OFS Capital Corp 10-K

ITEM 8. Financial Statements Index to Financial Statements Reports of Independent Registered Public Accounting Firms 103 Consolidated Statements of Assets and Liabilities as of December 31, 2021 and 2020 105 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019 106 Consolidated Statements of Changes in Net Assets for the Years Ended December 31, 2021, 2020, and 2019 107 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019 108 Consolidated Schedules of Investments as of December 31, 2021 and 2020 109 Notes to Consolidated Financial Statements 132 102 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors OFS Capital Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of assets and liabilities of OFS Capital Corporation and subsidiaries (the Company), including the consolidated schedules of investments, as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three‑year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Such procedures also included confirmation of investments owned as of December 31, 2021, by correspondence with custodians, agents, or portfolio companies, or by other appropriate auditing procedures where replies were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the fair value of Portfolio Company Investments using unobservable inputs As discussed in Notes 2 and 5 to the consolidated financial statements, the Company measures its investments at fair value. For those investments where the valuation is based on less observable or unobservable inputs, the Company’s determination of fair value requires more judgment. The majority of the Company’s investments are debt or equity investments in a portfolio company, excluding Structured Finance Notes, (collectively, Portfolio Company Investments), valued using unobservable inputs which the Company measures using either the income approach or market approach. As of December 31, 2021, the fair value of such investments was $366.3 million. We identified the evaluation of the fair value of Portfolio Company Investments valued using unobservable inputs as a critical audit matter. In particular, assessing the discount rates used in the discounted cash flows valuation technique and the earnings metric multiples used in the market approach valuation technique required a high degree of subjective auditor judgment and the involvement of valuation professionals. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the fair value of Portfolio Company Investments using unobservable inputs. This included controls related to the development of the discount rates and earnings metric multiples used in the discounted 103 cash flows and market approach valuation techniques, respectively. For a selection of Portfolio Company Investments, we compared relevant data elements used by the Company to derive the discount rates and earnings metric multiples to underlying documentation. We involved valuation professionals with specialized skills and knowledge who assisted in evaluating a selection of Portfolio Company Investments by developing: - a market yield analysis that assessed publicly available market information such as observable market yields of comparable companies of similar credit quality for selected Portfolio Company Investments fair valued by the Company using the income approach - a set of guideline public companies that assessed market information from publicly available sources, including earnings metric multiples of publicly traded comparable companies for selected Portfolio Company Investments fair valued by the Company using the market approach - a fair value range for the selected Portfolio Company Investments, based upon the independent market research performed and compared the results to the Company’s fair value estimates. /s/ KPMG LLP We have served as the Company’s auditor since 2019. Chicago, Illinois March 4, 2022 104 OFS Capital Corporation and Subsidiaries Consolidated Statements of Assets and Liabilities (Dollar amounts in thousands, except per share data) December 31, 2021 2020 Assets Investments, at fair value Non-control/non-affiliate investments (amortized cost of $428,398 and $363,628 respectively) $ 421,567 $ 328,665 Affiliate investments (amortized cost of $17,650 and $86,484, respectively) 72,584 102,846 Control investment (amortized cost of $11,264 and $10,911, respectively) 12,948 10,812 Total investments at fair value (amortized cost of $457,312 and $461,023, respectively) 507,099 442,323 Cash 43,048 37,708 Receivable for investments sold 14,893 — Interest receivable 1,475 1,298 Prepaid expenses and other assets 2,533 2,484 Total assets $ 569,048 $ 483,813 Liabilities Revolving lines of credit $ 100,000 $ 32,050 SBA debentures (net of deferred debt issuance costs of $555 and $1,088, respectively) 69,365 104,182 Unsecured Notes (net of discounts and deferred debt issuance costs of $4,554 and $4,897, respectively) 175,446 172,953 Interest payable 3,685 3,176 Payable to investment adviser and affiliates (Note 3) 6,217 3,252 Payable for investments purchased 8,788 8,411 Accrued professional fees 452 495 Other liabilities 1,351 338 Total liabilities $ 365,304 $ 324,857 Commitments and contingencies (Note 6) Net Assets Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively $ — $ — Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,422,413 and 13,409,559 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 134 134 Paid-in capital in excess of par 185,113 187,124 Total distributable earnings (accumulated losses) 18,497 (28,302) Total net assets $ 203,744 $ 158,956 Total liabilities and net assets $ 569,048 $ 483,813 Number of shares outstanding 13,422,413 13,409,559 Net asset value per share $ 15.18 $ 11.85 See Notes to Consolidated Financial Statements. 105 OFS Capital Corporation and Subsidiaries Consolidated Statements of Operations (Dollar amounts in thousands, except per share data) Years Ended December 31, 2021 2020 2019 Investment income Interest income: Non-control/non-affiliate investments $ 37,350 $ 34,278 $ 37,934 Affiliate investments 3,686 7,549 10,723 Control investment 1,348 1,217 1,172 Total interest income 42,384 43,044 49,829 Dividend income: Non-control/non-affiliate investments 888 — — Affiliate investments 1,143 955 1,311 Control investment 136 — 89 Total dividend income 2,167 955 1,400 Fee income: Non-control/non-affiliate investments 2,485 945 1,029 Affiliate investments 653 465 221 Control investment 74 66 42 Total fee income 3,212 1,476 1,292 Total investment income 47,763 45,475 52,521 Expenses Interest and financing expense 17,515 18,808 15,829 Management fees 7,669 7,605 8,271 Income Incentive Fee 2,352 2,025 4,760 Capital Gains Fee 1,916 — — Professional fees 1,670 1,993 1,814 Administration fees 1,758 1,855 1,747 Other expenses 1,433 1,335 1,002 Total expenses before Income Incentive Fee waiver 34,313 33,621 33,423 Income Incentive Fee waiver (Note 3) — (441) — Total expenses, net of Income Incentive Fee waiver 34,313 33,180 33,423 Net investment income 13,450 12,295 19,098 Net realized and unrealized gain (loss) on investments Net realized loss on non-control/non-affiliate investments (27,114) (10,021) (3,900) Net realized gain on affiliate investments 7,545 — — Income tax expense on net realized investment gains (1,027) — — Net unrealized appreciation (depreciation) on non-control/non-affiliate investments 38,551 (11,295) (9,194) Net unrealized appreciation on affiliate investments 28,153 12,633 5,376 Net unrealized appreciation (depreciation) on control investment 1,783 1,704 (1,411) Deferred tax benefit (expense) on investments net unrealized appreciation/depreciation 114 275 (416) Net gain (loss) on investments 48,005 (6,704) (9,545) Losses on extinguishment of debt (4,591) (820) — Loss on impairment of goodwill — (1,077) — Net increase in net assets resulting from operations $ 56,864 $ 3,694 $ 9,553 Net investment income per common share - basic and diluted $ 1.00 $ 0.92 $ 1.43 Net increase in net assets resulting from operations per common share - basic and diluted $ 4.24 $ 0.28 $ 0.71 Distributions declared per common share $ 0.91 $ 0.86 $ 1.36 Basic and diluted weighted average common shares outstanding 13,413,861 13,394,005 13,364,244 See Notes to Consolidated Financial Statements. 106 OFS Capital Corporation and Subsidiaries Consolidated Statements of Changes in Net Assets (Dollar amounts in thousands, except per share data) Preferred Stock Common Stock Number of shares Par value Number of shares Par value Paid-in capital in excess of par Total distributable earnings (accumulated losses) Total net assets Balances at January 1, 2019 — $ — 13,357,337 $ 134 $ 187,540 $ (12,651) $ 175,023 Net increase (decrease) in net assets resulting from operations: Net investment income — — — — — 19,098 19,098 Net realized losses on investments, net of taxes — — — — — (3,900) (3,900) Unrealized depreciation on investments, net of deferred taxes — — — — — (5,645) (5,645) Tax reclassifications of permanent differences — — — — (462) 462 — Distributions to stockholders: Common stock issued from reinvestment of stockholder distributions, net of repurchases — — 19,499 — 227 — 227 Dividends declared — — — — — (18,176) (18,176) Net increase (decrease) for the year ended December 31, 2019 — — 19,499 — (235) (8,161) (8,396) Balances at December 31, 2019 — $ — 13,376,836 $ 134 $ 187,305 $ (20,812) $ 166,627 Net increase (decrease) in net assets resulting from operations: Net investment income — — — — — 12,295 12,295 Net realized losses on investments, net of taxes — — — — — (10,022) (10,022) Unrealized appreciation on investments, net of deferred taxes — — — — — 3,318 3,318 Loss on extinguishment of debt — — — — — (820) (820) Loss on impairment of goodwill — — — — — (1,077) (1,077) Tax reclassifications of permanent differences — — — — (331) 331 — Distributions to stockholders: Common stock issued from reinvestment of stockholder distributions — — 32,723 — 150 — 150 Dividends declared — — — — — (11,515) (11,515) Net increase (decrease) for the year ended December 31, 2020 — — 32,723 — (181) (7,490) (7,671) Balances at December 31, 2020 — $ — 13,409,559 $ 134 $ 187,124 $ (28,302) $ 158,956 Net increase (decrease) in net assets resulting from operations: Net investment income — — — — — 13,450 13,450 Net realized losses on investments, net of taxes — — — — — (20,596) (20,596) Unrealized appreciation on investments, net of deferred taxes — — — — — 68,601 68,601 Loss on extinguishment of debt — — — — — (4,591) (4,591) Tax reclassifications of permanent differences — — — — (2,142) 2,142 — Distributions to stockholders: Common stock issued from reinvestment of stockholder distributions — — 13,554 — 136 — 136 Dividends declared — — — — — (12,207) (12,207) Repurchase of common stock — — (700) — (5) — (5) Net increase for the year ended December 31, 2021 — — 12,854 — (2,011) 46,799 44,788 Balances at December 31, 2021 — $ — 13,422,413 $ 134 $ 185,113 $ 18,497 $ 203,744 See Notes to Consolidated Financial Statements. 107 OFS Capital Corporation and Subsidiaries Consolidated Statements of Cash Flows (Dollar amounts in thousands) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities Net increase in net assets resulting from operations $ 56,864 $ 3,694 $ 9,553 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: Net realized loss on investments 19,568 10,022 3,900 Net unrealized (appreciation) depreciation on investments, net of deferred taxes (68,601) (3,318) 5,645 Income tax expense from realized gains on investments 1,027 — — Losses on extinguishment of debt 4,591 820 — Loss on impairment of goodwill — 1,077 — Amortization and write-off of deferred offering costs 1,969 1,690 1,332 Amortization of intangible asset 222 206 195 Amortization of Net Loan Fees (2,442) (1,640) (1,424) Amendment fees collected 265 106 177 Payment-in-kind interest and dividend income (2,141) (1,971) (1,825) Accretion of interest income on Structured Finance Notes (9,861) (5,877) (2,861) Purchase and origination of portfolio investments (268,901) (130,399) (222,173) Proceeds from principal payments on portfolio investments 200,713 129,580 60,883 Proceeds from sale or redemption of portfolio investments 52,789 70,771 35,033 Distributions received from Structured Finance Notes 12,656 6,709 3,076 Changes in operating assets and liabilities: Interest receivable (177) 2,051 (562) Interest payable 509 (523) 714 Receivable for investments sold (14,893) — — Payable to investment adviser and affiliates 2,965 (854) 406 Payable for investments purchased 377 (1,853) 6,113 Other assets and liabilities 492 334 182 Net cash provided by (used in) operating activities (12,009) 80,625 (101,636) Cash flows from financing activities Proceeds from offerings of Unsecured Notes, net of discounts 175,506 24,250 52,270 Redemptions of Unsecured Notes (177,850) — — Distributions paid to stockholders (12,071) (11,365) (17,949) Borrowings under revolving lines of credit 145,350 86,200 151,975 Repayments under revolving lines of credit (77,400) (110,600) (107,525) Repayments of SBA debentures (35,350) (44,610) — Payments of deferred debt issuance costs and other financing costs (836) (239) (1,860) Net cash provided by (used in) financing activities 17,349 (56,364) 76,911 Net increase (decrease) in cash 5,340 24,261 (24,725) Cash — beginning of year 37,708 13,447 38,172 Cash — end of year $ 43,048 $ 37,708 $ 13,447 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 15,037 $ 17,641 $ 13,754 Reinvestment of stockholder distributions 136 150 227 See Notes to Consolidated Financial Statements. 108 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Non-control/Non-affiliate Investments 3rd Rock Gaming Holdings, LLC (6) (10) Software Publishers Senior Secured Loan 4.00% N/A 3/13/2018 3/12/2023 $ 16,728 $ 14,358 $ 7,027 3.3 % AAdvantage Loyalty IP Ltd. and American Airlines, Inc. (14) (15) (22) Scheduled Passenger Air Transportation Senior Secured Loan 5.50% (L +4.75%) 3/10/2021 4/20/2028 364 360 377 0.2 Aegion Corporation (15) (22) Water and Sewer Line and Related Structures Construction Senior Secured Loan 5.50% (L +4.75%) 4/1/2021 5/17/2028 630 627 628 0.3 Allen Media, LLC (14) (15) Cable and Other Subscription Programming Senior Secured Loan 5.72% (L +5.50%) 3/2/2021 2/10/2027 3,807 3,801 3,810 1.8 All Star Auto Lights, Inc. (4) (15) Motor Vehicle Parts (Used) Merchant Wholesalers Senior Secured Loan 8.25% (L +7.25%) 12/19/2019 8/20/2025 23,335 23,005 23,052 11.3 Autokiniton US Holdings, Inc. (14) (15) Automotive Parts and Accessories Stores Senior Secured Loan 5.00% (L +4.50%) 3/26/2021 4/6/2028 2,696 2,688 2,704 1.3 Avison Young (15) Nonresidential Property Managers Senior Secured Loan 5.97% (L +5.75%) 11/25/2021 1/31/2026 2,987 2,972 2,972 1.5 Ball Metalpack Metal Can Manufacturing Senior Secured Loan 9.75% (L +8.75%) 6/8/2021 7/31/2026 2,167 2,143 2,167 1.1 Bass Pro Group, LLC (14) (15) Sporting Goods Stores Senior Secured Loan 4.50% (L +3.75%) 2/26/2021 3/6/2028 1,967 1,958 1,972 1.0 109 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets BayMark Health Services, Inc. (15) Outpatient Mental Health and Substance Abuse Centers Senior Secured Loan 9.50% (L +8.50%) 6/10/2021 6/11/2028 $ 4,962 $ 4,893 $ 5,061 2.5 % Senior Secured Loan (Delayed Draw) (5) n/m (18) (L +8.50%) 6/10/2021 6/11/2028 — (124) 170 0.1 4,962 4,769 5,231 2.6 Constellis Holdings, LLC (10) Other Justice, Public Order, and Safety Activities Common Equity (20,628 common shares) 3/27/2020 703 29 — Convergint Technologies Holdings, LLC Security Systems Services (except Locksmiths) Senior Secured Loan 7.50% (L +6.75%) 9/28/2018 3/30/2029 4,838 4,827 4,887 2.4 Corel Inc. (14) (15) Software Publishers Senior Secured Loan 5.18% (L +5.00%) 3/2/2021 7/2/2026 2,271 2,265 2,270 1.1 Creation Technologies (15) (22) Bare Printed Circuit Board Manufacturing Senior Secured Loan 6.00% (L +5.50%) 9/24/2021 10/5/2028 2,000 1,985 1,977 1.0 DHX Media Ltd. (14) (15) (22) Motion Picture and Video Production Senior Secured Loan 5.00% (L +4.25%) 3/19/2021 3/18/2028 3,974 3,929 3,970 1.9 Diamond Sports Group, LLC (14) (15) Television Broadcasting Senior Secured Loan 3.36% (L +3.25%) 11/19/2019 8/24/2026 1,955 1,957 918 0.5 DIRECTV Financing, LLC (14) (15) Wired Telecommunications Carriers Senior Secured Loan 5.75% (L +5.00%) 7/22/2021 8/2/2027 4,395 4,388 4,405 2.2 Eblens Holdings, Inc. (20) Shoe Store Subordinated Loan (11) 12.00% cash / 1.00% PIK N/A 7/13/2017 1/13/2023 9,207 9,181 9,049 4.4 Common Equity (71,250 Class A units) (10) 7/13/2017 713 292 0.1 9,207 9,894 9,341 4.5 Electrical Components International, Inc. Current-Carrying Wiring Device Manufacturing Senior Secured Loan 8.60% (L +8.50%) 4/8/2021 6/26/2026 3,000 2,653 2,954 1.4 110 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets EnergySolutions, LLC (14) (15) Hazardous Waste Treatment and Disposal Senior Secured Loan 4.75% (L +3.75%) 7/8/2021 5/9/2025 $ 1,837 $ 1,833 $ 1,837 0.9 % Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) Electrical Contractors and Other Wiring Installation Contractors Senior Secured Loan 7.50% N/A 12/31/2021 12/31/2025 6,424 6,424 6,424 3.2 Senior Secured Loan 10.00% PIK N/A 12/31/2021 12/31/2026 6,424 6,424 4,645 2.3 Senior Secured Loan (Revolver) (5) 7.50% N/A 11/29/2021 12/31/2025 563 563 563 0.3 Equity Participation Rights (23) 12/31/2021 — 4,722 — — 13,411 18,133 11,632 5.8 Excelin Home Health, LLC (4) Home Health Care Services Senior Secured Loan 11.50% (L +9.50%) 10/25/2018 9/30/2025 4,250 4,182 4,250 2.1 GGC Aerospace Topco L.P. Other Aircraft Parts and Auxiliary Equipment Manufacturing Common Equity (368,852 Class A units) (10) 12/29/2017 450 77 — Common Equity (40,984 Class B units) (10) 12/29/2017 50 3 — 500 80 — Honor HN Buyer Inc (15) Services for the Elderly and Persons with Disabilities Senior Secured Loan 7.00% (L +6.00%) 10/15/2021 10/15/2027 6,598 6,471 6,471 3.2 Senior Secured Loan (Delayed Draw) (5) n/m (18) (L +6.00%) 10/15/2021 10/15/2027 — (40) (40) — Senior Secured Loan (Revolver) (5) n/m (18) (L +6.00%) 10/15/2021 10/15/2027 — (15) (15) — 6,598 6,416 6,416 3.2 Hunter Fan Company (14) (15) Small Electrical Appliance Manufacturing Senior Secured Loan 5.75% (L +5.00%) 8/10/2021 5/8/2028 4,988 4,997 4,997 2.5 Inergex Holdings, LLC Other Computer Related Services Senior Secured Loan 8.00% cash / 1.00% PIK (L +8.00%) 10/1/2018 10/1/2024 15,260 15,030 15,260 7.5 Senior Secured Loan (Revolver) (5) n/m (18) (L +7.00%) 10/1/2018 10/1/2024 — (13) — — 15,260 15,017 15,260 7.5 Intouch Midco Inc. (15) (22) All Other Professional, Scientific, and Technical Services Senior Secured Loan 4.85% (L +4.75%) 12/20/2019 8/24/2025 2,909 2,872 2,865 1.4 111 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Ivanti Software, Inc. (14) (15) Software Publishers Senior Secured Loan 5.00% (L +4.25%) 3/26/2021 12/1/2027 $ 2,985 $ 2,996 $ 2,993 1.5 % JP Intermediate B, LLC (15) Drugs and Druggists' Sundries Merchant Wholesalers Senior Secured Loan 6.50% (L +5.50%) 1/14/2021 11/15/2025 5,736 5,529 5,550 2.7 KNS Acquisition Corp. (14) (15) Electronic Shopping and Mail-Order Houses Senior Secured Loan 7.00% (L +6.25%) 4/16/2021 4/21/2027 6,956 6,913 6,870 3.4 Kreg LLC (15) Other Ambulatory Health Care Services Senior Secured Loan 7.25% (L +6.25%) 12/20/2021 12/20/2026 20,500 20,347 20,347 10.0 Senior Secured Loan (Revolver) (5) n/m (18) (L +6.25%) 12/20/2021 12/20/2026 — (17) (17) — 20,500 20,330 20,330 10.0 LogMeIn, Inc. (14) (15) Data Processing, Hosting, and Related Services Senior Secured Loan 4.86% (L +4.75%) 3/26/2021 8/31/2027 2,979 2,977 2,966 1.5 Magenta Buyer LLC (14) (15) Software Publishers Senior Secured Loan 5.75% (L +5.00%) 7/28/2021 7/27/2028 4,850 4,836 4,845 2.4 McGraw Hill Global Education Holdings, LLC (14) (15) All Other Publishers Senior Secured Loan 4.85% (L +4.75%) 4/1/2021 7/28/2028 2,310 2,288 2,303 1.1 Milrose Consultants, LLC (4) Administrative Management and General Management Consulting Services Senior Secured Loan (15) 7.50% (L +6.50%) 7/16/2019 7/16/2025 22,364 22,364 22,024 10.8 Senior Secured Loan (Revolver) 7.50% (L +6.50%) 7/16/2019 7/16/2025 634 626 610 0.3 22,998 22,990 22,634 11.1 112 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Molded Devices, Inc. (15) Other Industrial Machinery Manufacturing Senior Secured Loan 8.25% (Prime + 5.00%) 11/1/2021 11/1/2026 $ 8,069 $ 7,991 $ 7,991 3.9 % Senior Secured Loan (Delayed Draw) (5) n/m (18) (Prime + 5.00%) 11/1/2021 11/1/2026 — (7) (7) — Senior Secured Loan (Revolver) (5) n/m (18) (Prime + 5.00%) 11/1/2021 11/1/2026 — (9) (9) — 8,069 7,975 7,975 3.9 Odyssey Logistics and Technology Corporation (14) (15) Freight Transportation Arrangement Senior Secured Loan 5.00% (L +4.00%) 4/5/2021 10/12/2024 1,985 1,960 1,970 1.0 One GI LLC (15) Offices of Other Holding Companies Senior Secured Loan (Delayed Draw) 7.75% (L +6.75%) 12/13/2021 3/13/2022 5,515 5,403 5,403 2.7 Senior Secured Loan (Delayed Draw) (5) n/m (18) (L +6.75%) 12/13/2021 12/13/2023 — (39) (39) — Senior Secured Loan (Revolver) (5) n/m (18) (L +6.75%) 12/13/2021 12/22/2025 — (29) (29) — 5,515 5,335 5,335 2.7 Parfums Holding Company, Inc. (14) (15) Cosmetics, Beauty Supplies, and Perfume Stores Senior Secured Loan 4.10% (L +4.00%) 6/25/2019 6/30/2024 1,534 1,533 1,531 0.8 Peraton Inc. (14) (15) Management Consulting Services Senior Secured Loan 4.50% (L +3.75%) 4/2/2021 2/1/2028 835 836 837 0.4 PM Acquisition LLC (20) All Other General Merchandise Stores Common Equity (499 units) (10) (13) 9/30/2017 499 1,698 0.8 Professional Pipe Holdings, LLC Plumbing, Heating, and Air-Conditioning Contractors Senior Secured Loan 9.75% cash / 1.00% PIK (L +9.75%) 3/23/2018 3/24/2025 5,367 5,344 5,378 2.6 Resource Label Group, LLC (14) (15) Commercial Printing (except Screen and Books) Senior Secured Loan 5.00% (L +4.25%) 7/2/2021 7/7/2028 694 692 694 0.3 Senior Secured Loan (Delayed Draw) 5.00% (L +4.25%) 7/2/2021 7/2/2028 2,743 2,735 2,742 1.3 3,437 3,427 3,436 1.6 113 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets RPLF Holdings, LLC (10) (13) Software Publishers Common Equity (345,339 Class A units) 1/17/2018 $ 492 $ 794 0.4 % RSA Security (15) Computer and Computer Peripheral Equipment and Software Merchant Wholesalers Senior Secured Loan (14) 5.50% (L +4.75%) 4/16/2021 4/27/2028 2,797 2,782 2,680 1.3 Senior Secured Loan 8.50% (L +7.75%) 4/16/2021 4/27/2029 4,450 4,392 4,223 2.1 7,247 7,174 6,903 3.4 RumbleOn, Inc. (15) (22) Other Industrial Machinery Manufacturing Senior Secured Loan 9.25% (L +8.25%) 8/31/2021 8/31/2026 4,190 3,964 4,006 2.0 Senior Secured Loan (Delayed Draw) (5) n/m (18) (L +8.25%) 8/31/2021 2/23/2023 — (18) (79) — Warrants (warrants to purchase up to $600,000 in common stock) 8/31/2021 2/28/2023 (12) — 200 274 0.1 4,190 4,146 4,201 2.1 Sentry Centers Holdings, LLC (10) (13) Other Professional, Scientific, and Technical Services Preferred Equity (2,248 Series A units) 9/4/2020 51 — — Preferred Equity (1,603 Series B units) 9/4/2020 160 12 — Common Equity (269 units) 9/4/2020 3 — — 214 12 — Signal Parent, Inc. (14) (15) New Single-Family Housing Construction (except For-Sale Builders) Senior Secured Loan 4.25% (L +3.50%) 3/25/2021 4/3/2028 1,840 1,823 1,794 0.9 SourceHOV Tax, Inc. (4) Other Accounting Services Senior Secured Loan 7.50% (L +6.50%) 3/16/2020 3/16/2025 19,790 19,648 19,935 9.8 Senior Secured Loan (Revolver) (5) n/m (18) (L +6.50%) 5/17/2021 3/17/2025 — (15) — — 19,790 19,633 19,935 9.8 Southern Technical Institute, LLC (4) (10)(23) Colleges, Universities, and Professional Schools Equity Participation Rights 6/27/2018 — 7,408 3.6 Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.) (15) Child Day Care Services Senior Secured Loan 8.47% (L +8.25%) 7/26/2018 7/30/2026 6,399 6,336 5,916 2.9 114 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets SSJA Bariatric Management LLC (15) Offices of Physicians, Mental Health Specialists Senior Secured Loan 6.00% (L +5.00%) 8/26/2019 8/26/2024 $ 9,775 $ 9,723 $ 9,775 4.8 % Senior Secured Loan 6.00% (L +5.00%) 12/31/2020 8/26/2024 1,056 1,048 1,056 0.5 Senior Secured Loan 6.00% (L +5.00%) 12/8/2021 8/26/2024 2,660 2,634 2,660 1.3 Senior Secured Loan (Revolver) (5) n/m (18) (L +5.00%) 8/26/2019 8/26/2024 — (4) — — 13,491 13,401 13,491 6.6 SS Acquisition, LLC (15) Sports and Recreation Instruction Senior Secured Loan (8) 7.88% (L +6.88%) 12/30/2021 12/30/2026 3,042 3,011 3,011 1.5 Senior Secured Loan (Delayed Draw) (5) n/m (18) (L +6.88%) 12/30/2021 12/30/2026 — — — — 3,042 3,011 3,011 1.5 Staples, Inc. (14) (15) (22) Business to Business Electronic Markets Senior Secured Loan 5.13% (L +5.00%) 6/24/2019 4/16/2026 2,930 2,875 2,838 1.4 STS Operating, Inc. Industrial Machinery and Equipment Merchant Wholesalers Senior Secured Loan 9.00% (L +8.00%) 5/15/2018 4/30/2026 9,073 9,071 9,073 4.5 Teneo Global LLC (14) (15) Management Consulting Services Senior Secured Loan 6.25% (L +5.25%) 9/10/2021 7/11/2025 1,421 1,415 1,427 0.7 The Escape Game, LLC (4) Other amusement and recreation industries Senior Secured Loan 8.00% (L +7.00%) 12/21/2021 12/22/2024 16,333 16,333 16,382 8.0 Senior Secured Loan (Revolver) (5) n/m (18) (L +7.00%) 12/21/2021 — (46) 14 — 16,333 16,287 16,396 8.0 Thryv, Inc. (14) (15) Directory and Mailing List Publishers Senior Secured Loan 9.50% (L +8.50%) 2/18/2021 3/1/2026 2,050 2,004 2,085 1.0 Tolemar Acquisition, INC. (15) Motorcycle, Bicycle, and Parts Manufacturing Senior Secured Loan 7.00% (L +6.00%) 10/14/2021 10/14/2026 14,889 14,818 14,818 7.3 Senior Secured Loan (Revolver) (5) 7.00% (L +6.00%) 10/14/2021 10/14/2026 360 348 348 0.2 15,249 15,166 15,166 7.5 TruGreen Limited Partnership Landscaping Services Senior Secured Loan 9.25% (L +8.50%) 5/13/2021 11/2/2028 4,500 4,630 4,590 2.3 115 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets United Biologics Holdings, LLC (4) (10) Medical Laboratories Preferred Equity (151,787 units) 4/16/2013 $ 9 $ 17 — % Warrants (29,374 units) 7/26/2012 3/5/2022 (12) 82 8 — 91 25 — West Corporation (14) (15) All Other Telecommunications Senior Secured Loan 4.50% (L +3.50%) 2/26/2021 10/10/2024 887 874 838 0.4 Senior Secured Loan 5.00% (L +4.00%) 7/29/2021 10/10/2024 2,611 2,555 2,485 1.2 3,498 3,429 3,323 1.6 Yahoo / Verizon Media (14) (15) Internet Publishing and Broadcasting and Web Search Portals Senior Secured Loan 6.25% (L +5.50%) 7/21/2021 9/1/2027 3,294 3,249 3,299 1.6 Total Debt and Equity Investments $ 350,939 $ 353,447 $ 346,366 170.1 % Structured Finance Note Investments (22) Subordinated Notes and Mezzanine Debt (9) (16) Apex Credit CLO 2020 (7) Subordinated Notes 10.20% 11/16/2020 10/20/2031 $ 11,080 $ 9,297 $ 9,090 4.5 % Apex Credit CLO 2021 Ltd (7) Subordinated Notes 14.53% 5/28/2021 7/18/2034 8,630 7,797 7,442 3.7 Dryden 53 CLO, LTD. (7) Subordinated Notes - Income 23.72% 10/26/2020 1/15/2031 2,700 1,611 1,672 0.8 Subordinated Notes 23.69% 10/26/2020 1/15/2031 2,159 1,289 1,337 0.7 4,859 2,900 3,009 1.5 Dryden 76 CLO, Ltd. (7) Subordinated Notes 15.73% 9/27/2019 10/20/2032 2,750 2,119 2,374 1.2 Elevation CLO 2017-7, Ltd. (7) Subordinated Notes 11.96% 2/6/2019 7/15/2030 10,000 6,137 5,357 2.6 116 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Flatiron CLO 18, Ltd. (7) Subordinated Notes 19.09% 1/2/2019 4/17/2031 $ 9,680 $ 6,942 $ 7,331 3.6 % Madison Park Funding XXIII, Ltd. (7) Subordinated Notes 24.21% 1/8/2020 7/27/2047 10,000 6,370 7,211 3.5 Madison Park Funding XXIX, Ltd. (7) Subordinated Notes 15.88% 12/22/2020 10/18/2047 9,500 6,899 7,001 3.4 Monroe Capital MML CLO X, LTD. Mezzanine bond - Class E 10.92% (L +8.85%) 8/7/2020 8/20/2031 1,000 949 996 0.5 Octagon Investment Partners 39, Ltd. (7) Subordinated Notes 17.69% 1/23/2020 10/20/2030 7,000 4,733 4,845 2.4 Park Avenue Institutional Advisers CLO Ltd 2021-1 Mezzanine bond - Class E 8.63% (L +7.30%) 1/26/2021 1/20/2034 1,000 974 988 0.5 Redding Ridge 4 (7) Subordinated Notes 18.02 3/4/2021 4/15/2030 1,300 1,104 1,106 0.5 Regatta II Funding Mezzanine bond - Class DR2 13.42% (L +6.95%) 6/5/2020 1/15/2029 800 737 795 0.4 THL Credit Wind River 2019‐3 CLO Ltd. (7) Subordinated Notes 13.09% 4/5/2019 4/15/2031 7,000 5,710 5,231 2.6 Trinitas CLO VIII (7) 117 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Subordinated Notes 21.34% 3/4/2021 7/20/2117 $ 5,200 $ 3,128 $ 3,229 1.6 % Wellfleet CLO 2018-2 (7) Subordinated Notes 19.74% 3/4/2021 10/20/2031 1,000 655 696 0.3 Total Subordinated Notes and Mezzanine Debt Investments $ 90,799 $ 66,451 $ 66,701 32.8 % Loan Accumulation Facility (17) (22) Apex Credit CLO 2021-II Ltd Loan accumulation facility 13.50% 7/14/2021 7/14/2022 $ 8,500 $ 8,500 $ 8,500 4.2 % Total Structured Finance Notes $ 99,299 $ 74,951 $ 75,201 37.0 % Total Non-control/Non-affiliate Investments $ 450,238 $ 428,398 $ 421,567 207.1 % Affiliate Investments Contract Datascan Holdings, Inc. (4) (10) (20) Office Machinery and Equipment Rental and Leasing Preferred Equity (3,061 Series A shares) 10% PIK 8/5/2015 $ 5,849 $ 2,748 1.3 % Common Equity (11,273 shares) 6/28/2016 104 25 — 5,953 2,773 1.3 DRS Imaging Services, LLC (20) Data Processing, Hosting, and Related Services Common Equity (1,135 units) (10) (13) 3/8/2018 1,135 1,289 0.6 Master Cutlery, LLC (4) (10)(20) Sporting and Recreational Goods and Supplies Merchant Wholesalers Subordinated Loan (6) (11) 13.00% (11) N/A 4/17/2015 7/20/2022 7,563 4,696 699 0.3 Preferred Equity (3,723 Series A units), 8% PIK 4/17/2015 3,483 — — Common Equity (15,564 units) 4/17/2015 — — — 7,563 8,179 699 0.3 118 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Pfanstiehl Holdings, Inc. (4) (20) (21) Pharmaceutical Preparation Manufacturing Common Equity (400 Class A shares) 1/1/2014 $ 217 $ 65,740 32.3 % TalentSmart Holdings, LLC (20) Professional and Management Development Training Common Equity (1,595,238 Class A shares) (10) (13) 10/11/2019 1,595 1,095 0.5 TRS Services, LLC (4) (10) (20) Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance Preferred Equity (1,937,191 Class A units), 11% PIK 12/10/2014 — 988 0.5 Common Equity (3,000,000 units) 12/10/2014 572 — — 572 988 0.5 Total Affiliate Investments $ 7,563 $ 17,650 $ 72,584 35.5 % Control Investment MTE Holding Corp. (4) (19) Travel Trailer and Camper Manufacturing Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.) 11.00% cash / 5.00% PIK (L +15.00%) 11/25/2015 4/30/2022 $ 8,195 $ 8,195 $ 8,195 4.0 % Common Equity (554 shares) 11/25/2015 3,069 4,753 2.3 8,195 11,264 12,948 6.3 Total Control Investment $ 8,195 $ 11,264 $ 12,948 6.3 % Total Investments $ 465,995 $ 457,312 $ 507,099 248.9 % (1) Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144. (2) Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L), generally between 0.75% and 1.00% at December 31, 2021, and reset monthly, quarterly, or semi-annually. Variable-rate loans with an aggregate cost of $316,558 include LIBOR reference rate floor provisions of generally 0.75% to 1.00% at December 31, 2021, the reference rates on such instruments were generally below the stated floor provisions. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, 2021. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision. (3) Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's investments and are considered Level 3 under GAAP. See Note 5 for further details. 119 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2021 (Dollar amounts in thousands) (4) Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company. (5) Subject to unfunded commitments. See Note 6. (6) Investment was on non-accrual status as of December 31, 2021, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details. (7) CLO subordinated debt positions are entitled to recurring distributions generally equal to the residual cash flow of payments received on underlying securities less contractual payments to debt holders and fund expenses. (8) The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The table below provides additional details as of December 31, 2021: Portfolio Company Reported Interest Rate Interest Rate per Credit Agreement Additional Interest per Annum SS Acquisition, LLC 7.88% 7.50% 0.38% (9) The rate disclosed is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amount and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized. (10) Non-income producing. (11) The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of December 31, 2021: Portfolio Company Investment Type Range of PIK Option Range of Cash Option Maximum PIK Rate Allowed Eblens Holdings, Inc. Subordinated Loan 0% or 1.00% 13.00% or 12.00% 1.00% Master Cutlery, LLC Senior Secured Loan 0% to 13.00% 13.00% to 0% 13.00% (12) Represents expiration date of the warrants. (13) All or portion of investment held by a wholly owned subsidiary subject to income tax. (14) Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details. (15) Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any other debt obligation of the Company. (16) Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO subordinated debt investments. (17) Loan accumulation facilities are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle. Reported yields represent the realized yield since acquisition. Income notes associated with loan accumulation facilities generally pay returns equal to the actual income earned on facility assets less costs of senior financing. As of December 31, 2021, the fair value of loan accumulation facilities were determined by reference to Transaction Price. (18) Not meaningful as there is no outstanding balance on the revolver or delayed draw loan. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income. (19) The Company holds at least one seat on the portfolio company’s board of directors. (20) The Company has an observer seat on the portfolio company’s board of directors. (21) Portfolio company at fair value represents greater than 5% of total assets at December 31, 2021. (22) Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets as defined in Section 55 of the 1940 Act must represent at least 70% of the Company's assets immediately following the acquisition of any additional non-qualifying assets. As of December 31, 2021, approximately 85% of the Company's assets were qualifying assets. (23) Equity participation rights issued by unaffiliated third party fully covered with underlying positions in the portfolio company. See Notes to Consolidated Financial Statements. 120 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Non-control/Non-affiliate Investments All Star Auto Lights, Inc. (4) Motor Vehicle Parts (Used) Merchant Wholesalers Senior Secured Loan 8.50% (L +7.50%) 12/19/2019 8/20/2024 $ 14,293 $ 14,167 $ 13,581 8.5 % A&A Transfer, LLC Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers Senior Secured Loan (15) 8.25% (L +6.50%) 2/7/2020 2/7/2025 16,632 16,427 16,798 10.6 Senior Secured Loan (Revolver) (5) n/m (18) (L +6.50%) 2/7/2020 2/7/2025 — (35) (21) — 16,632 16,392 16,777 10.6 Bass Pro Group, LLC (14) (15) Sporting Goods Stores Senior Secured Loan 5.75% (L +5.00%) 6/24/2019 9/25/2024 2,954 2,907 2,968 1.9 BayMark Health Services, Inc. Outpatient Mental Health and Substance Abuse Centers Senior Secured Loan 9.25% (L +8.25%) 3/22/2018 3/1/2025 4,000 3,976 4,000 2.5 Community Intervention Services, Inc. (4) (6) (11) Outpatient Mental Health and Substance Abuse Centers Subordinated Loan 7.00% cash / 6.00% PIK N/A 7/16/2015 1/16/2021 10,225 7,639 105 0.1 Confie Seguros Holdings II Co. Insurance Agencies and Brokerages Senior Secured Loan 8.73% (L +8.50%) 7/7/2015 11/1/2025 9,678 9,544 9,302 5.9 Connect U.S. Finco LLC (14) (15) Taxi Service Senior Secured Loan 5.50% (L +4.50%) 11/20/2019 12/11/2026 1,985 1,976 1,997 1.3 Constellis Holdings, LLC (10) Other Justice, Public Order, and Safety Activities Common Equity (20,628 common shares) 3/27/2020 703 676 0.4 Convergint Technologies Holdings, LLC Security Systems Services (except Locksmiths) Senior Secured Loan 7.50% (L +6.75%) 9/28/2018 2/2/2026 3,481 3,437 3,390 2.1 121 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Custom Truck One Source (14) (15) Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing Senior Secured Loan 4.40% (L +4.25%) 9/30/2020 4/18/2025 $ 497 $ 496 $ 499 0.3 % Diamond Sports Group, LLC (14) (15) Television Broadcasting Senior Secured Loan 3.40% (L +3.25%) 11/19/2019 8/24/2026 1,975 1,977 1,758 1.1 DuPage Medical Group (15) Offices of Physicians, Mental Health Specialists Senior Secured Loan 7.75% (L +7.00%) 8/22/2017 8/15/2025 10,098 10,159 10,098 6.4 Eblens Holdings, Inc. (20) Shoe Store Subordinated Loan (11) 12.00% cash / 1.00% PIK N/A 7/13/2017 1/13/2023 9,114 9,035 4,368 2.7 Common Equity (71,250 Class A units) (10) 7/13/2017 713 — — 9,114 9,748 4,368 2.7 Envocore Holding, LLC (F/K/A LRI Holding, LLC) (4) Electrical Contractors and Other Wiring Installation Contractors Senior Secured Loan 7.50% cash / 3.50% PIK (L +7.50%) 6/30/2017 6/30/2022 17,150 17,055 12,668 8.0 Preferred Equity (238,095 Series B units) (10) 6/30/2017 300 — — Preferred Equity (13,315 Series C units) (10) 8/13/2018 13 — — 17,150 17,368 12,668 8.0 Excelin Home Health, LLC Home Health Care Services Senior Secured Loan 11.50% (L +9.50%) 10/25/2018 4/25/2024 4,250 4,199 4,250 2.7 GGC Aerospace Topco L.P. Other Aircraft Parts and Auxiliary Equipment Manufacturing Senior Secured Loan 9.75% (L +9.50%) 12/29/2017 9/8/2024 5,000 4,931 4,102 2.6 Common Equity (368,852 Class A units) (10) 12/29/2017 450 166 0.1 Common Equity (40,984 Class B units) (10) 12/29/2017 50 7 — 5,000 5,431 4,275 2.7 Inergex Holdings, LLC Other Computer Related Services Senior Secured Loan 8.00% (L +7.00%) 10/1/2018 10/1/2024 16,422 16,265 15,913 9.9 Senior Secured Loan (Revolver) (5) n/m (18) (L +7.00%) 10/1/2018 10/1/2024 — (18) 87 0.1 16,422 16,247 16,000 10.0 122 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Institutional Shareholder Services, Inc. Administrative Management and General Management Consulting Services Senior Secured Loan 8.75% (L +8.50%) 3/4/2019 3/5/2027 $ 6,244 $ 6,099 $ 6,244 3.9 % Intouch Midco Inc. (15) All Other Professional, Scientific, and Technical Services Senior Secured Loan 4.90% (L +4.75%) 12/20/2019 8/24/2025 1,980 1,921 1,905 1.2 I&I Sales Group, LLC Marketing Consulting Services Senior Secured Loan (15) 9.50% (L +8.50%) 12/30/2020 7/10/2025 5,325 5,232 5,232 3.3 Senior Secured Loan (Revolver) (5) n/m (18) (L +8.50%) 12/30/2020 7/10/2025 — (3) (3) — 5,325 5,229 5,229 3.3 Milrose Consultants, LLC (4) (8) Administrative Management and General Management Consulting Services Senior Secured Loan 7.62% (L +6.62%) 7/16/2019 7/16/2025 22,574 22,404 22,485 14.0 My Alarm Center, LLC (10) Security Systems Services (except Locksmiths) Preferred Equity (335 Class Z units) (13) 9/12/2018 325 97 0.1 Preferred Equity (1,485 Class A units), 8% PIK (4) (13) 7/14/2017 1,571 — — Preferred Equity (1,198 Class B units) (4) 7/14/2017 1,198 — — Common Equity (64,149 units) (4) (13) 7/14/2017 — — — 3,094 97 0.1 Online Tech Stores, LLC (4) (6) Stationery and Office Supplies Merchant Wholesalers Subordinated Loan 13.50% PIK N/A 2/1/2018 8/1/2023 18,360 16,129 2,426 1.5 Panther BF Aggregator 2 LP (14) (15) (19) Other Commercial and Service Industry Machinery Manufacturing Senior Secured Loan 3.65% (L +3.50%) 11/19/2019 4/30/2026 1,939 1,925 1,936 1.2 Parfums Holding Company, Inc. Cosmetics, Beauty Supplies, and Perfume Stores Senior Secured Loan (14) (15) 4.23% (L +4.00%) 6/25/2019 6/30/2024 1,537 1,536 1,530 1.0 Senior Secured Loan 9.75% (L +8.75%) 11/16/2017 6/30/2025 5,171 5,202 5,171 3.3 6,708 6,738 6,701 4.3 123 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Pelican Products, Inc. Unlaminated Plastics Profile Shape Manufacturing Senior Secured Loan 8.75% (L +7.75%) 9/24/2018 5/1/2026 $ 6,055 $ 6,059 $ 5,994 3.8 % Pike Corp. (14) (15) Electrical Contractors and Other Wiring Installation Contractors Senior Secured Loan 3.14% (L +3.00%) 9/17/2020 7/24/2026 469 469 469 0.3 PM Acquisition LLC (20) All Other General Merchandise Stores Senior Secured Loan 11.50% cash / 2.50% PIK N/A 9/30/2017 10/29/2021 4,780 4,753 4,780 3.0 Common Equity (499 units) (10) (13) 9/30/2017 499 280 0.2 4,780 5,252 5,060 3.2 Quest Software US Holdings Inc. (14) (15) Computer and Computer Peripheral Equipment and Software Merchant Wholesalers Senior Secured Loan 4.46% (L +4.25%) 6/25/2019 5/16/2025 1,970 1,955 1,942 1.2 Resource Label Group, LLC Commercial Printing (except Screen and Books) Senior Secured Loan 9.50% (L +8.50%) 6/7/2017 11/26/2023 4,821 4,789 4,812 3.0 Rocket Software, Inc. (15) Software Publishers Senior Secured Loan 8.46% (L +8.25%) 11/20/2018 11/28/2026 6,275 6,190 6,241 3.9 RPLF Holdings, LLC (10) (13) Software Publishers Common Equity (254,110 Class A units) 1/17/2018 492 605 0.4 Sentry Centers Holdings, LLC (10) (13) Other Professional, Scientific, and Technical Services Preferred Equity (2,248 Series A units) 9/4/2020 51 47 — Preferred Equity (1,603 Series B units) 9/4/2020 160 160 0.1 Common Equity (269 units) 9/4/2020 3 3 — 214 210 0.1 SkyMiles IP Ltd. and Delta Air Lines, Inc. (14) (15) (23) Scheduled Passenger Air Transportation Senior Secured Loan 4.75 (L +3.75%) 9/15/2020 10/20/2027 500 495 520 0.3 124 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets SourceHOV Tax, Inc. (4) (8) Other Accounting Services Senior Secured Loan 7.61 (L +6.11%) 3/16/2020 3/16/2025 $ 19,892 $ 19,742 $ 19,988 12.6 Southern Technical Institute, LLC (4) (10) (22) Colleges, Universities, and Professional Schools Equity participation rights 6/27/2018 — 4,295 2.7 Spring Education Group, Inc. (F/K/A SSH Group Holdings, Inc.) Child Day Care Services Senior Secured Loan 8.50% (L +8.25%) 7/26/2018 7/30/2026 5,216 5,178 4,656 2.9 SSJA Bariatric Management LLC (15) Offices of Physicians, Mental Health Specialists Senior Secured Loan 6.00% (L +5.00%) 8/26/2019 8/26/2024 9,875 9,803 9,647 6.1 Senior Secured Loan 6.25% (L +5.25%) 12/31/2020 8/26/2024 1,067 1,056 1,042 0.7 Senior Secured Loan (Revolver) (5) n/m (18) (L +5.00%) 8/26/2019 8/26/2024 — (5) 15 — 10,942 10,854 10,704 6.8 Stancor, L.P. (4) Pump and Pumping Equipment Manufacturing Preferred Equity (1,250,000 Class A units), 8% PIK (10) 8/19/2014 1,501 1,281 0.8 Staples, Inc. (14) (15) (23) Business to Business Electronic Markets Senior Secured Loan 5.21% (L +5.00%) 6/24/2019 4/16/2026 2,960 2,891 2,875 1.8 STS Operating, Inc. Industrial Machinery and Equipment Merchant Wholesalers Senior Secured Loan (14) (15) 5.25% (L +4.25%) 5/16/2018 12/11/2024 625 626 601 0.4 Senior Secured Loan 9.00% (L +8.00%) 5/15/2018 4/30/2026 9,073 9,070 8,578 5.4 9,698 9,696 9,179 5.8 Sunshine Luxembourg VII SARL (14) (15) Pharmaceutical Preparation Manufacturing Senior Secured Loan 5.00% (L +4.00%) 11/20/2019 9/25/2026 1,980 1,988 1,992 1.3 125 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Tank Holding Corp. (15) Unlaminated Plastics Profile Shape Manufacturing Senior Secured Loan (14) 5.50% (L +4.00%) 6/24/2019 3/26/2026 $ 1,975 $ 1,981 $ 1,942 1.2 % Senior Secured Loan 3.40% (L +3.25%) 12/18/2020 3/26/2026 896 882 882 0.6 2,871 2,863 2,824 1.8 The Escape Game, LLC (4) Other amusement and recreation industries Senior Secured Loan 9.75% (L +8.75%) 7/18/2019 12/22/2022 7,000 6,973 6,647 4.2 Senior Secured Loan 9.75% (L +8.75%) 12/22/2017 12/31/2021 2,333 2,329 2,216 1.4 Senior Secured Loan 8.00% (L +7.00%) 7/20/2018 12/31/2021 4,667 4,665 4,463 2.8 Senior Secured Loan (Delayed Draw) 9.75% (L +8.75%) 7/20/2018 12/22/2022 7,000 7,000 6,647 4.2 21,000 20,967 19,973 12.6 Truck Hero, Inc. (15) Truck Trailer Manufacturing Senior Secured Loan 9.25% (L +8.25%) 5/30/2017 4/21/2025 8,174 8,118 8,174 5.1 United Biologics Holdings, LLC (4) (10) Medical Laboratories Preferred Equity (151,787 units) 4/16/2013 9 26 — Warrants (29,374 units) 7/26/2012 3/5/2022 (12) 82 12 — 91 38 — United Natural Foods (14) (15) (23) General Line Grocery Merchant Wholesalers Senior Secured Loan 4.40% (L +4.25%) 6/9/2020 10/22/2025 286 275 284 0.2 Wastebuilt Environmental Solutions, LLC (4) Industrial Supplies Merchant Wholesalers Senior Secured Loan 10.25% (L +8.75%) 10/11/2018 10/11/2024 7,000 6,908 5,476 3.4 Weight Watchers International, Inc. (14) (15) (23) Diet and Weight Reducing Centers Senior Secured Loan 5.50% (L +4.75%) 6/10/2020 11/29/2024 477 477 479 0.3 Xperi (14) (15) (23) Semiconductor and Related Device Manufacturing Senior Secured Loan 4.15% (L +4.00%) 6/1/2020 6/1/2025 433 399 434 0.3 Total Debt and Equity Investments $ 306,683 $ 307,768 $ 272,240 171.3 % 126 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Structured Finance Note Investments (23) Apex Credit CLO 2020 (7) Subordinated Notes 14.16% (9) 11/16/2020 11/19/2031 (17) $ 11,080 $9,461 (16) $ 10,006 6.3 % Dryden 53 CLO, LTD. (7) Subordinated Notes - Income 16.68% (9) 10/26/2020 1/15/2031 (17) 2,700 1,779 1,967 1.2 Subordinated Notes 16.68% (9) 10/26/2020 1/15/2031 (17) 2,159 1,423 (16) 1,573 1.0 4,859 3,202 3,540 2.2 Dryden 76 CLO, Ltd. (7) Subordinated Notes 18.68% (9) 9/27/2019 10/20/2032 (17) 2,750 2,282 (16) 2,235 1.4 Elevation CLO 2017-7, Ltd. (7) Subordinated Notes 12.32% (9) 2/6/2019 7/15/2030 (17) 10,000 6,955 (16) 6,226 3.9 Flatiron CLO 18, Ltd. (7) Subordinated Notes 20.73% (9) 1/2/2019 4/17/2031 (17) 9,680 7,265 (16) 7,702 4.8 Madison Park Funding XXIII, Ltd. (7) Subordinated Notes 21.99% (9) 1/8/2020 7/27/2047 (17) 10,000 6,654 (16) 7,129 4.5 Madison Park Funding XXIX, Ltd. (7) Subordinated Notes 14.22% (9) 12/22/2020 10/18/2047 (17) 9,500 7,529 (16) 7,569 4.8 Monroe Capital MML CLO X, LTD. Mezzanine bond - Class E 9.08% (L +8.85%) 8/7/2020 8/20/2031 (17) 863 802 838 0.5 Octagon Investment Partners 39, Ltd. (7) Subordinated Notes 20.81% (9) 1/23/2020 10/20/2030 (17) 7,000 5,173 (16) 5,493 3.5 127 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Park Avenue Institutional Advisers CLO 2017-1 Mezzanine bond - Class D 6.44% (L +6.22%) 6/5/2020 11/14/2029 (17) $ 100 $ 83 $ 95 0.1 % Regatta II Funding Mezzanine bond - Class DR2 7.19% (L +6.95%) 6/5/2020 1/15/2029 (17) 800 695 768 0.5 THL Credit Wind River 2019‐3 CLO Ltd. (7) Subordinated Notes 14.69% (9) 4/5/2019 4/15/2031 (17) 7,000 5,759 (16) 4,824 3.0 Total Structured Finance Note Investments $ 73,632 $ 55,860 $ 56,425 35.5 % Total Non-control/Non-affiliate Investments $ 380,315 $ 363,628 $ 328,665 206.8 % Affiliate Investments 3rd Rock Gaming Holdings, LLC (20) Software Publishers Senior Secured Loan (6) 8.50% cash / 1.00% PIK (L +7.50%) 3/13/2018 3/12/2023 $ 20,858 $ 19,570 $ 9,258 5.8 % Common Equity (2,547,250 units) (10) (13) 3/13/2018 2,547 — — 20,858 22,117 9,258 5.8 Chemical Resources Holdings, Inc. (20) Custom Compounding of Purchased Resins Senior Secured Loan (4)(8) 9.22% (L +7.72%) 1/25/2019 1/25/2024 13,743 13,630 13,744 8.6 Common Equity (1,832 Class A shares) (10) (13) 1/25/2019 1,814 3,420 2.2 13,743 15,444 17,164 10.8 Contract Datascan Holdings, Inc. (4)(20) Office Machinery and Equipment Rental and Leasing Preferred Equity (3,061 Series A shares) 10% PIK 8/5/2015 5,849 2,690 1.7 Common Equity (11,273 shares) (10) 6/28/2016 104 46 — 5,953 2,736 1.7 DRS Imaging Services, LLC (20) Data Processing, Hosting, and Related Services Common Equity (1,135 units) (10) (13) 3/8/2018 1,135 1,749 1.1 128 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Master Cutlery, LLC (4) (10)(20) Sporting and Recreational Goods and Supplies Merchant Wholesalers Subordinated Loan (6) 13.00% (11) N/A 4/17/2015 7/20/2022 $ 6,759 $ 4,764 $ 346 0.2 % Preferred Equity (3,723 Series A units), 8% PIK 4/17/2015 3,483 — — Common Equity (15,564 units) 4/17/2015 — — — 6,759 8,247 346 0.2 NeoSystems Corp. (4)(20) Other Accounting Services Preferred Equity (521,962 convertible shares) 10% PIK 8/14/2014 1,879 2,250 1.4 Pfanstiehl Holdings, Inc. (4)(20)(21) Pharmaceutical Preparation Manufacturing Common Equity (400 Class A shares) 1/1/2014 217 36,221 22.8 Professional Pipe Holdings, LLC (19) Plumbing, Heating, and Air-Conditioning Contractors Senior Secured Loan 9.75% cash / 1.50% PIK (L +8.75%) 3/23/2018 3/23/2023 6,263 6,193 6,086 3.8 Common Equity (1,414 Class A units) (10) 3/23/2018 1,414 1,208 0.8 6,263 7,607 7,294 4.6 TalentSmart Holdings, LLC (20) Professional and Management Development Training Common Equity (1,595,238 Class A shares) (10) (13) 10/11/2019 1,595 1,306 0.8 TRS Services, LLC (4)(20) Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance Preferred Equity (1,937,191 Class A units), 11% PIK 12/10/2014 — 915 0.6 Common Equity (3,000,000 units) (10) 12/10/2014 572 — — 572 915 0.6 TTG Healthcare, LLC (20) Diagnostic Imaging Centers Senior Secured Loan (4) 8.50% (L +7.50%) 3/1/2019 11/28/2025 19,603 19,409 19,530 12.3 Preferred Equity ( 2,309 Class B units) (10) (13) 3/1/2019 2,309 4,077 2.6 19,603 21,718 23,607 14.9 129 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) Portfolio Company (1) Investment Type Industry Interest Rate (2) Spread Above Index (2) Initial Acquisition Date Maturity Principal Amount Amortized Cost Fair Value (3) Percent of Net Assets Total Affiliate Investments $ 67,226 $ 86,484 $ 102,846 64.7 % Control Investment MTE Holding Corp. (4)(19) Travel Trailer and Camper Manufacturing Subordinated Loan (to Mirage Trailers, LLC, a controlled, consolidated subsidiary of MTE Holding Corp.) 11.00% cash / 5.00% PIK (L +10.00%) 11/25/2015 11/25/2021 $ 7,842 $ 7,842 $ 7,822 4.9 % Common Equity (554 shares) (10) 11/25/2015 3,069 2,990 1.9 7,842 10,911 10,812 6.8 Total Control Investment $ 7,842 $ 10,911 $ 10,812 6.8 % Total Investments $ 455,383 $ 461,023 $ 442,323 278.3 % (1) Equity ownership may be held in shares or units of companies affiliated with the portfolio company. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144. (2) Substantially all of the investments that bear interest at a variable rate are indexed to LIBOR (L), generally between 0.75% and 1.0% at December 31, 2021, and reset monthly, quarterly, or semi-annually. Variable-rate loans with an aggregate cost of $328,736 include LIBOR reference rate floor provisions of generally 0.75% to 1.0% at December 31, 2021, the reference rates on such instruments were generally below the stated floor provisions. For each investment, the Company has provided the spread over the reference rate and current interest rate in effect at December 31, 2021. Unless otherwise noted, all investments with a stated PIK rate require interest payments with the issuance of additional securities as payment of the entire PIK provision. (3) Unless otherwise noted with footnote 14, fair value was determined using significant unobservable inputs for all of the Company's investments and are considered Level 3 under GAAP. See Note 5 for further details. (4) Investments (or portion thereof) held by SBIC I LP. These assets are pledged as collateral of the SBA debentures and cannot be pledged under any debt obligation of the Company. (5) Subject to unfunded commitments. See Note 6. (6) Investment was on non-accrual status as of December 31, 2021, meaning the Company has suspended recognition of all or a portion of income on the investment. See Note 4 for further details. (7) CLO subordinated debt positions are entitled to recurring distributions generally equal to the residual cash flow of payments made by underlying securities less contractual payments to debt holders and fund expenses. (8) The Company has entered into a contractual arrangement with co‑lenders whereby, subject to certain conditions, it has agreed to receive its payment after the repayment of certain co‑lenders pursuant to a payment waterfall. The table below provides additional details as of December 31, 2021: Portfolio Company Reported Interest Rate Interest Rate per Credit Agreement Additional Interest per Annum Chemical Resources Holdings, Inc. 9.17% 7.50% 1.67% Milrose Consultants, LLC 7.62% 7.00% 0.62% SourceHOV Tax, Inc. 7.61% 7.00% 0.61% (9) The rate disclosed is the estimated effective yield, generally established at purchase and re-evaluated upon receipt of distributions, and based upon projected amounts and timing of future distributions and the projected amount and timing of terminal principal payments at the time of estimation. The estimated yield and investment cost may ultimately not be realized. (10) Non-income producing. 130 OFS Capital Corporation and Subsidiaries Consolidated Schedule of Investments December 31, 2020 (Dollar amounts in thousands) (11) The interest rate on these investments contains a PIK provision, whereby the issuer has the option to make interest payments in cash or with the issuance of additional securities as payment of the entire PIK provision. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed as of December 31, 2021: Portfolio Company Investment Type Range of PIK Option Range of Cash Option Maximum PIK Rate Allowed Community Intervention Services, Inc. Subordinated Loan 0% or 6.00% 13.00% or 7.00% 6.00% Eblens Holdings, Inc. Subordinated Loan 0% or 1.00% 13.00% or 12.00% 1.00% Master Cutlery, LLC Senior Secured Loan 0% to 13.00% 13.00% to 0% 13.00% (12) Represents expiration date of the warrants. (13) All or portion of investment held by a wholly owned subsidiary subject to income tax. (14) Fair value was determined by reference to observable inputs other than quoted prices in active markets and are considered Level 2 under GAAP. See Note 5 for further details. (15) Investments (or portion thereof) held by OFSCC-FS. These assets are pledged as collateral of the BNP Facility and cannot be pledged under any other debt obligation of the Company. (16) Amortized cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO subordinated debt investments. (17) Maturity date represents the contractual maturity date of the Structured Finance Notes. Projected cash flows, including the projected amount and timing of terminal principal payments which may be projected to occur prior to the contractual maturity date, were utilized in deriving the effective yield of the investments. (18) Not meaningful as there is no outstanding balance on the revolver. The Company earns unfunded commitment fees on undrawn revolving lines of credit balances, which are reported in fee income. (19) The Company holds at least one seat on the portfolio company’s board of directors. (20) The Company has an observer seat on the portfolio company’s board of directors. (21) Portfolio company represents greater than 5% of total assets at December 31, 2020. (22) Equity participation rights issued by unaffiliated third party fully covered with underlying positions in the portfolio company. (23) Non-qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets as defined in Section 55 of the 1940 Act must represent at least 70% of the Company's assets immediately following the acquisition of any additional non-qualifying assets. As of December 31, 2020, approximately 87% of the Company's assets were qualifying assets. See Notes to Consolidated Financial Statements. 131 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Note 1. Organization OFS Capital Corporation (the “Company”), a Delaware corporation, is an externally managed, closed-end, non-diversified management investment company. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”). In addition, for income tax purposes, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of Code under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment objective is to provide stockholders with both current income and capital appreciation through its strategic investment focus primarily on debt investments and, to a lesser extent, equity investments primarily in middle-market companies principally in the United States. In addition, the Company may invest in collateralized loan obligation (“CLO”) mezzanine debt, CLO subordinated debt and loan accumulation facility positions (collectively referred to as “Structured Finance Notes”). OFS Capital Management, LLC (“OFS Advisor”), a registered investment advisor under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), a wholly owned subsidiary of Orchard First Source Asset Management, LLC, and a full-service provider of capital and leveraged finance solutions to U.S. Corporations (“OFSAM”), manages the day-to-day operations of, and provides investment advisory services to, the Company. OFS Advisor also serves as the investment adviser for Hancock Park Corporate Income, Inc. (“HPCI”), a Maryland corporation and a BDC. HPCI’s investment objective is similar to that of the Company. OFS Advisor also serves as the investment adviser for OFS Credit Company, Inc. (“OCCI”), a non-diversified, externally managed, closed-end management investment company that has registered as an investment company under the 1940 Act that primarily invests in CLO debt and subordinated securities. Additionally, OFS Advisor serves as the collateral manager to CLOs and sub-advisor to investment companies manged by an affiliate. The Company may make follow-on investments in current portfolio companies held through OFS SBIC I LP (“SBIC LP”), its wholly owned and consolidated investment company subsidiary licensed under the U.S. Small Business Administration's (“SBA”) small business investment company program (“SBIC Program”). The SBIC Program is designed to stimulate the flow of capital into eligible businesses. SBIC I LP is subject to SBA regulatory requirements, including limitations on the businesses and industries in which it can invest, requirements to invest at least 25% of its “regulatory capital” in “eligible smaller businesses”, as defined under the Small Business Investment Act of 1958, as amended (“SBIC Act”), limitations on the financing terms of investments, and capitalization thresholds that may limit distributions to the Company; and is subject to periodic audits and examinations of its financial statements. The Company may also make investments through OFSCC-FS, LLC (“OFSCC-FS”), a wholly owned and consolidated special-purpose vehicle formed in April 2019 for the purpose of acquiring senior secured loan investments; and through OFSCC-MB, Inc. (“OFSCC-MB”), a wholly owned and consolidated subsidiary taxed under subchapter C of the Code, that generally holds the equity investments of the Company that are taxed as pass-through entities. Note 2. Summary of Significant Accounting Policies Basis of presentation: The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"), including ASC Topic 946, Financial Services-Investment Companies, and the reporting requirements for Form 10-K, the 1940 Act, and Articles 6 and 12 of Regulation S-X. The consolidated financial statements include all adjustments, consisting only of normal and recurring accruals and adjustments, necessary for fair presentation in accordance with GAAP. Reclassifications : Certain prior period amounts have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes thereto. Reclassifications did not impact net increase in net assets resulting from operations, total assets, total liabilities or total net assets, or consolidated statements of changes in net assets and consolidated statements of cash flows classifications. Principles of consolidation: The Company consolidates majority-owned investment company subsidiaries. The Company does not own any controlled operating company whose business consists of providing services to the Company, which would also require consolidation. All intercompany balances and transactions are eliminated upon consolidation. 132 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Investments: The Company applies fair value accounting in accordance with ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework to measure fair value, and requires disclosures regarding fair value measurements. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined through the use of models and other valuation techniques, valuation inputs, and assumptions market participants would use to value the investment. Highest priority is given to prices for identical assets quoted in active markets (Level 1) and the lowest priority is given to unobservable valuation inputs (Level 3). The availability of observable inputs can vary significantly and is affected by many factors, including the type of product, whether the product is new to the market, whether the product is traded on an active exchange or in the secondary market, and the current market conditions. To the extent that the valuation is based on unobservable inputs, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for financial instruments classified as Level 3 (i.e., those instruments valued using unobservable inputs), which comprise the majority of the Company’s investments. See Note 5 for details. Changes to the valuation policy are reviewed by management and the Company’s board of directors (the “Board”). As the Company’s investments change, markets change, new products develop, and valuation inputs become more or less observable, the Company will continue to refine its valuation methodologies. See Note 5 for more detailed disclosures of the Company’s fair value measurements of its financial instruments. Investment classification: The Company classifies its investments in accordance with the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in those companies in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of board representation, “Affiliate Investments” are defined as investments in those companies in which the Company owns between 5% and 25% of the voting securities, and “Non-Control/Non-Affiliate Investments” are those that neither qualify as Control Investments nor Affiliate Investments. Significant Subsidiaries : The Company evaluates the issuers of its Control Investments for significance in accordance with Rules 3-09 and 4-08(g) of Regulation S-X. No issuers of Control Investments were considered a significant subsidiary under these rules as of or for the years ended December 31, 2021, 2020 and 2019. Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of investment income, expenses, gains and losses during the reporting period. Actual results could differ significantly from those estimates. Reportable segments: The Company has a single reportable segment and single operating segment structure. Cash: The Company’s cash balances are maintained with a member bank of the Federal Deposit Insurance Corporation (“FDIC”) and at times, such balances may be in excess of the FDIC insurance limits. Cash includes $43,048 and $37,708 held in US Bank N.A. and Citibank N.A. money market deposit accounts as of December 31, 2021 and 2020, respectively. In addition, the Company's use of cash held by SBIC I LP is limited by SBA regulation, including, but not limited to, investment in eligible portfolio companies and general corporate purposes; distributions by SBIC I LP subject to a statutory measure of undistributed accumulated earnings. Revenue recognition: Interest income : Interest income is recognized on an accrual basis and reported as an interest receivable until collected. Interest income is accrued daily based on the outstanding principal amount on the consolidated statements of assets and liabilities and the contractual terms of the debt investment. Certain of the Company’s investments contain a payment-in-kind interest income provision (“PIK interest”). The PIK interest, computed at the contractual rate specified in the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash. Recognition of PIK interest includes assessments of collectibility. The Company discontinues accrual of interest income, including PIK interest, when there is reasonable doubt that the interest income will be collected. Loan origination fees, original issue discount (“OID”), market discount or premium, and loan amendment fees (collectively, “Net Loan Fees”) are recorded as an adjustment to the amortized cost of the investment, and accreted or amortized as an adjustment to interest income over the life of the respective debt investment using a method that approximates the effective interest method. When the Company receives a loan principal payment, the unamortized Net Loan Fees related to the paid principal is accelerated and recognized in interest income. 133 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Further, the Company may acquire or receive equity, warrants or other equity-related securities (“Equity”) in connection with the Company’s acquisition of, subsequent amendment or restructuing to, debt investments. The Company determines the cost basis of Equity based on its fair value, and the fair value of debt investments and other securities or consideration received. Any resulting difference between the face amount of the debt and its recorded cost resulting from the assignment of value to the Equity is treated as OID, and accreted into interest income as described above. Interest income - Structured Finance Notes : Structured Finance Notes includes CLO mezzanine debt, CLO subordinated debt and loan accumulation facility positions. Interest income from investments in CLO mezzanine debt and CLO subordinated debt positions is recognized on the basis of the estimated effective yield to expected redemptions utilizing assumed cash flows in accordance with ASC Sub-topic 325-40, Beneficial Interests in Securitized Financial Assets . The Company monitors the expected cash flows, and the accretable yields are determined and updated periodically. Expected cash flows inherent in the Company's estimates of accretable yields are based on expectations of defaults and loss-on-default severity, as well as other loan-performance assumptions, impacting the loans in the underlying CLO portfolios. These estimated cash flows are subject to a reasonable possibility of near-term change as economic and credit market conditions—including the transition away from LIBOR to any one the various alternative reference rates, including SOFR— become known, and the effect of these changes could be material. Recognition of interest income on our loan accumulation facilities generally take the form of mandatorily redeemable instruments that mature upon the earlier of closing of the CLO securitization or stated expiration date of the instrument. Interest income is recognized on an accrual basis as earned in accordance with the settlement terms of the instrument. Dividend income : Dividend income on common equity securities in limited liability companies, partnerships and other private entities, generally payable in cash, is recorded at the time dividends are declared. Dividend income on preferred equity investments is accrued daily based on the contractual terms of the preferred equity investment. Dividends on preferred equity securities may be payable in cash or in additional preferred securities, and are generally not payable unless declared or upon liquidation. Declared dividends payable in cash are reported as dividend receivables until collected. Non-cash dividends payable in additional preferred securities or contractually earned but not declared ("PIK dividends") and are recorded as an adjustment to the cost basis of the investment. Distributions in excess of the accumulated net income of the underlying portfolio company are recorded as a reduction in the cost of the common or preferred stock investment. Fee income : The Company generates fee revenue in the form of syndication, prepayment, and other contractual fees, that are recognized as the related services are rendered. In the general course of its business, the Company receives certain fees, such as management fees, from portfolio companies which are non-recurring in nature. Prepayment fees are received on certain loans when repaid prior to their scheduled due date, which are recognized as earned when received, and syndication fees are received for capital structuring, loan syndication or advisory services from certain portfolio companies, which are recognized as earned upon closing of the investment. Investment Transactions and net realized and unrealized gain or loss on investments : Investment transactions are reported on a trade-date basis. Unsettled trades as of the statement of assets and liabilities date are included in receivable for investments sold and payable for investments purchased. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of the investment. Investments are valued at fair value as determined in good faith by Company management under the supervision and review of the Board. After recording all appropriate interest, dividend, and other income, some of which is recorded as an adjustment to the cost basis of the investment as described above, the Company reports changes in the fair value of investments as net unrealized appreciation (depreciation) on investments in the consolidated statements of operations. Non-accrual loans : Management reviews all loans that become past due on principal and interest, or when there is reasonable doubt that principal, cash interest, or PIK interest, will be collected, for placement on non-accrual status. When a loan is placed on non-accrual status, unpaid interest is credited to income and is reversed. Additionally, Net Loan Fees are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments subsequently received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Interest accruals and Net Loan Fee amortization are resumed on non-accrual investments only when they are brought current with respect to principal, interest, and when, in the judgment of management, the investments are estimated to be fully collectible as to all principal and interest. See Note 4 for further information on loans on non-accrual status as of December 31, 2021 and December 31, 2020. 134 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Income taxes: The Company has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. To qualify as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements, and timely distribute at least 90% of its investment company taxable income (“ICTI”) to its stockholders. The Company has made, and intends to continue to make, the requisite distributions to its stockholders, which generally relieves the Company from U.S. federal income taxes. Depending on the level of ICTI earned in a tax year, the Company may choose to retain ICTI in an amount less than that which would trigger U.S. federal income tax liability under Subchapter M of the Code. However, the Company would be liable for a 4% excise tax on such income. Excise tax liability is recognized when the Company determines its estimated current year annual ICTI, as defined in the Code, exceeds distributions from current year ICTI. The Company may utilize OFSCC-MB when making equity investments in portfolio companies taxed as pass-through entities to meet its source-of-income requirements as a RIC. OFSCC-MB is an investment company under GAAP, is consolidated in the Company’s GAAP financial statements, and may incur current and deferred federal and state income tax expenses or benefits with respect to income derived from those investments. Such income, net of applicable income taxes, is not included in the Company’s tax-basis net investment income until distributed by OFSCC-MB, which may result in timing and character differences between the Company’s GAAP and tax-basis net investment income and realized gains and losses. Income tax expense from OFSCC-MB related to net investment income is included in general and administrative expenses, and the federal and state income tax from net investment gains, which includes taxes on realized gains upon the sale of the investment as well as deferred taxes or benefits on unrealized gains/losses, are included in net realized and unrealized gain (loss) on investments in the statements of operations. See Note 8 for further information. The Company evaluates tax positions taken in the course of preparing its tax returns to determine whether they are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold could result in greater and undistributed ICTI, income and excise tax expense, and, if involving multiple years, a re-assessment of the Company’s RIC status. GAAP requires recognition of accrued interest and penalties related to uncertain tax benefits as income tax expense. There were no uncertain income tax positions at December 31, 2021, 2020 and 2019. The current and prior three tax years remain subject to examination by U.S. federal and most state tax authorities. Distributions: Distributions to common stockholders are recognized on the record date. The timing of distributions as well as the amount to be paid out as a distribution is determined by the Board each quarter. Distributions from net investment income and net realized gains are determined in accordance with the Code. Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment. Distributions paid in excess of ICTI and not capital gains are considered returns of capital to stockholders. The Company has adopted a distribution reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Board authorizes and the Company declares a cash distribution, then stockholders who have not “opted out” of the DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. The Company may use newly issued shares under the guidelines of the DRIP, or the Company may purchase shares in the open market in connection with its obligations under the plan. Deferred debt issuance costs: Deferred debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. Deferred debt issuance costs are presented as a direct reduction of the related debt liability on the consolidated statements of assets and liabilities except for deferred debt issuance costs associated with the Company’s line of credit arrangements, which are included in prepaid expenses and other assets on the consolidated statements of assets and liabilities. Unamortized debt issuance costs included in prepaid expenses and other assets on the consolidated statements of assets and liabilities as of December 31, 2021 and 2020, were $671 and $1,015, respectively. Deferred debt issuance costs are amortized to interest expense over the term of the related debt. Goodwill: On December 4, 2013, in connection with the Company's acquisition of the remaining ownership interests in SBIC I LP and SBIC I GP, LLC, making SBIC I LP a wholly owned subsidiary of the Company (“SBIC Acquisition”), the Company recorded goodwill of $1,077. The decline in the price of the Company’s common stock and the level at which it continued to trade relative to the broader stock indices for the BDC industry, led management to conclude in the third quarter of 2020 that an impairment in the value of the Company’s goodwill was more likely than not. Moreover, due to the discount at which the 135 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Company’s stock traded to its net asset value management concluded that the impairment of goodwill equal to the full amount of its carrying value of $1,077 was appropriate. Intangible asset: On December 4, 2013, in connection with the SBIC Acquisition, the Company recorded an intangible asset of $2,500 attributable to the SBIC license. The Company amortizes this intangible asset on a straight-line basis over its estimated useful life, initially 154 months ending September 30, 2026. The Company changed its estimate on the useful life to terminate on December 31, 2025. The Company recognized amortization of $222 and $206 for the years ended December 31, 2021 and 2020, respectively. The Company tests its intangible asset for impairment if events or circumstances suggest that the asset carrying value may not be fully recoverable. The carrying value of the intangible asset, net of accumulated amortization, was $886 and $1,108 at December 31, 2021 and 2020, respectively, is included in prepaid expenses and other assets in the consolidated statements of assets and liabilities. Interest expense: Interest expense is recognized on an accrual basis as incurred. Concentration of credit risk: Aside from its debt instruments, financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during the year, the Company may exceed the federally insured limits. To mitigate this risk, the Company places cash deposits only with high credit quality institutions. Management believes this risk of loss is minimal. The amount of loss due to credit risk from debt investments if borrowers fail to perform according to the terms of the contracts, and the collateral or other security for those instruments proved to be of no value to the Company, is equal to the Company's recorded investment in debt instruments and the unfunded loan commitments as disclosed in Note 6 . Note 3. Related Party Transactions Investment Advisory and Management Agreement: OFS Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company pursuant to an agreement dated November 7, 2012 (“Investment Advisory Agreement”). The Investment Advisory Agreement was most recently re-approved on April 1, 2021. Under the terms of the Investment Advisory Agreement, which are in accordance with the 1940 Act and subject to the overall supervision of the Board, OFS Advisor is responsible for sourcing potential investments, conducting research and diligence on potential investments and equity sponsors, analyzing investment opportunities, structuring investments, and monitoring investments and portfolio companies on an ongoing basis. OFS Advisor is a subsidiary of OFSAM and a registered investment advisor under the Investment Advisers Act of 1940, as amended. OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to the Company and OFS Advisor is free to furnish similar services to other entities, including other BDCs affiliated with OFS Advisor, so long as its services to the Company are not impaired. OFS Advisor also serves as the investment adviser or collateral manager to CLOs and other companies, including HPCI and OCCI. OFS Advisor receives fees for providing services, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% and based on the average value of the Company’s total assets (other than cash and cash equivalents but including assets purchased with borrowed amounts and including assets owned by any consolidated entity) at the end of the two most recently completed calendar quarters, adjusted for any share issuances or repurchases during the quarter. OFS Advisor has elected to exclude the value of the intangible assets resulting from the SBIC Acquisition from the base management fee calculation. On June 11, 2019, OFS Advisor agreed to reduce the portion of its base management fee attributable to the portion of the assets held by the Company through OFSCC-FS (“OFSCC-FS Assets”) that caused the Company’s asset coverage ratio to fall below 200%. Specifically, under the reduction, the Company was required to pay 0.25% per quarter (1.00% annualized) on the average value of the portion of the OFSCC-FS Assets, at the end of the two most recently completed calendar quarters, that were financed using leverage and caused the Company’s statutory asset coverage ratio to fall below 200%. When calculating its statutory asset coverage ratio, the Company excludes its SBA guaranteed debentures from its total outstanding senior securities as permitted pursuant to exemptive relief granted by the SEC dated November 26, 2013. Additionally, effective from January 1, 2020, January 1, 2021 and January 1, 2022 through December 31, 2022, OFS Advisor agreed to continue the reduced base management fee attributable to all of the OFSCC-FS Assets, excluding cash commencing January 1, 2022, but without regard to the Company’s asset coverage. The agreement reduced the base management fee to 0.25% per quarter (1.00% annualized) of the average value of the OFSCC-FS Assets, excluding cash as of January 1, 2022, at 136 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) the end of the two most recently completed calendar quarters. OFS Advisor’s base management fee reduction is renewable on an annual basis and OFS Advisor is not entitled to recoup the amount of the base management fee reduced with respect to the OFSCC-FS Assets. This agreement was renewed for the 2022 calendar year on February 4, 2022. The incentive fee has two parts. The first part of the incentive fee ("Income Incentive Fee") is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination and sourcing, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement (as defined below) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest or dividend feature (such as OID, debt instruments with PIK interest, equity investments with accruing or PIK dividend and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income is expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter and adjusted for any share issuances or repurchases during such quarter. The incentive fee with respect to pre-incentive fee net income is 20.0% of the amount, if any, by which the pre-incentive fee net investment income for the immediately preceding calendar quarter exceeds a 2.0% (which is 8.0% annualized) hurdle rate and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, OFS Advisor receives no incentive fee until the net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up,” 100.0% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, OFS Advisor will receive 20.0% of the pre-incentive fee net investment income. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter in which the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the quarterly minimum hurdle rate, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses. The Company’s net investment income used to calculate this part of the incentive fee is also included in the amount of the Company’s gross assets used to calculate the base management fee. These calculations are appropriately prorated for any period of less than three months. The second part of the incentive fee (the “Capital Gains Fee”) is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), commencing on December 31, 2012, and equals 20.0% of the Company’s aggregate realized capital gains, if any, on a cumulative basis from the date of the election to be a BDC through the end of each calendar year, computed net of all realized capital losses, losses on extinguishment of debt, income taxes from realized capital gains and unrealized capital depreciation through the end of such year, less all previous amounts paid in respect of the Capital Gains Fee; provided that the incentive fee determined as of December 31, 2012, was calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses and unrealized capital depreciation for the period beginning on the date of the Company’s election to be a BDC and ending December 31, 2012. The Company accrues the Capital Gains Fee if, on a cumulative basis, the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation) is positive. An accrued Capital Gains Fee relating to net unrealized appreciation is deferred until, and not due to OFS Advisor, until the close of the year in which such gains are realized. If, on a cumulative basis, the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation) decreases during a period, the Company will reverse any excess Capital Gains Fee previously accrued such that the amount of Capital Gains Fee accrued is no more than 20% of the sum of net realized capital gains (losses) plus net unrealized appreciation (depreciation). As of December 31, 2021, payable to investment adviser and affiliates on the consolidated statements of assets and liabilities includes a Capital Gains Fee of $1,916 which is deferred. On May 4, 2020, OFS Advisor agreed to irrevocably waive the receipt of $441 in Income Incentive Fees (based on net investment income) related to net investment income, that it would otherwise be entitled to receive under the Investment Advisory Agreement for the three months ended March 31, 2020. As a result of the voluntary fee waiver, the Company incurred Income Incentive Fee expense of $442 for the three months ended March 31, 2020, which is equal to half the Income Incentive 137 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Fee expense the Company would have incurred for the three months ended March 31, 2020. The voluntary fee waiver did not include a Capital Gains Fee, which was $0 for the three months ended March 31, 2020. License Agreement: The Company entered into a license agreement with OFSAM under which OFSAM has agreed to grant the Company a non-exclusive, royalty-free license to use the name “OFS.” Administration Agreement: OFS Services furnishes the Company with office facilities and equipment, necessary software licenses and subscriptions, and clerical, bookkeeping and record keeping services at such facilities pursuant to an Administration Agreement. The Administration Agreement was most recently re-approved by the Board on April 1, 2021. Under the Administration Agreement, OFS Services performs, or oversees the performance of, the Company’s required administrative services, which include being responsible for the financial records that the Company is required to maintain and preparing reports to its stockholders and all other reports and materials required to be filed with the SEC or any other regulatory authority. In addition, OFS Services assists the Company in determining and publishing its net asset value, oversees the preparation and filing of its tax returns and the printing and dissemination of reports to its stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Under the Administration Agreement, OFS Services also provides managerial assistance on the Company’s behalf to those portfolio companies that have accepted the Company’s offer to provide such assistance. Payment under the Administration Agreement is equal to an amount based upon the Company’s allocable portion of OFS Services’s overhead in performing its obligations under the Administration Agreement, including, but not limited to, rent, information technology services and the Company’s allocable portion of the cost of its officers, including its chief executive officer, chief financial officer, chief compliance officer, chief accounting officer, and their respective staffs. To the extent that OFS Services outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without profit to OFS Services. Equity Ownership: As of December 31, 2021, affiliates of OFS Advisor held 3,037,349 shares of common stock, which is approximately 23% of the Company's outstanding shares of common stock. Distributions paid to affiliates and expenses recognized under agreements with OFS Advisor and OFS Services for the years ended December 31, 2021, 2020 and 2019 are presented below: December 31, 2021 2020 2019 Base management fees $ 7,669 $ 7,605 $ 8,271 Incentive fees: Income Incentive Fee 2,352 2,025 4,760 Income Incentive Fee waiver — (441) — Capital Gains Fee (1) 1,916 — — Administration fees 1,758 1,855 1,747 Distributions paid to affiliates 2,764 2,553 4,007 (1) As of December 31, 2021, the Capital Gains Fee of $1,916 is deferred, and not due to the Advisor, until the close of the year in which such gains are realized. 138 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Note 4. Investments As of December 31, 2021, the Company had loans to 58 portfolio companies, of which 95% were senior secured loans and 5% were subordinated loans, at fair value, as well as equity investments in 5 of these portfolio companies. The Company also held an equity investment in 12 portfolio companies in which it did not hold a debt investment, as well as 17 investments in Structured Finance Notes. At December 31, 2021, investments consisted of the following: Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Senior secured debt investments $ 336,132 73.3 % 165.0 % $ 326,704 64.9 % 160.4 % Subordinated debt investments 22,071 4.8 10.8 17,943 3.5 8.8 Preferred equity 9,552 2.1 4.7 3,765 0.7 1.8 Common equity, warrants and other 14,606 3.2 7.2 83,486 16.5 41.0 Total debt and equity investments $ 382,361 83.4 % 187.7 % $ 431,898 85.6 % 212.0 % Structured Finance Notes 74,951 16.6 36.8 75,201 14.4 36.9 Total $ 457,312 100.0 % 224.5 % $ 507,099 100.0 % 248.9 % At December 31, 2021, the Company had two loans (Master Cutlery, LLC and 3rd Rock Gaming Holdings, LLC) on non-accrual status with respect to all interest and Net Loan Fee amortization, with an aggregate amortized cost and fair value of $19,054 and $7,726, respectively. Geographic composition is determined by the location of the corporate headquarters of the portfolio company. As of December 31, 2021 and 2020, the Company's investment portfolio was domiciled as follows: December 31, 2021 December 31, 2020 Amortized Cost Fair Value Amortized Cost Fair Value United States of America $ 378,823 $ 428,321 $ 399,278 $ 380,004 Canada 12,038 12,077 1,921 1,905 Cayman Islands 1 66,451 66,701 55,860 56,425 Luxembourg — — 1,976 1,997 Switzerland — — 1,988 1,992 Total investments $ 457,312 $ 507,099 $ 461,023 $ 442,323 (1) Cayman Island investments represent subordinated notes and mezzanine debt securities held by the Company. These investments generally hold underling portfolios of investments in United States domiciled companies. 139 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) As of December 31, 2021, the industry compositions of the Company’s debt and equity investments were as follows: Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Administrative and Support and Waste Management and Remediation Services Convention and Trade Show Organizers $ 214 — % 0.1 % $ 12 — % — % Hazardous Waste Treatment and Disposal 1,833 0.4 0.9 1,837 0.4 0.9 Landscaping Services 4,630 1.0 2.3 4,590 0.9 2.3 Security Systems Services (except Locksmiths) 4,827 1.1 2.4 4,887 1.0 2.4 Arts, Entertainment, and Recreation Other Amusement and Recreation Industries 16,287 3.6 8.0 16,396 3.2 8.0 Construction Electrical Contractors and Other Wiring Installation Contractors 18,132 4.0 8.9 11,632 2.3 5.7 New Single-Family Housing Construction (except For-Sale Builders) 1,823 0.4 0.9 1,794 0.4 0.9 Plumbing, Heating, and Air-Conditioning Contractors 5,344 1.2 2.6 5,378 1.1 2.6 Water and Sewer Line and Related Structures Construction 627 0.1 0.3 628 0.1 0.3 Education Services Colleges, Universities, and Professional Schools — — — 7,408 1.5 3.6 Professional and Management Development Training 1,595 0.3 0.8 1,095 0.2 0.5 Sports and Recreation Instruction 3,011 0.7 1.5 3,011 0.6 1.5 Health Care and Social Assistance Child Day Care Services 6,336 1.4 3.1 5,916 1.2 2.9 Home Health Care Services 4,182 0.9 2.1 4,250 0.8 2.1 Medical Laboratories 92 — — 25 — — Offices of Physicians, Mental Health Specialists 13,402 2.9 6.6 13,491 2.7 6.6 Other Ambulatory Health Care Services 20,331 4.4 10.0 20,331 4.0 10.0 Outpatient Mental Health and Substance Abuse Centers 4,770 1.0 2.3 5,231 1.0 2.6 Services for the Elderly and Persons with Disabilities 6,416 1.4 3.1 6,416 1.3 3.1 Information All Other Publishers 2,288 0.5 1.1 2,303 0.5 1.1 All Other Telecommunications 3,429 0.7 1.7 3,323 0.7 1.6 Cable and Other Subscription Programming 3,801 0.8 1.9 3,810 0.8 1.9 Data Processing, Hosting, and Related Services 4,112 0.9 2.0 4,255 0.8 2.1 Directory and Mailing List Publishers 2,004 0.4 1.0 2,085 0.4 1.0 Internet Publishing and Broadcasting and Web Search Portals 3,249 0.7 1.6 3,299 0.7 1.6 Motion Picture and Video Production 3,929 0.9 1.9 3,970 0.8 1.9 Software Publishers 24,948 5.5 12.2 17,929 3.5 8.8 140 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Television Broadcasting $ 1,957 0.4 % 1.0 % $ 918 0.2 % 0.5 % Wired Telecommunications Carriers 4,388 1.0 2.2 4,405 0.9 2.2 Management of Companies and Enterprises Offices of Other Holding Companies 5,336 1.2 2.6 5,336 1.1 2.6 Manufacturing Bare Printed Circuit Board Manufacturing 1,985 0.4 1.0 1,977 0.4 1.0 Commercial Printing (except Screen and Books) 3,427 0.7 1.7 3,436 0.7 1.7 Current-Carrying Wiring Device Manufacturing 2,653 0.6 1.3 2,954 0.6 1.4 Motorcycle, Bicycle, and Parts Manufacturing 15,166 3.3 7.4 15,166 3.0 7.4 Metal Can Manufacturing 2,143 0.5 1.1 2,167 0.4 1.1 Other Aircraft Parts and Auxiliary Equipment Manufacturing 500 0.1 0.2 80 — — Other Industrial Machinery Manufacturing 12,121 2.7 5.9 12,176 2.4 6.0 Pharmaceutical Preparation Manufacturing 217 — 0.1 65,740 13.0 32.3 Small Electrical Appliance Manufacturing 4,997 1.1 2.5 4,997 1.0 2.5 Travel Trailer and Camper Manufacturing 11,264 2.5 5.5 12,948 2.6 6.4 Other Services (except Public Administration) Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance 572 0.1 0.3 988 0.2 0.5 Professional, Scientific, and Technical Services Administrative Management and General Management Consulting Services 22,990 5.0 11.3 22,634 4.5 11.1 All Other Professional, Scientific, and Technical Services 2,872 0.6 1.4 2,865 0.6 1.4 Management Consulting Services 2,251 0.5 1.1 2,264 0.4 1.1 Other Accounting Services 19,631 4.3 9.6 19,927 3.9 9.8 Other Computer Related Services 15,017 3.3 7.4 15,260 3.0 7.5 Public Administration Other Justice, Public Order, and Safety Activities 703 0.2 0.3 29 — — Real Estate and Rental and Leasing Nonresidential Property Managers 2,972 0.6 1.5 2,972 0.6 1.5 Office Machinery and Equipment Rental and Leasing 5,952 1.3 2.9 2,774 0.5 1.4 Retail Trade Automotive Parts and Accessories Stores 2,688 0.6 1.3 2,704 0.5 1.3 Cosmetics, Beauty Supplies, and Perfume Stores 1,533 0.3 0.8 1,531 0.3 0.8 Electronic Shopping and Mail-Order Houses 6,913 1.5 3.4 6,870 1.4 3.4 Shoe Store 9,893 2.2 4.9 9,342 1.8 4.6 Sporting Goods Stores 1,958 0.4 1.0 1,972 0.4 1.0 All Other General Merchandise Stores 499 0.1 0.2 1,698 0.3 0.8 141 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Transportation and Warehousing Freight Transportation Arrangement $ 1,960 0.4 % 1.0 % $ 1,970 0.4 % 1.0 % Scheduled Passenger Air Transportation 360 0.1 0.2 377 0.1 0.2 Wholesale Trade Business to Business Electronic Markets 2,875 0.6 1.4 2,838 0.6 1.4 Computer and Computer Peripheral Equipment and Software Merchant Wholesalers 7,173 1.6 3.5 6,903 1.4 3.4 Drugs and Druggists' Sundries Merchant Wholesalers 5,529 1.2 2.7 5,550 1.1 2.7 Industrial Machinery and Equipment Merchant Wholesalers 9,071 2.0 4.5 9,073 1.8 4.5 Motor Vehicle Parts (Used) Merchant Wholesalers 23,005 5.0 11.3 23,052 4.5 11.3 Sporting and Recreational Goods and Supplies Merchant Wholesalers 8,179 1.8 3.9 699 0.1 0.2 Total debt and equity investments $ 382,361 83.4 % 187.7 % $ 431,898 85.6 % 212.0 % Structured Finance Notes 74,951 16.6 36.8 75,201 14.4 36.9 Total investments $ 457,312 100.0 % 224.5 % $ 507,099 100.0 % 248.9 % As of December 31, 2020, the Company had loans to 49 portfolio companies, of which 95% were senior secured loans and 5% were subordinated loans, at fair value, as well as equity investments in 10 of these portfolio companies. The Company also held an equity investment in 13 portfolio companies in which it did not hold a debt investment, as well as 12 investments in Structured Finance Notes. At December 31, 2020, investments consisted of the following: Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Senior secured debt investments $ 325,647 70.6 % 204.9 % $ 306,304 69.2 % 192.7 % Subordinated debt investments 45,409 9.8 28.6 15,067 3.4 9.5 Preferred equity 18,648 4.0 11.7 11,543 2.6 7.3 Common equity, warrants and other 15,459 3.4 9.7 52,984 12.0 33.3 Total debt and equity investments $ 405,163 87.8 % 254.9 % $ 385,898 87.2 % 242.8 % Structured Finance Notes 55,860 12.2 35.1 56,425 12.8 35.5 Total $ 461,023 100.0 % 290.0 % $ 442,323 100.0 % 278.3 % At December 31, 2020, the Company had four loans (Community Intervention Services, Inc., Master Cutlery, LLC, 3rd Rock Gaming Holdings, LLC, and Online Tech Stores, LLC) on non-accrual status with respect to all interest and Net Loan Fee amortization, with an aggregate amortized cost and fair value of $48,102 and $12,135, respectively. As of December 31, 2020, the industry compositions of the Company’s debt and equity investments were as follows: Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Administrative and Support and Waste Management and Remediation Services Convention and Trade Show Organizers $ 214 — % 0.1 % $ 210 — % 0.1 % Security Systems Services (except Locksmiths) 6,531 1.4 4.1 3,487 0.8 2.2 142 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Arts, Entertainment, and Recreation Other Amusement and Recreation Industries $ 20,967 4.5 % 13.3 % $ 19,973 4.5 % 12.6 % Construction Electrical Contractors and Other Wiring Installation Contractors 17,837 3.9 11.2 13,137 3.0 8.3 Plumbing, Heating, and Air-Conditioning Contractors 7,607 1.7 4.8 7,294 1.6 4.6 Education Services Colleges, Universities, and Professional Schools — — — 4,295 1.0 2.7 Professional and Management Development Training 1,595 0.3 1.0 1,306 0.3 0.8 Finance and Insurance Insurance Agencies and Brokerages 9,544 2.1 6.0 9,302 2.1 5.9 Health Care and Social Assistance Child Day Care Services 5,178 1.1 3.3 4,656 1.1 2.9 Diagnostic Imaging Centers 21,718 4.8 13.8 23,607 5.3 14.9 Home Health Care Services 4,199 0.9 2.6 4,250 1.0 2.7 Medical Laboratories 91 — 0.1 38 — — Offices of Physicians, Mental Health Specialists 21,013 4.6 13.2 20,802 4.7 13.1 Outpatient Mental Health and Substance Abuse Centers 11,615 2.5 7.3 4,105 0.9 2.6 Information Data Processing, Hosting, and Related Services 1,135 0.2 0.7 1,749 0.4 1.1 Software Publishers 28,799 6.3 18.2 16,104 3.6 10.0 Television Broadcasting 1,977 0.4 1.2 1,758 0.4 1.1 Manufacturing Commercial Printing (except Screen and Books) 4,789 1.0 3.0 4,812 1.1 3.0 Custom Compounding of Purchased Resins 15,444 3.3 9.7 17,164 3.9 10.8 Other Aircraft Parts and Auxiliary Equipment Manufacturing 5,431 1.2 3.4 4,275 1.0 2.7 Other Commercial and Service Industry Machinery Manufacturing 1,925 0.4 1.2 1,936 0.4 1.2 Pharmaceutical Preparation Manufacturing 2,205 0.5 1.4 38,213 8.7 24.1 Pump and Pumping Equipment Manufacturing 1,501 0.3 0.9 1,281 0.3 0.8 Semiconductor and Related Device Manufacturing 399 0.1 0.3 434 0.1 0.3 Travel Trailer and Camper Manufacturing 10,911 2.4 6.9 10,812 2.4 6.8 Truck Trailer Manufacturing 8,118 1.8 5.1 8,174 1.8 5.1 Unlaminated Plastics Profile Shape Manufacturing 8,922 1.9 5.6 8,818 2.0 5.5 143 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Other Services (except Public Administration) Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance $ 572 0.1 % 0.4 % $ 915 0.2 % 0.6 % Diet and Weight Reducing Centers 477 0.1 0.3 479 0.1 0.3 Professional, Scientific, and Technical Services Administrative Management and General Management Consulting Services 28,503 6.3 18.0 28,729 6.6 18.2 All Other Professional, Scientific, and Technical Services 1,921 0.4 1.2 1,905 0.4 1.2 Marketing Consulting Services 5,229 1.1 3.3 5,229 1.2 3.3 Other Accounting Services 21,621 4.7 13.7 22,238 5.0 14.0 Other Computer Related Services 16,247 3.5 10.2 16,000 3.6 10.1 Public Administration Other Justice, Public Order, and Safety Activities 703 0.2 0.4 676 0.2 0.4 Real Estate and Rental and Leasing Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing 496 0.1 0.3 499 0.1 0.3 Office Machinery and Equipment Rental and Leasing 5,953 1.3 3.7 2,736 0.6 1.7 Retail Trade Cosmetics, Beauty Supplies, and Perfume Stores 6,738 1.5 4.2 6,701 1.5 4.2 Shoe Store 9,748 2.1 6.1 4,368 1.0 2.7 Sporting Goods Stores 2,907 0.6 1.8 2,968 0.7 1.9 All Other General Merchandise Stores 5,252 1.1 3.3 5,060 1.1 3.2 Transportation and Warehousing Scheduled Passenger Air Transportation 495 0.1 0.3 520 0.1 0.3 Taxi Service 1,976 0.4 1.2 1,997 0.5 1.3 Wholesale Trade Business to Business Electronic Markets 2,891 0.6 1.8 2,875 0.6 1.8 Computer and Computer Peripheral Equipment and Software Merchant Wholesalers 1,955 0.4 1.2 1,942 0.4 1.2 Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers 16,392 3.6 10.3 16,777 3.8 10.6 General Line Grocery Merchant Wholesalers 275 0.1 0.2 284 0.1 0.2 Industrial Machinery and Equipment Merchant Wholesalers 9,696 2.1 6.1 9,179 2.1 5.8 Industrial Supplies Merchant Wholesalers 6,908 1.5 4.3 5,476 1.2 3.4 144 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Percentage of Total Percentage of Total Amortized Cost Amortized Cost Net Assets Fair Value Fair Value Net Assets Motor Vehicle Parts (Used) Merchant Wholesalers $ 14,167 3.1 % 8.9 % $ 13,581 3.1 % 8.5 % Sporting and Recreational Goods and Supplies Merchant Wholesalers 8,247 1.8 5.2 346 0.1 0.2 Stationery and Office Supplies Merchant Wholesalers 16,129 3.5 10.1 2,426 0.5 1.5 Total debt and equity investments $ 405,163 87.9 % 254.9 % $ 385,898 87.2 % 242.8 % Structured Finance Notes 55,860 12.1 35.1 56,425 12.8 35.5 Total investments $ 461,023 100.0 % 290.0 % $ 442,323 100.0 % 278.3 % Note 5. Fair Value of Financial Instruments Investments The Company’s investments are carried at fair value as determined by the Board. These fair values are determined in accordance with a documented valuation policy and a consistently applied valuation process. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values are determined with models or other valuation techniques, valuation inputs, and assumptions market participants would use in pricing an asset or liability. Valuation inputs are organized in a hierarchy that gives the highest priority to prices for identical assets or liabilities quoted in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs in the fair value hierarchy are described below: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include: (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived principally from or corroborated by observable market data. Level 3: Unobservable inputs for the asset or liability, and situations where there is little, if any, market activity for the asset or liability at the measurement date. The inputs into the determination of fair value are based upon the best information under the circumstances and may require significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The Company generally categorizes its investment portfolio into Level 2 and Level 3 of the hierarchy. The Company assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the measurement date. Senior securities with a fair value of $-0- and $601 were transferred from Level 3 to Level 2 during the years ended December 31, 2021 and 2020, respectively. Certain of the Company's investments are exchanged in the non-public market among banks, CLOs and other institutional investors for loans to large U.S. corporations. The Company classifies these loan investments as Level 2 when a sufficient number of market quotations or indicative prices from pricing services or broker/dealers (collectively, “Indicative Prices”) are available, and the depth of the market is sufficient to transact to those prices in amounts approximating the Company's investment position at the measurement date. Investments for which sufficient Indicative Prices exist are generally valued consistent with such Indicative Prices. 145 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) In addition, each quarter, the Company assesses whether an arm’s length transaction occurred in the same security, including the Company's new investments during the quarter, the cost of which (“Transaction Prices”), may be considered a reasonable indication of fair value for up to six months after the transaction date. Senior secured debt investments with a fair value of $72,572 and $6,114, respectively, were valued at their Transaction Price at December 31, 2021 and December 31, 2020; these securities are designated as Level 3 in the fair value hierarchy based on assessments of market liquidity and other factors. Investments that are not valued using Indicative Prices or Transaction Prices are typically valued using two different valuation techniques. The Company typically estimates the fair value of debt investments by a discounted cash flows technique in which a current price is imputed for the investment based upon an assessment of the expected market yield (or discount rate) for similarly structured investments with a similar level of risk. The Company considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the portfolio company and various market indices. A key determinant of portfolio-company risk is the leverage through the investment relative to earnings metrics of the portfolio company. The fair value of Structured Finance Notes are also estimated primarily by discounted cash flow techniques. In valuing such investments, the Company considers CLO performance metrics, including prepayment rates, default rates, loss-on-default and recovery rates, and other metrics, as well as estimated market yields provided by a recognized industry pricing service as a primary source for discounted cash flow fair value estimates, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by broker-dealers in its estimate of the fair value of such investments. The Company also considers the operating metrics of the CLO vehicle, including compliance with collateralization tests, concentration limits and restructuring activity, if applicable. The fair value of Company’s equity investments as well as certain of its non-performing debt investments are estimated through analysis of the portfolio companies’ enterprise value under a market approach. Enterprise value means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining enterprise value under the market approach involves multiple analysis whereby appropriate multiples are applied to an earnings metric of the portfolio company, typically earnings before net interest expense, income tax expense, depreciation and amortization (“EBITDA”). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The Company may also utilize other portfolio-company earnings metrics to determine enterprise value, such as recurring monthly revenue or a delineated measure of portfolio company EBITDA. Application of these valuation methodologies involves a significant degree of judgment by management. Due to the inherent uncertainty of determining the fair value of Level 3 investments, the fair value of the investments may differ significantly from the values that would have been used had a ready market or observable inputs existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions, or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company might realize significantly less than the value at which such investment had previously been recorded. The Company’s investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded. 146 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The following tables presents the Company's investment portfolio measured at fair value on a recurring basis as of December 31, 2021 and 2020, respectively. Security Level 1 Level 2 Level 3 Fair Value at December 31, 2021 Debt investments $ — $ 65,591 $ 279,056 $ 344,647 Equity investments — — 87,251 87,251 Structured Finance Notes — — 75,201 75,201 $ — $ 65,591 $ 441,508 $ 507,099 Security Level 1 Level 2 Level 3 Fair Value at December 31, 2020 Debt investments $ — $ 22,226 $ 299,145 $ 321,371 Equity investments — — 64.527 64,527 Structured Finance Notes — — 56.425 56,425 $ — $ 22,226 $ 420,097 $ 442,323 147 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The following tables provide quantitative information about the Company’s significant unobservable inputs to the Company’s Level 3 fair value measurements as of December 31, 2021 and 2020. Fair Value at December 31, 2021 Valuation technique Unobservable inputs Range (Weighted average) Debt investments: Senior secured $ 178,382 Discounted cash flow Discount rates 6.47% - 12.32% (9.25%) Senior secured 11,632 Market approach EBITDA multiples 7.09x - 7.09x (7.09x) Senior secured 7,027 Market approach Revenue multiples 0.74x - 0.74x (0.74x) Senior secured 64,072 Market approach Transaction Price Subordinated 17,244 Discounted cash flow Discount rates 15.90% - 17.49% (16.65%) Subordinated 699 Market approach Revenue multiples 0.28x - 0.28x (0.28x) Structured Finance Notes: Subordinated notes (1) 63,922 Discounted cash flow Discount rates 8.00% - 16.00% (12.39%) Constant default rate (2) 0.00% - 2.00% (1.77%) Constant default rate (3) 2.00% - 2.00% (2.00%) Recovery rate 60.00% - 60.00% (60.00%) Mezzanine debt 2,779 Discounted cash flow Discount margin 7.10% - 8.95% (7.91%) Constant default rate (2) 2.00% - 3.00% (2.36%) Constant default rate (3) 2.00% - 3.00% (2.36%) Recovery rate 60.00% - 60.00% (60.00%) Loan accumulation facility 8,500 Market approach Transaction Price Equity investments: Preferred equity 2,748 Market approach EBITDA multiples 7.80x - 7.80x (7.80x) Preferred equity 1,017 Market approach Revenue multiples 0.15x - 3.00x (0.91x) Common equity, warrants and other 83,478 Market approach EBITDA multiples 4.50x - 12.00x (8.10x) Common equity, warrants and other 8 Market approach Revenue multiples 0.15x - 3.00x (0.15x) $ 441,508 (1) The cash flows utilized in the discounted cash flow calculations assume liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices, and redeployment of proceeds at the issuing CLO's assumed reinvestment rate. (2) Constant default rates for the six months ended June 30, 2022. (3) Constant default rates for the period between June 30, 2022, and the assumed optional redemptions of the instruments. 148 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Fair Value at December 31, 2020 Valuation technique Unobservable inputs Range (Weighted average) Debt investments: Senior secured $ 256,042 Discounted cash flow Discount rates 6.30% - 24.43% (10.18%) Senior secured 12,668 Market approach EBITDA multiples 8.50x - 8.50x (8.50x) Senior secured 9,257 Market approach Revenue multiples 0.86x - 0.86x (0.86x) Senior secured 6,111 Market approach Transaction Prices Subordinated 7,822 Discounted cash flow Discount rates 17.83% - 17.83% (17.83%) Subordinated 6,794 Market approach EBITDA multiples 7.05x - 9.10x (7.78x) Subordinated 451 Market approach Revenue multiples 0.10x - 0.20x (0.18x) Structured Finance Notes: Subordinated notes (1) 54,724 Discounted cash flow Discount rates 15.00% - 19.50% (17.79%) Constant default rate (2) 0.00% - 2.00% (1.63%) Constant default rate (3) 2.00% - 2.00% (2.00%) Recovery rate 60.00% - 60.00% (60.00%) Mezzanine debt 1,701 Discounted cash flow Discount Margin 7.25% - 9.45% (8.58%) Constant default rate (4) 0.00% - 2.00% (1.01%) Constant default rate (5) 2.00% - 3.00% (2.49%) Recovery rate 60.00% - 60.00% (60.00%) Equity investments: Preferred equity 10,395 Market approach EBITDA multiples 4.73x - 8.50x (7.37x) Preferred equity 1,148 Market approach Revenue multiples 0.20x - 1.56x (0.96x) Common equity and warrants 52,969 Market approach EBITDA multiples 3.75x - 11.50x (8.10x) Common equity and warrants 15 Market approach Revenue multiples 0.20x - 1.56x (0.47x) $ 420,097 (1) The cash flows utilized in the discounted cash flow calculations assume liquidation at current market prices and redeployment of proceeds on all assets currently in default and all assets below specified fair value thresholds. (2) Constant default rates for the six months ended June 30, 2021. (3) Constant default rates for the period between June 30, 2021, and the assumed optional redemptions of the instruments. (4) Constant default rates for the nine months ended September 30, 2021. (5) Constant default rates for the period between September 30, 2021, and the assumed optional redemptions of the instruments. Changes in market credit spreads or events impacting the credit quality of the underlying portfolio company (both of which could impact the discount rate), as well as changes in EBITDA and/or EBITDA multiples, among other things, could have a significant impact on fair values, with the fair value of a particular debt investment susceptible to change in inverse relation to the changes in the discount rate. Changes in EBITDA and/or EBITDA multiples, as well as changes in the discount rate, could have a significant impact on fair values, with the fair value of an equity investment susceptible to change in tandem with the changes in EBITDA and/or EBITDA multiples, and in inverse relation to changes in the discount rate. Due to wide range of 149 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) approaches towards developing input assumptions to these valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following tables present changes in investments measured at fair value using Level 3 inputs for the years ended December 31, 2021 and 2020: Year Ended December 31, 2021 Senior Secured Debt Investments Subordinated Debt Investments Preferred Equity Common Equity and Warrants Structured Finance Notes Total Level 3 assets, December 31, 2020 $ 284,078 $ 15,067 $ 11,543 $ 52,984 $ 56,425 $ 420,097 Net realized gain (loss) on investments (265) (23,676) 3,310 (49) — (20,680) Net change in unrealized appreciation (depreciation) on investments 10,780 26,214 1,318 31,355 (314) 69,353 Amortization of net loan origination fees 2,092 24 — — 73 2,189 Accretion of interest income on Structured Finance Notes — — — — 9,861 9,861 Capitalized PIK interest, dividends, and fees 1,472 526 143 — — 2,141 Purchase and origination of portfolio investments 167,720 — — 200 30,412 198,332 Proceeds from principal payments on portfolio investments (172,661) (121) — — — (172,782) Sale and redemption of portfolio investments (27,381) (91) (12,549) (5,726) (8,600) (54,347) Distributions received from Structured Finance Notes — — — — (12,656) (12,656) Conversion from debt investment to equity investment (Note 4) (4,722) — — 4,722 — — Level 3 assets, December 31, 2021 $ 261,113 $ 17,943 $ 3,765 $ 83,486 $ 75,201 $ 441,508 Year Ended December 31, 2020 Senior Secured Debt Investments Subordinated Debt Investments Preferred Equity Common Equity and Warrants Structured Finance Notes Total Level 3 assets, January 1, 2020 $ 334,059 $ 43,090 $ 17,729 $ 25,777 $ 21,610 $ 442,265 Net realized loss on investments (9,107) — 51 (497) — (9,553) Net change in unrealized appreciation (depreciation) on investments (2,119) (16,702) (2,909) 26,668 2,081 7,019 Amortization of net loan origination fees 1,421 11 — — 30 1,462 Accretion of interest income on Structured Finance Notes — — — — 5,877 5,877 Capitalized PIK interest, dividends, and fees 1,066 478 437 — — 1,981 Purchase and origination of portfolio investments 79,695 — 160 333 33,536 113,724 Proceeds from principal payments on portfolio investments (109,998) (11,810) — — — (121,808) Sale and redemption of portfolio investments (9,635) — (3,925) — — (13,560) Distributions received from Structured Finance Notes — — — — (6,709) (6,709) Conversion from debt investment to equity investment (Note 4) (703) — — 703 — — Transfers out of Level 3 (601) — — — — (601) Level 3 assets, December 31, 2020 $ 284,078 $ 15,067 $ 11,543 $ 52,984 $ 56,425 $ 420,097 150 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The net unrealized appreciation (depreciation) reported in the Company’s consolidated statements of operations for the years ended December 31, 2021 and 2020, attributable to the Company’s Level 3 assets still held at those respective year ends was as follows: Year Ended December 31, 2021 2020 Senior secured debt investments $ 3,637 $ (14,911) Subordinated debt investments 4,977 (16,716) Preferred equity (73) (2,907) Common equity, warrants and other 30,208 27,657 Structured Finance Notes (302) 2,081 Net unrealized appreciation (depreciation) on investments held $ 38,447 $ (4,796) Other Financial Assets and Liabilities GAAP requires disclosure of the fair value of financial instruments not reported at fair value on a recurring basis for which it is practical to estimate such values. The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such financial instruments. The senior secured revolving credit facility between the Company and Pacific Western Bank, as lender (“PWB Credit Facility”) and the secured revolving credit facility that provides for borrowings in an aggregate principal amount up to $150,000 issued pursuant to a Revolving Credit and Security Agreement by and among OFSCC-FS, the lenders from time to time parties thereto, BNP Paribas, as administrative agent, OFSCC-FS Holdings, LLC, a wholly owned subsidiary of the Company, as equityholder, the Company, as servicer, Citibank, N.A., as collateral agent and Virtus Group, LP, as collateral administrator (“BNP Facility”) are variable rate instruments and fair value is approximately book value. The following tables present the fair value measurements of the Company's debt and the level within fair value hierarchy of the significant unobservable inputs used to determine such fair values as of December 31, 2021 and 2020: December 31, 2021 Description Level 1 (2) Level 2 Level 3 (1) Total PWB Credit Facility $ — $ — $ — $ — BNP Facility — — 100,000 100,000 OFS Capital Corporation 4.75% Notes due 2026 — — 123,130 123,130 OFS Capital Corporation 4.95% Notes due 2028 56,430 — — 56,430 SBA-guaranteed debentures — — 73,011 73,011 Total debt $ 56,430 $ — $ 296,141 $ 352,571 151 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) December 31, 2020 Description Level 1 (2) Level 2 Level 3 (1) Total PWB Credit Facility $ — $ — $ 600 $ 600 BNP Facility — — 31,450 31,450 OFS Capital Corporation 6.375% Notes due 2025 48,800 — — 48,800 OFS Capital Corporation 6.5% Notes due 2025 47,069 — — 47,069 OFS Capital Corporation 5.95% Notes due 2026 51,066 — — 51,066 OFS Capital Corporation 6.25% Notes due 2023 25,100 — — 25,100 SBA-guaranteed debentures — — 116,172 116,172 Total debt $ 172,035 $ — $ 148,222 $ 320,257 (1) For Level 3 measurements, fair value is estimated through discounting remaining payments using current market rates for similar instruments at the measurement date through the legal maturity date. (2) For Level 1 measurements, fair value is estimated by using the closing price of the security on the Nasdaq Global Select Market. The following are the carrying values and fair values of the Company’s debt as of December 31, 2021 and 2020: As of December 31, 2021 As of December 31, 2020 Description Carrying Value Fair Value Carrying Value Fair Value PWB Credit Facility $ — $ — $ 600 $ 600 BNP Facility 100,000 100,000 31,450 31,450 OFS Capital Corporation 6.375% Notes due 2025 — — 48,891 48,800 OFS Capital Corporation 6.5% Notes due 2025 — — 47,339 47,069 OFS Capital Corporation 5.95% Notes due 2026 — — 52,617 51,066 OFS Capital Corporation 6.25% Notes due 2023 — — 24,106 25,100 OFS Capital Corporation 4.75% Notes due 2026 121,774 123,130 — — OFS Capital Corporation 4.95% Notes due 2028 53,672 56,430 — — SBA-guaranteed debentures 69,365 73,011 104,182 116,172 Total debt $ 344,811 $ 352,571 $ 309,185 $ 320,257 Note 6. Commitments and Contingencies The Company has outstanding commitments to fund investments totaling $43,690 and $5,772 under various undrawn revolvers and other credit facilities as of December 31, 2021 and 2020, respectively. Legal and regulatory proceedings: From time to time, the Company is involved in legal proceedings in the normal course of its business. Although the outcome of such litigation cannot be predicted with any certainty, management is of the opinion, based on the advice of legal counsel, that final disposition of any litigation should not have a material adverse effect on the financial position of the Company as of December 31, 2021. Additionally, the Company is subject to periodic inspection by regulators to assess compliance with applicable BDC regulations and the SBIC I LP is subject to periodic inspections by the SBA. Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company believes the risk of any material obligation under these indemnifications to be low. 152 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Note 7. Borrowings SBA Debentures: The SBIC Program enabled SBIC I LP to obtain leverage by issuing SBA-guaranteed debentures, subject to issuance of a capital commitment by the SBA and customary procedures. These debentures are non-recourse to the Company, have interest payable semi-annually and a ten-year maturity. The interest rate is fixed at the time of SBA pooling, which is March and September of each year, at a market-driven spread over U.S. Treasury Notes with ten-year maturities. As of December 31, 2021 and 2020, SBIC I LP had outstanding SBA debentures of $69,920 and $105,270, respectively. On a stand-alone basis, SBIC I LP held $195,502 and $223,795 in assets at December 31, 2021 and 2020, respectively, which accounted for approximately 34% and 46% of the Company’s total consolidated assets, respectively. These assets cannot be pledged under any debt obligation of the Company. The following table shows the Company’s outstanding SBA debentures payable as of December 31, 2021 and 2020: Fixed Interest Rate SBA debentures outstanding Pooling Date Maturity Date December 31, 2021 December 31, 2020 September 19, 2012 September 1, 2022 3.049 % $ — $ 14,000 September 24, 2014 September 1, 2024 3.370 — 2,765 March 25, 2015 March 1, 2025 2.872 65,920 65,920 September 23, 2015 September 1, 2025 3.184 4,000 22,585 SBA debentures outstanding 69,920 105,270 Unamortized debt issuance costs (555) (1,088) SBA debentures outstanding, net of unamortized debt issuance costs $ 69,365 $ 104,182 The Company received exemptive relief from the SEC effective November 26, 2013, which permits the Company to exclude SBA guaranteed debentures from the definition of senior securities in the statutory asset coverage ratio under the 1940 Act, allowing for greater capital deployment. The effective interest rate on the SBA debentures, which includes amortization of deferred debt issuance costs, was 3.11% and 3.31% as of December 31, 2021 and 2020, respectively. Interest expense on the SBA debentures was $2,836, $4,402, and $5,137 for the years ended December 31, 2021, 2020 and 2019, respectively, which includes $209, $332, and $377 of debt issuance costs amortization, respectively. The weighted-average fixed cash interest rate on the SBA debentures as of December 31, 2021 and 2020, was 2.89% and 2.98%, respectively. During the year ended December 31, 2021, SBIC I LP redeemed $35,350 of SBA debentures that were contractually due September 1, 2022, September 1, 2024 and September 1, 2025. The Company recognized losses on extinguishment of debt of $324 related to the charge-off of deferred borrowing costs on the prepaid debentures. Unsecured Notes: The unsecured notes totaled $180,000 and $177,850 in aggregate principal debt at December 31, 2021 and 2020, respectively. Issuances during the years ended December 31, 2021 and 2020 On February 10, 2021, the Company closed the public offering of $100,000 aggregate principal amount of its 4.75% notes due 2026, and on March 18, 2021, the Company closed an additional public offering of $25,000 aggregate principal amount of its 4.75% notes due 2026 (the "Unsecured Notes Due February 2026"). The total net proceeds to the Company from the Unsecured Notes Due February 2026, after deducting underwriting fees and offering expenses of $3,936, was approximately $121,064. On October 28, 2021 and November 1, 2021, the Company closed the public offering of the $55,000 aggregate principal amount of its 4.95% notes due 2028 (the “Unsecured Notes Due October 2028”), which included a full exercise of the underwriters overallotment option. The total net proceeds to the Company, after deducting underwriting discounts and offering expenses of $1,389, was approximately $53,611. 153 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) In September 2020, the Company closed the public offering of the $25,000 aggregate principal amount of its 6.25% notes due 2023 (the “Unsecured Notes Due September 2023”). The total net proceeds to the Company, after deducting underwriting discounts and offering expenses of $894, was approximately $24,106. Redemptions during the years ended December 31, 2021 On March 12, 2021, the Company redeemed all of its $50,000 aggregate principal amount of 6.375% notes due April 30, 2025 (the “Unsecured Notes Due April 2025”) and $48,525 aggregate principal amount of 6.50% notes due October 30, 2025 (the “Unsecured Notes Due October 2025”). On November 1, 2021, the Company redeemed all of its Unsecured Notes Due September 2023. On November 22, 2021, the Company redeemed all of its $54,325 aggregate principal amount of 5.95% notes due October 31, 2026 (the “Unsecured Notes Due October 2026”). During the year ended December 31, 2021, the Company recognized a loss on extinguishment of $4,267 related to the charge-off of deferred borrowing costs on the redemption of unsecured notes. The Unsecured Notes Due February 2026, the Unsecured Notes Due October 2028, the Unsecured Notes Due April 2025, the Unsecured Notes Due October 2025, the Unsecured Notes Due September 2023 and Unsecured Notes Due October 2026, combined (the “Unsecured Notes”), of which the Unsecured Notes Due February 2026 and the Unsecured Notes Due October 2028 were outstanding at December 31, 2021, are direct unsecured obligations and rank equal in right of payment with all current and future unsecured indebtedness of the Company. Because the Unsecured Notes are not secured by any of the Company's assets, they are effectively subordinated to all existing and future secured unsubordinated indebtedness (or any indebtedness that is initially unsecured as to which the Company subsequently grant a security interest), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under PWB Credit Facility and BNP Facility. The indenture governing the Unsecured Notes contains certain covenants (i) prohibiting additional borrowings, including through the issuance of additional debt securities, unless the Company's asset coverage, as defined in the 1940 Act, after giving effect to any exemptive relief granted to the Company by the SEC, equals at least 150% after such borrowings; and (ii) prohibiting (a) the declaration of any cash dividend or distribution upon any class of the Company’s capital stock (except to the extent necessary for the Company to maintain its treatment as a RIC under Subchapter M of the Code), or (b) the purchase of any capital stock if the Company’s asset coverage, as defined in the 1940 Act, were below 150% at the time of such capital transaction and after deducting the amount of such transaction. As of December 31, 2021, the Unsecured Notes had the following terms and balances: Unsecured Notes Principal Unamortized Discount and Issuance Costs Stated Interest Rate (1) Effective Interest Rate (2) Maturity (3) Unsecured Notes Due February 2026 $ 125,000 $ 3,226 4.75 % 5.38 % 2/10/2026 Unsecured Notes Due October 2028 55,000 1,328 4.95 % 5.29 % 10/31/2028 Total $ 180,000 $ 4,554 (1) The weighted-average fixed cash interest rate on the Unsecured Notes as of December 31, 2021 was 4.81%. (2) The effective interest rate on the Unsecured Notes includes deferred debt issuance cost amortization. (3) The Company may redeem the Unsecured Notes Due February 2026 in whole or in part at any time, or from time to time, at its option at par plus a "make-whole" premium, if applicable. The Company may redeem the Unsecured Notes Due October 2028 in whole or in part at any time, or from time to time, at its option on or after October 31, 2023. Interest expense on the Unsecured Notes were $12,563, $10,952 and $7,650 for the years ended December 31, 2021, 2020, and 2019, respectively, which includes $1,403, $909 and $584 of deferred financing amortization, respectively. PWB Credit Facility : The Company is party to a business loan agreement (“BLA”) with Pacific Western Bank, as lender, to provide the Company with a $25,000 senior secured revolving credit facility. The PWB Credit Facility is available for general corporate purposes including investment funding and is scheduled to mature on February 28, 2023. The maximum availability of the PWB Credit Facility is equal to 50% of the aggregate outstanding principal amount of eligible loans included in the 154 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) borrowing base, which excludes subordinated loan investments and as otherwise specified in the BLA. The PWB Credit Facility is guaranteed by OFSCC-MB and secured by all of our current and future assets excluding assets held by SBIC I LP, OFSCC-FS, and the Company’s partnership interests in SBIC I LP and SBIC I GP. The PWB Credit Facility bears interest at a variable rate of the Prime Rate plus a 0.25% margin, with a 4.00% floor, and includes an unused commitment fee for any unused portion in excess of $15,000, payable monthly in arrears, equal to 0.50% per annum on any unused portion. As of December 31, 2021, the stated interest rate of the PWB Credit Facility was 4.00%. At December 31, 2021, the effective interest rate was 4.22% based on the maximum amount available under the PWB Credit Facility. Interest expense on the PWB Credit Facility was $120, $1,285 and $2,136 for the years ended December 31, 2021, 2020, and 2019, respectively, which includes $19, $225 and $283 of deferred financing amortization, respectively, based on average balances outstanding of $1,810, $15,222 and $28,061, respectively. Unamortized debt issuance costs included in prepaid expenses and other assets on the consolidated statements of assets and liabilities as of December 31, 2021 and 2020, were $6 and $11, respectively. As of December 31, 2021, the Company had $0 outstanding debt under the PWB Credit Facility and $25.0 million of availability under the terms of the borrowing base. On February 17, 2021, the Company amended the BLA to among other things: (i) increase the maximum amount available from $20,000 to $25,000; (ii) decrease the interest rate floor from 5.25% per annum to 5.00% per annum; (iii) modify certain financial performance covenants; and (iv) extend the maturity date from February 28, 2021 to February 28, 2023. On November 15, 2021, the Company amended the BLA to decrease the interest rate floor from 5.0% to 4.0%, effective as of November 1, 2021. The BLA contains customary terms and conditions, including, without limitation, affirmative and negative covenants such as information reporting requirements, a minimum tangible net asset value, a minimum quarterly net investment income after incentive fees, and a maximum debt/worth ratio. The BLA also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change in investment advisor, and the occurrence of a material adverse change in our financial condition. As of December 31, 2021, the Company was in compliance with the applicable covenants. BNP Facility: OFSCC-FS is party to the BNP Facility, which provides for borrowings in an aggregate principal amount up to $150,000, of which $100,000 was drawn as of December 31, 2021. Borrowings under the BNP Facility bear interest of LIBOR plus an applicable spread, which is determined on the basis of industry-recognized portfolio company metrics at the time of funding. At December 31, 2021, the effective interest rate on the BNP Facility was 4.20%. The BNP Facility will mature on the earlier of June 20, 2024 or upon certain other events defined in the credit agreement which result in accelerated maturity. Borrowings under the BNP Facility are secured by substantially all of the assets held by OFSCC-FS, which were $185,105 and $72,412, or 33% and 15% of the Company's total consolidated assets at December 31, 2021 and 2020, respectively. OFSCC-FS incurred fees to the lenders as well as legal costs of approximately $1,346 to establish the BNP Facility, which are amortized over the life of the facility. Unamortized debt issuance costs included in prepaid expenses and other assets on the consolidated statements of assets and liabilities as of December 31, 2021 and 2020 were $665 and $1,004, respectively. The unused commitment under the BNP Facility was $50,000 as of December 31, 2021. For the years ended December 31, 2021, 2020 and 2019, interest expense on the BNP Facility was $1,996, $2,168 and $905, respectively, which included $338, $225 and $118 of deferred financing amortization, based on average balances outstanding of $47,481, $39,182 and $20,000, respectively. 155 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The average dollar borrowings and average interest rate for all Company debt during the years ended December 31, 2021, 2020 and 2019, were as follows: Year ended Average Dollar Borrowings Weighted Average Interest Rate December 31, 2021 $ 344,241 5.09 % December 31, 2020 347,229 5.42 December 31, 2019 307,826 4.99 As of December 31, 2021, the Company's debt liabilities are scheduled to mature as follows: Principal Due by Year Debt liabilities Total 2022 2023 2024 2025 2026 Thereafter PWB Credit Facility $ — $ — $ — $ — $ — $ — $ — BNP Facility 100,000 — — 100,000 — — — SBA Debentures 69,920 — — — 69,920 — — Unsecured Notes 180,000 — — — — 125,000 55,000 Total $ 349,920 $ — $ — $ 100,000 $ 69,920 $ 125,000 $ 55,000 Note 8. Federal Income Tax Filing status: The Company has elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain its status as a RIC, the Company is required to distribute annually to its stockholders at least 90% of its ICTI, as defined by the Code. Additionally, to avoid a 4% U.S. federal excise tax on undistributed earnings the Company is required to distribute each calendar year the sum of (i) 98% of its ordinary income for such calendar year, (ii) 98.2% of its net capital gains for the one-year period ending October 31 of that calendar year, and (iii) any income recognized, but not distributed, in preceding years and on which the Company paid no U.S. federal income tax. Maintenance of the Company's RIC status also requires adherence to certain source of income and asset diversification requirements. OFSCC-MB, an entity taxed as a corporation under Subchapter C of the Code, is consolidated in the Company’s GAAP financial statements but is not included in the determination of ICTI or the RIC compliance requirements of the Company. The income of OFSCC-MB, net of applicable income taxes, is not included in the Company’s ICTI until distributed by OFSCC-MB, which may result in timing and character differences between the Company’s GAAP and tax-basis net investment income and realized gains and losses. Taxable income and distributions: The Company has met the required distribution, source of income and asset diversification requirements as of December 31, 2021, and intends to continue meeting these requirements. Accordingly, there is no liability for federal income tax at the Company level. The Company’s ICTI differs from the net increase in net assets resulting from operations primarily due to differences in income recognition on the unrealized appreciation/depreciation of investments, income from Company’s equity investments in pass-through entities, PIK dividends that have not yet been declared and paid by underlying portfolio companies, capital gains and losses and the net creation or utilization of capital loss carryforwards. The Company recognized approximately $12,207 of ordinary taxable income during the year ended December 31, 2021. 156 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The distributions paid to stockholders are reported as ordinary income, long-term capital gains, and returns of capital. The tax character of distributions paid (1) were as follows: Years Ended December 31, 2021 2020 2019 Ordinary taxable income $ 12,207 $ 11,516 $ 18,176 Long-term capital gain — — — Return of capital — — — Total distributions to stockholders $ 12,207 $ 11,516 $ 18,176 (1) The calculation of 2021 U.S. federal taxable income is based on certain estimated amounts, including information received from third parties and, as a result, actual 2021 U.S. federal taxable income will not be finally determined until the Company’s 2021 U.S. federal tax return is filed in 2022 (and, therefore, such estimate is subject to change). Tax-basis components of distributable earnings (accumulated losses) as of December 31, 2021 and 2020, were as follows: December 31, 2021 2020 Ordinary income (RIC) $ 1,193 $ 5,640 Undistributed earnings and profits (net operating loss carry-forward) (OFSCC-MB; C-Corporation) 3,325 (1,188) Capital loss carryforwards: RIC – short-term, non-expiring (3,226) (695) RIC – long-term, non-expiring (34,292) (17,325) OFSCC-MB (C-Corporation) – short-term, expires in 2025 — (446) The Company records reclassifications to its capital accounts related to permanent differences between GAAP and tax treatment of excise taxes and other permanent differences. The Company recorded reclassifications to decrease additional paid-in capital against total distributable earnings (accumulated loss) o f $2,142, $33 1 and $462 for the years ended December 31, 2021, 2020 and 2019, respectively. The tax-basis cost of investments and associated tax-basis gross unrealized appreciation (depreciation) inherent in the fair value of investments as of December 31, 2021 and 2020, were as follows: December 31, 2021 2020 Tax-basis amortized cost of investments $ 452,722 $ 456,634 Tax-basis gross unrealized appreciation on investments 83,033 50,176 Tax-basis gross unrealized depreciation on investments (28,656) (64,487) Tax-basis net unrealized appreciation (depreciation) on investments 54,377 (14,311) Fair value of investments $ 507,099 $ 442,323 Deferred taxes: The Company recognizes deferred taxes on the unrealized appreciation or depreciation of securities held through OFSCC-MB, and other basis differences including available loss carry forwards and suspended interest expense deductions reported by portfolio companies. Deferred tax assets and liabilities are measured using enacted corporate federal tax rates expected to apply to taxable income in the years in which those unrealized gains and losses are realized. The recoverability of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any 157 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) portion of the deferred tax asset will not be realized on the basis of the projected taxable income or other taxable events in OFSCC-MB. The tax-basis unrealized appreciation (depreciation) of investments by tax entity inherent in the fair value of investments as of December 31, 2021 and 2020, were as follows: 2021 2020 Total net unrealized appreciation (depreciation) on investments held by RIC entities $ 54,282 (15,519) OFSCC-MB (C-Corp): Gross unrealized appreciation on investments 649 4,400 Gross unrealized depreciation on investments (554) $ (3,192) Total net unrealized appreciation on investments on investments held by OFSCC-MB 95 1,208 Total tax-basis net unrealized appreciation (depreciation) on investments $ 54,377 $ (14,311) Deferred tax assets and liabilities as of December 31, 2021 and 2020, were as follows: December 31, 2021 2020 Total deferred tax assets $ 141 $ 1,012 Total deferred tax liabilities (167) (1,153) Deferred tax liabilities and assets with tax basis unrealized gain and losses differs from the amount that would have resulted from applying the federal rate of 21% to unrealized gains and losses because of state income taxes, net of associated federal benefit. 158 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Note 9. Financial Highlights The following is a schedule of financial highlights for the each year in the five-year period ended December 31, 2021: Years Ended December 31, 2021 2020 2019 2018 2017 Per share operating performance: Net asset value per share at beginning of year $ 11.85 $ 12.46 $ 13.10 $ 14.12 $ 14.82 Net investment income (4) 1.00 0.92 1.43 1.38 1.28 Net realized loss on non-control/non-affiliate investments (4) (2.02) (0.75) (0.29) (0.37) (0.26) Net realized gain on affiliate investments (4) 0.56 — — 0.01 0.81 Income tax expense on net realized investment gains (4) (0.08) — — — — Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of deferred taxes (4) 2.89 (0.82) (0.72) (0.19) (0.78) Net unrealized appreciation (depreciation) on affiliate investments (4) 2.10 0.94 0.40 (0.06) (0.41) Net unrealized appreciation (depreciation) on control investment (4) 0.13 0.13 (0.10) (0.06) — Loss on extinguishment of debt (4) (0.34) (0.06) — — — Loss on impairment of goodwill (4) — (0.08) — — — Total from operations 4.24 0.28 0.72 0.71 0.64 Distributions (0.91) (0.86) (1.36) (1.73) (1.36) Issuance of common stock (5) — (0.03) — — (0.03) Other (6) — — — — 0.05 Net asset value per share at end of year $ 15.18 $ 11.85 $ 12.46 $ 13.10 $ 14.12 Per share market value, end of period $ 10.90 $ 7.15 $ 11.17 $ 10.60 $ 11.90 Total return based on market value (1) 66.8 % (24.0) % 18.3 % 3.5 % (4.7) % Total return based on net asset value (2) 40.2 % 13.6 % 6.7 % 7.8 % 5.0 % Shares outstanding at end of period 13,422,413 13,409,559 13,376,836 13,357,337 13,340,217 Weighted average shares outstanding 13,413,861 13,394,005 13,364,244 13,348,203 12,403,706 Ratio/Supplemental Data (in thousands except ratios) Average net asset value (3) $ 178,628 $ 148,175 $ 171,889 $ 182,468 $ 171,631 Net asset value at end of year $ 203,744 $ 158,956 $ 166,627 $ 175,023 $ 188,336 Net investment income $ 13,450 $ 12,295 $ 19,098 $ 18,385 $ 15,877 Ratio of total expenses, net to average net assets (8) 19.2 % 22.4 % 19.4 % 13.4 % 10.2 % Ratio of total expenses, net and losses on impairment of goodwill and extinguishment of debt to average net assets (9) 21.8 % 23.7 % — % — % — % Ratio of net investment income to average net assets (10) 7.5 % 8.3 % 11.1 % 10.5 % 8.4 % Ratio of goodwill impairment loss to average net assets — % 0.7 % — % — % — % Ratio of loss on extinguishment of debt to average net assets 2.6 % 0.6 % — % — % — % Portfolio turnover (7) 54.9 % 28.1 % 21.2 % 41.9 % 50.4 % (1) Calculated as ending market value less beginning market value, adjusted for distributions reinvested at prices based on the Company’s dividend reinvestment plan for the respective distributions. (2) Calculated as ending net asset value less beginning net asset value, adjusted for distributions reinvested at the Company’s dividend reinvestment plan for the respective distributions. (3) Based on the average of the net asset value at the beginning of the indicated period and the end of each calendar quarter within the period indicated. (4) Calculated on the average share method. (5) The issuance of common stock on a per share basis reflects the incremental net asset value change as a result of the Offering. 159 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) (6) Represents the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on a weighted average shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date. (7) Portfolio turnover rate is calculated using the lesser of year-to-date sales, Structured Finance Note distributions and principal payments or year-to-date purchases over the average of the invested assets at fair value at the beginning of the indicated period and the end of each calendar quarter within the period indicated. (8) Ratio of total expenses before incentive fee waiver to average net assets was 22.7% and 13.4% for the years ended December 31, 2020 and December 31, 2018, respectively. (9) Ratio of total expenses before incentive fee waiver and losses on impairment of goodwill and extinguishment of debt to average net assets was 24.0% for the year ended December 31, 2020. (10) Ratio of net investment income before incentive fee waiver to average net assets was 8.0% and 10.5% for the years ended December 31, 2020 and December 31, 2018, respectively. Note 10. Capital Transactions Distributions: The Company intends to make distributions to stockholders on a quarterly basis of substantially all of its net investment income. In addition, although the Company intends to make distributions of any net realized capital gains, out of assets legally available for such distributions at least annually, the Company may in the future decide to retain such net investment income and capital gains for investment or corporate purposes. The Company may be limited in its ability to make distributions due to the BDC asset coverage requirements of the 1940 Act. The Company’s ability to make distributions may also be affected by its restrictions imposed by the SBA regulations on the Company's wholly owned SBIC subsidiary, and currently require the prior approval of the SBA. In addition, distributions from OFSCC-FS to the Company are restricted by the terms and conditions of the BNP Facility. At December 31, 2021 and December 31, 2020, net assets of SBIC I LP were $125,375 and $118,554, respectively, which included cash of $11,265 and $32,187, of which $12,422 and $18,257 were available for distribution at December 31, 2021 and 2020, respectively. At December 31, 2021 and December 31, 2020, net assets of OFSCC-FS were $76,072 and $39,942, respectively, which included cash of $3,693 and $3,264 of which $0 and $618 were available for distribution to the Company at December 31, 2021 and 2020, respectively. 160 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The following table summarizes distributions declared and paid for the years ended December 31, 2021, 2020 and 2019: Date Declared Record Date Payment Date Amount Per Share Cash Distribution DRIP Shares Issued DRIP Shares Value Year ended December 31, 2019 March 5, 2019 March 22, 2019 March 29, 2019 $ 0.34 $ 4,497 3,797 $ 45 April 30, 2019 June 21, 2019 June 28, 2019 0.34 4,479 5,327 64 July 30, 2019 September 23, 2019 September 30, 2019 0.34 4,487 4,990 58 November 6, 2019 December 24, 2019 December 31, 2019 0.34 4,486 5,385 60 $ 1.36 $ 17,949 19,499 $ 227 Year ended December 31, 2020 March 11, 2020 March 24, 2020 March 31, 2020 $ 0.34 $ 4,484 15,693 $ 64 May 4, 2020 June 23, 2020 June 30, 2020 0.17 2,244 7,165 32 July 28, 2020 September 23, 2020 September 30, 2020 0.17 2,246 6,708 32 November 3, 2020 December 24, 2020 December 31, 2020 0.18 2,391 3,157 22 $ 0.86 $ 11,365 32,723 $ 150 Year ended December 31, 2021 March 2, 2021 March 24, 2021 March 31, 2021 $ 0.20 $ 2,655 3,103 $ 27 May 7, 2021 June 23, 2021 June 30, 2021 0.22 2,918 3,273 33 August 3, 2021 September 23, 2021 September 30, 2021 0.24 3,181 3,738 39 November 2, 2021 December 24, 2021 December 31, 2021 0.25 3,317 3,440 38 $ 0.91 $ 12,071 13,554 $ 137 The following table represents DRIP participation for the years ended December 31, 2021, 2020 and 2019, respectively: For the Year Ended DRIP Shares Value Total Distribution Declared DRIP Shares Issued Average Value Per Share December 31, 2021 136 $ 12,207 13,554 $ 10.04 December 31, 2020 150 11,516 32,723 4.60 December 31, 2019 227 18,176 19,500 11.62 Since the Company’s initial public offering in 2012, distributions to stockholders total $132,763, or $11.49 per share on a cumulative basis. Distributions in excess of the Company’s current and accumulated ICTI would be treated first as a return of capital to the extent of a stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of the Company’s distributions is made annually as of the end of its fiscal year based upon its ICTI for the full year and distributions paid for the full year. Each year if required, a statement on Form 1099-DIV identifying the source of the distribution is mailed to the Company’s stockholders. Stock repurchase program: The Company is authorized to acquire up to $10,000 of our outstanding common stock through May 22, 2022 (the “Stock Repurchase Program”). Under the Stock Repurchase Program, the Company may repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. The Company expects the Stock Repurchase Program to be in place through May 22, 2022, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. 161 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) The following table summarizes the shares of common stock the Company repurchased under the Stock Repurchase Program (amount in thousands except shares): Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs May 22, 2018 through December 31, 2018 300 $ 10.29 300 $ 9,997 January 1, 2019 through December 31, 2019 — — — — January 1, 2020 through December 31, 2020 — — — — January 1, 2021 through December 31, 2021 700 6.7 700 9,992 Total 1,000 $ 7.78 1,000 $ 9,992 162 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Note 11. Consolidated Schedule of Investments In and Advances To Affiliates Year Ended December 31, 2021 Name of Portfolio Company Investment Type (1) Net Realized Gain (Loss) Net change in unrealized appreciation/ (depreciation) Interest & PIK Interest Dividends Fees Total Income (2) December 31, 2020, Fair Value Gross Additions (3) Gross Reductions (4) December 31, 2021, Fair Value (5) Control Investment MTE Holding Corp. Subordinated Loan $ — $ 20 $ 1,348 $ — $ 74 $ 1,422 $ 7,822 $ 425 $ (52) $ 8,195 Common Equity — 1,763 — 136 — 136 2,990 1,763 — 4,753 — 1,783 1,348 136 74 1,558 10,812 2,188 (52) 12,948 Total Control Investment — 1,783 1,348 136 74 1,558 10,812 2,188 (52) 12,948 Affiliate Investments 3rd Rock Gaming Holdings, LLC Senior Secured Loan — — — — — — 9,258 — (9,258) — Common Equity (6) (2,537) 2,547 — — — — — — — — (2,537) 2,547 — — — — 9,258 — (9,258) — Chemical Resources Holdings, Inc. Senior Secured Loan — (114) 857 — 201 1,058 13,744 114 (13,858) — Common Equity (6) 1,730 (1,606) — — — — 3,420 — (3,420) — 1,730 (1,720) 857 — 201 1,058 17,164 114 (17,278) — Contract Datascan Holdings, Inc. Preferred Equity (7) — 59 — — — — 2,690 58 — 2,748 Common Equity (6) — (21) — — — — 46 — (21) 25 — 38 — — — — 2,736 58 (21) 2,773 163 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Year Ended December 31, 2021 Name of Portfolio Company Investment Type (1) Net Realized Gain (Loss) Net change in unrealized appreciation/ (depreciation) Interest & PIK Interest Dividends Fees Total Income (2) December 31, 2020, Fair Value Gross Additions (3) Gross Reductions (4) December 31, 2021, Fair Value (5) DRS Imaging Services, LLC Common Equity (6) $ — $ (460) $ — $ — $ — $ — $ 1,749 $ — $ (460) $ 1,289 Master Cutlery, LLC Subordinated Loan (6) — 421 — — — — 346 421 (68) 699 Preferred Equity (6) — — — — — — — — — — Common Equity (6) — — — — — — — — — — — 421 — — — — 346 421 (68) 699 NeoSystems Corp. Preferred Equity (7) 1,505 (371) — 143 — 143 2,250 143 (2,393) — Pfanstiehl Holdings, Inc. Common Equity — 29,519 — 1,000 — 1,000 36,221 29,519 — 65,740 Professional Pipe Holdings, LLC Senior Secured Loan — — 867 — — 867 6,086 1,370 (7,456) — Common Equity (6) 1,061 206 — — — — 1,208 1,267 (2,475) — 1,061 206 867 — — 867 7,294 2,637 (9,931) — TalentSmart Holdings, LLC Common Equity (6) — (211) — — — 1,306 — (211) 1,095 TRS Services, Inc. Preferred Equity (6) — 73 — — — — 915 73 — 988 Common Equity (6) — — — — — — — — — — — 73 — — — — 915 73 — 988 164 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Year Ended December 31, 2021 Name of Portfolio Company Investment Type (1) Net Realized Gain (Loss) Net change in unrealized appreciation/ (depreciation) Interest & PIK Interest Dividends Fees Total Income (2) December 31, 2020, Fair Value Gross Additions (3) Gross Reductions (4) December 31, 2021, Fair Value (5) TTG Healthcare, LLC Senior Secured Loan $ — $ (123) $ 1,962 $ — $ 452 $ 2,414 $ 19,530 $ 194 $ (19,724) $ — Preferred Equity (6) 5,786 (1,766) — — — — 4,077 — (4,077) — 5,786 (1,889) 1,962 — 452 2,414 23,607 194 (23,801) — Total Affiliate Investments 7,545 28,153 3,686 1,143 653 5,482 102,846 33,159 (63,421) 72,584 Total Control and Affiliate Investments 7,545 $ 29,936 $ 5,034 $ 1,279 $ 727 $ 7,040 $ 113,658 $ 35,347 $ (63,473) $ 85,532 (1) Principal balance of debt investments and ownership detail for equity investments are shown in the consolidated schedule of investments. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144. (2) Represents the total amount of interest, fees or dividends included in 2021 income for the portion of the year ended December 31, 2021, that an investment was included in Control or Affiliate Investment categories, respectively. (3) Gross additions include increases in cost basis resulting from a new portfolio investment, PIK interest, fees and dividends, accretion of OID, and net increases in unrealized net appreciation or decreases in net unrealized depreciation. (4) Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if any, and net decreases in net unrealized appreciation or net increases in net unrealized depreciation. Gross reductions also include transfers of portfolio companies out of the affiliate classification to the non-affiliate/non-control classificaiton during the period. (5) Fair value was determined using significant unobservable inputs. See Note 5 for further details. (6) Non-income producing. (7) Dividends credited to income include dividends contractually earned but not declared. 165 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Year Ended December 31, 2020 Name of Portfolio Company Investment Type (1) Net Realized Gain (Loss) Net change in unrealized appreciation/ (depreciation) Interest & PIK Interest Dividends Fees Total Income (2) December 31, 2019, Fair Value Gross Additions (3) Gross Reductions (4) December 31, 2020, Fair Value (5) Control Investment MTE Holding Corp. Subordinated Loan $ — $ (33) $ 1,217 $ — $ 66 $ 1,283 $ 7,464 $ 391 $ (33) $ 7,822 Common Equity — 1,737 — — — — 1,253 1,737 — 2,990 — 1,704 1,217 — 66 1,283 8,717 2,128 (33) 10,812 Total Control Investment — 1,704 1,217 — 66 1,283 8,717 2,128 (33) 10,812 Affiliate Investments 3rd Rock Gaming Holdings, LLC Senior Secured Loan — (9,235) 572 — — 572 20,099 — (10,841) 9,258 Common Equity (6) — (1,044) — — — — 1,044 — (1,044) — — (10,279) 572 — — 572 21,143 — (11,885) 9,258 Chemical Resources Holdings, Inc. Senior Secured Loan — (40) 1,352 — — 1,352 13,746 38 (40) 13,744 Common Equity (6) — 757 — — — — 2,662 758 — 3,420 — 717 1,352 — — 1,352 16,408 796 (40) 17,164 Contract Datascan Holdings, Inc. Subordinated Loan — (5) 912 — — 912 8,000 27 (8,027) — Preferred Equity (7) — (3,231) 250 — — 250 5,671 250 (3,231) 2,690 Common Equity (6) — (625) — — — — 671 — (625) 46 — (3,861) 1,162 — — 1,162 14,342 277 (11,883) 2,736 166 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Year Ended December 31, 2020 Name of Portfolio Company Investment Type (1) Net Realized Gain (Loss) Net change in unrealized appreciation/ (depreciation) Interest & PIK Interest Dividends Fees Total Income (2) December 31, 2019, Fair Value Gross Additions (3) Gross Reductions (4) December 31, 2020, Fair Value (5) DRS Imaging Services, LLC Senior Secured Loan $ — $ 101 $ 1,188 $ — $ — $ 1,188 $ 10,569 $ 172 $ (10,741) $ — Common Equity (6) — 418 — — — — 1,331 418 — 1,749 — 519 1,188 — — 1,188 11,900 590 (10,741) 1,749 Master Cutlery, LLC Subordinated Loan (6) — 91 — — — — 255 91 — 346 Preferred Equity (6) — — — — — — — — — — Common Equity (6) — — — — — — — — — — — 91 — — — — 255 91 — 346 NeoSystems Corp. Preferred Stock (7) — (181) 180 — — 180 2,250 181 (181) 2,250 Pfanstiehl Holdings, Inc. Subordinated Loan — 19 361 — — 361 3,788 19 (3,807) — Common Equity — 24,242 — 450 — 450 11,979 24,242 — 36,221 — 24,261 361 450 — 811 15,767 24,261 (3,807) 36,221 Professional Pipe Holdings, LLC Senior Secured Loan — (269) 848 — — 848 7,170 128 (1,212) 6,086 Common Equity (6) — (1,205) — — — — 2,413 — (1,205) 1,208 — (1,474) 848 — — 848 9,583 128 (2,417) 7,294 167 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Year Ended December 31, 2020 Name of Portfolio Company Investment Type (1) Net Realized Gain (Loss) Net change in unrealized appreciation/ (depreciation) Interest & PIK Interest Dividends Fees Total Income (2) December 31, 2019, Fair Value Gross Additions (3) Gross Reductions (4) December 31, 2020, Fair Value (5) TalentSmart Holdings, LLC Senior Secured Loan $ — $ — $ 855 $ — $ 205 $ 1,060 $ 9,833 $ 167 $ (10,000) $ — Senior Secured Loan (Revolver) — — 42 — — 42 242 258 (500) — Common Equity (6) — (289) — — — 1,500 95 (289) 1,306 — (289) 897 — 205 1,102 11,575 520 (10,789) 1,306 TRS Services, Inc. Senior Secured Loan — (8) 81 — 7 88 14,623 9 (14,632) — Preferred Equity (Class AA units) — (2) 6 — — 6 547 6 (553) — Preferred Equity (Class A units) — 1,194 69 — — 69 3,095 1,194 (3,374) 915 Common Equity (6) — — — — — — — — — — — 1,184 156 — 7 163 18,265 1,209 (18,559) 915 TTG Healthcare, LLC Senior Secured Loan — 291 1,338 — 253 1,591 11,767 7,891 (128) 19,530 Preferred Equity (6) — 1,653 — — — — 2,424 1,653 — 4,077 — 1,944 1,338 — 253 1,591 14,191 9,544 (128) 23,607 Total Affiliate Investments — 12,633 8,054 450 465 8,969 135,679 37,598 (70,430) 102,846 Total Control and Affiliate Investments — $ 14,337 $ 9,271 $ 450 $ 531 $ 10,252 $ 144,396 $ 39,726 $ (70,463) $ 113,658 (1) Principal balance of debt investments and ownership detail for equity investments are shown in the consolidated schedule of investments. The Company's investments are generally classified as "restricted securities" as such term is defined under Regulation S-X Rule 6-03(f) or Securities Act Rule 144. (2) Represents the total amount of interest, fees or dividends included in 2020 income for the portion of the year ended December 31, 2020, that an investment was included in Control or Affiliate Investment categories, respectively. 168 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) (3) Gross additions include increases in cost basis resulting from a new portfolio investment, PIK interest, fees and dividends, accretion of OID, and net increases in unrealized net appreciation or decreases in net unrealized depreciation. (4) Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales, if any, and net decreases in net unrealized appreciation or net increases in net unrealized depreciation. (5) Fair value was determined using significant unobservable inputs. See Note 5 for further details. (6) Non-income producing. (7) Dividends credited to income include dividends contractually earned but not declared. 169 OFS Capital Corporation and Subsidiaries Notes to Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Note 12. Subsequent Events Not Disclosed Elsewhere On March 1, 2022, the Company’s Board declared a distribution of $0.28 per share for the first quarter of 2022, payable on March 31, 2022 to stockholders of record as of March 24, 2022. On February 28, 2022, SBIC I LP prepaid $19,000 of SBA debentures that were contractually due March 1, 2025 and September 1, 2025. 170 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.