CION Investment Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” or similar terms include CĪON Investment Corporation and its consolidated subsidiaries. In addition, the term "portfolio companies" refers to companies in which we have invested, either directly or indirectly through our consolidated subsidiaries. The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical information, the following discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking information that involves risks and uncertainties. Amounts and percentages presented herein may have been rounded for presentation and all dollar amounts, excluding share and per share amounts, are presented in thousands unless otherwise noted. Forward-Looking Statements Some of the statements within this Quarterly Report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve numerous risks and uncertainties, including statements as to: • our future operating results; • our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of tariffs and trade disputes with other countries, inflation, high interest rates and the risk of recession; • the impact of the investments that we expect to make; • the ability of our portfolio companies to achieve their objectives; • our current and expected financings and investments; • the adequacy of our cash resources, financing sources and working capital; • the use of borrowed money to finance a portion of our investments; • the timing of cash flows, if any, from the operations of our portfolio companies; • our contractual arrangements and relationships with third parties; • the actual and potential conflicts of interest with CIM and its affiliates; • the ability of CIM's investment professionals to locate suitable investments for us and the ability of CIM to monitor and administer our investments; • the ability of CIM and its affiliates to attract and retain highly talented professionals; • the dependence of our future success on the general economy and its impact on the industries in which we invest, including tariffs and trade disputes with other countries, inflation, high interest rates, the risk of recession and the related economic disruptions caused thereby; • the effects of a changing interest rate environment; • our ability to source favorable private investments; • our tax status; • the effect of changes to tax legislation and our tax position; • the tax status of the companies in which we invest; and • the timing and amount of distributions and dividends from the companies in which we invest. 69 In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. Other factors that could cause actual results to differ materially include: • changes in the economy; • risks associated with possible disruption in our operations or the economy generally due to terrorism, pandemics, or natural disasters; • future changes in laws or regulations and conditions in our operating areas; • the prices at which shares of our common stock and our 7.50% Notes due 2029 may trade on and volume fluctuations in the NYSE; and • the costs associated with being a publicly traded company. 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 review 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 contained in this Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Overview We were incorporated under the general corporation laws of the State of Maryland on August 9, 2011 and commenced operations on December 17, 2012 upon raising proceeds of $2,500 from persons not affiliated with us, CIM or its affiliates. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We elected to be treated for federal income tax purposes as a RIC, as defined under Subchapter M of the Code. Our investment objective is to generate current income and, to a lesser extent, capital appreciation for investors. Our portfolio is comprised primarily of investments in senior secured debt, including first lien loans, second lien loans and unitranche loans, and, to a lesser extent, collateralized securities, structured products and other similar securities, unsecured debt, and equity, of private and thinly-traded U.S. middle-market companies. In connection with our debt investments, we may receive equity interests such as warrants or options as additional consideration. We may also purchase equity interests in the form of common or preferred stock in our target companies, either in conjunction with one of our debt investments or through a co-investment with a financial sponsor. On October 5, 2021, our shares of common stock began trading on the NYSE under the ticker symbol “CION”. The Listing accomplished our goal of providing our shareholders with greatly enhanced liquidity. On February 26, 2023, our shares of common stock and our Series A Notes listed and commenced trading in Israel on the TASE under the ticker symbol “CION” and "CION B1", respectively. On October 9, 2024, our 2029 Notes listed and commenced trading on the NYSE under the ticker symbol "CICB". We are managed by CIM, our affiliate and a registered investment adviser. Pursuant to an investment advisory agreement with us, CIM oversees the management of our activities and is responsible for making investment decisions for our portfolio. On August 6, 2024, our board of directors, including a majority of the board of directors who are not interested persons, approved the renewal of the second amended and restated investment advisory agreement with CIM for a period of twelve months, commencing August 9, 2024. We have also entered into an administration agreement with CIM to provide us with administrative services necessary for us to operate. We and CIM previously engaged AIM to act as our investment sub-adviser. On July 11, 2017, the members of CIM entered into the Third Amended CIM LLC Agreement for the purpose of creating a joint venture between AIM and CIG. Under the Third Amended CIM LLC Agreement, AIM became a member of CIM and was issued a newly-created class of membership interests in CIM pursuant to which AIM, among other things, shares in the profits, losses, distributions and expenses of CIM with the other members in accordance with the terms of the Third Amended CIM LLC Agreement, which results in CIG and AIM each owning a 50% economic interest in CIM. On July 10, 2017, our independent directors unanimously approved the termination of the investment sub-advisory agreement with AIM, effective as of July 11, 2017, as part of the new and ongoing relationship among us, CIM and AIM. Although the investment sub-advisory agreement and AIM's engagement as our investment sub-adviser were terminated, AIM continues to perform certain services for CIM and us. AIM is not paid a separate fee in exchange for such services, but is entitled to receive distributions as a member of CIM as described above. 70 On December 4, 2017, the members of CIM entered into the Fourth Amended CIM LLC Agreement under which AIM performs certain services for CIM, which include, among other services, providing (a) trade and settlement support; (b) portfolio and cash reconciliation; (c) market pipeline information regarding syndicated deals, in each case, as reasonably requested by CIM; and (d) monthly valuation reports and support for all broker-quoted investments. AIM may also, from time to time, provide us with access to potential investment opportunities made available on Apollo's credit platform on a similar basis as other third-party market participants. All of our investment decisions are the sole responsibility of, and are made at the sole discretion of, CIM's investment committee, which consists entirely of CIG senior personnel. Upon the occurrence of the Listing on October 5, 2021, we and CIM entered into the second amended and restated investment advisory agreement in order to implement the changes to the advisory fees payable from us to CIM that (i) reduced the annual base management fee, (ii) amended the structure of the subordinated incentive fee on income payable from us to CIM and reduced the hurdle and incentive fee rates, and (iii) reduced the incentive fee on capital gains payable from us to CIM (as described in further detail in Notes 2 and 4 to our consolidated financial statements included in this report). We seek to meet our investment objective by utilizing the experienced management team of CIM, which includes its access to the relationships and human capital of its affiliates in sourcing, evaluating and structuring transactions, as well as monitoring and servicing our investments. We focus primarily on the senior secured debt of private and thinly-traded U.S. middle-market companies, which we define as companies that generally possess annual EBITDA of $75 million or less, with experienced management teams, significant free cash flow, strong competitive positions and potential for growth. Revenue We primarily generate revenue in the form of interest income on the debt securities that we hold and capital gains on debt or other equity interests that we acquire in portfolio companies. The majority of our senior debt investments bear interest at a floating rate. Interest on debt securities is generally payable quarterly or monthly. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued, but unpaid, interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and capital structuring fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees generated in connection with our investments will be recognized when earned. Operating Expenses Our primary operating expenses are the payment of management fees and subordinated incentive fees on income under the investment advisory agreement and interest expense on our financing arrangements. Our investment advisory fees compensate CIM for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. We bear all other expenses of our operations and transactions. Recent Developments Q2 2025 Base Distribution On May 5, 2025, our co-chief executive officers declared a quarterly base distribution of $0.36 per share for the second quarter of 2025, payable on June 16, 2025 to shareholders of record as of June 2, 2025. 71 Portfolio Investment Activity for the Three Months Ended March 31, 2025 and 2024 and the Year Ended December 31, 2024 The following table summarizes our investment activity, excluding short term investments and PIK securities, for the three months ended March 31, 2025 and 2024 and the year ended December 31, 2024: Three Months Ended March 31, Year Ended December 31, Net Investment Activity 2025 2024 2024 Purchases and drawdowns Senior secured first lien debt $ 60,792 $ 101,895 $ 439,038 Collateralized securities and structured products - equity 979 — 2,002 Unsecured debt — 1,096 1,096 Equity 3,124 8,645 21,918 Sales and principal repayments (49,430) (207,621) (486,463) Net portfolio activity $ 15,465 $ (95,985) $ (22,409) The following tables summarize the composition of our investment portfolio at amortized cost and fair value as of March 31, 2025 and December 31, 2024: March 31, 2025 Investments Cost(1) Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,639,284 $ 1,556,067 86.9 % Senior secured second lien debt 5,261 2,593 0.1 % Collateralized securities and structured products - equity 3,959 3,612 0.2 % Unsecured debt 29,531 12,278 0.7 % Equity 232,905 217,134 12.1 % Subtotal/total percentage 1,910,940 1,791,684 100.0 % Short term investments(2) 53,976 53,976 Total investments $ 1,964,916 $ 1,845,660 Number of portfolio companies 104 Average annual EBITDA of portfolio companies $53.2 million Median annual EBITDA of portfolio companies $34.2 million Purchased at a weighted average price of par 96.22 % Gross annual portfolio yield based upon the purchase price(3) 10.84 % (1) Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments. (2) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (3) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. 72 December 31, 2024 Investments Cost(1) Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,610,540 $ 1,563,256 86.0 % Senior secured second lien debt 5,187 2,680 0.1 % Collateralized securities and structured products - equity 2,980 2,682 0.1 % Unsecured debt 29,487 11,814 0.6 % Equity 226,681 239,438 13.2 % Subtotal/total percentage 1,874,875 1,819,870 100.0 % Short term investments(2) 68,818 68,818 Total investments $ 1,943,693 $ 1,888,688 Number of portfolio companies 105 Average annual EBITDA of portfolio companies $53.6 million Median annual EBITDA of portfolio companies $34.2 million Purchased at a weighted average price of par 96.17 % Gross annual portfolio yield based upon the purchase price(3) 10.96 % (1) Represents amortized cost for debt investments and cost for equity investments. Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on our investments. (2) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (3) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. The following table summarizes the composition of our investment portfolio by the type of interest rate as of March 31, 2025 and December 31, 2024, excluding short term investments of $53,976 and $68,818, respectively: March 31, 2025 December 31, 2024 Interest Rate Allocation Investments Cost Investments Fair Value Percentage of Investment Portfolio Investments Cost Investments Fair Value Percentage of Investment Portfolio Floating interest rate investments $ 1,544,579 $ 1,469,869 82.0 % $ 1,519,038 $ 1,476,158 81.1 % Non-income producing investments 204,326 189,219 10.6 % 202,115 214,958 11.8 % Fixed interest rate investments 152,300 121,811 6.8 % 145,347 119,844 6.6 % Other income producing investments 9,735 10,785 0.6 % 8,375 8,910 0.5 % Total investments $ 1,910,940 $ 1,791,684 100.0 % $ 1,874,875 $ 1,819,870 100.0 % 73 The following table shows the composition of our investment portfolio by industry classification and the percentage, by fair value, of the total assets in such industries as of March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 Industry Classification Investments Fair Value Percentage of Investment Portfolio Investments Fair Value Percentage of Investment Portfolio Services: Business $ 274,056 15.3 % $ 285,960 15.7 % Healthcare & Pharmaceuticals 210,143 11.7 % 199,733 11.0 % Retail 138,569 7.7 % 160,093 8.8 % Media: Diversified & Production 127,001 7.1 % 129,210 7.1 % Energy: Oil & Gas 115,872 6.5 % 116,393 6.4 % Services: Consumer 114,767 6.5 % 111,832 6.2 % Beverage, Food & Tobacco 109,022 6.1 % 100,612 5.5 % Media: Advertising, Printing & Publishing 106,095 5.9 % 104,622 5.7 % Construction & Building 97,061 5.4 % 99,383 5.5 % Consumer Goods: Durable 95,522 5.3 % 95,968 5.3 % Banking, Finance, Insurance & Real Estate 64,317 3.6 % 64,422 3.5 % Diversified Financials 58,165 3.3 % 56,822 3.1 % Hotel, Gaming & Leisure 47,850 2.7 % 49,823 2.7 % Capital Equipment 43,604 2.4 % 52,349 2.9 % High Tech Industries 38,212 2.1 % 37,665 2.1 % Consumer Goods: Non-Durable 33,621 1.9 % 35,210 1.9 % Automotive 30,978 1.7 % 31,104 1.7 % Environmental Industries 27,274 1.5 % 27,344 1.5 % Containers, Packaging & Glass 18,637 1.0 % 18,687 1.0 % Aerospace & Defense 13,650 0.8 % 13,825 0.8 % Metals & Mining 10,974 0.6 % 13,094 0.7 % Transportation: Cargo 10,876 0.6 % 10,465 0.6 % Telecommunications 5,345 0.3 % 5,222 0.3 % Chemicals, Plastics & Rubber 73 — 32 — Subtotal/total percentage 1,791,684 100.0 % 1,819,870 100.0 % Short term investments 53,976 68,818 Total investments $ 1,845,660 $ 1,888,688 Our investment portfolio may contain senior secured investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. As of March 31, 2025 and December 31, 2024, our unfunded commitments amounted to $65,130 and $70,681 , respectively. As of April 30, 2025, our unfunded commitments amount ed to $61,793. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for us. Refer to the section “Commitments and Contingencies” for further details on our unfunded commitments. Investment Portfolio Asset Quality CIM uses an investment rating system to characterize and monitor our expected level of returns on each investment in our portfolio. These ratings are just one of several factors that CIM uses to monitor our portfolio, are not in and of themselves determinative of fair value or revenue recognition and are presented for indicative purposes. CIM rates the credit risk of all investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. 74 The following is a description of the conditions associated with each investment rating used in this ratings system: Investment Rating Description 1 Indicates the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. 2 Indicates a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing in accordance with our analysis of its business and the full return of principal and interest or dividend is expected. 3 Indicates that the risk to our ability to recoup the cost of such investment has increased since origination or acquisition, but full return of principal and interest or dividend is expected. A portfolio company with an investment rating of 3 requires closer monitoring. 4 Indicates that the risk to our ability to recoup the cost of such investment has increased significantly since origination or acquisition, including as a result of factors such as declining performance and noncompliance with debt covenants, and we expect some loss of interest, dividend or capital appreciation, but still expect an overall positive internal rate of return on the investment. 5 Indicates that the risk to our ability to recoup the cost of such investment has increased materially since origination or acquisition and the portfolio company likely has materially declining performance. Loss of interest or dividend and some loss of principal investment is expected, which would result in an overall negative internal rate of return on the investment. For investments rated 3, 4, or 5, CIM enhances its level of scrutiny over the monitoring of such portfolio company. The following table summarizes the composition of our investment portfolio based on the 1 to 5 investment rating scale at fair value as of March 31, 2025 and December 31, 2024, excluding short term investments of $53,976 and $68,818, respectively: March 31, 2025 December 31, 2024 Investment Rating Investments Fair Value Percentage of Investment Portfolio Investments Fair Value Percentage of Investment Portfolio 1 $ 40,752 2.3 % $ 36,418 2.0 % 2 1,543,954 86.1 % 1,561,233 85.8 % 3 184,110 10.3 % 192,203 10.6 % 4 16,065 0.9 % 23,554 1.3 % 5 6,803 0.4 % 6,462 0.3 % $ 1,791,684 100.0 % $ 1,819,870 100.0 % The amount of the investment portfolio in each rating category may vary substantially from period to period resulting primarily from changes in the composition of such portfolio as a result of new investment, repayment and exit activities. In addition, changes in the rating of investments may be made to reflect our expectation of performance and changes in investment values. 75 Current Investment Portfolio The following table summarizes the composition of our investment portfolio at fair value as of April 30, 2025: Investments Fair Value Percentage of Investment Portfolio Senior secured first lien debt $ 1,557,458 86.9 % Senior secured second lien debt 2,594 0.1 % Collateralized securities and structured products - equity 3,612 0.2 % Unsecured debt 12,278 0.7 % Equity 216,822 12.1 % Subtotal/total percentage 1,792,764 100.0 % Short term investments(1) 52,070 Total investments $ 1,844,834 Number of portfolio companies 103 Average annual EBITDA of portfolio companies $53.7 million Median annual EBITDA of portfolio companies $34.6 million Purchased at a weighted average price of par 95.48 % Gross annual portfolio yield based upon the purchase price(2) 10.92 % (1) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. (2) The gross annual portfolio yield does not represent and may be higher than an actual investment return to shareholders because it excludes our expenses and all sales commissions and dealer manager fees and does not consider the cost of leverage. Results of Operations for the Three Months Ended March 31, 2025 and 2024 Our results of operations for the three months ended March 31, 2025 and 2024 were as follows: Three Months Ended March 31, 2025 2024 Investment income $ 56,074 $ 73,554 Operating expenses and income taxes 36,822 40,961 Net investment income after taxes 19,252 32,593 Net realized gain (loss) on investments 2,294 (9,736) Net change in unrealized depreciation on investments (64,251) (16,412) Net (decrease) increase in net assets resulting from operations $ (42,705) $ 6,445 Investment Income For the three months ended March 31, 2025 and 2024, we generated investment income of $56,074 and $73,554, respectively, consisting primarily of interest income on investments in senior secured debt, collateralized securities and structured products, and unsecured debt of 89 and 95 portfolio companies held during each respective period. The decrease in total investment income was primarily driven by lower investment income generated from restructuring and amendment activities and yield-enhancement provisions from repayments on certain investments and lower SOFR rates during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. 76 Operating Expenses and Income Taxes The composition of our operating expenses and income taxes for the three months ended March 31, 2025 and 2024 was as follows: Three Months Ended March 31, 2025 2024 Management fees $ 6,625 $ 6,864 Administrative services expense 1,279 1,092 Subordinated incentive fee on income 4,084 6,914 General and administrative 1,836 1,784 Interest expense 22,998 24,302 Income tax expense, including excise tax — 5 Total operating expenses and income taxes $ 36,822 $ 40,961 The decrease in subordinated incentive fee on income was primarily the result of the decrease in investment income during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, which was partially offset by the decrease in interest expense during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease in interest expense was primarily the result of lower SOFR rates on our borrowings during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, which was partially offset by higher average borrowings under our financing arrangements during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The composition of our general and administrative expenses for the three months ended March 31, 2025 and 2024 was as follows: Three Months Ended March 31, 2025 2024 Professional fees $ 768 $ 521 Valuation expense 230 144 Dues and subscriptions 203 435 Insurance expense 184 169 Director fees and expenses 172 171 Transfer agent expense 119 123 Accounting and administrative costs 112 162 Printing and marketing expense 17 3 Other expenses 31 56 Total general and administrative expense $ 1,836 $ 1,784 Net Investment Income After Taxes Our net investment income after taxes totaled $19,252 and $32,593 for the three months ended March 31, 2025 and 2024, respectively. The decrease in net investment income was a result of a decrease in our investment income during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, which was partially offset by a decrease in our operating expenses during the three months ended March 31, 2025, which was driven primarily by decreases in the subordinated incentive fee on income and interest expense. Net Realized Gain (Loss) on Investments Our net realized gain (loss) on investments totaled $2,294 and $(9,736) for the three months ended March 31, 2025 and 2024, respectively. The change was driven primarily by realized gains on the restructure of certain investments during the three months ended March 31, 2025 compared to realized losses on the restructure of certain investments during the three months ended March 31, 2024. 77 Net Change in Unrealized Depreciation on Investments The net change in unrealized depreciation on our investments totaled $(64,251) and $(16,412) for the three months ended March 31, 2025 and 2024, respectively. This increase was driven primarily by larger mark-to-market declines in certain investments during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Net (Decrease) Increase in Net Assets Resulting from Operations For the three months ended March 31, 2025 and 2024, we recorded a net (decrease) increase in net assets resulting from operations of $(42,705) and $6,445, respectively, as a result of our operating activity for the respective periods. Financial Condition, Liquidity and Capital Resources We generate cash primarily from cash flows from interest, fees and dividends earned from our investments as well as principal repayments and proceeds from sales of our investments. We also employ leverage to seek to enhance our returns as market conditions permit and at the discretion of CIM and pursuant to the 1940 Act. As a result, we also generate cash from our existing financing arrangements and may generate cash from future borrowings, as well as future offerings of securities including public and/or private issuances of debt and/or equity securities. We use cash primarily to (i) purchase investments in new and existing portfolio companies, (ii) pay for the cost of operations (including paying advisory fees to and reimbursing CIM), (iii) make debt service payments related to any of our financing arrangements and (iv) pay cash distributions to the holders of our shares. On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC’s debt to equity from a maximum of 1-to-1 to a maximum of 2-to-1, so long as certain approval and disclosure requirements are satisfied. As a result of receiving shareholder approval on December 30, 2021, effective December 31, 2021, we are required to maintain asset coverage for our senior securities of 150% rather than 200%, which allows us to increase the maximum amount of leverage that we are permitted to incur. We may from time to time enter into additional financing arrangements or increase the size of our existing financing arrangements. Any such increase to our leverage would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. As of March 31, 2025 and December 31, 2024, our asset coverage ratio was 1.68 and 1.73, respectively. We carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage, daily cash management and liquidity requirements. On August 27, 2024, our shareholders authorized us to issue shares of our common stock at prices below the then current NAV per share in one or more offerings for a 12-month period following such shareholder approval. As of the date of this report, we are not engaged in discussions and do not otherwise intend to issue any such shares. As of March 31, 2025, we had cash of $7,720 and short term investments of $53,976 invested in a fund that primarily invests in U.S. government securities. Cash and short term investments as of March 31, 2025, taken together with amounts available to us for borrowing under our secured financing arrangements, is expected to be sufficient for our investing and financing activities and to conduct our operations in the near term. As of March 31, 2025, we had $106 million available under our secured financing arrangements. Our short and long-term cash needs include principal payments on outstanding financing arrangements, the funding of new and existing portfolio investments, the payment of operating expenses including interest expense, management fees, incentive fees, administrative services expense and general and administrative expenses, as well as paying distributions to our shareholders. Funding for short and long-term cash needs will come from cash provided from operating activities and/or unused net proceeds from financing activities. We believe that our liquidity and sources of capital are adequate to satisfy our short and long-term cash requirements. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future. 78 Post-Listing Share Repurchase Policy On September 15, 2021, our board of directors, including the independent directors, approved a share repurchase policy authorizing us to repurchase up to $50 million of our outstanding common stock after the Listing. On June 24, 2022, our board of directors, including the independent directors, increased the amount of shares of our common stock that may be repurchased under the share repurchase policy by $10 million to up to an aggregate of $60 million. Under the share repurchase policy, we may purchase shares of our common stock through various means such as open market transactions, including block purchases, and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at our discretion. Factors include, but are not limited to, share price, trading volume and general market conditions, along with our general business conditions. The policy may be suspended or discontinued at any time and does not obligate us to acquire any specific number of shares of our common stock. On August 19, 2024, as part of the share repurchase policy, we entered into a new trading plan with an independent broker, Wells Fargo, in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, based in part on historical trading data with respect to our shares. The 10b5-1 trading plan permits common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan expires on August 19, 2025, and is subject to price, market volume and timing restrictions. During the three months ended March 31, 2025, we repurchased an aggregate of 185,862 shares under the 10b5-1 trading plan for an aggregate purchase price of $2,172, or an average purchase price of $11.68 per share. From April 1, 2025 to April 30, 2025, we repurchased an aggregate of 315,943 shares of common stock under the 10b5-1 trading plan for an aggregate purchase price of $2,957, or an average purchase price of $9.36 per share. From the inception of the 10b5-1 trading plan in August 2022 through April 30, 2025, we repurchased an aggregate of 4,270,976 shares of common stock under the 10b5-1 trading plan for an aggregate purchase price of $43,438, or an average purchase price of $10.17 per share. RIC Status and Distributions To qualify for and maintain RIC tax treatment, we must, among other things, distribute in respect of each taxable year at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. We will incur an excise tax of 4% imposed on RICs to the extent we do not distribute in respect of each calendar year an amount at least equal to the sum of (1) 98.0% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses, or capital gain net income (adjusted for certain ordinary losses), for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gain net income from preceding years that were not distributed during such years and on which we paid no federal income tax. For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report. We intend to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. Therefore, subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to authorize, declare, and pay base distributions on a quarterly basis. Base and any supplemental and/or special distributions in respect of future periods will be evaluated by management and our board of directors based on circumstances and expectations existing at the time of consideration. The following table presents distributions per share that were declared during the year ended December 31, 2024 and the three months ended March 31, 2025: Distributions Three Months Ended Per Share Amount 2024 March 31, 2024 (one record date) $ 0.34 $ 18,279 June 30, 2024 (two record dates) 0.41 21,960 September 30, 2024 (one record date) 0.36 19,234 December 31, 2024 (two record dates) 0.41 21,835 Total distributions for the year ended December 31, 2024 $ 1.52 $ 81,308 2025 March 31, 2025 (one record date) $ 0.36 $ 19,149 Total distributions for the three months ended March 31, 2025 $ 0.36 $ 19,149 79 On May 5, 2025, our co-chief executive officers declared a quarterly base distribution of $0.36 per share for the second quarter of 2025 payable on June 16, 2025 to shareholders of record as of June 2, 2025. For an additional discussion of our RIC status and distributions, refer to Note 2 and Note 5, respectively, of our consolidated financial statements included in this report. JPM Credit Facility As of March 31, 2025 and April 30, 2025, our aggregate outstanding borrowings under the JPM Credit Facility were $325,000 and the aggregate unfunded principal amount in connection with the JPM Credit Facility was $81,250. For a detailed discussion of our JPM Credit Facility, refer to Note 8 to our consolidated financial statements included in this report. 2025 UBS Credit Facility As of March 31, 2025 and April 30, 2025, our outstanding borrowings under the 2025 UBS Credit Facility were $100,000 and the aggregate unfunded principal amount in connection with the 2025 UBS Credit Facility was $25,000. For a detailed discussion of our 2025 UBS Credit Facility, refer to Note 8 to our consolidated financial statements included in this report. 2026 Notes As of March 31, 2025 and April 30, 2025, we had $125,000 in aggregate principal amount of 2026 Notes outstanding and there was no unfunded principal amount in connection with the 2026 Notes. For a detailed discussion of our 2026 Notes, refer to Note 8 to our consolidated financial statements included in this report. 2022 Term Loan As of March 31, 2025 and April 30, 2025, our outstanding borrowings under the 2022 Term Loan were $50,000 and there was no unfunded principal amount in connection with the 2022 Term Loan. For a detailed discussion of our 2022 Term Loan, refer to Note 8 to our consolidated financial statements included in this report. 2024 Term Loan As of March 31, 2025 and April 30, 2025, our outstanding borrowings under the 2024 Term Loan were $30,000 and there was no unfunded principal amount in connection with the 2024 Term Loan. For a detailed discussion of our 2024 Term Loan, refer to Note 8 to our consolidated financial statements included in this report. Series A Notes As of March 31, 2025 and April 30, 2025, we had approximately $114,844 in aggregate principal amount of Series A Notes outstanding and there was no unfunded principal amount in connection with the Series A Notes. For a detailed discussion of our Series A Notes, refer to Note 8 to our consolidated financial statements included in this report. 2027 Notes As of March 31, 2025 and April 30, 2025, we had $200,000 in aggregate principal amount of 2027 Notes outstanding and there was no unfunded principal amount in connection with the 2027 Notes. For a detailed discussion of our 2027 Notes, refer to Note 8 to our consolidated financial statements included in this report. 2029 Notes As of March 31, 2025 and April 30, 2025, we had $172,500 in aggregate principal amount of 2029 Notes outstanding and there was no unfunded principal amount in connection with the 2029 Notes. For a detailed discussion of our 2029 Notes, refer to Note 8 to our consolidated financial statements included in this report. 80 Unfunded Commitments As of March 31, 2025 and April 30, 2025, our unfunded commitments amounted to $65,130 and $61,793, respectively. For a detailed discussion of our unfunded commitments, refer to Note 11 to our consolidated financial statements included in this report. Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included in this report for a discussion of certain recent accounting pronouncements that are applicable to us. Critical Accounting Policies Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, we also utilize available information, including our past history, industry standards and the current economic environment, among other factors, in forming our estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. Valuation of Portfolio Investments The value of our assets is determined quarterly and at such other times that an event occurs that materially affects the valuation. The valuation is made pursuant to Section 2(a)(41) of the 1940 Act, which requires that we value our assets as follows: (i) the market price for those securities for which a market quotation is readily available, and (ii) for all other securities and assets, at fair value, as determined in good faith by our board of directors. As a BDC, Section 2(a)(41) of the 1940 Act requires the board of directors to determine in good faith the fair value of portfolio securities for which a market price is not readily available, and it does so in conjunction with the application of our valuation procedures by CIM. In accordance with Rule 2a-5 of the 1940 Act, our board of directors has designated CIM as our “valuation designee.” Our board of directors and the audit committee of our board of directors, which is comprised solely of our independent directors, oversees the activities, methodology and processes of the valuation designee. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed. Determinations of fair value involve subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations in our consolidated financial statements. Valuation Methods With respect to investments for which market quotations are not readily available, CIM, as the valuation designee of our board of directors, undertakes a multi-step valuation process each quarter, as described below: • our quarterly valuation process generally begins with each portfolio company or investment either being sent directly to an independent valuation firm or initially valued by certain of CIM’s investment professionals and certain members of its management team, with such valuation taking into account information received from various sources, including independent valuation firms, if applicable; • preliminary valuation conclusions are then documented and discussed with members of CIM’s management team; • designated members of CIM’s management team review the preliminary valuation, and, if applicable, deliver such preliminary valuation to an independent valuation firm for its review; • designated members of CIM’s management team and, if appropriate, the relevant investment professionals meet with the independent valuation firm to discuss the preliminary valuation; • designated members of CIM’s management team respond and supplement the preliminary valuation to reflect any comments provided by the independent valuation firm; • our audit committee meets with members of CIM’s management team and the independent valuation firms to discuss the assistance provided and the results of the independent valuation firms' review; and • our board of directors and our audit committee provide oversight with respect to this valuation process, including requesting such materials as they may determine appropriate. 81 We shall promptly (but no later than five business days after we become aware) report to our board of directors in writing on the occurrence of matters that materially affect the fair value of the designated portfolio of investments. Material matters in this instance include a significant deficiency or material weakness in the design or effectiveness of CIM’s fair value determination process resulting in a material error in the calculation of NAV of $0.01 per share or greater. In addition to the foregoing, certain investments for which a market price is not readily available are evaluated on a quarterly basis by an independent valuation firm and certain other investments are on a rotational basis reviewed by an independent valuation firm. Finally, certain investments are not evaluated by an independent valuation firm unless certain aspects of such investments in the aggregate meet certain criteria. Given the expected types of investments, excluding short term investments and stock of publicly traded companies that are classified as Level 1, management expects our portfolio holdings to be classified as Level 3. Due to the uncertainty inherent in the valuation process, particularly for Level 3 investments, such fair value estimates may differ significantly from the values that would have been used had an active market for the investments existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses that we ultimately realize on these investments to materially differ from the valuations currently assigned. Inputs used in the valuation process are subject to variability in the future and can result in materially different fair values. For an additional discussion of our investment valuation process, refer to Note 2 to our consolidated financial statements included in this report. Related Party Transactions For a discussion of our relationship with related parties including CIM, CIG, and AIA and amounts incurred under agreements with such related parties, refer to Note 4 to our consolidated financial statements included in this report. For a discussion of our relationship with CION/EagleTree, refer to Note 7 to our consolidated financial statements included in this report. Contractual Obligations On August 26, 2016, 34th Street entered into the JPM Credit Facility with JPM, as amended on September 30, 2016, July 11, 2017, November 28, 2017, May 23, 2018, May 15, 2020, February 26, 2021, March 28, 2022, May 15, 2023, May 14, 2024, June 17, 2024 and July 15, 2024. See Note 8 to our consolidated financial statements for a more detailed description of the JPM Credit Facility. On February 13, 2025, Murray Hill Funding II entered into the 2025 UBS Credit Facility with UBS. See Note 8 to our consolidated financial statements for a more detailed description of the 2025 UBS Credit Facility. On February 11, 2021, we entered into the 2026 Note Purchase Agreement with purchasers of the 2026 Notes. See Note 8 to our consolidated financial statements for a more detailed description of the 2026 Notes. On April 27, 2022, we entered into the 2022 Term Loan with an Israeli institutional investor. See Note 8 to our consolidated financial statements for a more detailed description of the 2022 Term Loan. On February 28, 2023, we entered into a Deed of Trust with Mishmeret Trust Company Ltd., as trustee, pursuant to which we issued our Series A Notes. See Note 8 to our consolidated financial statements for a more detailed description of the Deed of Trust and the Series A Notes. On November 8, 2023, we entered into the 2027 Note Purchase Agreement with purchasers of the Tranche A 2027 Notes and on September 18, 2024, we entered into the AR Note Purchase Agreement with purchasers of the Tranche B 2027 Notes. See Note 8 to our consolidated financial statements for a more detailed description of the 2027 Notes. On September 30, 2024, we entered into the 2024 Term Loan with an Israeli institutional investor. See Note 8 to our consolidated financial statements for a more detailed description of the 2024 Term Loan. On October 3, 2024, we issued and sold our 2029 Notes under the Indenture pursuant to a U.S. public offering. See Note 8 to our consolidated financial statements for a more detailed description of the 2029 Notes. 82 Commitments and Contingencies We have entered into certain contracts with other parties that contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be remote. Our investment portfolio may contain debt investments that are in the form of lines of credit, delayed draw term loans, revolving credit facilities, or other unfunded commitments, which may require us to provide funding when requested in accordance with the terms of the underlying agreements. For further details on such debt investments, refer to Note 11 to our consolidated financial statements included in this report. We currently have no off-balance sheet arrangements, except for those discussed in Note 7 and Note 11 to our consolidated financial statements included in this report. 83