighted-average performing income yield on interest-bearing investments decreased to 12.5%12.1% from 13.5%12.5% during the prior quarter. This decrease iswas primarily attributable to athe 2.53%reversal decreaseof inpreviously accrued interest income on debt investments to one portfolio company placed on non-accrual status during the performingquarter income yield on our Structured Finance Securities primarily related toand a declinedecrease in the effective yields onof our subordinatedStructured noteFinance investments.Securities.

Weighted-average yields of our investments are 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 yields will remain at their current levels. As of MarchJune 31,30, 2026, 94%93% of our total loan portfolio, at fair value, consisted of variable rate investments, generally indexed to SOFR. See additional information under “Item 3. Quantitative and Qualitative Disclosures About Market Risk”.

The following table summarizes the composition of our Portfolio Company Investments as of MarchJune 31,30, 2026 and December 31, 2025 (dollar amounts in thousands):

As of MarchJune 31,30, 2026 and December 31, 2025, first lien debt investments include unitranche investments (which are loans that combine both senior and subordinated debt, in a first lien position) with an amortized cost and fair value of $125.3$123.4 million and $110.5$106.4 million, respectively, and $130.3 million and $116.3 million, respectively. Unitranche loans generally provide leverage levels comparable to a combination of first lien and second lien or subordinated loans. Investments in “last out” pieces of unitranche loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same unitranche loan with respect to payment of principal and interest.

As of MarchJune 31,30, 2026, 100% of our loan portfolio and 51%49% of our total portfolio consisted of first lien and second lien loans, based on fair value.

As of MarchJune 31,30, 2026, the three largest industries of our Portfolio Company Investments by fair value, were: (1) Manufacturing (37.2%40.9%); (2) Health Care and Social Assistance (15.7%15.4%); and (3) Real Estate and Rental and Leasing (8.8%8.4%), totaling an aggregate of approximately 61.7%64.7% of our Portfolio Company Investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1—Financial Statements—Note 4.”

The following table summarizes the composition of our Structured Finance Securities as of MarchJune 31,30, 2026 and December 31, 2025 (dollar amounts in thousands):

Non-performing Structured Finance Securities are securities that have not been optionally redeemed and have an effective yield of 0.0%, as remaining residual distributions are anticipated to be recognized as a return of capital. As of MarchJune 31,30, 2026, the aggregate amortized cost and fair value of non-performing Structured Finance Securities were $2.3$7.2 million and $0.1$1.1 million, respectively.

During the threesix months ended MarchJune 31,30, 2026, we sold aStructured subordinatedFinance note investmentSecurities for net proceeds of $2.6$11.0 million, resulting in aan aggregate net realized loss of $1.2$6.1 million, of which $0.9 million was recognized during the current quarter.million.

The following is a summary of our investment activity for the three months ended June 30, 2026 and March 31, 2026, and the six months ended June 30, 2026 and 2025 (dollar amounts in thousands):

During the threesix months ended MarchJune 31,30, 2026, our first lien debt investment in Redstone HoldCo 2 LP (F/K/A RSA Security) underwent a restructuring through which our first lien debt investment was exchanged for a combination of new first lien debt investments in the portfolio company at a price equal to 63% of par. In connection with the transaction, we recognized a realized loss of $0.6 million on the debt restructure corresponding to the amount forgiven upon the exchange, of which $0.2 million was recognized in the current quarter.exchange. As of MarchJune 31,30, 2026, our new first lien debt investments had an aggregate amortized cost of and fair value of $1.1 million and $1.0 million, respectively.

We categorize debt investments into seven risk categories based on relevant information about the ability of borrowers to service their debt. For additional information regarding our risk categories, see “Item 1. Business—Portfolio Review/Risk Monitoring” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed on March 3, 2026. The following table shows the classification of our debt investments, excluding Structured Finance Securities, by credit risk rating as of MarchJune 31,30, 2026 and December 31, 2025 (dollar amounts in thousands):

As of MarchJune 31,30, 2026

For the three months ended MarchJune 31,30, 2026, our first lien debt investmentinvestments in JPOne Intermediate B,GI LLC with an aggregate amortized cost and fair value of $1.5$12.5 million and $1.0$10.4 million, respectively, waswere placed on non-accrual status.

Comparison of the three months ended June 30, 2026 and March 31, 2026 and December 31, 2025 and comparison of the threesix months ended MarchJune 31,30, 2026 and 2025

Consolidated operating results for the three months ended June 30, 2026 and March 31, 2026, Decemberand 31,the 2025six months ended June 30, 2026 and March 31, 2025 are as follows (in thousands):

Comparison of the three months ended June 30, 2026 and March 31, 2026 and December 31, 2025

For the three months ended MarchJune 31,30, 2026, total investment income decreased from $9.4$8.9 million in the prior quarter to $8.9$6.8 million, primarily due to a decreasedecreases in interest income,income partiallyof offset$1.2 bymillion an increase in non-recurringand dividend income.income of $0.9 million.

For the three months ended MarchJune 31,30, 2026, interest income decreased by $1.3$1.2 million compared to the prior quarter, primarily due to a smaller average debt investment portfolio, at cost, the impactplacement of lowerloans SOFRto ratesa drivenportfolio bycompany theon U.S.non-accrual Federal Reserve rate cuts,status and a decrease in the effective yields on our Structured Finance Securities.

For the three months ended MarchJune 31,30, 2026, dividend income increaseddecreased by $0.9 million compared to the prior quarter, primarily due to a non-recurring cash dividend of $0.9 million from our common equity investment in Pfanstiehl Holdings, Inc. recognized during the prior quarter.

Comparison of the threesix months ended MarchJune 31,30, 2026 and 2025

Total investment income for the threesix months ended MarchJune 31,30, 2026 decreased $1.4$5.0 million compared to the corresponding period in the prior year, primarily due to a decrease in total interest income of $2.4$6.0 million, partially offset by an increase in total dividend income of $1.0$1.1 million.

Operating expenses for the three months ended June 30, 2026 and March 31, 2026, Decemberand 31,the 2025six months ended June 30, 2026 and March 31, 2025 are presented below (in thousands):

Comparison of the three months ended June 30, 2026 and March 31, 2026 and 2025

BaseIncome managementIncentive fees, net of the fee waiver,Fees for the three months ended MarchJune 31,30, 2026 decreased $0.3$0.4 million compared to the corresponding period in the prior year,quarter, primarily due to a decrease in our totalnet investment portfolio,income atreturn fairon value.net assets in the current quarter.

Net gain (loss) on investments, inclusive of realized and unrealized gains (losses), and net of current and deferred income taxes, by investment type for the three months ended June 30, 2026 and March 31, 2026, Decemberand 31,the 2025six months ended June 30, 2026 and March 31, 2025 were as follows (in thousands):

Net gain (loss) on investments for the three months ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 20252026

ThreeSix months ended DecemberJune 31,30, 20252026