What changed in this filing

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Item 1. Business

2025-03-04 compared with 2024-03-05 · 105 added, 78 removed, 710 unchanged (20% of the section changed)

17 unchanged sentences

We have made, and may continue to make, opportunistic investments in Structured Finance Securities and other non-qualifying assets (discussed below), consistent with our investment strategy.

As of December 31, 2023 and 2022, approximately 81% and 80%, respectively, of our investments were qualifying assets.

As of December 31, 2024 and 2023, approximately 80% and 81% of our investments were qualifying assets, respectively.

As of December 31, 2024, the fair value of our debt investment portfolio totaled $224.2 million in 36 portfolio companies, of which 85% and 15% were comprised of first lien loans and second lien loans, respectively.

As of December 31, 2024, the fair value of our equity investments totaled $108.6 million in 15 portfolio companies, and the fair value of our 18 Structured Finance Security investments totaled $76.9 million.

We execute on our investment strategy, in part, through OFSCC-FS, which established the BNP Facility on June 20, 2019, to provide borrowings of up to $150.0 million.

On June 24, 2022, we amended the BNP Facility to, among other things:

(i) extend the reinvestment period for three years from June 20, 2022 to June 20, 2025;

and (ii) extend the maturity date from June 20, 2024 to June 20, 2027.

On a stand-alone basis, OFSCC-FS held approximately $158.3 million and $173.7 million in assets as of December 31, 2023 and 2022, respectively, which accounted for approximately 34% and 33% of our consolidated total assets, respectively.

We execute on our investment strategy, in part, through OFSCC-FS, which established the BNP Facility on June 20, 2019.

The reinvestment period of the BNP Facility ends on June 20, 2025, at which time the ability to access the unused commitment of the facility terminates.

The facility is scheduled to mature on June 20, 2027.

On a stand-alone basis, OFSCC-FS held approximately $151.0 million and $158.3 million in total assets as of December 31, 2024 and 2023, respectively, which accounted for approximately 35% and 34% of our consolidated total assets, respectively.

We also execute our investment strategy, in part, by investing in Structured Finance Securities.

We believe OFS Advisor is uniquely positioned, given its expertise in structured credit and managing CLOs, to make opportunistic investments in Structured Finance Securities, through which we target attractive risk-adjusted returns.

During the years ended December 31, 2024 and 2023, we purchased $27.4 million and $7.6 million of Structured Finance Securities, respectively.

We historically have executed our investment strategy, in part, through SBIC I LP, a licensee under the SBA’s SBIC program.

As part of our continued plans to focus on providing first lien senior secured loans to larger borrowers, which we believe will improve our overall risk profile, SBIC I LP has been repaying its outstanding SBA debentures prior to their scheduled maturity dates.

On March 1, 2024, SBIC I LP fully repaid its outstanding SBA debentures totaling $31.9 million and requested the approval of the SBA to surrender its license to operate as a SBIC.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments.”

We historically have executed our investment strategy, in part, through SBIC I LP, a former licensee under the SBA’s SBIC program.

On March 1, 2024, SBIC I LP fully repaid its outstanding SBA debentures totaling $31.9 million, and, on April 17, 2024, surrendered its license to operate as a SBIC.

A BDC is generally not permitted to incur indebtedness unless, immediately after such borrowing, it has an asset coverage ratio for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets).

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

See “Item 1A.

Risk Factors—Risks Related to our Business and Structure—Because we received the approval of our Board, we became subject to 150% asset coverage effective May 3, 2019.” Additionally, effective November 26, 2013, we received exemptive relief from the SEC to exclude our SBA guaranteed debentures from the definition of senior securities in the statutory asset coverage ratio under the 1940 Act.

See “Part 1, Item 1A.

Risk Factors—Risks Related to our Business and Structure—Because we received the approval of our Board, we became subject to 150% asset coverage effective May 3, 2019.”

Consistent with our strategy to maintain a leveraged portfolio of credit investments, our total outstanding debt levels of $248.4 million and $302.4 million resulted in a statutory asset coverage ratio of 169% and 160% as of December 31, 2024 and December 31, 2023, respectively.

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Additionally, OFS Advisor provides advisory and sub-advisory services to various funds, including:

(i) CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust, and (ii) CIM Real Assets & Credit Fund, an externally managed registered investment company under the 1940 Act that operates as an interval fund and invests primarily in a combination of real estate, credit and related investments.

(i) CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust;

and (ii) CIM Real Assets & Credit Fund, an externally managed registered investment company under the 1940 Act that operates as an interval fund and invests primarily in a combination of real estate, credit and related investments.

See “ Item 1A.

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The Staffing Agreement also provides OFS Advisor with access to deal flow generated by OFS and its affiliates in the ordinary course of their businesses and commits the members of OFS Advisor’s investment committees to serve in that capacity.

Our investment activities are managed by OFS Advisor, our investment adviser.

Our investment activities are managed by OFS Advisor, an investment adviser that is registered with the SEC under the Advisers Act and a wholly owned subsidiary of OFSAM.

OFS Advisor is responsible for sourcing potential investments, conducting research and diligence on potential investments and equity sponsors, analyzing investment opportunities, structuring our investments, and monitoring our investments and portfolio companies on an ongoing basis.

As our investment adviser, OFS Advisor allocates investment opportunities among us and any other clients fairly and equitably over time in accordance with its allocation policy.

See “Regulation—Exemptive Relief.” OFS Advisor is a registered investment adviser under the Advisers Act and a wholly owned subsidiary of OFSAM.

See “Regulation—Exemptive Relief.”

Our relationship with OFS Advisor is governed by, and dependent on, the Investment Advisory Agreement and may be subject to conflicts of interest;

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Our Board is charged with protecting stockholders’ interests by monitoring how OFS Advisor addresses these and other conflicts of interest associated with its management services and compensation.

While our Board is not expected to review or approve each

borrowing or incurrence of leverage, our independent directors periodically review OFS Advisor’s services and fees as well as its portfolio management decisions and portfolio performance.

While our Board is not expected to review or approve each borrowing or incurrence of leverage, our independent directors periodically review OFS Advisor’s services and fees as well as its portfolio management decisions and portfolio performance.

OFS Advisor capitalizes on the deal origination and sourcing, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of OFS’s professionals.

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These managers have developed a broad network of contacts within the investment community, and possess an average of over 30 years of experience investing in debt and equity securities of middle-market companies.

In addition, these managers have extensive experience investing in assets that constitute our primary focus and have expertise in investing across all levels of the capital structure of middle-market companies.

In addition, these managers have extensive experience investing in

assets that constitute our primary focus and have expertise in investing across all levels of the capital structure of middle-market companies.

For further details, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments.

Competitive Strengths and Core Competencies

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We do not have any direct employees, and our day-to-day investment operations are managed by OFS Advisor.

We have a chief executive officer, chief financial officer, chief compliance officer, chief accounting officer, corporate secretary and, to the extent necessary, our Board may elect to appoint additional officers going forward.

Currently, we have a chief executive officer, chief financial officer, chief compliance officer, chief accounting officer, corporate secretary and, to the extent necessary, our Board may elect to appoint additional officers going forward.

Our officers are employees of OFSC, an affiliate of OFS Advisor, and a portion of the compensation paid to our officers is paid by us pursuant to the Administration Agreement.

All of our executive officers are also officers of OFS Advisor.

OFS Services, an affiliate of OFS Advisor, provides the administrative services necessary for us to operate.

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economy and often require substantial capital investments to grow.

Middle-market companies have historically constituted the bulk of OFS’s portfolio companies since its inception and constituted 64% of our portfolio at fair value as of December 31, 2023.

Middle-market companies have historically constituted the bulk of OFS’s portfolio

companies since its inception and constituted 67% of our portfolio at fair value as of December 31, 2024.

We believe that this market segment will continue to produce significant investment opportunities for us.

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middle-market companies.

For example, based on the experience of our management team, lending to private middle-market companies in the United States (a) is generally more labor-intensive than lending to larger companies due to the smaller size of each investment and the fragmented nature of information for such companies, (b) requires due diligence and underwriting practices consistent with the demands and economic limitations of the middle-market and (c) may also require more extensive ongoing monitoring by the lender.

For example, based on the experience of our management team, lending to private middle-market companies in the United States:

(a) is generally more labor-intensive than lending to larger companies due to the smaller size of each investment and the fragmented nature of information for such companies;

(b) requires due diligence and underwriting practices consistent with the demands and economic limitations of the middle-market;

and (c) may also require more extensive ongoing monitoring by the lender.

As a result, middle-market companies historically have been served by a limited segment of the lending community.

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It could have some financial/non-financial weaknesses which are offset by strengths;

however, the credit demonstrates an ample current cash flow from operations.

however, the credit

demonstrates an ample current cash flow from operations.

The trends and outlook for the portfolio company's operations, balance sheet, and industry are generally positive or neutral to somewhat negative.

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The Middle-Market Investment Committee, comprised of Richard Ressler (Chairman), Jeffrey A.

Cerny, Kyde Sharp and Bilal Rashid, is responsible for the evaluation and approval of all debt and equity investments made by us, including ultimate asset allocations to us.

Cerny (through March 31, 2025), Kyde Sharp and Bilal Rashid, is responsible for the evaluation and approval of all debt and equity investments made by us, including ultimate asset allocations to us.

The Broadly Syndicated Investment Committee, comprised of Messrs.

Ressler (Chairman), Rashid, Cerny, and Kenneth A.

Ressler (Chairman), Rashid, Cerny (through March 31, 2025), and Kenneth A.

Brown, assists with the review and evaluation of potential investments in Broadly Syndicated Loans made by us.

The Structured Credit Investment Committee, comprised of Messrs.

Ressler (Chairman), Rashid, Cerny, Brown, and Glen Ostrander, assists with the review and evaluation of potential investments in Structured Finance Security investments made by us.

Ressler (Chairman), Rashid, Cerny (through March 31, 2025), Brown, and Glen Ostrander, assists with the review and evaluation of potential investments in Structured Finance Security investments made by us.

The Pre-Allocation Investment Committee, comprised of Messrs.

Ressler (Chairman), Rashid, Cerny, Ostrander, Tod K.

Ressler (Chairman), Rashid, Cerny (through March 31, 2025), Ostrander, Tod K.

Reichert and Manish Rajguru, is responsible for determining whether a prospective investment is appropriate for allocation to one or more clients managed by registered investment advisor subsidiaries of OFSAM, including OFS Advisor, and the allocation of such investment among groups of advisory clients.

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The process employed by the Advisor Investment Committees is intended to bring the diverse experience and perspectives of the committees’ members to the investment process.

The Middle-Market Investment Committee serves to provide investment consistency and adherence to our core investment philosophy and policies.

The Middle-Market Investment Committee serves to

provide investment consistency and adherence to our core investment philosophy and policies.

The Middle-Market Investment Committee also determines appropriate investment sizing and implements ongoing monitoring requirements of our investments.

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Potential transactions and deal flows are also reviewed on a regular basis.

On January 28, 2025, Jeffrey A.

Cerny notified our Board of his intention to retire.

Cerny’s resignation as Chief Financial Officer and Treasurer is effective on March 31, 2025.

As of March 31, 2025, Mr.

Cerny will no longer be a member of the Middle-Market Investment Committee, Broadly Syndicated Investment Committee, Structure Credit Investment Committee, or Pre-Allocation Investment Committee.

For further details, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments.

We pursue an investment strategy focused primarily on investments in middle-market companies in the United States.

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Senior Secured First Lien Loans.

First lien senior secured loans comprise, and will continue to comprise, a significant portion of our investment portfolio.

First lien senior secured loans comprise, and are expected to continue to comprise, a significant portion of our investment portfolio.

We obtain security interests in the assets of these portfolio companies as collateral in support of the repayment of these loans (in certain cases, subject to a payment waterfall).

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The Agent may monitor the value of the collateral and, if the value of the collateral declines, may accelerate the Broadly Syndicated Loan, may give the borrower an opportunity to provide additional collateral or may seek other protection for the benefit of the participants in the Broadly Syndicated Loan.

The Agent and other loan investors may also pursue a “priming transaction”, where the Loan Agreement can be amended to the detriment of other lenders, in order to move collateral, or in order to facilitate capital outflow to other parties/subsidiaries in a capital structure, any of which may result in the loss of all or a significant part of such investment.

The Agent is compensated by the borrower for providing these services under a Loan Agreement, and such compensation may include special fees paid upon structuring and funding the Broadly Syndicated Loan and other fees paid on a continuing basis.

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We may structure such warrants to include provisions protecting our rights as a minority-interest holder, as well as a put to sell such securities back to the issuer, upon the occurrence of specified events.

many cases, we may also seek to obtain registration rights in connection with these equity interests, which may include demand and “piggyback” registration rights.

In many cases, we may also seek to obtain registration rights in connection with these equity interests, which may include demand and “piggyback” registration rights.

These securities are categorized as Warrants in our consolidated schedules of investments included in “Part II, Item 8.

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Investment Advisory Agreement

OFS Advisor is registered as an investment adviser under the Advisers Act and a wholly owned subsidiary of OFSAM.

OFS Advisor is registered with the SEC as an investment adviser under the Advisers Act and is a wholly owned subsidiary of OFSAM.

Pursuant to the Investment Advisory Agreement with and subject to the overall supervision of our Board and in accordance with the 1940 Act, OFS Advisor provides investment advisory services to us.

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OFS Advisor most recently renewed the agreement to reduce its base management fee for the 2025 calendar year on January 8, 2025.

During the years ended December 31, 2024, 2023 and 2022, this resulted in a reduction to our base management fee of $1.1 million, $1.2 million and $1.4 million, respectively.

The incentive fee has two parts.

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“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 we receive 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 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 original issue discount, or “OID”, debt instruments with PIK interest, equity investments with accruing or PIK dividend, and zero coupon securities), accrued income that we have not yet received in cash.

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 we have not yet received in cash.

Pre-incentive fee net investment income does not include any realized gains, realized losses, unrealized capital appreciation or unrealized capital depreciation.

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The Capital Gains Fee for any partial year is prorated based on the number of days in such year.

Expenses recognized under the Investment Advisory Agreement with OFS Advisor for the years ended December 31, 2023, 2022 and 2021, are presented below:

Expenses recognized under the Investment Advisory Agreement with OFS Advisor for the years ended December 31, 2024, 2023 and 2022, are presented below (dollar amounts in thousands):

Year Ended December 31,

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Capital Gains Fee (1)

— (1,916) 1,916

(1) In accordance with GAAP, we are required to include aggregate unrealized appreciation on investments in the calculation and accrue a Capital Gains Fee on a quarterly basis as if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment

Advisory Agreement.

As of December 31, 2021, the cumulative Capital Gains Fee accrued by the Company was $1.9 million due to net unrealized appreciation in excess of cumulative net realized capital losses, none of which was payable as a Capital Gains Fee pursuant to the Investment Advisory Agreement.

(1) During the year ended December 31, 2022, we reversed the previously accrued $1.9 million Capital Gains Fee due to a reduction in net unrealized appreciation on the investment portfolio.

As of December 31, 2023, no accrual of a Capital Gains Fee was required as cumulative net realized capital losses exceeded net unrealized appreciation.

Any payment due under the terms of the current Investment Advisory Agreement is based on the calculation at the end of each calendar year or upon termination of the Investment Advisory Agreement.

Examples of Incentive Fee Calculation

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We bear all other out-of-pocket costs and expenses of our operations and transactions including the allocable portion of compensation and overhead of personnel of OFS Services.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

Duration and Termination

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See “ Item 1A.

Risk Factors—Risks Related to our Business and Structure—We are dependent upon the OFSC senior professionals for our future success and upon their access to the investment professionals and partners of OFSC and its affiliates.

Administration Agreement

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To the extent that OFS Services outsources any of its functions, we pay the fees associated with such functions at cost without incremental profit to OFS Services.

Expenses recognized under the Administration Agreement with OFS Services for the years ended December 31, 2023, 2022 and 2021, are presented below:

Expenses recognized under the Administration Agreement with OFS Services for the years ended December 31, 2024, 2023 and 2022, are presented below (dollar amounts in thousands):

Year Ended December 31,

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Indemnification

The Investment Advisory Agreement and the Administration Agreement both provide that OFS Advisor, OFS Services and their affiliates’ respective officers, directors, members, managers, partners, stockholders and employees are entitled to indemnification from us from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement or the Administration Agreement, except where attributable to willful misfeasance, bad faith or gross negligence in the performance of such person’s duties or reckless disregard of such person’s obligations and duties under the Investment Advisory Agreement or the Administration Agreement.

The Investment Advisory Agreement and the Administration Agreement both provide that OFS Advisor, OFS Services and their affiliates’ respective directors, officers, employees, members, managers, partners and stockholders are entitled to indemnification from us from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement or the Administration Agreement, except where attributable to willful misfeasance, bad faith or gross negligence in the performance of such person’s duties or reckless disregard of such person’s obligations and duties under the Investment Advisory Agreement or the Administration Agreement.

Board Approval of the Investment Advisory and Administrative Agreements

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We generally cannot issue and sell our common stock at a price below net asset value per share.

We may, however, issue and sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV of our common stock if (1) our Board determines that such sale is in our best interests and the best interests of our stockholders, and (2) our stockholders have approved our policy and practice of making such sales within the preceding 12 months.

We may, however, issue and sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV of our common stock if:

(1) our Board determines that such sale is in our best interests and the best interests of our stockholders;

and (2) our stockholders have approved our policy and practice of making such sales within the preceding 12 months.

In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board, closely approximates the market value of such securities.

On July 19, 2023, our stockholders approved a proposal to authorize us, with approval of our Board, to sell or otherwise issue shares of our common stock (during a twelve-month period) at a price below our then-current NAV per share in one or more offerings, subject to certain limitations (including that the cumulative number of shares sold pursuant to such authority does not exceed 25% of our then outstanding common stock immediately prior to each such sale).

On June 26, 2024, our stockholders approved a proposal to authorize us, with approval of our Board, to sell or otherwise issue shares of our common stock (during a twelve-month period) at a price below our then-current NAV per share in one or more offerings, subject to certain limitations (including that the cumulative number of shares sold pursuant to such authority does not exceed 25% of our then outstanding common stock immediately prior to each such sale).

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so.

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(1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned;

and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

In addition, we may file an application for an amendment to our existing Order to permit us to participate in follow-on investments in our existing portfolio companies with private funds that do not hold any investments in such existing portfolio companies.

(2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies;

(3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing;

and (4) the proposed investment by us would not benefit OFS Advisor, the other Affiliated Funds that are participating in the investment, or any affiliated person of any of them (other than parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.

In addition, we may file an application for an amendment to our existing Order to permit us to co-invest in our existing portfolio companies with certain affiliates that are private funds even if such other funds had not previously invested in such existing portfolio companies, subject to certain conditions.

However, if filed, there is no guarantee that such application will be granted.

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government or its agencies.

A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an

agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate.

A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate.

Consequently, repurchase agreements are functionally similar to loans.

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Under the 1940 Act, a BDC is subject to restrictions on the amount of warrants, options, restricted stock or rights to purchase shares of capital stock that it may have outstanding at any time.

Under the 1940 Act, we may generally only offer warrants provided that (i) the warrants expire by their terms within ten years, (ii) the exercise or conversion price is not less than the current market value at the date of issuance, (iii) our stockholders authorize the proposal to issue such warrants, and our Board approves such issuance on the basis that the issuance is in the best interests of OFS Capital and its stockholders and (iv) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed.

Under the 1940 Act, we may generally only offer warrants provided that:

(i) the warrants expire by their terms within ten years;

(ii) the exercise or conversion price is not less than the current market value at the date of issuance;

(iii) our stockholders authorize the proposal to issue such warrants, and our Board approves such issuance on the basis that the issuance is in the best interests of OFS Capital and its stockholders;

and (iv) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed.

The 1940 Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants, as well as options and rights, at the time of issuance may not exceed 25% of our outstanding voting securities.

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Specifically, Section 61(a)(2) provides that in order for a BDC whose common stock is traded on a national securities exchange to be subject to 150% asset coverage, the BDC must either obtain:

(i) approval of the required majority of its non-interested directors who have no financial interest in the proposal, which would become effective one year after the date of such approval, or (ii) obtain stockholder approval (of more than 50% of the votes cast for the proposal at a meeting in which quorum is present), which would become effective on the first day after the date of such stockholder approval.

(i) approval of the required majority of its non-interested directors who have no financial interest in the proposal, which would become effective one year after the date of such approval;

or (ii) obtain stockholder approval (of more than 50% of the votes cast for the proposal at a meeting in which quorum is present), which would become effective on the first day after the date of such stockholder approval.

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

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

See “Item 1A.

See “Part 1, Item 1A.

Risk Factors—Risks Related to our Business and Structure—Because we received the approval of our Board, we became subject to 150% asset coverage effective May 3, 2019.”

We may borrow money when the terms and conditions available are favorable to do so and are aligned with our investment strategy and portfolio composition.

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Compliance with the Sarbanes-Oxley Act of 2002 and the Nasdaq Global Select Market Corporate Governance Regulations

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) imposes a wide variety of regulatory requirements on publicly held companies and their insiders, many of which affect us.

The Sarbanes-Oxley Act has required us to review our policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder.

The Sarbanes-Oxley Act imposes a wide variety of regulatory requirements on publicly held companies and their insiders, many of which affect us.

The Sarbanes-Oxley Act has required us to review our policies and procedures to determine

whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder.

We will continue to monitor, and take actions necessary to ensure, our compliance with all future regulations that are adopted under the Sarbanes-Oxley Act.

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On August 4, 2020, we received our existing Order, which superseded a previous order that we received on October 12, 2016, and provides us with greater flexibility to enter into co-investment transactions with certain Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions.

We are generally permitted to co-invest with Affiliated Funds if under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

In addition, we may file an application for an amendment to our existing Order to permit us to participate in follow-on investments in our existing portfolio companies with certain private funds that do not hold any investments even if such other funds had not previously invested in such existing portfolio companies.

(1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned;

(2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies;

(3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing;

In addition, we may file an application for an amendment to our existing Order to co-invest in our existing portfolio companies with certain affiliates that are private funds even if such other funds had not previously invested in such existing portfolio companies, subject to certain conditions.

However, if filed, there is no guarantee that such application will be granted.

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Small Business Investment Company Regulations

On March 1, 2024, SBIC I LP fully repaid its outstanding SBA debentures totaling $31.9 million and requested the approval of the SBA to surrender its license to operate as a SBIC.

See “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments ” .

SBIC I LP was limited in its ability to make distributions to us if it did not have sufficient accumulated net profit, in accordance with SBA regulations.

Income distributions from SBIC I LP are limited to a statutory measurement of “retained earnings available for distribution” (“READ”) which generally is measured by adjusting undistributed net realized earnings for unrealized depreciation on investments, calculated in accordance with SBA regulations.

Additionally, return of capital distributions from SBIC I LP required the pre-approval of the SBA.

During the year ended December 31, 2023, SBIC I LP distributed READ and return of capital distributions to us of $4.5 million and $2.5 million, respectively.

On March 1, 2024, SBIC I LP fully repaid its outstanding SBA debentures totaling $31.9 million, and, on April 17, 2024, surrendered its license to operate as a SBIC.

Prior to surrendering our SBIC license on April 17, 2024, our use of cash held by SBIC I LP was restricted by SBA regulations, including limitations on the amount of cash SBIC I LP could distribute to us.

We are subject to periodic examination by the SEC for compliance with the Exchange Act and the 1940 Act.

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We make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We make our website

content available for informational purposes only.

We make our website content available for informational purposes only.

It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K.

35 unchanged sentences

Generally, we do not receive any nonpublic personal information relating to our stockholders, although certain nonpublic personal information of our stockholders may become available to us.

We do not disclose any nonpublic personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third-party administrator).

We do not disclose any nonpublic personal

information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third-party administrator).

We restrict access to nonpublic personal information about our stockholders to employees of OFS Advisor and its affiliates with a legitimate business need for the information.

27 unchanged sentences

federal excise tax on the retained amounts.

For the years ended December 31, 2023, 2022 and 2021, we accrued U.S.

federal excise taxes of $0, $0.1 million and $0, respectively.

For the years ended December 31, 2024, 2023 and 2022, we recognized U.S.

federal excise tax expense of $(0.1) million, $0.0 million and $0.1 million, respectively.

In order to maintain our qualification as a RIC for U.S.

9 unchanged sentences

We are required to recognize ICTI in circumstances in which we have not received a corresponding payment in cash.

For example, we hold debt obligations that are treated under applicable tax rules as issued with OID and debt instruments with PIK interest, and we must include in ICTI each year the portion of the OID and PIK interest that accrues for that year (as it accrues over the life of the obligation), irrespective of whether the cash representing such income is received by us in that taxable year.

accrues over the life of the obligation), irrespective of whether the cash representing such income is received by us in that taxable year.

The continued recognition of non-cash ICTI may cause difficulty in meeting the Annual Distribution Requirement.

10 unchanged sentences

Certain of our investment practices may be subject to special and complex U.S.

federal income tax provisions that may, among other things, (1) treat dividends that would otherwise qualify for the dividends received deduction or constitute qualified dividend income as ineligible for such treatment, (2) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (3) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (5) cause us to recognize income or gain without receipt of a corresponding distribution of cash, (6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (7) adversely alter the characterization of certain complex financial transactions and (8) produce income that will not be considered “qualifying income” for purposes of the 90% Income Test.

federal income tax provisions that may, among other things:

(1) treat dividends that would otherwise qualify for the dividends received deduction or constitute qualified dividend income as ineligible for such treatment;

(2) disallow, suspend or otherwise limit the allowance of certain losses or deductions;

(3) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income;

(4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited);

(5) cause us to recognize income or gain without receipt of a corresponding distribution of cash;

(6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur;

(7) adversely alter the characterization of certain complex financial transactions;

and (8) produce income that will not be considered “qualifying income” for purposes of the 90% Income Test.

We will monitor our transactions and may make certain tax elections to mitigate the potential adverse effect of these provisions, but there can be no assurance that any adverse effects of these provisions will be mitigated.

13 unchanged sentences

OFSCC-MB, our taxable C-corporation subsidiary, held equity investments with an aggregate fair value of $4.6 million and $2.8 million as of December 31, 2024 and 2023, respectively, to prevent such non-qualifying income from adversely affecting our RIC status.

During the years ended December 31, 2023, 2022 and 2021, OFSCC-MB incurred $0.1 million, $0.2 million and $0, respectively, of federal and state income taxes on its earnings and profits.

During the years ended December 31, 2024, 2023 and 2022, OFSCC-MB incurred $0, $0.1 million and $0.2 million, respectively, of federal and state income taxes on its earnings and profits.

Failure to Qualify as a RIC.

6 unchanged sentences

To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our stockholders our earnings and profits attributable to non-RIC years.

In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of five years, in order to qualify as a RIC in a subsequent year.

In addition, if we failed to qualify as a RIC for a period greater than two taxable years,

then we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of five years, in order to qualify as a RIC in a subsequent year.

Conflicts of Interests

24 unchanged sentences

These variations in timing may be detrimental to us.

issuers or borrowers within the same overall capital structure) and, as such, there may be a degree of variation and potential inconsistencies, in the manner in which potential or actual conflicts are addressed.

The application of our or an Affiliated Account's governing documents and the policies and procedures of OFS Advisor are expected to vary based on the particular facts and circumstances surrounding each investment by two or more accounts, in particular when those accounts are in different classes of an issuer’s capital structure (as well as across multiple issuers or borrowers within the same overall capital structure) and, as such, there may be a degree of variation and potential inconsistencies, in the manner in which potential or actual conflicts are addressed.

Co-Investment with Affiliates.

2 unchanged sentences

and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

(2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies;

(3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing;

However, if filed, there is no guarantee that such application will be granted.

16 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business