Oxford Square Capital Corp. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10 -Q contains forward -looking statements that involve substantial risks and uncertainties. These forward -looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Oxford Square Capital Corp., our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward -looking statements. The forward -looking statements contained in this Quarterly Report on Form 10 -Q involve risks and uncertainties, including statements as to: • our future operating results, including our ability to achieve objectives; • our business prospects and the prospects of our portfolio companies; • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • the ability of our portfolio companies to achieve their objectives; • the valuation of our investments in portfolio companies and CLOs, particularly those having no liquid trading market; • market conditions and our ability to access alternative debt markets and additional debt and equity capital; • our expected financings and investments; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies and CLO investments; and • the ability of our investment adviser to locate suitable investments for us and monitor and administer our investments. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward -looking statements, including without limitation: • an economic downturn could impair our portfolio companies’ and CLO investments’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies and CLO investments; • a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities; • interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; • inflation and its impact on our investment activities and the industries in which we invest; • currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; 44 Table of Contents • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions and cybersecurity attacks; and • the risks, uncertainties and other factors we identify in Item 1A. — Risk Factors contained in our Annual Report on Form 10 -K for the year ended December 31, 2024, elsewhere in this Quarterly Report on Form 10 -Q and in our other filings with the SEC. Although we believe that the assumptions on which these forward -looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward -looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward -looking statement in this Quarterly Report on Form 10 -Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in Item 1A. — Risk Factors contained in our Annual Report on Form 10 -K for the year ended December 31, 2024, and elsewhere in this Quarterly Report on Form 10 -Q . You should not place undue reliance on these forward -looking statements, which apply only as of the date of this Quarterly Report on Form 10 -Q . Because we are an investment company, the forward -looking statements and projections contained in this quarterly report are excluded from the safe harbor protections provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995). Except where the context requires otherwise, the terms “OXSQ,” “Company,” “we,” “us” and “our” refer to Oxford Square Capital Corp.; “Oxford Square Management” refers to Oxford Square Management, LLC; and “Oxford Funds” refers to Oxford Funds, LLC. The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10 -Q . OVERVIEW Our investment objective is to maximize our portfolio’s total return. Our primary focus is to seek an attractive risk -adjusted total return by investing primarily in corporate debt securities and, to a lesser extent, in collateralized loan obligations (“CLO”), which are structured finance investments that own corporate debt securities. CLO investments may also include warehouse facilities, which are early -stage CLO vehicles intended to aggregate loans that may be used to form the basis of a traditional CLO vehicle. We operate as a closed -end management investment company and have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We have elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Our investment activities are managed by Oxford Square Management, LLC (“Oxford Square Management”), a registered investment adviser under the Investment Advisers Act of 1940, as amended. Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member, and a related party, Charles M. Royce, a member of our Board of Directors (“Board”) who holds a minority, non -controlling interest in Oxford Square Management. Jonathan H. Cohen, our Chief Executive Officer, and Saul B. Rosenthal, our President, are the controlling members of Oxford Funds. Under an investment advisory agreement (the “Investment Advisory Agreement”), we have agreed to pay Oxford Square Management an annual base management fee calculated on gross assets, and an incentive fee based upon our performance. Under an amended and restated administration agreement (the “Administration Agreement”), we have agreed to pay or reimburse Oxford Funds, as administrator, for certain expenses incurred in operating the Company. Our executive officers and directors, and the executive officers of Oxford Square Management and Oxford Funds, serve or may serve as officers and directors of entities that operate in a line of business similar to our own. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. We generally expect to invest between $5 million and $50 million in each of our portfolio companies, although this investment size may vary proportionately as the size of our capital base changes and market conditions warrant. We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of March 31, 2025, our debt investments had stated interest rates of between 7.07% and 12.87% and maturity dates of between 0 and 83 months. In addition, our total portfolio had a weighted average annualized yield on debt investments of approximately 14.31% as of March 31, 2025. 45 Table of Contents The weighted average annualized yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our fees and expenses. The weighted average annualized yield was computed using the effective interest rates as of March 31, 2025, including accretion of original issue discount (“OID”) and excluding any debt investments on non -accrual status. There can be no assurance that the weighted average annualized yield will remain at its current level. We have borrowed funds to make investments and may continue to borrow funds to make investments. As a result, we are exposed to the risks of leverage, which may be considered a speculative investment technique. Borrowings, also known as leverage, magnify the potential for gain and loss on amounts invested and therefore increase the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fees payable to Oxford Square Management, will be borne by our common stockholders. In addition, as a BDC under the 1940 Act, we are required to make available significant managerial assistance, for which we may receive fees, to our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. These fees would be generally non -recurring , however in some instances they may have a recurring component. We have received no fee income for managerial assistance to date. To the extent possible, we will generally seek to invest in loans that are collateralized by a security interest in the borrower’s assets or guaranteed by a principal to the transaction. Interest payments, if not deferred, are normally payable quarterly with most debt investments having scheduled principal payments on a monthly or quarterly basis. When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock. During the three months ended March 31, 2025, U.S. loan market performance weakened versus the prior quarter. U.S. loan prices, as defined by the Morningstar/LSTA US Leveraged Loan Index, decreased from 97.33% of par as of December 31, 2024 to 96.31% of par as of March 31, 2025. As of March 31, 2025, the Company’s Board of Directors approved the fair value of the Company’s investment portfolio of approximately $243.2 million in good faith in accordance with the Company’s valuation procedures. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) revenues and expenses during the periods reported. Our critical accounting estimates, including those relating to the valuation of our investment portfolio, are described below. Actual results could materially differ from those estimates. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in Item 1A. — Risk Factors contained in our Annual Report on Form 10 -K for the year ended December 31, 2024. See “Note 3. Summary of Significant Accounting Policies” to our financial statements for the three months ended March 31, 2025 for more information on our critical accounting policies. Investment Valuation Our Board of Directors determines the fair value of our investment portfolio in accordance with the provisions of ASC 820, Fair Value Measurement and Disclosure (“ASC 820”) and Rule 2a -5 under the 1940 Act. Estimates made in the preparation of our financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We believe that there is no single definitive method for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. ASC 820 clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. 46 Table of Contents ASC 820 defines fair value 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. ASC 820 also establishes a three -tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: • Level 1, defined as observable inputs such as quoted prices in active markets; • Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and • Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. We consider the attributes of current market conditions on an on -going basis and have determined that due to the general illiquidity of the market for our investment portfolio, whereby little or no market data exists, substantially all of our fair valued investments are measured based upon Level 3 inputs as of March 31, 2025 and December 31, 2024. Our Board of Directors determines the value of our investment portfolio each quarter. In connection with that determination, members of Oxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. We may also engage a third -party valuation firm to provide assistance in valuing certain of our syndicated loans and bilateral investments, including related equity investments, although our Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statements of operations as net change in unrealized appreciation/depreciation. Our corporate loan portfolio investments are valued using several valuation processes. The quantitative inputs and data points that determine which method to utilize to value any given investment include, but are not limited to: • Bid/offer prices; • Depth, which is defined as the number of securities firms that make a market in a respective corporate syndicated loan and contribute data on the corporate syndicated loan to market data providers; • Liquidity score, which is a metric to help market participants ascertain their ability to exit a position within a given time frame and near a prevailing indicative price, which provides a benchmark of liquidity risk; • Financial performance of the underlying portfolio company; • Recent business developments; • Covenant compliance; and • Recent transactions. In instances where secondary market data is limited, we may engage a third -party valuation firm to independently determine an estimate of fair value. Currently, we have a single company valued via a third -party valuation firm. This valuation method employs a waterfall method whereby the enterprise value (“EV”) of the company is estimated based on company financial performance inputs, such as EBITDA, and publicly traded comparable company multiples. The EV is then attributed to each debt tranche, preferred equity tranche, and common equity, in order of seniority, to arrive at a valuation for our holdings. Generally speaking, as estimated EV increases, the fair value of our investments will also increase. As market multiples and EBITDA increase, estimated EV will also increase. In valuing our CLO debt and equity investments, we consider the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period -end , as well as the indicative prices provided by brokers who arrange transactions in such investment vehicles. We also consider those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require 47 Table of Contents a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids -wanted-in-competition . In addition, we consider the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. We calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. Oxford Square Management or its Valuation Committee may request an additional analysis by a third -party firm to assist in the valuation process of CLO investment vehicles. All information is presented to our Board for its determination of fair value of these investments. Recently Issued Accounting Standards See “Note 3. Summary of Significant Accounting Policies” to our financial statements for a description of recent accounting pronouncements, including the impact on our financial statements. PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY The total fair value of our investment portfolio was approximately $243.2 million and $260.9 million as of March 31, 2025, and December 31, 2024, respectively. The decrease in the value of investments during the three month period ended March 31, 2025, was due primarily to debt repayments of approximately $8.7 million, sales of investments of approximately $10.7 million, net realized losses of approximately $12.2 million, and net unrealized depreciation on our investment portfolio of approximately $2.1 million (which incorporates reductions to CLO equity cost value of $1.7 million), which were partially offset by investment acquisitions of approximately $16.0 million. A reconciliation of the investment portfolio for the three months ended March 31, 2025 and the year ended December 31, 2024 follows: ($ in millions) Three Months Ended March 31, 2025 Year Ended December 31, 2024 Beginning investment portfolio $ 260.9 $ 266.9 Portfolio investments acquired 16.0 112.2 Debt repayments (8.7 ) (75.0 ) Sales of securities (10.7 ) (11.8 ) Reductions to CLO equity cost value (1) (1.7 ) (13.0 ) Accretion of discounts on investments 0.9 1.7 PIK income 0.8 0.5 Net change in unrealized (depreciation)/appreciation on investments (2.1 ) 75.7 Net realized losses on investments (12.2 ) (96.2 ) Ending investment portfolio (2) $ 243.2 $ 260.9 ____________ (1) For the three months ended March 31, 2025, the reductions to CLO equity cost value of approximately $1.7 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $5.7 million, plus the amortization of cost on our CLO fee notes of approximately $6,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $4.0 million. For the year ended December 31, 2024, the reductions to CLO equity cost value of approximately $13.0 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $28.4 million, plus the amortization of cost on our CLO fee notes of approximately $71,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $15.4 million. (2) Totals may not sum due to rounding. 48 Table of Contents During the three months ended March 31, 2025 we purchased approximately $16.0 million in portfolio investments, all of which represented investments in new portfolio companies. During the year ended December 31, 2024, we purchased approximately $112.2 million in portfolio investments, including additional investments of approximately $31.0 million in existing portfolio companies and approximately $81.2 million in new portfolio companies. In certain instances, we receive investment proceeds based on the scheduled amortization of the outstanding loan balances and from the sales of portfolio investments. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. For the three months ended March 31, 2025, we recognized proceeds from the sales of securities of approximately $10.7 million. For the year ended December 31, 2024, we recognized proceeds from the sales of securities of approximately $11.8 million. Also, during the three months ended March 31, 2025 and the year ended December 31, 2024, we had loan principal repayments of approximately $8.7 million and $75.0 million, respectively. As of March 31, 2025, we had investments in debt securities of, or loans to, 20 portfolio companies, with a fair value of approximately $147.3 million, CLO equity investments of approximately $91.3 million, and equity and other investments of approximately $4.5 million. As of December 31, 2024, we had investments in debt securities of, or loans to, 21 portfolio companies, with a fair value of approximately $150.7 million, CLO equity investments of approximately $104.6 million, and equity and other investments of approximately $5.6 million. The following table indicates the quarterly portfolio investment activity for the past five quarters: Three Months Ended ($ in millions) Purchases of Investments Debt Repayments Sales of Investments Reductions to CLO Equity Cost Value (1) March 31, 2025 $ 16.0 $ 8.7 $ 10.7 $ 1.7 Total 2025 to date $ 16.0 $ 8.7 $ 10.7 $ 1.7 December 31, 2024 $ 25.1 $ 15.0 $ 7.0 $ 3.3 September 30, 2024 47.7 27.9 — 2.5 June 30, 2024 27.3 14.3 3.4 6.3 March 31, 2024 12.1 17.9 1.4 0.8 Total (2) $ 112.2 $ 75.0 $ 11.8 $ 13.0 ____________ (1) Reductions to CLO equity cost value represent the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes, plus the amortization of cost of our CLO fee notes, less the effective yield interest income recognized on our CLO equity subordinated and income notes. (2) Totals may not sum due to rounding. The following table shows the fair value of our portfolio of investments by asset class as of March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 ($ in millions) Investments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio Senior Secured Notes $ 147.3 60.6 % $ 150.7 57.8 % CLO Equity 91.3 37.5 % 104.6 40.1 % Equity and Other Investments 4.5 1.9 % 5.6 2.1 % Total (1) $ 243.2 100.0 % $ 260.9 100.0 % ____________ (1) Totals may not sum due to rounding. Qualifying assets must represent at least 70.0% of the Company’s total assets at the time of acquisition of any additional non -qualifying assets. As of March 31, 2025 and December 31, 2024, we held qualifying assets that represented 67.1% and 63.8%, respectively, of the total assets. No additional non -qualifying assets were acquired during the periods when qualifying assets were less than 70.0% of the total assets. 49 Table of Contents The following table shows our portfolio of investments by industry at fair value, as of March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 Investments at Fair Value Percentage of Fair Value Investments at Fair Value Percentage of Fair Value ($ in millions) ($ in millions) Structured Finance (1) $ 91.3 37.5 % $ 104.6 40.2 % Software 43.4 17.9 % 42.0 16.1 % Business Services 42.8 17.6 % 45.5 17.4 % Industrials 21.8 9.0 % 16.0 6.1 % Healthcare 17.5 7.2 % 18.9 7.2 % Food and Beverage 9.8 4.0 % 10.0 3.8 % Telecommunication Services 6.7 2.8 % 7.2 2.8 % Materials 5.9 2.4 % 6.0 2.3 % IT Consulting 3.9 1.6 % 4.6 1.8 % Aerospace and Defense — 0.0 % 6.0 2.3 % Total (2) $ 243.2 100.0 % $ 260.9 100.0 % ____________ (1) Reflects our equity investments in CLOs as of March 31, 2025, and December 31, 2024, respectively. (2) Totals may not sum due to rounding. PORTFOLIO GRADING We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of March 31, 2025 and December 31, 2024, our portfolio had a weighted average grade of 2.2 and 2.3, respectively, based upon the fair value of the debt investments in the portfolio. Equity securities and investments in CLOs are not graded. As of March 31, 2025 and December 31, 2024, our debt investment portfolio was graded as follows: ($ in millions) March 31, 2025 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 125.8 68.9 % 119.9 81.4 % 3 Closer monitoring is required. Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 56.8 31.1 % 27.4 18.6 % 4 A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. — — % — — % 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status. — — % — — % Total (1) $ 182.5 100.0 % $ 147.3 100.0 % ____________ (1) Totals may not sum due to rounding. 50 Table of Contents ($ in millions) December 31, 2024 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — —% $ — —% 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 117.5 58.2% 112.2 74.5% 3 Closer monitoring is required. Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 82.0 40.6% 38.0 25.2% 4 A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non -accrual status. Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. — —% — —% 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non -accrual status 2.5 1.2% 0.5 0.3% Total $ 202.0 100.0% $ 150.7 100.0% A portion of our investments are, and will continue to be, in the grades 3, 4 or 5 categories from time to time, and, as such, we are required to work with troubled portfolio companies to improve their business and protect our investment. The number and amount of investments included in grades 3, 4 or 5 may fluctuate from period to period. RESULTS OF OPERATIONS Set forth below is a comparison of our results of operations for the three months ended March 31, 2025 to the three months ended March 31, 2024. Investment Income Investment income for the three months ended March 31, 2025 and March 31, 2024 was approximately $10.2 million and $10.7 million, respectively. The following tables set forth the components of investment income for the three months ended March 31, 2025 and March 31, 2024: Three Months Ended March 31, 2025 Three Months Ended March 31, 2024 Interest Income Stated interest income $ 3,960,281 $ 6,128,457 PIK interest income (1) 708,351 13,572 Original issue discount and market discount income 870,249 302,275 Discount income derived from unscheduled remittances at par (4,126 ) (23,257 ) Total interest income $ 5,534,755 $ 6,421,047 Income from securitization vehicles and investments $ 3,956,053 $ 3,932,374 Other income Fee letters 145,678 131,988 Money market fund income and all other fees (2) 524,564 192,015 Total other income $ 670,242 $ 324,003 Total investment income $ 10,161,050 $ 10,677,424 ____________ (1) Change in prior period was made to conform to the current period presentation. (2) For the three months ended March 31, 2025, the Company earned approximately $131,000 of PIK fees. 51 Table of Contents The decrease in total investment income for the three months ended March 31, 2025 was primarily due to a decrease in interest income for the three months ended March 31, 2025. The total principal value of income producing debt investments as of March 31, 2025 and March 31, 2024 was approximately $182.5 million and $218.2 million, respectively. As of March 31, 2025, our debt investments had a range of stated interest rates of 7.07% and 12.87% and maturity dates of between 0 and 83 months compared to a range of stated interest rates of 9.19% and 15.33% and maturity dates of between 0 and 82 months as of March 31, 2024. In addition, our total debt portfolio had a weighted average yield on debt investments of approximately 14.31% as of March 31, 2025, compared to approximately 13.94% as of March 31, 2024. As of March 31, 2025, we had no debt investments on non -accrual status. As of March 31, 2024, six debt investments in three portfolio companies were on non -accrual status with a fair value of approximately $2.0 million and total principal value of approximately $63.8 million. Income from securitization vehicles for the three months ended March 31, 2025 and March 31, 2024, was approximately $4.0 million and $3.9 million, respectively. The total principal outstanding on our investments in CLOs as of March 31, 2025 and March 31, 2024, was approximately $336.2 million and $314.7 million, respectively. The weighted average yield on CLO equity investments as of March 31, 2025 and March 31, 2024, was approximately 9.0% and 9.5%, respectively. Operating Expenses Total expenses, including taxes, for both of the three months ended March 31, 2025 and 2024, were approximately $4.1 million. These amounts consisted of base management fees, interest expense, professional fees, compensation expense, general and administrative expenses, excise tax, and incentive fees. The base management fee for the three months ended March 31, 2025 was approximately $1.1 million compared with $1.0 million for the three months ended March 31, 2024. That increase for the three months ended March 31, 2025 was due largely to an increase in the weighted average gross assets. There was no net investment income incentive fee for the three months ended March 31, 2025 and 2024. Interest expense for the three months ended March 31, 2025, was approximately $2.0 million, which primarily relates to our 5.50% unsecured notes due 2028 (the “5.50% Unsecured Notes”) and 6.25% unsecured notes due 2026 (the “6.25% Unsecured Notes”). Interest expense for the three months ended March 31, 2024, was approximately $2.0 million, which primarily relates to our 5.50% Unsecured Notes and 6.25% Unsecured Notes. Professional fees, consisting of legal, consulting, valuation, audit and tax fees, were approximately $323,000 for the three months ended March 31, 2025, compared to approximately $312,000 for the three months ended March 31, 2024. That increase for the three months ended March 31, 2025 was primarily due to higher legal fees, partially offset by lower consulting fees. Compensation expense was approximately $240,000 for the three months ended March 31, 2025, compared to approximately $207,000 for the three months ended March 31, 2024. Compensation expense reflects the allocation of compensation expenses for the services of our Chief Financial Officer, accounting personnel, and other administrative support staff. General and administrative expenses, consisting primarily of directors’ fees, insurance, listing fees, transfer agent and custodian fees, office supplies, facilities costs and other expenses, was approximately $355,000 for the three months ended March 31, 2025, compared to approximately $347,000 for the three months ended March 31, 2024. Office supplies, facilities costs and other expenses are allocated to us under the terms of the Administration Agreement. Excise tax was approximately $121,000 for the three months ended March 31, 2025, compared to approximately $326,000 for the three months ended March 31, 2024. Incentive Fees There was no net investment income incentive fee (“Net Investment Income Incentive Fee”) recorded for the three months ended March 31, 2025 and 2024. The Net Investment Income Incentive Fee is calculated and payable quarterly in arrears based on the amount by which (x) the “Pre -Incentive Fee Net Investment Income” for the 52 Table of Contents immediately preceding calendar quarter exceeds (y) the “Preferred Return Amount” for the calendar quarter. For this purpose, “Pre -Incentive Fee Net Investment Income” means interest income, dividend income and any other income accrued during the calendar quarter minus our operating expenses for the quarter (including the Base Fee, expenses payable under the Administration Agreement with Oxford Funds, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Refer to “Note 7. Related Party Transactions” in the notes to our financial statements. The expense attributable to the capital gains incentive fee (the “Capital Gains Incentive Fee”), as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period. That expense (or the reversal of such an expense) related to that hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to our investment adviser in the event of a complete liquidation of our portfolio as of period end and the termination of the Investment Advisory Agreement on such date. For the three months ended March 31, 2025 and 2024, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio. The amount of the Capital Gains Incentive Fee which will actually be payable is determined in accordance with the terms of the Investment Advisory Agreement and is calculated as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). The terms of the Investment Advisory Agreement state that the Capital Gains Incentive Fee calculation is based on net realized gains, if any, offset by gross unrealized depreciation for the calendar year. No effect is given to gross unrealized appreciation in this calculation. For the three months ended March 31, 2025 and 2024, such an accrual was not required under the terms of the Investment Advisory Agreement. Realized and Unrealized Gains/Losses on Investments For the three months ended March 31, 2025, we recognized net realized losses of approximately $12.2 million. For the three months ended March 31, 2025, our net change in unrealized depreciation was approximately $2.1 million, composed of $2.4 million in gross unrealized appreciation, $16.6 million in gross unrealized depreciation and approximately $12.1 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized. This includes net unrealized appreciation of approximately $1.7 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $5.7 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $4.0 million. The most significant components of the net change in unrealized depreciation during the three months ended March 31, 2025, were as follows (in millions): Portfolio Company Changes in Unrealized Appreciation/ (Depreciation) Alvaria, Inc. (f/k/a Aspect Software, Inc.) $ 5.8 HealthChannels, Inc. (f/k/a ScribeAmerica, LLC) 3.7 OCP CLO 2024-37, Ltd. (2.0 ) BlueMountain CLO XXXI Ltd. (2.2 ) Dryden 43 Senior Loan Fund (2.5 ) Net all other (4.9 ) Total $ (2.1 ) For the three months ended March 31, 2024, we recognized realized losses of approximately $8.1 million. $7.9 million of those realized losses were recognized on our former investments in Alvaria, Inc. first and second lien senior secured notes, as Alvaria, Inc. went through a debt restructuring. We also sold a CLO equity investment for approximately $1.4 million and recognized a realized loss of approximately $236,000. 53 Table of Contents For the three months ended March 31, 2024, our net change in unrealized depreciation was approximately $0.2 million, composed of $6.9 million in gross unrealized appreciation, $15.3 million in gross unrealized depreciation and approximately $8.2 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized. This includes net unrealized appreciation of approximately $0.8 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $4.8 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $3.9 million. The most significant components of the net change in unrealized depreciation during the three months ended March 31, 2024, were as follows (in millions): Portfolio Company Changes in Unrealized Appreciation/ (Depreciation) Alvaria, Inc. (f/k/a Aspect Software, Inc.) $ 7.7 Octagon Investment Partners 49, Ltd. 4.2 Magenta Buyer, LLC (f/k/a McAfee Enterprise) (1.6 ) Quest Software, Inc. (3.4 ) ConvergeOne Holdings, Inc. (4.5 ) Net all other (2.6 ) Total $ (0.2 ) Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the three months ended March 31, 2025 and March 31, 2024 was approximately $6.1 million and $6.5 million, respectively. For the three months ended March 31, 2025, the net increase in net assets resulting from net investment income per common share was $0.09 (basic and diluted), compared to the net increase in net assets resulting from net investment income per share of $0.11 (basic and diluted) for the three months ended March 31, 2024. The per share decrease was primarily due to a decrease in investment income and an increase in weighted average shares of common stock outstanding. Net Decrease Net Assets Resulting from Operations Net decrease in net assets resulting from operations for the three months ended March 31, 2025 was approximately $8.1 million compared with a net decrease in net assets resulting from operations of approximately $1.8 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, the net decrease in net assets resulting from operations per common share was $0.12 (basic and diluted), compared to a net decrease in net assets resulting from operations per share of $0.03 (basic and diluted) for the three months ended March 31, 2024. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2025, cash and cash equivalents were approximately $37.3 million as compared to approximately $34.9 million as of December 31, 2024. For the three months ended March 31, 2025, net cash provided by operating activities for the period, consisting primarily of the items described in “— Results of Operations,” was approximately $6.0 million, largely reflecting repayments of principal of approximately $8.7 million, net realized losses of approximately $12.2 million, and sales of investments of approximately $9.2 million, partially offset by cash purchases of investments of approximately $18.5 million. For the three months ended March 31, 2025, net cash used in financing activities was approximately $3.7 million, reflecting the payment of distributions of approximately $7.1 million, partially offset by the issuance of common stock in connection with our ATM program of approximately $3.5 million. 54 Table of Contents Contractual Obligations A summary of our significant contractual payment obligations as of March 31, 2025, is as follows: Payments Due by Period Contractual obligations (in millions) Principal Amount Less than 1 year 1 – 3 years 3 – 5 years More than 5 years Long-term debt obligations: 6.25% Unsecured Notes $ 44.8 $ — $ 44.8 $ — $ — 5.50% Unsecured Notes 80.5 — — 80.5 — $ 125.3 $ — $ 44.8 $ 80.5 $ — Refer to “Note 6. Borrowings” in the notes to our financial statements. Off-Balance Sheet Arrangements In the normal course of business, we enter into a variety of undertakings containing a variety of warranties and indemnifications that may expose us to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote. As of March 31, 2025, we did not have any commitments to purchase additional investments. Share Issuance and Repurchase Programs On August 22, 2023, we entered into Amendment No. 1 to the Equity Distribution Agreement dated August 1, 2019 with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an At -the-Market (“ATM”) offering. On August 16, 2024, we entered into an amended and restated equity distribution agreement (the “Amended and Restated Equity Distribution Agreement”) with Lucid Capital Markets, LLC and Ladenburg Thalmann & Co. Inc., as the sales agents, to add Lucid Capital Markets, LLC as an additional sales agent to the Amended and Restated Equity Distribution Agreement. We issued a total of 1,341,138 shares of common stock pursuant to the ATM offering during the three months ended March 31, 2025. The total amount of capital raised net of underwriting fees and offering costs was approximately $3.5 million during the three months ended March 31, 2025. From time to time, the Board may authorize a share repurchase program under which shares are purchased in open market transactions. Since we are incorporated in Maryland, MGCL requires share repurchases to be accounted for as a share retirement. The cost of repurchased shares is charged against capital on the settlement date. During the three months ended March 31, 2025 and 2024, we were not authorized to repurchase any shares of outstanding common stock. Borrowings In accordance with the 1940 Act, with certain limited exceptions, as of March 31, 2025, we were only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, was at least 150%, immediately after such borrowing. As of March 31, 2025 and December 31, 2024, our asset coverage for borrowed amounts was approximately 218% and 227%, respectively. The weighted average stated interest rate and weighted average maturity on all of the Company’s debt outstanding as of March 31, 2025, were 5.77% and 2.5 years, respectively, and as of December 31, 2024, were 5.77% and 2.8 years, respectively. On April 3, 2019, we completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of the 6.25% Unsecured Notes. The 6.25% Unsecured Notes will mature on April 30, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after April 30, 2022. The 6.25% Unsecured Notes bear interest at a rate of 6.25% per year payable quarterly on January 31, April 30, July 31, and October 31 of each year. The 6.25% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQZ.” 55 Table of Contents On May 20, 2021, we completed an underwritten public offering of approximately $80.5 million in aggregate principal amount of 5.50% Unsecured Notes. The 5.50% Unsecured Notes will mature on July 31, 2028, and may be redeemed in whole or in part at any time or from time to time at our option (on or after May 31, 2024). The 5.50% Unsecured Notes bear interest at a rate of 5.50% per year payable quarterly on January 31, April 30, July 31, and October 31, of each year. The 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQG.” Refer to “Note 6. Borrowings” in the notes to our financial statements. Distributions In order to qualify for tax treatment as a RIC, and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and short -term capital gains to our stockholders on an annual basis. To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our taxable ordinary income or capital gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is taxable ordinary income or capital gains. The final determination of the nature of our distributions can only be made upon the filing of our tax return. We have until October 15, 2026, to file our federal income tax return for the year ended December 31, 2025. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a BDC under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure stockholders that they will receive any distributions. 56 Table of Contents The following table reflects the cash distributions, including distributions reinvested, if any, per share that our Board has declared on our common stock since the beginning of 2024: Date Declared Record Date Payment Date Total Distributions GAAP Net Investment Income Distributions in Excess of/ (Less than) GAAP Net Investment Income (1) Fiscal 2025 (1) April 22, 2025 September 16, 2025 September 30, 2025 $ 0.035 $ N/A $ — April 22, 2025 August 15, 2025 August 29, 2025 0.035 N/A — April 22, 2025 July 17, 2025 July 31, 2025 0.035 N/A — Total (Third Quarter 2025) 0.105 — ​ (3) — February 27, 2025 June 16, 2025 June 30, 2025 0.035 $ N/A — February 27, 2025 May 16, 2025 May 30, 2025 0.035 N/A — February 27, 2025 April 16, 2025 April 30, 2025 0.035 N/A — Total (Second Quarter 2025) 0.105 — ​ (3) — October 31, 2024 March 17, 2025 March 31, 2025 0.035 $ N/A — October 31, 2024 February 14, 2025 February 28, 2025 0.035 N/A — October 31, 2024 January 17, 2025 January 31, 2025 0.035 N/A — Total (First Quarter 2025) 0.105 0.09 0.02 Fiscal 2024 August 8, 2024 December 17, 2024 December 31, 2024 $ 0.035 $ N/A $ — August 8, 2024 November 15, 2024 November 29, 2024 0.035 N/A — August 8, 2024 October 17, 2024 October 31, 2024 0.035 N/A — Total (Fourth Quarter 2024) 0.105 0.09 0.02 April 25, 2024 September 16, 2024 September 30, 2024 $ 0.035 $ N/A $ — April 25, 2024 August 16, 2024 August 30, 2024 0.035 N/A — April 25, 2024 July 17, 2024 July 31, 2024 0.035 N/A — Total (Third Quarter 2024) 0.105 0.10 0.01 March 14, 2024 June 14, 2024 June 28, 2024 0.035 $ N/A — March 14, 2024 May 17, 2024 May 31, 2024 0.035 N/A — March 14, 2024 April 16, 2024 April 30, 2024 0.035 N/A — Total (Second Quarter 2024) 0.105 0.13 (0.02 ) November 2, 2023 March 15, 2024 March 29, 2024 0.035 $ N/A — November 2, 2023 February 15, 2024 February 29, 2024 0.035 N/A — November 2, 2023 January 17, 2024 January 31, 2024 0.035 N/A — Total (First Quarter 2024) 0.105 0.11 (0.01 ) Total (2024) $ 0.42 $ 0.42 ​ (2) 0.00 ​ (2) ____________ (1) The tax characterization of cash distributions for the year ending December 31, 2025 and year ended December 31, 2024 will not be known until the tax return for such years are finalized. For the year ending December 31, 2025 and year ended December 31, 2024, the amounts and sources of distributions reported are only estimates and are not being provided for U.S. tax reporting purposes. The final determination of the source of all distributions in 2025 and 2024 will be made after year -end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099 -DIV notice. The actual amounts and sources of the amounts for tax reporting purposes will depend upon our investment performance and may be subject to change based on tax regulations. (2) Totals may not sum due to rounding. (3) We have not yet reported investment income for this period. 57 Table of Contents Related Parties We have a number of business relationships with affiliated or related parties, including the following: • We have entered into the Investment Advisory Agreement with Oxford Square Management. Oxford Square Management is controlled by Oxford Funds, its managing member. In addition to Oxford Funds, Oxford Square Management is owned by Charles M. Royce, a member of our Board, who holds a minority, non -controlling interest in Oxford Square Management as the non -managing member. Oxford Funds, as the managing member of Oxford Square Management, manages the business and internal affairs of Oxford Square Management. In addition, Oxford Funds provides us with office facilities and administrative services pursuant to the Administration Agreement. • Messrs. Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, at Oxford Gate Management, LLC (“Oxford Gate Management”), the investment adviser to Oxford Gate Master Fund, LLC, Oxford Gate, LLC and Oxford Gate (Bermuda), LLC (collectively, the “Oxford Gate Funds”) and Oxford Bridge II, LLC. Oxford Funds is the managing member of Oxford Gate Management. In addition, Bruce L. Rubin serves as the Chief Financial Officer and Secretary, and Gerald Cummins serves as the Chief Compliance Officer, respectively, of Oxford Gate Management. • Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non -diversified closed -end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Lane Management, LLC (“Oxford Lane Management”). Oxford Funds provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Lane Management. In addition, Bruce L. Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Lane Capital Corp. and Chief Financial Officer and Treasurer of Oxford Lane Management, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Lane Capital Corp. and Oxford Lane Management. • Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Park Income Fund, Inc., a non -diversified closed -end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Park Management, LLC (“Oxford Park Management”). Oxford Funds provides Oxford Park Income Fund, Inc. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Park Management. In addition, Bruce L. Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Park Income Fund, Inc. and Chief Financial Officer and Treasurer of Oxford Park Management, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Park Income Fund, Inc. and Oxford Park Management. As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs. Cohen and Rosenthal to manage Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford Gate Funds, respectively, on the other hand. Oxford Square Management, Oxford Lane Management, Oxford Park Management and Oxford Gate Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford Gate Funds. Where investments are suitable for more than one entity, the allocation policy generally provides that, depending on size and subject to current and anticipated cash availability, the absolute size of the investment as well as its relative size compared to the total assets of each entity, current and anticipated weighted average costs of capital, among other factors, an investment amount will be determined by the adviser to each entity. If the investment opportunity is sufficient for each entity to receive its investment amount, then each entity receives the investment amount; otherwise, the investment amount is reduced pro rata. On June 14, 2017, the Securities and Exchange Commission issued an exemptive order permitting the Company and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions (the “Order”). Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is the Company’s investment adviser or an investment adviser controlling, controlled by, or under common control 58 Table of Contents with the Company’s investment adviser, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing the Company’s stockholders with access to a broader array of investment opportunities. Pursuant to the Order, we are permitted to co -invest in such investment opportunities with our affiliates if 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, but not limited to, that (1) the terms of the potential co -investment 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 potential co -investment transaction is consistent with the interests of our stockholders and is consistent with our then -current investment objective and strategies. In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board reviews these procedures on an annual basis. We have also adopted a Code of Business Conduct and Ethics which applies to our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Business Conduct and Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Business Conduct and Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict. Our Audit Committee is charged with approving any waivers under our Code of Business Conduct and Ethics. As required by the NASDAQ Global Select Market corporate governance listing standards, the Audit Committee of our Board is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S -K ). Information concerning related party transactions is included in the financial statements and related notes, appearing elsewhere in this quarterly report on Form 10 -Q . RECENT DEVELOPMENTS The following distributions payable to stockholders are shown below: Date Declared Record Date Payable Date Per Share Distribution Amount Declared February 27, 2025 April 16, 2025 April 30, 2025 $0.035 February 27, 2025 May 16, 2025 May 30, 2025 $0.035 February 27, 2025 June 16, 2025 June 30, 2025 $0.035 April 22, 2025 July 17, 2025 July 31, 2025 $0.035 April 22, 2025 August 15, 2025 August 29, 2025 $0.035 April 22, 2025 September 16, 2025 September 30, 2025 $0.035 59 Table of Contents