Palmer Square Capital BDC Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-56126 Palmer Square Capital BDC Inc. (Exact name of registrant as specified in its charter) Maryland 84-3665200 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1900 Shawnee Mission Parkway , Suite 315 , Mission Woods , KS 66205 (Address of principal executive offices) (Zip Code) (816) 994-3200 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered None None None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No As of April 30, 2023, the registrant had 25,043,540 shares of common stock, $0.001 par value per share, outstanding. Table of Contents Page PART I. FINANCIAL INFORMATION 1 Item 1. Consolidated Financial Statements (Unaudited) 1 Consolidated Statements of Assets and Liabilities as of March 31, 2023 (Unaudited) and December 31, 2022 1 Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and March 31, 2022 (Unaudited) 2 Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2023 and March 31, 2022 (Unaudited) 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and March 31, 2022 (Unaudited) 4 Consolidated Schedules of Investments as of March 31, 2023 (Unaudited) and December 31, 2022 5 Notes to Consolidated Financial Statements (Unaudited) 28 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 46 Item 3. Quantitative and Qualitative Disclosures About Market Risk 61 Item 4. Controls and Procedures 62 PART II. OTHER INFORMATION 63 Item 1. Legal Proceedings 63 Item 1A. Risk Factors 63 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 63 Item 3. Defaults Upon Senior Securities 63 Item 4. Mine Safety Disclosures 63 Item 5. Other Information 63 Item 6. Exhibits 64 Signatures 65 i PART I—FINANCIAL INFORMATION Item 1. Consolidated Financial Statements. Palmer Square Capital BDC Inc. Consolidated Statements of Assets and Liabilities (Unaudited) March 31, 2023 (Unaudited) December 31, 2022 Assets: Non-controlled, non-affiliated investments, at fair value (amortized cost of $ 1,130,719,129 and $ 1,120,099,935 , respectively) $ 1,042,644,015 $ 1,017,211,732 Cash and cash equivalents 6,242,191 1,650,801 Receivables: Receivable for sales of investments 4,041,576 31,014,356 Receivable for paydowns of investments 242,872 136,119 Due from investment adviser 239,028 234,102 Dividend receivable 217,698 141,997 Interest receivable 6,020,267 6,465,594 Prepaid expenses and other assets 604,026 598,327 Total Assets $ 1,060,251,673 $ 1,057,453,028 Liabilities: Credit facilities, net (Note 6) $ 616,414,365 $ 641,309,417 Payables: Payable for investments purchased 38,167,495 42,750,748 Distributions payable - 6,941,066 Management fee payable 1,912,228 1,872,815 Accrued other general and administrative expenses 1,121,556 1,135,500 Total Liabilities $ 657,615,644 $ 694,009,546 Commitments and contingencies (Note 8) Net Assets: Common Shares, $ 0.001 par value; 450,000,000 shares authorized; 24,975,302 and 24,286,628 as of March 31, 2023 and December 31, 2022, respectively issued and outstanding $ 24,975 $ 24,287 Additional paid-in capital 485,024,914 473,921,377 Total distributable earnings (accumulated deficit) ( 82,413,860 ) ( 110,502,182 ) Total Net Assets $ 402,636,029 $ 363,443,482 Total Liabilities and Net Assets $ 1,060,251,673 $ 1,057,453,028 Net Asset Value Per Common Share $ 16.12 $ 14.96 The accompanying notes are an integral part of these consolidated financial statements. 1 Palmer Square Capital BDC Inc. Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31 2023 2022 Income: Investment income from non-controlled, non-affiliated investments: Interest income $ 25,452,738 $ 14,157,273 Dividend income 676,868 4,646 Other income 55,896 93,041 Total investment income from non-controlled, non-affiliated investments 26,185,502 14,254,960 Total Investment Income 26,185,502 14,254,960 Expenses: Interest expense 10,322,130 3,151,012 Management fees 1,912,228 2,257,962 Professional fees 211,994 138,440 Directors fees 18,493 18,493 Other general and administrative expenses 367,006 300,725 Total Expenses 12,831,851 5,866,632 Less: Management fee waiver (Note 3) ( 239,028 ) ( 282,245 ) Net expenses 12,592,823 5,584,387 Net Investment Income (Loss) 13,592,679 8,670,573 Realized and unrealized gains (losses) on investments and foreign currency transactions Net realized gains (losses): Non-controlled, non-affiliated investments ( 317,446 ) ( 369,870 ) Total net realized gains (losses) ( 317,446 ) ( 369,870 ) Net change in unrealized gains (losses): Non-controlled, non-affiliated investments 14,813,089 ( 11,731,503 ) Total net change in unrealized gains (losses) 14,813,089 ( 11,731,503 ) Total realized and unrealized gains (losses) 14,495,643 ( 12,101,373 ) Net Increase (Decrease) in Net Assets Resulting from Operations $ 28,088,322 ( 3,430,800 ) Per Common Share Data: Basic and diluted net investment income per common share $ 0.55 0.38 Basic and diluted net increase (decrease) in net assets resulting from operations $ 1.14 ( 0.15 ) Weighted Average Common Shares Outstanding - Basic and Diluted 24,591,581 22,807,768 The accompanying notes are an integral part of these consolidated financial statements. 2 Palmer Square Capital BDC Inc. Consolidated Statements of Changes in Net Assets (Unaudited) For the Three Months Ended March 31 2023 2022 Increase (Decrease) in Net Assets Resulting from Operations: Net investment income (loss) $ 13,592,679 $ 8,670,573 Net realized gains (losses) on investments and foreign currency transactions ( 317,446 ) ( 369,870 ) Net change in unrealized gains (losses) on investments, foreign currency translations, and foreign currency exchange contracts 14,813,089 ( 11,731,503 ) Net Increase (Decrease) in Net Assets Resulting from Operations 28,088,322 ( 3,430,800 ) Increase in Net Assets Resulting from Capital Share Transactions Issuance of common shares 11,104,225 4,823,800 Net Increase in Net Assets Resulting from Capital Share Transactions 11,104,225 4,823,800 Total Increase (Decrease) in Net Assets 39,192,547 1,393,000 Net Assets, Beginning of Period 363,443,482 452,797,588 Net Assets, End of Period $ 402,636,029 $ 454,190,588 The accompanying notes are an integral part of these consolidated financial statements. 3 Palmer Square Capital BDC Inc. Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31 2023 2022 Cash Flows from Operating Activities: Net increase (decrease) in net assets resulting from operations $ 28,088,322 $ ( 3,430,800 ) Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: Net realized (gains)/losses on investments 317,446 369,870 Net change in unrealized (gains)/losses on investments ( 14,813,089 ) 11,731,503 Net accretion of discount on investments ( 352,426 ) ( 111,281 ) Purchases of short-term investments ( 230,510,615 ) ( 137,515,526 ) Purchases of portfolio investments ( 63,457,688 ) ( 158,946,166 ) Proceeds from sale of short-term investments 181,245,181 168,868,099 Proceeds from sale of portfolio investments 102,138,907 147,465,895 Amortization of deferred financing cost 244,963 243,676 Increase/(decrease) in operating assets and liabilities: (Increase)/decrease in receivable for sales of investments 26,972,780 ( 12,674,429 ) (Increase)/decrease in interest and dividends receivable 369,626 ( 413,399 ) (Increase)/decrease in due from investment adviser ( 4,926 ) ( 1,505 ) (Increase)/decrease in receivable for paydowns of investments ( 106,753 ) ( 69,718 ) (Increase)/decrease in prepaid expenses and other assets ( 5,699 ) ( 165,494 ) Increase/(decrease) in interest payable on credit facilities 2,377,711 ( 333,754 ) Increase/(decrease) in payable for investments purchased ( 4,583,253 ) ( 21,726,598 ) Increase/(decrease) in management fees payable 39,413 12,044 Increase/(decrease) in directors fee payable - ( 617 ) Increase/(decrease) in accrued other general and administrative expenses ( 13,943 ) ( 1,607,683 ) Net cash provided by (used in) operating activities 27,945,957 ( 8,305,883 ) Cash Flows from Financing Activities: Borrowings on the credit facilities - 33,000,000 Payments on the credit facilities ( 27,500,000 ) ( 20,000,000 ) Payments of debt issuance costs ( 17,726 ) - Distributions paid in cash ( 6,941,066 ) ( 5,874,681 ) Proceeds from issuance of common shares, net of change in subscriptions receivable of $ - 11,104,225 4,823,800 Net cash provided by (used in) financing activities ( 23,354,567 ) 11,949,119 Net increase/(decrease) in cash and cash equivalents 4,591,390 3,643,236 Cash and cash equivalents, beginning of period 1,650,801 1,093,503 Cash and cash equivalents, end of period $ 6,242,191 $ 4,736,739 Supplemental and Non-Cash Information: Interest paid during the period $ 7,944,419 $ 3,484,766 The accompanying notes are an integral part of these consolidated financial statements. 4 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Debt Investments First Lien Senior Secured (2) AAdvantage Loyalty IP Ltd. (4)(7) Insurance 9.56 % (L + 4.75 %) 4/20/2028 $ 3,750,000 $ 3,718,813 $ 3,813,536 0.8 % AccentCare, Inc. (7) Healthcare Providers and Services 8.95 % (L + 4.00 %) 6/22/2026 5,954,987 5,956,463 4,252,843 1.1 % Acrisure, LLC (7) Insurance 9.09 % (L + 4.25 %) 2/15/2027 4,986,875 4,959,694 4,899,605 1.1 % Acrisure, LLC (7) Insurance 8.34 % (L + 3.50 %) 2/12/2027 5,827,330 5,817,764 5,654,928 1.4 % AI Aqua Merger Sub, Inc., (7)(8) Food Products 8.48 % (S + 3.75 %) 6/16/2028 7,642,250 7,646,935 7,398,692 1.8 % Aimbridge Acquisition Co., Inc. (7) Hotels, Restaurants and Leisure 8.59 % (L + 3.75 %) 2/2/2026 4,923,469 4,843,549 4,714,222 1.2 % Alliant Holdings Intermediate LLC (7) Insurance 8.28 % (L + 3.50 %) 11/5/2027 2,917,595 2,916,128 2,892,066 0.7 % Allied Universal Holdco LLC (7) Professional Services 8.66 % (S + CSA + 3.75 %) 4/7/2028 6,895,000 6,890,224 6,558,283 1.6 % Amentum Government Services Holdings LLC (7) Aerospace and Defense 9.03 % (S + 4.00 %) 2/15/2029 5,955,000 5,931,112 5,835,900 1.4 % American Rock Salt Company LLC (7) Metals and Mining 8.84 % (L + 4.00 %) 6/9/2028 5,899,937 5,893,731 5,700,814 1.4 % Amynta Agency Borrower, Inc. (7) Insurance 9.99 % (S + CSA + 5.00 %) 2/28/2028 7,000,000 6,792,618 6,746,250 1.7 % AP Gaming I, LLC (4)(7) Hotels, Restaurants and Leisure 8.91 % (S + CSA + 4.00 %) 2/15/2029 8,667,475 8,558,090 8,569,966 2.1 % Aptean Inc (7)(8) Software 9.16 % (S + CSA + 4.25 %) 4/23/2026 7,784,469 7,787,113 7,496,444 1.9 % 5 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets AQA Acquisition Holding, Inc. (7) Software 9.20 % (L + 4.25 %) 11/19/2027 8,409,627 8,298,846 8,220,453 2.0 % ARC Falcon I Inc. (7) Chemicals 8.59 % (L + 3.75 %) 8/31/2028 4,943,869 4,925,370 4,494,299 1.1 % Ascend Learning, LLC (7) Professional Services 8.41 % (S + CSA + 3.50 %) 11/18/2028 7,406,250 7,377,557 6,856,077 1.7 % AssuredPartners, Inc. (7) Insurance 8.34 % (L + 3.50 %) 2/12/2027 4,405,263 4,409,546 4,359,823 1.1 % AssuredPartners, Inc. (7) Insurance 8.31 % (S + 3.50 %) 2/12/2027 1,980,000 1,970,159 1,962,675 0.5 % Athletico Management, LLC (7) Healthcare Providers and Services 9.30 % (S + CSA + 4.25 %) 2/2/2029 7,170,813 7,142,215 5,293,566 1.2 % Autokiniton US Holdings, Inc. (7)(8) Auto Components 9.42 % (S + CSA + 4.50 %) 3/27/2028 8,113,628 8,121,424 7,900,645 2.0 % Aveanna Healthcare LLC (4)(5)(7) Healthcare Providers and Services 8.70 % (L + 3.75 %) 6/30/2028 5,136,742 5,099,213 4,386,392 1.1 % Barracuda Networks, Inc. (7) Software 9.18 % (S + 4.50 %) 4/13/2029 7,481,250 7,274,848 7,221,763 1.8 % BBB Industries (8) Auto Components 10.16 % (S + CSA + 5.25 %) 6/29/2029 3,990,000 3,618,783 3,816,435 0.9 % Belfor Holdings, Inc. (7) Commercial Services and Supplies 8.84 % (L + 3.75 %) 3/31/2026 1,989,664 1,985,809 1,989,664 0.5 % Castle US Holding Corporation (7)(8) Professional Services 8.84 % (L + 4.00 %) 1/31/2027 6,024,469 5,974,152 3,957,353 1.0 % Castle US Holding Corporation (8) Professional Services 8.59 % (L + 3.75 %) 1/27/2027 1,970,526 1,963,614 1,301,611 0.3 % CCI Buyer, Inc. (7)(8) Wireless Telecommunication Services 8.90 % (S + 4.00 %) 12/17/2027 6,777,990 6,773,066 6,701,737 1.7 % CCS-CMGC Holdings, Inc. (7) Healthcare Providers and Services 10.33 % (L + 5.50 %) 10/1/2025 5,341,764 5,295,839 3,629,515 0.9 % CDK Global (7) Software 9.15 % (S + 4.25 %) 7/6/2029 3,990,000 3,877,920 3,983,875 1.0 % 6 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Congruex Group LLC (8) Construction and Engineering 10.58 % (S + CSA + 5.75 %) 4/28/2029 6,203,125 6,064,089 6,017,031 1.5 % Connectwise LLC (7) IT Services 8.34 % (L + 3.50 %) 9/29/2028 7,900,000 7,889,950 7,653,125 1.9 % Consolidated Communications, Inc. (4)(7) Diversified Telecommunication Services 8.38 % (L + 3.50 %) 10/2/2027 1,428,009 1,413,569 1,141,872 0.3 % ConvergeOne Holdings Corp. (7)(8) IT Services 9.84 % (L + 5.00 %) 1/4/2026 9,813,545 9,671,859 5,991,169 1.5 % Corelogic, Inc. (7) Internet Software and Services 8.38 % (L + 3.50 %) 4/14/2028 7,880,000 7,874,841 6,745,871 1.7 % CP Atlas Buyer, Inc (7) Building Products 8.41 % (S + CSA + 3.50 %) 11/23/2027 6,877,436 6,789,835 6,134,432 1.5 % Creation Technologies, Inc. (4)(8) Electronic Equipment, Instruments and Components 10.28 % (L + 5.50 %) 9/14/2028 4,962,500 4,902,171 4,286,359 1.1 % Crown Subsea Communications Holding, Inc. (7) Construction and Engineering 10.03 % (S + CSA + 5.25 %) 4/27/2027 1,875,000 1,838,451 1,853,325 0.5 % Curia Global, Inc. (7) Healthcare Providers and Services 8.53 % (S + CSA + 3.75 %) 8/30/2026 4,837,746 4,825,920 4,146,867 1.0 % Dave & Buster’s, Inc. (4)(7) Hotels, Restaurants and Leisure 9.94 % (S + CSA + 5.00 %) 6/22/2029 4,987,469 4,971,513 4,995,075 1.2 % DCert Buyer, Inc. (7) IT Services 8.70 % (S + 4.00 %) 10/16/2026 7,815,310 7,816,171 7,670,023 1.9 % Deerfield Dakota Holding, LLC (7) Diversified Financial Services 8.56 % (S + 3.75 %) 2/25/2027 4,862,500 4,815,859 4,720,685 1.2 % Delta Topco, Inc. (7) IT Services 8.66 % (S + 3.75 %) 10/29/2027 6,884,887 6,881,540 6,400,053 1.6 % Digi International Inc. (4)(8) Technology Hardware, Storage and Peripherals 9.84 % (L + 5.00 %) 12/22/2028 4,296,875 4,224,534 4,286,133 1.1 % DIRECTV Financing, LLC (7) Media 9.84 % (L + 5.00 %) 8/2/2027 5,190,000 5,157,273 5,006,585 1.2 % Dotdash Meredith, Inc. (7) Media 8.77 % (S + CSA + 4.00 %) 11/23/2028 9,875,000 9,837,024 8,936,875 2.2 % EAB Global, Inc. (7) Professional Services 8.34 % (L + 3.50 %) 6/28/2028 1,787,387 1,780,794 1,751,193 0.4 % ECI Software Solutions, Inc. (7) Software 8.91 % (L + 3.75 %) 9/30/2027 2,857,616 2,849,880 2,798,321 0.7 % ECL Entertainment, LLC (8) Hotels, Restaurants and Leisure 12.42 % (S + CSA + 7.50 %) 3/31/2028 4,158,780 4,191,817 4,166,599 1.0 % EFS Cogen Holdings I, LLC (7)(8) Independent Power and Renewable Electricity Producers 8.66 % (L + 3.50 %) 10/29/2027 7,631,990 7,639,509 7,452,638 1.9 % Endurance International Group, Inc., The (7) Professional Services 8.22 % (L + 3.50 %) 2/10/2028 4,674,281 4,612,769 4,382,138 1.1 % 7 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Fertitta Entertainment, LLC (7) Hotels, Restaurants and Leisure 8.81 % (S + 4.00 %) 1/29/2029 7,425,000 7,399,182 7,327,139 1.8 % Flexera Software LLC (7)(8) Software 8.59 % (L + 3.75 %) 1/26/2028 8,814,641 8,796,737 8,704,458 2.2 % Fugue Finance, LLC (4)(7) Diversified Consumer Services 9.37 % (S + 4.50 %) 1/31/2028 3,975,000 3,896,580 3,975,835 1.0 % Garda World Security Corporation (4)(5)(7) Diversified Consumer Services 9.01 % (S + 4.25 %) 2/12/2029 7,979,950 7,729,148 7,755,554 1.9 % Getty Images, Inc. (7)(8) Media 9.49 % (S + CSA + 4.50 %) 2/13/2026 8,325,122 8,327,385 8,332,032 2.1 % GIP III Stetson I, LP (7) Energy Equipment and Services 9.09 % (L + 4.25 %) 7/19/2025 1,826,015 1,780,514 1,822,208 0.5 % Global Medical Response, Inc. (7) Healthcare Providers and Services 9.24 % (L + 4.25 %) 9/24/2025 9,072,634 9,033,913 6,426,464 1.6 % Grab Holdings Inc (4)(7) IT Services 9.35 % (L + 4.50 %) 2/27/2026 2,246,302 2,263,385 2,242,371 0.6 % Great Outdoors Group, LLC (7) Specialty Retail 8.59 % (L + 3.75 %) 3/6/2028 6,989,929 6,965,327 6,911,328 1.7 % Grinding Media Inc. (8) Metals and Mining 8.70 % (L + 4.00 %) 9/21/2028 4,925,000 4,907,041 4,654,125 1.2 % HAH Group Holding Company LLC (7) Healthcare Providers and Services 9.91 % (S + CSA + 5.00 %) 10/22/2027 709,144 692,496 691,416 0.2 % HAH Group Holding Company LLC (7) Healthcare Providers and Services 9.91 % (S + CSA + 5.00 %) 10/20/2027 5,604,307 5,472,685 5,464,199 1.4 % Hamilton Projects Acquiror, LLC (7)(8) Independent Power and Renewable Electricity Producers 9.66 % (L + 4.50 %) 6/11/2027 8,721,780 8,685,874 8,668,838 2.2 % 8 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Help/Systems Holdings, Inc. (7) Software 8.78 % (S + CSA + 4.00 %) 11/19/2026 6,831,699 6,798,188 6,112,662 1.5 % Hyperion Refinance Sarl (4)(5)(7) Diversified Financial Services 8.66 % (S + 4.00 %) 3/24/2030 3,000,000 2,880,000 2,988,750 0.7 % Idera, Inc. (7) IT Services 8.51 % (L + 3.75 %) 3/2/2028 9,774,514 9,738,916 9,352,988 2.3 % IMA Financial Group, Inc. (8) Insurance 8.34 % (L + 3.50 %) 10/16/2028 4,937,500 4,918,643 4,844,922 1.2 % Indy US Holdco, LLC (5)(7) Media 10.82 % (S + 6.25 %) 3/6/2028 4,445,361 3,956,371 3,875,799 1.0 % Indy US Holdco, LLC (7) Media 10.87 % (S + 6.25 %) 3/6/2028 2,154,639 1,918,979 1,878,576 0.5 % Infinite Bidco, LLC (5) Electronic Equipment, Instruments and Components 10.92 % (L + 6.25 %) 3/2/2028 3,000,000 2,992,500 2,992,500 0.7 % Infinite Bidco, LLC (7) Electronic Equipment, Instruments and Components 8.41 % (L + 3.25 %) 3/2/2028 6,393,900 6,351,641 6,143,483 1.5 % Inmar, Inc. (7)(8) Professional Services 8.93 % (L + 4.00 %) 5/1/2024 7,821,671 7,807,760 7,519,833 1.9 % Ivanti Software, Inc. (7) Software 8.98 % (L + 4.00 %) 12/1/2027 980,000 978,824 791,350 0.2 % Ivanti Software, Inc. (7) Software 9.21 % (L + 4.25 %) 12/1/2027 6,905,250 6,863,427 5,695,001 1.4 % Jack Ohio Finance LLC (8) Hotels, Restaurants and Leisure 9.59 % (L + 4.75 %) 10/31/2028 4,935,342 4,939,759 4,750,267 1.2 % Kestrel Acquisition, LLC (7) Independent Power and Renewable Electricity Producers 9.10 % (L + 4.25 %) 5/2/2025 6,814,213 6,365,026 6,387,268 1.6 % Kleopatra Finco S.a.r.l (4)(7) Containers and Packaging 10.13 % (S + CSA + 4.75 %) 2/4/2026 1,960,000 1,955,029 1,813,823 0.5 % Koppers, Inc. (4)(5) Chemicals 8.84 % (S + 4.00 %) 3/8/2030 2,075,000 2,012,750 2,038,688 0.5 % LBM Acquisition LLC (7)(8) Building Products 8.59 % (L + 3.75 %) 12/31/2027 7,373,134 7,305,818 6,968,755 1.7 % Life Time, Inc. (4)(7) Hotels, Restaurants and Leisure 9.59 % (L + 4.75 %) 12/10/2024 7,582,556 7,578,163 7,584,148 1.9 % 9 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Lifescan Global Corporation (7) Healthcare Equipment and Supplies 10.75 % (L + 6.00 %) 10/1/2024 5,997,514 5,977,768 4,536,459 1.1 % Lightstone Holdco LLC (7) Independent Power and Renewable Electricity Producers 10.56 % (S + 5.75 %) 2/1/2027 4,782,436 4,334,870 4,122,459 1.0 % Lightstone Holdco LLC (7) Independent Power and Renewable Electricity Producers 10.56 % (S + 5.75 %) 2/1/2027 270,490 245,168 233,162 0.1 % LogMeIn, Inc. (7) IT Services 9.59 % (L + 4.75 %) 8/31/2027 9,819,382 9,725,359 5,659,745 1.4 % LSF9 Atlantis Holdings, LLC (7) Specialty Retail 12.15 % (S + 7.25 %) 3/29/2029 6,825,000 6,580,116 6,665,773 1.7 % Magenta Buyer LLC (7) Software 9.58 % (L + 4.75 %) 7/27/2028 5,431,250 5,390,713 4,498,243 1.1 % Mariner Wealth Advisors, LLC (8) Diversified Financial Services 9.01 % (S + CSA + 4.25 %) 8/18/2028 3,000,000 2,869,989 2,988,750 0.7 % Maverick 1, LLC (5) Software 9.17 % (S + CSA + 4.25 %) 5/18/2028 5,000,000 4,750,000 4,787,500 1.2 % Maxar Technologies, Inc. (4)(7) Aerospace and Defense 9.16 % (S + CSA + 4.25 %) 6/14/2029 3,879,207 3,879,207 3,883,048 1.0 % Medical Solutions L.L.C. (8) Healthcare Providers and Services 8.24 % (S + CSA + 3.25 %) 10/6/2028 4,953,857 4,935,239 4,826,915 1.2 % Michael Baker International, LLC (8) Construction and Engineering 9.84 % (L + 5.00 %) 11/2/2028 6,171,875 6,121,282 6,056,152 1.5 % Micro Holding Corp. (7) IT Services 8.59 % (L + 3.75 %) 9/13/2024 9,835,841 9,807,423 9,692,926 2.4 % Midwest Veterinary Partners, LLC (7) Healthcare Providers and Services 8.84 % (L + 4.00 %) 4/27/2028 8,860,050 8,789,901 8,217,697 2.0 % Milano Acquisition Corporation (7) Healthcare Providers and Services 9.00 % (S + CSA + 4.00 %) 10/1/2027 8,855,744 8,706,450 8,479,375 2.1 % Minotaur Acquisition, Inc. (7)(8) Diversified Financial Services 9.66 % (S + CSA + 4.75 %) 3/27/2026 11,913,082 11,909,502 11,602,693 2.9 % 10 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Mitchell International, Inc. (7) Professional Services 8.50 % (L + 3.75 %) 10/16/2028 9,900,000 9,843,838 9,385,299 2.3 % MLN US HoldCo LLC (7) Diversified Telecommunication Services 8.25 % (L + 4.50 %) 12/31/2025 4,056,188 4,002,394 1,145,873 0.3 % Momentive Performance Materials USA, LLC (5)(7) Chemicals 9.29 % (S + 4.50 %) 3/31/2028 7,750,000 7,440,000 7,614,375 1.9 % Moneygram International, Inc. (4)(7) Diversified Consumer Services 9.34 % (L + 4.50 %) 7/21/2026 9,869,792 9,853,609 9,832,780 2.4 % NAPA Management Services Corporation (7) Healthcare Providers and Services 10.14 % (S + CSA + 5.25 %) 2/23/2029 7,920,000 7,859,508 5,771,700 1.4 % National Mentor Holdings, Inc. (7) Healthcare Providers and Services 8.75 % (S + CSA + 3.75 %) 2/18/2028 291,993 291,308 224,755 0.1 % National Mentor Holdings, Inc. (7) Healthcare Providers and Services 8.69 % (S + CSA + 3.75 %) 2/18/2028 9,110,922 9,090,834 7,012,905 1.7 % Navicure, Inc. (7) Healthcare Technology 8.84 % (L + 4.00 %) 10/22/2026 4,613,923 4,616,580 4,606,010 1.1 % NorthStar Group Services, Inc. (7)(8) Commercial Services and Supplies 10.42 % (S + CSA + 5.50 %) 11/9/2026 8,591,452 8,566,473 8,505,538 2.1 % NSM Top Holdings Corp. (7) Healthcare Equipment and Supplies 10.16 % (S + CSA + 5.25 %) 11/12/2026 4,923,664 4,907,172 4,606,088 1.1 % OneDigital Borrower LLC (7) Insurance 9.16 % (S + CSA + 4.25 %) 11/16/2027 9,846,301 9,754,248 9,501,680 2.4 % Orchid Merger Sub II, LLC (4)(7) Software 9.80 % (S + CSA + 4.75 %) 5/12/2027 4,275,000 4,083,715 3,516,188 0.9 % Padagis, LLC (7) Pharmaceuticals 9.54 % (L + 4.75 %) 7/31/2028 6,588,235 6,556,805 6,044,706 1.5 % 11 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets PECF USS Intermediate Holding III Corporation (8) Professional Services 9.09 % (L + 4.25 %) 11/6/2028 4,937,500 4,930,728 4,183,322 1.0 % Peraton Corp. (8) Aerospace and Defense 8.59 % (L + 3.75 %) 2/1/2028 4,829,889 4,841,452 4,779,586 1.2 % PetVet Care Centers, LLC (7) Healthcare Providers and Services 8.34 % (L + 3.50 %) 2/14/2025 6,849,451 6,843,334 6,630,269 1.6 % PMHC II Inc. (7) Chemicals 9.08 % (S + CSA + 4.25 %) 2/2/2029 6,571,975 6,519,293 5,810,382 1.4 % Prairie ECI Acquiror LP (7) Oil, Gas and Consumable Fuels 9.59 % (L + 4.75 %) 3/11/2026 7,182,326 7,026,970 7,038,679 1.7 % Pretium PKG Holdings, Inc. (7)(8) Containers and Packaging 9.01 % (L + 4.00 %) 9/22/2028 5,925,000 5,880,299 4,762,219 1.2 % Project Alpha Intermediate Holding, Inc. (7) Software 8.85 % (L + 4.00 %) 4/26/2024 8,329,435 8,279,791 8,291,245 2.1 % Project Boost Purchaser, LLC (7) Professional Services 8.34 % (L + 3.50 %) 6/1/2026 5,895,000 5,887,747 5,800,444 1.4 % PS Holdco, LLC (8) Road and Rail 9.09 % (L + 4.25 %) 10/31/2028 5,419,975 5,400,932 5,205,723 1.3 % PT Intermediate Holdings III LLC (8) Machinery 11.02 % (S + CSA + 5.98 %) 11/1/2028 495,000 490,642 478,913 0.1 % PT Intermediate Holdings III, LLC Machinery 11.39 % (S + 6.50 %) 11/1/2028 1,333,400 1,313,665 1,316,733 0.3 % PT Intermediate Holdings III, LLC (8) Machinery 11.02 % (S + CSA + 5.98 %) 11/1/2028 1,516,900 1,504,576 1,467,601 0.4 % PT Intermediate Holdings III, LLC (8) Machinery 11.02 % (S + CSA + 5.98 %) 10/15/2025 2,291,000 2,283,215 2,216,543 0.6 % 12 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets PT Intermediate Holdings III, LLC (8) Machinery 11.02 % (S + CSA + 5.98 %) 11/1/2028 2,113,250 2,113,250 2,044,569 0.5 % Quest Software US Holdings Inc. (7) Software 9.08 % (S + CSA + 4.25 %) 2/1/2029 9,452,500 9,366,715 7,764,189 1.9 % Radiology Partners, Inc. (7) Healthcare Providers and Services 9.09 % (L + 4.25 %) 7/9/2025 6,000,000 5,994,723 4,865,610 1.2 % RC Buyer, Inc. (7) Auto Components 8.34 % (L + 3.50 %) 7/28/2028 2,052,750 2,049,122 1,924,453 0.5 % RealPage, Inc. (7) Real Estate Management and Development 7.84 % (L + 3.00 %) 2/18/2028 6,895,000 6,887,826 6,704,250 1.7 % Red Planet Borrower, LLC (7) Internet Software and Services 8.59 % (L + 3.75 %) 10/2/2028 7,880,000 7,850,892 5,583,295 1.4 % Redstone Holdco 2 LP (7)(8) IT Services 9.57 % (L + 4.75 %) 4/14/2028 7,880,000 7,835,494 6,230,125 1.5 % Refresco (4)(7) Food Products 9.01 % (S + CSA + 4.25 %) 12/13/2024 4,987,500 4,951,914 4,927,226 1.2 % Renaissance Holding Corp. (5)(7) Software 9.58 % (S + 4.75 %) 4/5/2030 7,726,866 7,495,060 7,528,247 1.9 % Renaissance Holdings Corp. (7) Software 9.23 % (S + 4.50 %) 3/30/2029 4,962,500 4,830,269 4,951,136 1.2 % Rocket Software, Inc. (7) Software 9.09 % (L + 4.25 %) 11/28/2025 4,919,887 4,902,171 4,841,489 1.2 % Rocket Software, Inc. (7) Software 9.09 % (L + 4.25 %) 11/20/2025 3,481,865 3,375,479 3,425,720 0.9 % Rodan & Fields, LLC (7) Textiles, Apparel and Luxury Goods 8.68 % (L + 4.00 %) 6/16/2025 1,709,615 1,571,103 640,046 0.2 % Rohm Holding GMBH (4)(7)(8) Chemicals 10.10 % (L + 4.75 %) 7/31/2026 8,822,327 8,809,337 7,535,723 1.9 % Roper Industrial Products Investment Co. (7) Software 9.40 % (S + 4.50 %) 11/22/2029 4,000,000 3,862,575 3,975,720 1.0 % RSC Acquisition, Inc. Insurance 10.55 % (S + CSA + 5.50 %) 10/30/2026 804,392 780,816 776,238 0.2 % RSC Acquisition, Inc. (8) Insurance 10.55 % (S + CSA + 5.50 %) 9/30/2026 6,176,247 6,134,717 5,960,079 1.5 % Runner Buyer Inc. (8) Household Durables 10.45 % (L + 5.50 %) 10/20/2028 4,950,000 4,909,952 3,712,550 0.9 % Sabert Corporation (8) Containers and Packaging 9.38 % (L + 4.50 %) 11/26/2026 1,996,988 2,004,190 1,994,491 0.5 % Shearer’s Foods, LLC (7) Food Products 8.34 % (L + 3.50 %) 9/23/2027 1,669,784 1,662,003 1,635,345 0.4 % Sophia, L.P. (7) Software 9.06 % (S + 4.25 %) 10/7/2027 1,985,000 1,968,281 1,970,113 0.5 % Sovos Compliance, LLC (8) Software 9.34 % (L + 4.50 %) 7/28/2028 3,952,945 3,947,535 3,752,827 0.9 % Specialty Building Products Holdings, LLC (7)(8) Building Products 8.10 % (L + 3.25 %) 10/5/2028 9,900,000 9,887,595 9,322,533 2.3 % 13 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Summer BC Holdco B LLC (4)(8) Media 9.66 % (L + 4.50 %) 12/4/2026 4,925,000 4,929,737 4,664,394 1.2 % Tecta America Corp. (7)(8) Construction and Engineering 8.92 % (S + CSA + 4.00 %) 4/6/2028 8,563,301 8,549,775 8,417,725 2.1 % The Edelman Financial Center, LLC (7) Diversified Financial Services 8.59 % (L + 3.50 %) 4/7/2028 7,839,969 7,767,726 7,576,586 1.9 % Thryv, Inc. (4)(7) Professional Services 13.34 % (L + 8.50 %) 2/18/2026 6,291,829 6,303,306 6,264,334 1.6 % Titan US Finco, LLC (4)(8) Media 9.16 % (L + 4.00 %) 10/6/2028 5,940,000 5,929,242 5,798,925 1.4 % Tosca Services, LLC (7) Containers and Packaging 8.42 % (S + CSA + 3.50 %) 8/18/2027 6,881,995 6,833,022 5,436,776 1.4 % Truck Hero, Inc. (7) Auto Components 8.59 % (L + 3.50 %) 1/20/2028 6,962,912 6,958,135 6,221,884 1.5 % U.S. Renal Care, Inc. (7) Healthcare Providers and Services 10.38 % (L + 5.50 %) 6/26/2026 492,500 487,611 336,747 0.1 % U.S. Renal Care, Inc. (7)(8) Healthcare Providers and Services 9.88 % (L + 5.00 %) 6/26/2026 8,797,855 8,682,829 6,015,534 1.5 % US Radiology Specialists, Inc. (7) Healthcare Providers and Services 10.16 % (S + CSA + 5.25 %) 12/10/2027 8,857,875 8,772,878 8,344,118 2.1 % 14 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Veracode (7) Software 9.53 % (S + CSA + 4.75 %) 4/20/2029 8,756,000 8,716,393 8,274,420 2.1 % VeriFone Systems, Inc. (7) Commercial Services and Supplies 8.96 % (L + 4.00 %) 8/20/2025 2,938,619 2,911,723 2,531,253 0.6 % Verscend Holding Corp. (7) Healthcare Technology 8.84 % (L + 4.00 %) 8/27/2025 6,048,594 6,038,748 6,050,500 1.5 % Vision Solutions, Inc. (7) IT Services 8.82 % (L + 4.00 %) 4/24/2028 9,850,000 9,825,625 8,791,125 2.2 % Vocus Group DD T/L (4)(7) Diversified Telecommunication Services 8.67 % (S + CSA + 3.50 %) 5/26/2028 1,995,000 1,975,544 1,972,556 0.5 % WaterBridge Midstream Operating, LLC (7) Energy Equipment and Services 10.57 % (L + 5.75 %) 6/22/2026 3,948,849 3,862,885 3,889,913 1.0 % Watlow Electric Manufacturing Company (7) Electrical Equipment 8.69 % (S + CSA + 3.75 %) 3/2/2028 3,273,558 3,253,389 3,214,225 0.8 % Wencor Group (7) Aerospace and Defense 8.91 % (S + CSA + 4.00 %) 6/19/2026 2,969,231 2,910,983 2,912,385 0.7 % White Cap Buyer LLC (7)(8) Building Products 8.56 % (S + 3.75 %) 10/8/2027 6,872,925 6,864,349 6,813,337 1.7 % Wilsonart LLC (7)(8) Building Products 8.46 % (L + 3.25 %) 12/18/2026 9,824,313 9,786,304 9,481,493 2.4 % Total First Lien Senior Secured 924,995,091 $ 915,825,362 $ 848,935,238 210.8 % Second Lien Senior Secured (2) American Rock Salt Company LLC Metals and Mining 12.09 % (L + 7.25 %) 6/4/2029 2,750,000 2,773,401 2,612,500 0.7 % ARC Falcon I Inc. (7) Chemicals 11.84 % (L + 7.00 %) 9/24/2029 2,000,000 1,983,973 1,710,000 0.5 % Artera Services, LLC (7) Construction and Engineering 12.41 % (L + 7.25 %) 3/6/2026 7,810,000 7,520,047 4,935,920 1.2 % Aruba Investments, Inc. (7) Chemicals 12.59 % (L + 7.75 %) 10/27/2028 2,350,000 2,320,968 2,126,750 0.5 % Asurion, LLC (7) Insurance 10.09 % (L + 5.25 %) 1/19/2029 6,000,000 5,968,930 4,983,000 1.2 % Barracuda Networks, Inc. Software 11.68 % (S + 7.00 %) 5/17/2030 3,000,000 2,915,098 2,690,010 0.7 % DCert Buyer, Inc. (7) IT Services 11.70 % (L + 7.00 %) 2/19/2029 1,500,000 1,497,962 1,394,580 0.3 % 15 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Delta Topco, Inc. IT Services 12.16 % (S + 7.25 %) 10/6/2028 3,435,617 3,469,848 2,951,762 0.7 % Energy Acquisition LP Electrical Equipment 13.34 % (L + 8.50 %) 6/25/2026 2,812,400 2,732,747 2,221,796 0.6 % Epicor Software Corporation (7) Software 12.59 % (L + 7.75 %) 7/31/2028 3,000,000 3,038,321 2,980,635 0.7 % Help/Systems Holdings, Inc. Software 11.66 % (S + CSA + 6.75 %) 11/19/2027 3,656,217 3,662,674 3,007,238 0.7 % Idera, Inc. IT Services 11.51 % (L + 6.75 %) 2/5/2029 5,000,000 5,027,524 4,350,000 1.1 % Infinite Bidco, LLC (7) Electronic Equipment, Instruments and Components 12.16 % (L + 7.00 %) 2/24/2029 2,729,999 2,726,097 2,429,699 0.6 % Inmar, Inc. (7) Professional Services 12.84 % (L + 8.00 %) 5/1/2025 5,000,000 5,003,540 4,787,500 1.2 % Ivanti Software, Inc. Software 12.21 % (L + 7.25 %) 12/1/2028 3,000,000 3,011,314 1,824,000 0.5 % Magenta Buyer LLC Software 13.08 % (L + 8.25 %) 7/27/2029 5,000,000 4,991,719 3,766,675 0.9 % Paradigm Outcomes Healthcare Providers and Services 12.54 % (S + CSA + 7.50 %) 10/26/2026 1,500,000 1,480,825 1,440,000 0.4 % Peraton Corp. Aerospace and Defense 12.65 % (L + 7.75 %) 2/26/2029 2,912,425 2,968,342 2,839,615 0.7 % Pretium PKG Holdings, Inc. (7) Containers and Packaging 11.76 % (L + 6.75 %) 9/30/2029 2,000,000 1,983,336 1,282,920 0.3 % Quest Software US Holdings Inc. Software 12.33 % (S + CSA + 7.50 %) 2/1/2030 3,000,000 2,960,590 1,860,000 0.5 % Vision Solutions, Inc. IT Services 12.07 % (L + 7.25 %) 4/23/2029 3,500,000 3,506,494 2,801,838 0.7 % Total Second Lien Senior Secured 71,956,658 71,543,750 58,996,438 14.7 % Corporate Bonds KOBE US Midco 2 Inc Chemicals 9.25 % 11/1/2026 1,900,000 1,885,372 1,377,500 0.3 % Total Corporate Bonds 1,900,000 1,885,372 1,377,500 0.3 % Total Debt Investments $ 998,851,749 $ 989,254,484 $ 909,309,176 225.8 % 16 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets CLO Mezzanine (2) 522 Funding CLO 2020-6, Ltd. (4) Structured Note 12.86 % (L + 8.04 %) 10/23/2034 2,800,000 2,725,569 2,177,003 0.5 % Carlyle US CLO 2020-2, Ltd (4) Structured Note 13.35 % (L + 8.53 %) 1/25/2035 4,000,000 3,891,963 3,385,662 0.9 % Elmwood CLO III Ltd. (4) Structured Note 12.55 % (L + 7.74 %) 10/20/2034 2,000,000 1,928,716 1,620,465 0.5 % GoldenTree Loan Management US 2020-7A (4) Structured Note 12.56 % (L + 7.75 %) 4/20/2034 2,000,000 1,897,628 1,632,774 0.4 % GoldenTree Loan Management US 2021-10A (4) Structured Note 12.60 % (L + 7.79 %) 7/20/2034 1,250,000 1,217,307 993,690 0.2 % GoldenTree Loan Management US 2021-9A (4) Structured Note 11.56 % (L + 6.75 %) 1/20/2033 2,000,000 1,899,308 1,602,997 0.4 % Thayer Park CLO, Ltd. (4) Structured Note 13.68 % (L + 8.87 %) 4/20/2034 1,300,000 1,263,320 982,224 0.2 % Total CLO Mezzanine 15,350,000 14,823,811 12,394,815 3.1 % CLO Equity Ares CLO Ltd 2021-62A (4) Structured Subordinated Note NA 1/25/2034 5,000,000 4,225,172 3,578,524 1.0 % Babson CLO 2018-4A, Ltd. (4) Structured Subordinated Note NA 10/15/2030 4,000,000 1,856,928 1,535,969 0.4 % Dryden 86 CLO, Ltd. (4) Structured Subordinated Note NA 7/17/2030 6,000,000 4,395,442 3,641,471 0.9 % HPS Loan Management 12-2018, Ltd. (4) Structured Subordinated Note NA 7/18/2031 7,500,000 4,290,326 3,420,525 0.8 % Long Point Park CLO, Ltd. (4) Structured Subordinated Note NA 1/17/2030 6,358,000 3,776,969 2,086,696 0.5 % Regatta XII Funding Ltd. (4) Structured Subordinated Note NA 10/15/2032 6,000,000 4,430,480 3,665,134 0.9 % Signal Peak CLO, LLC (4) Structured Subordinated Note NA 10/26/2034 5,000,000 2,437,836 2,148,015 0.5 % Stratus CLO Series 2021-1A (4) Structured Subordinated Note NA 12/29/2029 2,000,000 1,503,105 1,130,016 0.3 % Total CLO Equity 41,858,000 26,916,258 21,206,350 5.3 % Total Equity and Other Investments $ 57,208,000 $ 41,740,069 $ 33,601,165 8.4 % 17 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of March 31, 2023 (Unaudited) Number of Shares Cost Fair Value Percentage of Net Assets Short-Term Investments Fidelity Investments Money Market Government Portfolio - Institutional Class, 4.76% (7)(8)(9) 50,579,190 50,579,190 50,579,190 12.5 % US Treasury Bill (7)(8) US Treasury Bill 4.52 % 4/4/2023 7,500,000 7,497,269 7,499,050 1.9 % US Treasury Bill (7)(8) US Treasury Bill 4.04 % 4/6/2023 7,500,000 7,495,413 7,497,053 1.9 % US Treasury Bill (7)(8) US Treasury Bill 4.55 % 4/11/2023 7,500,000 7,490,778 7,492,132 1.9 % US Treasury Bill (7)(8) US Treasury Bill 4.31 % 4/13/2023 26,700,000 26,661,926 26,666,249 6.6 % Total Short-Term Investments 99,779,190 $ 99,724,576 $ 99,733,674 24.8 % Total Investments $ 1,130,719,129 $ 1,042,644,015 259.0 % Liabilities in Excess of Other Assets ( 640,007,986 ) ( 159.0 )% Net Assets $ 402,636,029 100.0 % (1) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method. (2) Loan contains a variable rate structure, subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR), SOFR + Credit Spread Adjustment (S+CSA), where the Credit Spread Adjustment is a defined additional spread amount based on the tenor of SOFR the borrower selects, or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement. For the holdings as of March 31, 2023 that have S+CSA as the base rate, the CSA is 10bp for 1M SOFR, 15bp for 3M SOFR, and 25bp for 6M SOFR. For the avoidance of doubt, loan floors apply to S+CSA, not S. (3) As of March 31, 2023, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company. (4) Non-qualifying investment as defined by Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of March 31, 2023, 13.8% of the Company’s total assets were in non-qualifying investments. (5) Investments or a portion of investments are unsettled as of March 31, 2023. (6) As of March 31, 2023, the tax cost of the Company’s investments approximates their amortized cost. (7) Security or portion thereof held within Palmer Square BDC Funding I, LLC (“PS BDC Funding”) and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Bank of America, N.A. (“BofA N.A.”) (see Note 6 to the consolidated financial statements). (8) Security or portion thereof held within Palmer Square BDC Funding II, LLC (“PS BDC Funding II”) and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Wells Fargo Bank, National Association (“WFB”) (see Note 6 to the consolidated financial statements). (9) 7-day effective yield as of March 31, 2023. The accompanying notes are an integral part of these consolidated financial statements. 18 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Debt Investments First Lien Senior Secured (2) AAdvantage Loyalty IP Ltd. (4)(7) Insurance 8.99 % (L + 4.75 %) 4/20/2028 $ 3,750,000 $ 3,716,805 $ 3,740,039 0.9 % AccentCare, Inc. (7) Healthcare Providers and Services 8.73 % (L + 4.00 %) 6/22/2026 5,970,140 5,971,668 4,059,695 1.1 % Acrisure, LLC (7) Insurance 7.88 % (L + 3.50 %) 2/12/2027 5,842,349 5,829,939 5,496,511 1.5 % Acrisure, LLC (7) Insurance 8.63 % (L + 4.25 %) 2/15/2027 4,999,500 4,968,962 4,851,590 1.3 % AI Aqua Merger Sub, Inc., (7)(8) Food Products 7.97 % (S + 3.75 %) 6/16/2028 7,661,500 7,664,792 7,235,329 2.0 % Aimbridge Acquisition Co., Inc. (7) Hotels, Restaurants and Leisure 8.13 % (L + 3.75 %) 2/2/2026 4,936,225 4,848,346 4,508,945 1.2 % Alliant Holdings Intermediate LLC (7) Insurance 7.85 % (L + 3.50 %) 11/5/2027 5,925,000 5,919,495 5,799,094 1.6 % Allied Universal Holdco LLC (7) Professional Services 8.17 % (S + CSA + 3.75 %) 4/7/2028 6,912,500 6,907,152 6,580,735 1.8 % Amentum Government Services Holdings LLC (7) Aerospace and Defense 8.76 % (S + 4.00 %) 2/15/2029 5,970,000 5,944,146 5,831,944 1.6 % American Rock Salt Company LLC (7) Metals and Mining 8.38 % (L + 4.00 %) 6/9/2028 5,914,950 5,906,545 5,582,234 1.5 % Amynta Agency Borrower, Inc. (7) Insurance 8.88 % (L + 4.50 %) 2/28/2025 8,837,032 8,726,822 8,395,181 2.3 % AP Gaming I, LLC (4)(5)(7) Hotels, Restaurants and Leisure 8.73 % (S + CSA + 4.00 %) 2/15/2029 8,689,362 8,574,269 8,254,894 2.3 % Aptean Inc (7)(8) Software 8.98 % (L + 4.25 %) 4/23/2026 7,804,752 7,806,146 7,492,562 2.1 % AQA Acquisition Holding, Inc. (5)(7) Software 8.98 % (L + 4.25 %) 11/19/2027 8,431,026 8,314,473 8,107,865 2.2 % ARC Falcon I Inc. (7) Chemicals 8.13 % (L + 3.75 %) 8/31/2028 4,319,427 4,298,413 3,740,771 1.0 % Aruba Investments Holdings, LLC (7) Chemicals 8.14 % (L + 4.00 %) 10/28/2027 2,463,819 2,437,480 2,400,178 0.7 % Ascend Learning, LLC (7) Professional Services 7.88 % (L + 3.50 %) 11/18/2028 7,425,000 7,392,488 7,038,789 1.9 % AssuredPartners, Inc. (7) Insurance 7.88 % (L + 3.50 %) 2/12/2027 4,416,472 4,421,141 4,288,394 1.2 % AssuredPartners, Inc. (7) Insurance 7.82 % (S + 3.50 %) 2/12/2027 1,985,000 1,973,934 1,932,398 0.5 % Athletico Management, LLC (7) Healthcare Providers and Services 8.98 % (S + CSA + 4.25 %) 2/2/2029 7,188,875 7,157,111 5,890,384 1.6 % Autokiniton US Holdings, Inc. (7)(8) Auto Components 8.79 % (L + 4.50 %) 3/27/2028 8,134,273 8,142,050 7,895,370 2.2 % Aveanna Healthcare LLC (4)(5)(7) Healthcare Providers and Services 8.14 % (L + 3.75 %) 6/30/2028 5,149,341 5,111,181 3,988,165 1.1 % Barracuda Networks, Inc. (7) Software 8.59 % (S + 4.50 %) 4/13/2029 7,500,000 7,285,329 7,245,825 2.0 % BBB Industries (8) Auto Components 9.67 % (S + CSA + 5.25 %) 6/29/2029 4,000,000 3,616,539 3,650,000 1.0 % BCP Renaissance Parent LLC (7) Oil, Gas and Consumable Fuels 7.82 % (S + 3.50 %) 10/30/2026 7,569,511 7,554,173 7,511,377 2.1 % Belfor Holdings, Inc. (5)(7) Commercial Services and Supplies 8.38 % (L + 3.75 %) 3/31/2026 1,994,832 1,989,845 1,984,858 0.5 % Castle US Holding Corporation (7)(8) Professional Services 8.38 % (L + 4.00 %) 1/29/2027 6,037,233 5,981,767 3,758,177 1.0 % Castle US Holding Corporation (8) Professional Services 8.13 % (L + 3.75 %) 1/29/2027 1,974,737 1,966,699 1,230,508 0.3 % CCI Buyer, Inc. (7)(8) Wireless Telecommunication Services 8.58 % (S + 4.00 %) 12/17/2027 6,795,280 6,789,067 6,509,879 1.8 % 19 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets CCS-CMGC Holdings, Inc. (7) Healthcare Providers and Services 9.91 % (L + 5.50 %) 10/1/2025 5,355,711 5,303,965 4,263,360 1.2 % CDK Global (7) Software 9.08 % (S + 4.50 %) 7/6/2029 4,000,000 3,883,280 3,970,680 1.1 % Congruex Group LLC (8) Construction and Engineering 9.99 % (S + CSA + 5.75 %) 4/28/2029 6,218,750 6,073,258 6,063,281 1.7 % Connectwise LLC (7) IT Services 7.88 % (L + 3.50 %) 9/29/2028 7,920,000 7,908,488 7,543,800 2.1 % Consolidated Communications, Inc. (4)(7) Diversified Telecommunication Services 7.88 % (L + 3.50 %) 10/2/2027 1,428,009 1,412,497 1,265,573 0.3 % ConvergeOne Holdings Corp. (7)(8) IT Services 9.38 % (L + 5.00 %) 1/4/2026 9,839,102 9,682,304 5,765,959 1.6 % Corelogic, Inc. (7) Internet Software and Services 7.94 % (L + 3.50 %) 4/14/2028 7,900,000 7,893,718 6,618,739 1.8 % CP Atlas Buyer, Inc (7) Building Products 7.88 % (L + 3.50 %) 11/23/2027 6,894,514 6,800,708 6,064,484 1.7 % Creation Technologies, Inc. (4)(8) Electronic Equipment, Instruments and Components 9.25 % (L + 5.50 %) 9/14/2028 4,975,000 4,911,130 4,004,875 1.1 % Curia Global, Inc. (7) Healthcare Providers and Services 8.16 % (L + 3.75 %) 8/30/2026 4,850,056 4,836,404 4,017,980 1.1 % Dave & Buster’s, Inc. (4)(5)(7) Hotels, Restaurants and Leisure 9.44 % (S + CSA + 5.00 %) 6/22/2029 5,000,000 4,981,250 4,982,825 1.4 % DCert Buyer, Inc. (7) IT Services 8.70 % (S + 4.00 %) 10/16/2026 7,835,452 7,835,021 7,586,402 2.1 % Deerfield Dakota Holding, LLC (7) Diversified Financial Services 8.07 % (S + 3.75 %) 2/25/2027 4,875,000 4,824,100 4,564,999 1.3 % Delta Topco, Inc. (7) IT Services 8.15 % (S + 3.75 %) 10/29/2027 6,902,406 6,897,810 6,398,530 1.8 % Digi International Inc. (4)(8) Technology Hardware, Storage and Peripherals 9.38 % (L + 5.00 %) 12/22/2028 4,386,161 4,308,443 4,353,265 1.2 % DIRECTV Financing, LLC (7) Media 9.38 % (L + 5.00 %) 8/2/2027 5,325,000 5,287,772 5,195,762 1.4 % Dotdash Meredith, Inc. (7) Media 8.22 % (S + CSA + 4.00 %) 11/23/2028 9,900,000 9,856,743 8,563,500 2.4 % EAB Global, Inc. (7) Professional Services 7.88 % (L + 3.50 %) 6/28/2028 1,791,912 1,784,394 1,728,237 0.5 % ECI Software Solutions, Inc. (7) Software 8.48 % (L + 3.75 %) 9/30/2027 6,864,925 6,841,429 6,607,490 1.8 % ECL Entertainment, LLC (8) Hotels, Restaurants and Leisure 11.88 % (L + 7.50 %) 3/31/2028 1,970,000 2,006,853 1,968,365 0.5 % EFS Cogen Holdings I, LLC (7)(8) Independent Power and Renewable Electricity Producers 8.23 % (L + 3.50 %) 10/29/2027 7,680,240 7,686,971 7,404,558 2.0 % Endurance International Group, Inc., The (7) Professional Services 7.72 % (L + 3.50 %) 2/10/2028 4,686,175 4,620,144 4,229,273 1.2 % Ensemble RCM, LLC (7) Healthcare Technology 7.94 % (S + CSA + 3.75 %) 7/24/2026 5,689,474 5,618,296 5,636,135 1.6 % Fertitta Entertainment, LLC (7) Hotels, Restaurants and Leisure 8.32 % (S + 4.00 %) 1/29/2029 7,443,750 7,415,307 7,092,070 2.0 % Filtration Group Corporation (7) Industrial Conglomerates 7.88 % (L + 3.50 %) 10/20/2028 3,950,000 3,941,824 3,887,452 1.1 % Flexera Software LLC (7)(8) Software 8.14 % (L + 3.75 %) 1/26/2028 8,837,266 8,817,772 8,503,129 2.3 % 20 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Garda World Security Corporation (4)(5)(7) Diversified Consumer Services 8.53 % (S + 4.25 %) 2/12/2029 7,000,000 6,772,500 6,755,000 1.9 % Getty Images, Inc. (5)(7)(8) Media 8.94 % (L + 4.50 %) 2/13/2026 8,356,730 8,358,691 8,351,507 2.3 % GIP III Stetson I, LP (7) Energy Equipment and Services 8.63 % (L + 4.25 %) 7/19/2025 1,855,663 1,804,227 1,822,614 0.5 % Global Medical Response, Inc. (7) Healthcare Providers and Services 8.42 % (L + 4.25 %) 9/24/2025 9,095,838 9,053,579 6,429,666 1.8 % Grab Holdings Inc (4)(7) IT Services 8.89 % (L + 4.50 %) 2/27/2026 4,903,031 4,942,597 4,854,001 1.3 % Great Outdoors Group, LLC (7) Specialty Retail 8.13 % (L + 3.75 %) 3/6/2028 7,007,670 6,979,386 6,749,262 1.9 % Grinding Media Inc. (8) Metals and Mining 7.93 % (L + 4.00 %) 9/21/2028 4,937,500 4,916,856 4,616,563 1.3 % HAH Group Holding Company LLC (5)(7) Healthcare Providers and Services 9.43 % (S + CSA + 5.00 %) 10/22/2027 710,949 693,320 679,845 0.2 % HAH Group Holding Company LLC (5)(7) Healthcare Providers and Services 9.43 % (S + CSA + 5.00 %) 10/20/2027 5,618,604 5,479,223 5,372,790 1.5 % Hamilton Projects Acquiror, LLC (7)(8) Independent Power and Renewable Electricity Producers 8.17 % (L + 4.50 %) 6/11/2027 8,721,780 8,681,952 8,596,404 2.4 % Help/Systems Holdings, Inc. (7) Software 8.19 % (S + CSA + 4.00 %) 11/19/2026 6,849,306 6,812,195 6,193,485 1.7 % Hyland Software, Inc. (7) Software 7.88 % (L + 3.50 %) 7/1/2024 4,905,349 4,904,261 4,849,551 1.3 % Idera, Inc. (7) IT Services 7.5 % (L + 3.75 %) 3/2/2028 9,799,449 9,760,546 9,266,604 2.5 % IMA Financial Group, Inc. (8) Insurance 7.88 % (L + 3.50 %) 10/16/2028 4,950,000 4,928,624 4,801,525 1.3 % Ineos US Finance LLC (4)(5)(7) Chemicals 8.17 % (S + CSA + 3.75 %) 11/8/2027 4,077,252 3,934,548 4,021,189 1.1 % Infinite Bidco LLC (7) Electronic Equipment, Instruments and Components 7.98 % (L + 3.25 %) 3/2/2028 6,409,925 6,364,641 6,169,552 1.7 % Inmar, Inc. (7)(8) Professional Services 8.47 % (L + 4.00 %) 5/1/2024 7,842,418 7,822,586 7,158,167 2.0 % Ivanti Software, Inc. (7) Software 8.73 % (L + 4.00 %) 12/1/2027 982,500 980,602 778,022 0.2 % Ivanti Software, Inc. (7) Software 9.01 % (L + 4.25 %) 12/1/2027 6,922,688 6,877,857 5,512,917 1.5 % Jack Ohio Finance LLC (8) Hotels, Restaurants and Leisure 9.13 % (L + 4.75 %) 10/31/2028 4,948,645 4,950,641 4,862,044 1.3 % Kestrel Acquisition, LLC (7) Independent Power and Renewable Electricity Producers 8.64 % (L + 4.25 %) 5/2/2025 6,832,098 6,333,128 6,657,025 1.8 % Kleopatra Finco S.a.r.l (4)(7) Containers and Packaging 8.26 % (S + CSA + 4.75 %) 2/4/2026 1,965,000 1,959,187 1,753,763 0.5 % LBM Acquisition LLC (7)(8) Building Products 7.12 % (L + 3.75 %) 12/31/2027 7,391,911 7,318,369 6,441,385 1.8 % Life Time, Inc. (4)(7) Hotels, Restaurants and Leisure 9.48 % (L + 4.75 %) 12/10/2024 7,582,556 7,575,249 7,555,335 2.1 % Lifescan Global Corporation (7) Healthcare Equipment and Supplies 9.74 % (L + 6.00 %) 10/1/2024 6,146,918 6,121,209 4,471,883 1.2 % 21 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Lightstone Holdco LLC (7) Independent Power and Renewable Electricity Producers 10.07 % (S + 5.75 %) 2/1/2027 4,795,064 4,322,409 4,411,459 1.2 % Lightstone Holdco LLC (7) Independent Power and Renewable Electricity Producers 10.07 % (S + 5.75 %) 2/1/2027 271,204 244,463 249,508 0.1 % LogMeIn, Inc. (7) IT Services 9.14 % (L + 4.75 %) 8/31/2027 9,844,496 9,742,894 6,379,233 1.8 % LSF9 Atlantis Holdings, LLC (7) Specialty Retail 11.83 % (S + 7.25 %) 3/29/2029 6,912,500 6,654,959 6,734,503 1.9 % Magenta Buyer LLC (7) Software 9.17 % (L + 4.75 %) 7/27/2028 5,445,000 5,401,766 4,687,818 1.3 % Mariner Wealth Advisors, LLC (5)(8) Diversified Financial Services 9.04 % (S + CSA + 4.25 %) 8/18/2028 3,000,000 2,865,000 2,891,250 0.8 % Maxar Technologies, Inc. (4)(5)(7) Aerospace and Defense 8.67 % (S + CSA + 4.25 %) 6/14/2029 3,888,979 3,888,979 3,890,709 1.1 % Medical Solutions L.L.C. (8) Healthcare Providers and Services 7.88 % (L + 3.50 %) 10/6/2028 4,966,304 4,945,113 4,665,744 1.3 % Michael Baker International, LLC (8) Construction and Engineering 9.38 % (L + 5.00 %) 11/2/2028 6,187,500 6,132,616 6,001,875 1.7 % Micro Holding Corp. (7) IT Services 8.13 % (L + 3.75 %) 9/13/2024 9,861,126 9,824,488 9,604,046 2.6 % Midwest Veterinary Partners, LLC (7) Healthcare Providers and Services 8.38 % (L + 4.00 %) 4/27/2028 8,882,538 8,806,026 8,038,697 2.2 % Milano Acquisition Corporation (5)(7) Healthcare Providers and Services 8.73 % (L + 4.00 %) 10/1/2027 8,878,393 8,719,701 8,356,788 2.3 % Minotaur Acquisition, Inc. (7)(8) Diversified Financial Services 9.17 % (S + CSA + 5.00 %) 3/27/2026 11,944,106 12,017,475 11,356,411 3.1 % Mitchell International, Inc. (7) Professional Services 8.41 % (L + 3.75 %) 10/16/2028 9,925,000 9,862,344 9,175,514 2.5 % MLN US HoldCo LLC (7) Diversified Telecommunication Services 8.25 % (L + 4.50 %) 12/31/2025 4,056,188 3,997,358 1,429,806 0.4 % Moneygram International, Inc. (4)(7) Diversified Consumer Services 8.88 % (L + 4.50 %) 7/21/2026 9,895,833 9,876,860 9,891,182 2.7 % NAPA Management Services Corporation (7) Healthcare Providers and Services 9.67 % (S + CSA + 5.25 %) 2/23/2029 7,940,000 7,874,026 6,538,114 1.8 % National Mentor Holdings, Inc. (7) Healthcare Providers and Services 8.33 % (L + 3.75 %) 2/18/2028 9,134,164 9,111,508 6,434,516 1.8 % National Mentor Holdings, Inc. (7) Healthcare Providers and Services 8.48 % (L + 3.75 %) 2/18/2028 291,993 291,242 205,693 0.1 % Navicure, Inc. (7) Healthcare Technology 8.38 % (L + 4.00 %) 10/22/2026 4,625,815 4,627,579 4,556,428 1.3 % NorthStar Group Services, Inc. (7)(8) Commercial Services and Supplies 9.94 % (S + CSA + 5.50 %) 11/9/2026 8,649,114 8,620,554 8,526,599 2.3 % NSM Top Holdings Corp. (7) Healthcare Equipment and Supplies 9.67 % (S + CSA + 5.25 %) 11/12/2026 4,936,387 4,916,697 4,450,967 1.2 % OneDigital Borrower LLC (7) Insurance 8.49 % (S + CSA + 4.25 %) 11/16/2027 9,871,228 9,770,988 9,352,989 2.6 % Orchid Merger Sub II, LLC (4)(7) Software 9.58 % (S + CSA + 4.75 %) 5/12/2027 4,331,250 4,127,214 3,789,844 1.0 % Padagis, LLC (7) Pharmaceuticals 8.49 % (L + 4.75 %) 7/31/2028 6,588,235 6,553,975 5,874,532 1.6 % PECF USS Intermediate Holding III Corporation (8) Professional Services 8.63 % (L + 4.25 %) 11/6/2028 4,950,000 4,940,828 4,145,972 1.1 % Peraton Corp. (7)(8) Aerospace and Defense 8.13 % (L + 3.75 %) 2/1/2028 10,644,693 10,616,273 10,414,075 2.9 % PetVet Care Centers, LLC (7) Healthcare Providers and Services 7.88 % (L + 3.50 %) 2/14/2025 6,867,196 6,857,497 6,475,079 1.8 % PMHC II Inc. (7) Chemicals 8.49 % (S + CSA + 4.25 %) 2/2/2029 6,588,488 6,532,502 5,601,927 1.5 % 22 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets PQ Performance Chemicals (7) Chemicals 7.39 % (L + 3.25 %) 4/28/2028 4,950,000 4,947,652 4,830,383 1.3 % Prairie ECI Acquiror LP (7) Oil, Gas and Consumable Fuels 9.13 % (L + 4.75 %) 3/11/2026 7,182,326 7,013,472 7,000,757 1.9 % Pretium PKG Holdings, Inc. (7)(8) Containers and Packaging 8.73 % (L + 4.00 %) 9/22/2028 5,940,000 5,892,087 4,764,741 1.3 % Project Alpha Intermediate Holding, Inc. (5)(7) Software 8.39 % (L + 4.00 %) 4/26/2024 8,350,738 8,289,560 8,167,022 2.2 % Project Boost Purchaser, LLC (7) Professional Services 7.88 % (L + 3.50 %) 6/1/2026 5,910,000 5,899,689 5,714,261 1.6 % Proofpoint, Inc. (5)(7) IT Services 7.98 % (L + 3.25 %) 6/9/2028 2,421,385 2,414,428 2,334,276 0.6 % PS Holdco, LLC (8) Road and Rail 8.63 % (L + 4.25 %) 10/31/2028 5,433,731 5,411,542 5,060,162 1.4 % PT Intermediate Holdings III LLC (8) Machinery 10.23 % (L + 5.50 %) 11/1/2028 2,296,800 2,287,978 2,227,896 0.6 % PT Intermediate Holdings III LLC (8) Machinery 10.23 % (L + 5.50 %) 11/1/2028 496,250 491,647 481,363 0.1 % PT Intermediate Holdings III LLC (8) Machinery 10.23 % (L + 5.50 %) 11/1/2028 1,520,750 1,507,724 1,475,128 0.4 % PT Intermediate Spider DD T/L (Parts Town) (8) Machinery 10.23 % (L + 5.50 %) 11/1/2028 2,118,600 2,118,600 2,055,042 0.6 % Quest Software US Holdings Inc. (7) Software 8.49 % (S + CSA + 4.25 %) 2/1/2029 9,476,250 9,385,131 7,353,001 2.0 % Radiology Partners, Inc. (7) Healthcare Providers and Services 8.64 % (L + 4.25 %) 7/9/2025 6,000,000 5,993,919 5,064,390 1.4 % RC Buyer, Inc. (7) Auto Components 8.23 % (L + 3.50 %) 7/28/2028 2,073,750 2,069,336 1,946,090 0.5 % RealPage, Inc. (7) Real Estate Management and Development 7.38 % (L + 3.00 %) 2/18/2028 6,912,500 6,903,165 6,587,613 1.8 % Red Planet Borrower, LLC (7) Internet Software and Services 8.13 % (L + 3.75 %) 10/2/2028 7,900,000 7,866,755 4,984,900 1.4 % Redstone Holdco 2 LP (7)(8) IT Services 9.11 % (L + 4.75 %) 4/14/2028 7,900,000 7,852,104 5,507,406 1.5 % Refresco (4)(7) Food Products 8.52 % (S + 4.25 %) 12/13/2024 5,000,000 4,958,869 4,850,000 1.3 % Renaissance Holdings Corp. (7) Software 8.72 % (S + 4.50 %) 4/1/2027 4,975,000 4,836,940 4,795,900 1.3 % Rocket Software, Inc. (5)(7) Software 8.63 % (L + 4.25 %) 11/28/2025 3,490,933 3,377,477 3,364,823 0.9 % Rocket Software, Inc. (7) Software 8.63 % (L + 4.25 %) 11/28/2025 4,932,406 4,912,516 4,762,855 1.3 % Rodan & Fields, LLC (7) Textiles, Apparel and Luxury Goods 8.32 % (L + 4.00 %) 6/16/2025 1,714,103 1,561,291 640,063 0.2 % Rohm Holding GMBH (4)(7)(8) Chemicals 8.37 % (L + 4.75 %) 7/31/2026 8,845,183 8,830,408 7,418,897 2.0 % RSC Acquisition, Inc. (8) Insurance 10.23 % (S + CSA + 5.50 %) 9/30/2026 6,193,331 6,147,556 6,023,015 1.7 % Runner Buyer Inc. (8) Household Durables 10.23 % (L + 5.50 %) 10/20/2028 4,962,500 4,919,797 3,523,375 1.0 % Sabert Corporation (8) Containers and Packaging 8.94 % (L + 4.50 %) 11/26/2026 2,101,808 2,109,801 2,091,299 0.6 % Shearer’s Foods, LLC (7) Food Products 7.88 % (L + 3.50 %) 9/23/2027 1,674,054 1,665,320 1,600,814 0.4 % Sophia, L.P. (7) Software 8.57 % (S + 4.00 %) 10/7/2027 1,990,000 1,971,843 1,941,912 0.5 % Sovos Compliance, LLC (8) Software 8.57 % (L + 4.50 %) 7/28/2028 3,962,945 3,955,834 3,660,771 1.0 % 23 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Specialty Building Products Holdings, LLC (7)(8) Building Products 7.64 % (L + 3.25 %) 10/5/2028 9,925,000 9,909,395 8,969,768 2.5 % Summer BC Holdco B LLC (4)(8) Media 8.17 % (L + 4.50 %) 12/4/2026 4,937,500 4,942,258 4,595,998 1.3 % Surgery Center Holdings, Inc. (4)(7) Healthcare Providers and Services 8.05 % (L + 3.75 %) 9/3/2026 4,217,676 4,201,753 4,175,035 1.1 % Tecta America Corp. (7)(8) Construction and Engineering 8.69 % (S + CSA + 4.25 %) 4/6/2028 8,585,091 8,568,674 8,263,150 2.3 % The Edelman Financial Center, LLC (7) Diversified Financial Services 7.88 % (L + 3.50 %) 4/7/2028 7,859,918 7,783,213 7,354,919 2.0 % Thryv, Inc. (4)(7) Professional Services 12.88 % (L + 8.50 %) 2/18/2026 4,850,226 4,861,233 4,791,636 1.3 % Tidal Power Holdings, LLC (4)(7) Independent Power and Renewable Electricity Producers 8.48 % (L + 3.75 %) 4/1/2027 848,961 847,980 846,838 0.2 % Titan US Finco, LLC (4)(8) Media 7.67 % (L + 4.00 %) 10/6/2028 5,955,000 5,942,128 5,711,857 1.6 % Tosca Services, LLC (7) Containers and Packaging 7.94 % (S + CSA + 3.50 %) 8/18/2027 6,899,596 6,847,551 5,640,420 1.6 % Traverse Midstream Partners LLC (7) Oil, Gas and Consumable Fuels 8.95 % (S + CSA + 4.25 %) 9/27/2024 3,162,774 3,153,165 3,160,798 0.9 % Truck Hero, Inc. (7) Auto Components 8.13 % (L + 3.50 %) 1/20/2028 6,980,675 6,973,011 6,016,469 1.7 % U.S. Renal Care, Inc. (7)(8) Healthcare Providers and Services 9.44 % (L + 5.00 %) 6/26/2026 8,820,648 8,697,196 4,978,153 1.4 % U.S. Renal Care, Inc. (7) Healthcare Providers and Services 9.94 % (L + 5.50 %) 6/26/2026 493,750 488,355 278,660 0.1 % U.S. Silica Company (4)(7) Metals and Mining 8.44 % (L + 4.00 %) 4/25/2025 7,856,622 7,724,787 7,797,697 2.1 % UKG Inc. (7) Software 8.13 % (L + 3.75 %) 4/8/2026 4,365,880 4,352,517 4,217,746 1.2 % United Airlines, Inc. (4)(7) Airlines 8.11 % (L + 3.75 %) 4/21/2028 7,887,124 7,944,048 7,809,909 2.1 % US Radiology Specialists, Inc. (7) Healthcare Providers and Services 8.94 % (L + 5.25 %) 12/10/2027 8,880,300 8,788,150 8,046,395 2.2 % Veracode (7) Software 8.94 % (S + CSA + 4.75 %) 4/20/2029 8,778,000 8,735,737 8,245,878 2.3 % VeriFone Systems, Inc. (7) Commercial Services and Supplies 8.36 % (L + 4.00 %) 8/20/2025 2,946,292 2,916,464 2,714,743 0.7 % Verscend Holding Corp. (7) Healthcare Technology 8.38 % (L + 4.00 %) 8/27/2025 6,063,985 6,052,127 6,037,455 1.7 % Vision Solutions, Inc. (7) IT Services 8.36 % (L + 4.00 %) 4/24/2028 9,875,000 9,848,442 8,203,656 2.3 % WaterBridge Midstream Operating, LLC (7) Energy Equipment and Services 9.13 % (L + 5.75 %) 6/22/2026 3,959,079 3,866,350 3,816,176 1.1 % Watlow Electric Manufacturing Company (7) Electrical Equipment 8.15 % (S + CSA + 3.75 %) 3/2/2028 3,281,909 3,260,223 3,165,007 0.9 % Wencor Group (7) Aerospace and Defense 8.42 % (S + CSA + 4.25 %) 6/19/2026 2,976,923 2,913,743 2,906,221 0.8 % White Cap Buyer LLC (7)(8) Building Products 8.07 % (S + 3.75 %) 10/8/2027 6,890,281 6,880,543 6,674,960 1.8 % Wilsonart LLC (7)(8) Building Products 7.98 % (L + 3.25 %) 12/18/2026 9,849,375 9,807,312 9,397,535 2.6 % Zelis Cost Management Buyer, Inc. (7) Healthcare Technology 7.88 % (L + 3.50 %) 9/30/2026 4,744,302 4,738,488 4,701,319 1.3 % Total First Lien Senior Secured 959,720,843 $ 951,753,250 $ 870,880,344 239.6 % 24 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets Second Lien Senior Secured (2) American Rock Salt Company LLC Metals and Mining 11.63 % (L + 7.25 %) 6/4/2029 2,750,000 2,774,395 2,640,000 0.7 % ARC Falcon I Inc. (7) Chemicals 11.38 % (L + 7.00 %) 9/24/2029 2,000,000 1,982,524 1,745,000 0.5 % Artera Services, LLC (7) Construction and Engineering 11.98 % (L + 7.25 %) 3/6/2026 7,810,000 7,499,293 4,867,309 1.3 % Aruba Investments, Inc. (7) Chemicals 12.14 % (L + 7.75 %) 10/27/2028 2,350,000 2,318,902 2,150,250 0.6 % Asurion, LLC (7) Insurance 9.63 % (L + 5.25 %) 1/19/2029 6,000,000 5,965,262 4,699,290 1.3 % Barracuda Networks, Inc. Software 11.09 % (S + 7.00 %) 5/17/2030 3,000,000 2,912,610 2,741,250 0.8 % DCert Buyer, Inc. (7) IT Services 11.7 % (L + 7.00 %) 2/19/2029 1,500,000 1,497,620 1,375,500 0.4 % Delta Topco, Inc. IT Services 11.65 % (S + 7.25 %) 10/6/2028 3,435,617 3,470,139 2,735,610 0.8 % Energy Acquisition LP Electrical Equipment 12.88 % (L + 8.50 %) 6/25/2026 2,812,400 2,726,657 2,271,013 0.6 % Epicor Software Corporation (7) Software 12.13 % (L + 7.75 %) 7/31/2028 3,000,000 3,044,723 2,968,500 0.8 % Help/Systems Holdings, Inc. Software 10.94 % (S + CSA + 6.75 %) 11/19/2027 3,656,217 3,663,047 2,911,263 0.8 % Idera, Inc. IT Services 10.5 % (L + 6.75 %) 2/5/2029 5,000,000 5,027,564 4,150,000 1.1 % Infinite Bidco LLC (7) Electronic Equipment, Instruments and Components 11.73 % (L + 7.00 %) 2/24/2029 2,729,999 2,725,339 2,525,249 0.7 % Inmar, Inc. (7) Professional Services 12.38 % (L + 8.00 %) 5/1/2025 5,000,000 5,004,820 4,675,000 1.3 % Ivanti Software, Inc. Software 12.01 % (L + 7.25 %) 12/1/2028 3,000,000 3,011,509 1,755,000 0.5 % Magenta Buyer LLC Software 12.67 % (L + 8.25 %) 7/27/2029 5,000,000 4,990,886 3,975,000 1.1 % Paradigm Outcomes Healthcare Providers and Services 12.05 % (S + CSA + 7.50 %) 10/26/2026 1,500,000 1,479,565 1,440,000 0.4 % Peraton Corp. Aerospace and Defense 12.09 % (L + 7.75 %) 2/26/2029 2,912,425 2,970,059 2,783,551 0.8 % Pretium PKG Holdings, Inc. (7) Containers and Packaging 11.54 % (L + 6.75 %) 9/30/2029 2,000,000 1,982,769 1,247,510 0.3 % Quest Software US Holdings Inc. Software 11.59 % (S + 7.50 %) 2/1/2030 3,000,000 2,958,821 1,851,255 0.5 % Vision Solutions, Inc. IT Services 11.61 % (L + 7.25 %) 4/23/2029 3,500,000 3,506,759 2,610,790 0.7 % Total Second Lien Senior Secured 71,956,658 71,513,263 58,118,340 16.0 % Corporate Bonds KOBE US Midco 2 Inc Chemicals 9.25 % 11/1/2026 1,900,000 1,884,529 1,332,888 0.4 % Total Corporate Bonds 1,900,000 1,884,529 1,332,888 0.4 % Total Debt Investments 1,033,577,501 $ 1,025,151,042 $ 930,331,572 256.0 % 25 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Portfolio Company (3) Industry Interest Rate Maturity Date Principal / Par Amortized Cost (1)(6) Fair Value Percentage of Net Assets CLO Mezzanine (2) 522 Funding CLO 2020-6, Ltd. (4) Structured Note 12.36 % (L + 8.04 %) 10/23/2034 2,800,000 2,723,983 2,188,332 0.7 % Barings CLO 2013-IA Class FR (4) Structured Note 10.99 % (L + 6.75 %) 1/20/2028 2,000,000 1,935,102 1,788,731 0.5 % Carlyle US CLO 2020-2, Ltd (4) Structured Note 12.89 % (L + 8.53 %) 1/25/2035 4,000,000 3,889,711 3,213,525 0.9 % Elmwood CLO III Ltd. (4) Structured Note 11.98 % (L + 7.74 %) 10/20/2034 2,000,000 1,927,196 1,600,079 0.4 % GoldenTree Loan Management US 2020-7A (4) Structured Note 11.99 % (L + 7.75 %) 4/20/2034 2,000,000 1,895,346 1,532,172 0.4 % GoldenTree Loan Management US 2021-10A (4) Structured Note 12.03 % (L + 7.79 %) 7/20/2034 1,250,000 1,216,595 983,411 0.3 % GoldenTree Loan Management US 2021-9A (4) Structured Note 10.99 % (L + 6.75 %) 1/20/2033 2,000,000 1,896,778 1,558,971 0.4 % Magnetite CLO, Ltd. 2015-16A (4) Structured Note 10.69 % (L + 6.50 %) 1/18/2028 1,000,000 842,116 854,968 0.2 % Thayer Park CLO, Ltd. (4) Structured Note 13.11 % (L + 8.87 %) 4/20/2034 1,300,000 1,262,503 1,012,532 0.3 % Total CLO Mezzanine 18,350,000 17,589,330 14,732,721 4.1 % CLO Equity Ares CLO Ltd 2021-62A (4) Structured Subordinated Note NA 1/25/2034 5,000,000 4,225,172 3,679,447 1.0 % Babson CLO 2018-4A, Ltd. (4) Structured Subordinated Note NA 10/15/2030 4,000,000 1,856,928 1,637,600 0.5 % Dryden 86 CLO, Ltd. (4) Structured Subordinated Note NA 7/17/2030 6,000,000 4,395,442 3,732,464 1.0 % HPS Loan Management 12-2018, Ltd. (4) Structured Subordinated Note NA 7/18/2031 7,500,000 4,290,326 3,006,631 0.8 % Long Point Park CLO, Ltd. (4) Structured Subordinated Note NA 1/17/2030 6,358,000 3,836,615 2,550,735 0.7 % Regatta XII Funding Ltd. (4) Structured Subordinated Note NA 10/15/2032 6,000,000 4,430,480 3,845,111 1.1 % Signal Peak CLO, LLC (4) Structured Subordinated Note NA 10/26/2034 5,000,000 2,437,836 2,253,444 0.6 % Stratus CLO Series 2021-1A (4) Structured Subordinated Note NA 12/29/2029 2,000,000 1,539,549 1,094,792 0.3 % Total CLO Equity 41,858,000 27,012,348 21,800,224 6.0 % Total Other Investments 60,208,000 $ 44,601,678 $ 36,532,945 10.1 % 26 Palmer Square Capital BDC Inc. Consolidated Schedules of Investments As of December 31, 2022 Number of Fair Percentage Shares Cost Value of Net Assets Short-Term Investments Fidelity Investments Money Market Government Portfolio - Institutional Class, 4.10% (9) 50,347,215 50,347,215 50,347,215 13.9 % Total Short-Term Investments 50,347,215 $ 50,347,215 $ 50,347,215 13.9 % Total Investments $ 1,120,099,935 $ 1,017,211,732 280.0 % Liabilities in Excess of Other Assets ( 653,768,250 ) ( 180.0 )% Net Assets $ 363,443,482 100.0 % (1) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method. (2) Loan contains a variable rate structure, subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR), SOFR + Credit Spread Adjustment (S+CSA), where the Credit Spread Adjustment is a defined additional spread amount based on the tenor of SOFR the borrower selects, or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement. For the holdings as of December 31, 2022 that have S+CSA as the base rate, the CSA is 10bp for 1M SOFR, 15bp for 3M SOFR, and 25bp for 6M SOFR. For the avoidance of doubt, loan floors apply to S+CSA, not S. (3) As of December 31, 2022, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company. (4) Non-qualifying investment as defined by Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2022, 14.9% of the Company’s total assets were in non-qualifying investments. (5) Investments or a portion of investments are unsettled as of December 31, 2022. (6) As of December 31, 2022, the tax cost of the Company’s investments approximates their amortized cost. (7) Security or portion thereof held within Palmer Square BDC Funding I, LLC (“PS BDC Funding”) and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Bank of America, N.A. (“BofA N.A.”) (see Note 6 to the consolidated financial statements). (8) Security or portion thereof held within Palmer Square BDC Funding II, LLC (“PS BDC Funding II”) and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Wells Fargo Bank, National Association (“WFB”) (see Note 6 to the consolidated financial statements). (9) 7-day effective yield as of December 31, 2022. The accompanying notes are an integral part of these consolidated financial statements. 27 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 1. Organization Organization Palmer Square Capital BDC Inc. (the “Company”) is a financial services company that primarily lends to and invests in corporate debt securities of companies, including small to large private U.S. companies. The Company was organized as a Maryland corporation on August 26, 2019 and is structured as an externally managed, non-diversified closed-end management investment company. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Beginning with its taxable year ending December 31, 2020, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and expects to qualify as a RIC each year thereafter. The Company commenced operations on January 23, 2020. Palmer Square BDC Funding I, LLC (“PS BDC Funding”) was formed on January 21, 2020 and entered into a senior, secured revolving credit facility with Bank of America, N.A. (“BofA N.A.”) Palmer Square BDC Funding II LLC (“PS BDC Funding II”) was formed on September 8, 2020 and entered into a senior, secured credit facility with Wells Fargo, National Association (“WFB”). The Company’s investment objective is to maximize total return, comprised of current income and capital appreciation. The Company’s current investment focus is guided by two strategies that facilitate its investment opportunities and core competencies: (1) investing in corporate debt securities and, to a lesser extent, (2) investing in collateralized loan obligation (“CLO”) structured credit funds that typically own corporate debt securities, including the equity and junior debt tranches of CLOs. To a limited extent, the Company may enter into derivatives transactions, which may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of the Company’s portfolio positions from changes in currency exchange rates and market interest rates or to earn income and enhance the Company’s total returns. The Company may receive or purchase warrants or rights to acquire equity or other securities in connection with making a debt investment in a company. During the three months ended March 31, 2023 and March 31, 2022, the Company did not invest in any derivative contracts. The Company is externally managed by Palmer Square BDC Advisor LLC (the “Investment Advisor”), an investment adviser that is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, pursuant to an investment advisory agreement between the Company and the Investment Advisor (the “Advisory Agreement”). The Investment Advisor, in its capacity as administrator (the “Administrator”), provides the administrative services necessary for the Company to operate pursuant to an administration agreement between the Company and the Administrator (the “Administration Agreement”). The Company’s fiscal year ends on December 31. The Company has two wholly-owned subsidiaries: PS BDC Funding, a special purpose wholly-owned subsidiary established for utilizing the Company’s revolving credit facility with BofA N.A., and PS BDC Funding II, a special purpose wholly-owned subsidiary established for utilizing the Company’s credit facility with WFB. These subsidiaries are consolidated in the financial statements of the Company. 28 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 2. Significant Accounting Policies The Company is an investment company and applies specific accounting and financial reporting requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Topic 946, Financial Services-Investment Companies . The Company’s functional currency is U.S. dollars (“USD”) and these consolidated financial statements have been prepared in that currency. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to Regulation S-X. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates. Indemnifications In the normal course of business, the Company enters into contracts that contain a variety of representations which provide general indemnifications. The Company’s maximum exposure under these arrangements cannot be known; however, the Company expects any risk of loss to be remote. Cash and Cash Equivalents Cash is comprised of cash on deposit with major financial institutions. Cash equivalents consist of highly liquid investments with original maturities of three months or less. The Company places its cash with high credit quality institutions to minimize credit risk exposure. Debt Issuance Costs The Company records origination and other expenses related to its debt obligations as deferred financing costs. These expenses are deferred and amortized over the life of the related debt instrument. Debt issuance costs are presented on the consolidated statements of assets and liabilities as a direct deduction from the debt liability. In circumstances in which there is not an associated debt liability amount recorded in the consolidated financial statements when the debt issuance costs are incurred, such debt issuance costs will be reported on the consolidated statements of assets and liabilities as an asset until the debt liability is recorded. As of December 31, 2022, the balance of debt issuance costs was $( 0.1 ) million, representing deferred financing costs of $ 2.4 million less accrued interest of $ 2.5 million, included in BoA Credit Facility and WF Credit Facility (each as defined below), net of $ 641.3 million on the consolidated statements of assets and liabilities. As of March 31, 2023, the balance of debt issuance costs was $( 2.6 ) million, representing deferred financing costs of $ 2.2 million less accrued interest of $ 4.8 million, included in BoA Credit Facility and WF Credit Facility, net of $ 616.4 million on the consolidated statements of assets and liabilities. Income Taxes The Company has elected to be treated as a RIC under Subchapter M of the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. 29 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its stockholders, for each taxable year, at least 90 % of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses. In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one year period ending October 31 in such calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income. The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. Basis of Consolidation As provided under ASC 946, the Company will generally not consolidate its investment in a company other than a substantially wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly owned investment company subsidiaries (PS BDC Funding and PS BDC Funding II) in its consolidated financial statements. Interest and Dividend Income Recognition Interest income is recorded on the accrual basis and includes amortization of premiums or accretion of discounts. Discounts and premiums to par value on securities purchased are accreted and amortized, respectively, into interest income over the contractual life of the respective security using the effective interest method. The amortized cost of investments represents the original cost adjusted for the amortization of premiums or accretion of discounts, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees, paydown gains/losses and unamortized discounts are recorded as interest income in the current period. Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities and money market funds is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies. Non-Accrual Status Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine not to place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. 30 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Management reviews all loans that have principal or interest that is 90 days past due, or when there is reasonable doubt as to the collection of principal or interest to determine if a loan will be placed on non-accrual status. When a loan is placed on non-accrual status, the accrued interest and unpaid interest is generally reversed, and any discount (market or original) is no longer accreted to interest income. Interest payments received while a loan is on non-accrual status may be applied to principal or recognized as income, as determined by management’s judgement regarding collectability. A loan may be taken off non-accrual status if past due payments are made, and if management determines the issuer is likely to remain current on future payments. Management may make exceptions to this policy if the loan has sufficient collateral value or is in the process of collection. Management may also leave a loan on accrual status while actively seeking recovery of past due payment. As of March 31, 2023, the Company had no portfolio investments on non-accrual status. Other Income From time to time, the Company may receive fees for services provided to portfolio companies. These fees are generally only available to the Company as a result of closing investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Investment Advisor provides vary by investment, but can include closing, work, diligence or other similar fees and fees for providing managerial assistance to the Company’s portfolio companies. In addition, the Company may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees and possibly consulting and performance- based fees. Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized. New Accounting Pronouncements In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022 the FASB issued Accounting Standards Update 2022-06, Reference Rate Reform (Topic 848) – Deferral of the Sunset Date of Topic 848 which extended the effective period through December 31, 2024. 31 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 3. Agreements and Related Party Transactions Administration Agreement The Company has entered into the Administration Agreement with the Administrator. Pursuant to the Administration Agreement, the Administrator furnishes office facilities and equipment and provides clerical, bookkeeping, compliance, recordkeeping and other administrative services at such facilities. Under the Administration Agreement, the Administrator performs, or oversees the performance of, required administrative services, which include being responsible for the financial and other records that the Company is required to maintain and preparing reports to stockholders and reports and other materials filed with the SEC. In addition, the Administrator assists the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports and other materials to stockholders, and generally overseeing the payment of expenses and the performance of administrative and professional services rendered to the Company by others. Under the Administration Agreement, the Administrator also provides managerial assistance on the Company’s behalf to those portfolio companies that have accepted the offer to provide such assistance. Under the Administration Agreement, the Company reimburses the Administrator based upon its allocable portion of the Administrator’s overhead (including rent) in performing its obligations under the Administration Agreement, including the fees and expenses associated with performing compliance functions and the Company’s allocable portion of the cost of its officers (including the Company’s Chief Financial Officer and Chief Compliance Officer), and any of their respective staff who provide services to the Company, operations staff who provide services to the Company, and internal audit staff, if any, to the extent internal audit performs a role in the Company’s Sarbanes-Oxley internal control assessment. In addition, if requested to provide managerial assistance to portfolio companies, the Administrator is reimbursed based on the services provided. The Administration Agreement has an initial term of two years and may be renewed with the approval of the Company’s board of directors (the “Board”). The agreement was renewed during the year for an additional one year period. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. To the extent that the Administrator outsources any of its functions, the Company pays the fees associated with such functions on a direct basis without any incremental profit to the Administrator. In addition, the Administrator has, pursuant to a sub-administration agreement, engaged U.S. Bancorp Fund Services, LLC to act on behalf of the Company’s Administrator in the performance of certain other administrative services. The Company has also engaged U.S. Bank, National Association or its affiliates (“US Bank”) directly to serve as custodian, transfer agent, distribution paying agent and registrar. Investment Advisory Agreement The Investment Advisor serves as the investment adviser of the Company and is registered as an investment adviser with the SEC. The Investment Advisor’s primary business is to provide a variety of investment management services, including an investment program for the Company. The Investment Advisor is responsible for all business activities and oversight of the investment decisions made for the Company. In return for providing management services to the Company, the Company pays the Investment Advisor a base management fee, calculated and paid quarterly in arrears at an annual rate of 2.00 % of the average value of the weighted average (based on the number of shares outstanding each day in the quarter) of the Company’s total net assets at the end of the two most recently completed calendar quarters. The base management fee for any partial quarter will be pro-rated based on the number of days actually elapsed in that quarter relative to the total number of days in such quarter. The Investment Advisor, however, has agreed to waive its right to receive management fees in excess of 1.75% of the total net assets during any period prior to the listing of the Company’s common stock on a national securities exchange (a “Listing”). If a Listing does not occur, such fee waiver will remain in place through liquidation of the Company. The Investment Advisor will not be permitted to recoup any waived amounts at any time and the waiver may only be modified or terminated prior to a Listing with the approval of the Board. 32 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Additionally, pursuant to the Advisory Agreement, the Investment Advisor is not entitled to an incentive fee prior to a Listing. Following a Listing, the Investment Advisor will be entitled to an incentive fee (the “Income Incentive Fee”) based on the Company’s pre-incentive fee net investment income for the then most recently completed calendar quarter, as adjusted downward (but not upward) if over the most recently completed and three preceding calendar quarters aggregate net realized losses on the Company’s investments exceed the Company’s aggregate net investment income over the same period, excluding the most recently completed quarter, as described in more detail below. In this regard, if the Company’s net realized losses over the most recently completed and three preceding calendar quarters are greater than the Company’s net investment income over the same period, excluding the most recently completed quarter, then the pre-incentive fee net income used in the calculation of the Income Incentive Fee would be subject to a downward adjustment. The amount of the adjustment would be equal to the amount by which such net realized losses exceed such net investment income. On the other hand, if the Company’s net investment income over the most recently completed and three preceding calendar quarters is equal to or greater than the Company’s net realized losses over the same period, excluding the most recently completed quarter, then no adjustment to pre-incentive fee net investment income would be made. The Income Incentive Fee will be calculated and payable quarterly in arrears commencing with the first calendar quarter following a Listing. The Company will pay the Investment Advisor an Income Incentive Fee with respect to its “adjusted net investment income” in each calendar quarter as follows: ● no Income Incentive Fee in any calendar quarter in which the Company’s “adjusted net investment income” does not exceed an amount equal to a “hurdle rate” of 1.5% per quarter (6% annualized) of the Company’s total net assets at the end of that quarter (the “Hurdle Amount”); ● 100% of the Company’s “adjusted net investment income” with respect to that portion of such “adjusted net investment income,” if any, that exceeds the Hurdle Amount but is less than or equal to an amount (the “Catch-Up Amount”) determined on a quarterly basis by multiplying 1.6875% by the Company’s total net asset value for the immediately preceding calendar quarter. The Catch-Up Amount is intended to provide the Investment Advisor with an incentive fee of 12.5% on all of the Company’s “adjusted net investment income” when the Company’s “adjusted net investment income” reaches the Catch-Up Amount in any calendar quarter; and ● for any calendar quarter in which the Company’s “adjusted net investment income” exceeds the Catch-Up Amount, the Income Incentive Fee shall equal 12.5% of the amount of the Company’s “adjusted net investment income” for the calendar quarter. “Adjusted net investment income” means the Company’s “pre-incentive fee net investment income” during the then most recently completed calendar quarter minus the difference, if positive, between (i) the Company’s “net realized losses” over the then most recently completed and three preceding calendar quarters (or if shorter, the number of calendar quarters that have occurred since the Listing) and (ii) the Company’s “net investment income” over the three preceding calendar quarters (or if shorter, the number of calendar quarters that have occurred since the Listing). No adjustment (downward or upward) will be made to “pre-incentive fee net investment income” if the difference between clause (i) minus clause (ii) is zero or negative. “Pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any outstanding preferred stock, but excluding the Income Incentive Fee). “Pre-incentive fee net investment income” includes, in the case of investments with a deferred interest feature such as market discount, original issue discount (“OID”), debt instruments with payment-in-kind (“PIK”) interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash. “Net realized losses” in respect of a particular period means the difference, if positive, between (i) the aggregate realized capital losses on the Company’s investments in such period and (ii) the aggregate realized capital gains on the Company’s investments in such period. “Net investment income” in respect of the particular period means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the particular period, minus operating expenses for the particular period (including the base management fee, the Income Incentive Fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any outstanding preferred stock). “Net investment income” includes, in the case of investments with a deferred interest feature such as market discount, OID, debt instruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash. The Income Incentive Fee amount, or the calculations pertaining thereto, as appropriate, will be pro-rated for any period less than a full calendar quarter. 33 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 4. Investments The following table presents the composition of the Company’s investment portfolio at amortized cost and fair value as of March 31, 2023 and December 31, 2022: March 31, 2023 December 31, 2022 Amortized Fair Amortized Fair Cost Value Cost Value First-lien senior secured debt $ 915,825,362 $ 848,935,238 $ 951,753,250 $ 870,880,344 Second-lien senior secured debt 71,543,750 58,996,438 71,513,263 58,118,340 Corporate Bonds 1,885,372 1,377,500 1,884,529 1,332,888 CLO Mezzanine 14,823,811 12,394,815 17,589,330 14,732,721 CLO Equity 26,916,258 21,206,350 27,012,348 21,800,224 Short-term investments 99,724,576 99,733,674 50,347,215 50,347,215 Total Investments $ 1,130,719,129 $ 1,042,644,015 $ 1,120,099,935 $ 1,017,211,732 As of March 31, 2023, approximately 15.3 % of the long-term investment portfolio at amortized cost and 15.5 % of the long-term investment portfolio measured at fair value, respectively, were invested in non-qualifying assets. As of December 31, 2022, approximately 16.0 % of the investment portfolio at amortized cost and 16.3 % of the investment portfolio measured at fair value, respectively, were invested in non-qualifying assets. With respect to the Company’s total assets, 13.8 % and 14.9 % of the Company’s total assets were in non-qualifying assets as defined by Section 55(a) of the 1940 Act as of March 31, 2023 and December 31, 2022, respectively. 34 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) The industry composition of investments based on fair value, as a percentage of total investments at fair value, as of March 31, 2023 and December 31, 2022 was as follows: March 31, 2023 December 31, 2022 Software 12.9 % 12.9 % Healthcare Providers and Services 9.4 % 9.9 % IT Services 7.9 % 8.4 % Professional Services 6.0 % 5.9 % Insurance 5.4 % 5.8 % Cash and Cash Equivalents 4.9 % 4.9 % US Treasury Bill 4.7 % - % Hotels, Restaurants and Leisure 4.0 % 3.9 % Building Products 3.7 % 3.7 % Media 3.7 % 3.2 % Chemicals 3.1 % 3.3 % Diversified Financial Services 2.9 % 2.6 % Construction and Engineering 2.6 % 2.5 % Independent Power and Renewable Electricity Producers 2.6 % 2.8 % Diversified Consumer Services 2.1 % 1.6 % Structured Subordinated Note 2.0 % 2.1 % Aerospace and Defense 1.9 % 2.5 % Auto Components 1.9 % 1.9 % Electronic Equipment, Instruments and Components 1.5 % 1.2 % Containers and Packaging 1.5 % 1.5 % Food Products 1.3 % 1.3 % Specialty Retail 1.3 % 1.3 % Commercial Services and Supplies 1.2 % 1.3 % Metals and Mining 1.2 % 2.0 % Structured Note 1.2 % 1.4 % Internet Software and Services 1.2 % 1.1 % Healthcare Technology 1.0 % 2.1 % Healthcare Equipment and Supplies 0.9 % 0.9 % Machinery 0.7 % 0.6 % Oil, Gas and Consumable Fuels 0.7 % 1.7 % Real Estate Management and Development 0.6 % 0.6 % Wireless Telecommunication Services 0.6 % 0.6 % Pharmaceuticals 0.6 % 0.6 % Energy Equipment and Services 0.5 % 0.6 % Electrical Equipment 0.5 % 0.5 % Road and Rail 0.5 % 0.5 % Technology Hardware, Storage and Peripherals 0.4 % 0.4 % Diversified Telecommunication Services 0.4 % 0.3 % Household Durables 0.4 % 0.3 % Textiles, Apparel and Luxury Goods 0.1 % 0.1 % Airlines - % 0.8 % Industrial Conglomerates - % 0.4 % Total 100.0 % 100.0 % 35 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 5. Fair Value of Investments Fair value is defined as the price that the Company would receive upon selling an investment or paying to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. Accounting guidance emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined as follows: Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 — Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities. Level 3 — Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. Investments in private investment companies measured based upon net asset value as a practical expedient to determine fair value are not required to be categorized in the fair value hierarchy. As of March 31, 2023 and as of December 31, 2022, there were no investments accounted for using the practical expedient. The inputs for the determination of fair value may require significant management judgment or estimation and are based upon management’s assessment of the assumptions that market participants would use in pricing the assets or liabilities. These investments include debt and equity investments in private companies or assets valued using the market or income approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples. The information may also include pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence. Pricing inputs and weightings applied to determine fair value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. 36 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) The following table presents the fair value hierarchy of investments as of March 31, 2023: Fair Value Hierarchy as of March 31, 2023 Investments: Level 1 Level 2 Level 3 Total First-lien senior secured debt $ - $ 848,935,238 $ - $ 848,935,238 Second-lien senior secured debt - 58,996,438 - 58,996,438 Corporate Bonds - 1,377,500 - 1,377,500 CLO Mezzanine - 12,394,815 - 12,394,815 CLO Equity - 21,206,350 - 21,206,350 Short Term Investments 50,579,190 49,154,484 - 99,733,674 Total Investments $ 50,579,190 $ 992,064,825 $ - $ 1,042,644,015 The following table presents the fair value hierarchy of investments as of December 31, 2022: Fair Value Hierarchy as of December 31, 2022 Investments: Level 1 Level 2 Level 3 Total First-lien senior secured debt $ - $ 870,880,344 $ - $ 870,880,344 Second-lien senior secured debt - 58,118,340 - 58,118,340 Corporate Bonds - 1,332,888 - 1,332,888 CLO Mezzanine - 14,732,721 - 14,732,721 CLO Equity - 21,800,224 - 21,800,224 Short Term Investments 50,347,215 - - 50,347,215 Total Investments $ 50,347,215 $ 966,864,517 $ - $ 1,017,211,732 For the three months ended March 31, 2023 and the year ended December 31, 2022, the Company did not recognize any transfers to or from Level 3. Debt Not Carried at Fair Value The fair value of the BoA Credit Facility and the WF Credit Facility, which would be categorized as Level 3 within the fair value hierarchy as of March 31, 2023, approximates their respective carrying values because the BoA Credit Facility and WF Credit Facility each have variable interest based on selected short term rates. 37 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 6. Borrowings In accordance with the 1940 Act, with certain limitations, BDCs are permitted to borrow amounts such that their asset coverage ratios, as defined in the 1940 Act, are at least 150 % after such borrowing. As of March 31, 2023, the Company’s asset coverage ratio was 165 %. Bank of America Credit Facility On February 18, 2020, the Company, through a special purpose wholly-owned subsidiary, PS BDC Funding (together with the Company, the “Borrowers”) entered into a Credit Agreement (the “Credit Agreement”) with certain financial institutions as lenders (“Lenders”), Bank of America N.A. as the Administrative Agent (“BofA N.A.”) and BofA Securities, Inc. (“BofA Securities”), as Lead Arranger and Sole Book Manager, pursuant to which the Lenders agreed to provide the Company with a revolving line of credit (the “BoA Credit Facility”). Under the BoA Credit Facility, which matures on February 18, 2025, the Lenders have agreed to extend credit to PS BDC Funding in an aggregate amount up to the Commitment (as defined in the Credit Agreement) amount. The Commitment amount for the BoA Credit Facility was $200.0 million as of the closing date of the Credit Agreement, increased to $400.0 million on the one-month anniversary of the closing date, further increased to $475.0 million on October 12, 2020, and further increased to $725 million on September 29, 2021. The Borrowers’ ability to draw under the BoA Credit Facility is scheduled to terminate on February 11, 2025. All amounts outstanding under the BoA Credit Facility are required to be repaid by February 18, 2025. As the Company raises additional capital, we may enter into additional credit agreements to expand our borrowing capacity. Debt obligations under the BoA Credit Facility consisted of the following as of March 31, 2023: March 31, 2023 Aggregate Principal Committed Outstanding Principal Amount Available (1) Net Carrying Value (2) BoA Credit Facility $ 725,000,000 $ 487,000,000 $ 238,000,000 $ 488,479,470 Total debt $ 725,000,000 $ 487,000,000 $ 238,000,000 $ 488,479,470 (1) The amount available reflects any limitations related to the BoA Credit Facility’s borrowing base. (2) The carrying value of the BoA Credit Facility is presented net of deferred financing costs of $ 1.217 million and accrued interest of $ 2.697 million. Debt obligations under the BoA Credit Facility consisted of the following as of December 31, 2022: December 31, 2022 Aggregate Principal Committed Outstanding Principal Amount Available (1) Net Carrying Value (2) BoA Credit Facility $ 725,000,000 $ 514,500,000 $ 210,500,000 $ 513,726,164 Total debt $ 725,000,000 $ 514,500,000 $ 210,500,000 $ 513,726,164 (1) The amount available reflects any limitations related to the BoA Credit Facility’s borrowing base. (2) The carrying value of the BoA Credit Facility is presented net of deferred financing costs of $ 1.358 million and accrued interest of $ 584 thousand. 38 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Average debt outstanding under the BoA Credit Facility during the three months ended March 31, 2023 and March 31, 2022, was $ 512.3 million and $ 559.8 million, respectively. The loans under the BoA Credit Facility may be base rate loans or SOFR loans. The base rate loans will bear interest at the base rate plus 1.40%, and the SOFR loans will bear interest at 1-month SOFR plus 1.40% or 3-month SOFR plus 1.45%. The “base rate” will be equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate, and (c) 1-month or 3-month SOFR plus 0.10%. The Credit Agreement includes fallback language in the event that SOFR becomes unavailable. Interest pursuant to base rate loans is payable quarterly in arrears, and interest pursuant to SOFR loans is payable either quarterly or monthly, as specified by the Borrowers in a loan notice pertaining thereto. The Credit Agreement requires the payment of a commitment fee of 0.50% for unused Commitments until the four-month anniversary of the Second Amendment to the Credit Agreement. Thereafter, the commitment fee is 0.50% on unused Commitments up to 30% of the BoA Credit Facility, and 1.30% on unused Commitments in excess of 30% of the BoA Credit Facility. Such fee is payable quarterly in arrears. The advance rate for PS BDC Funding’s Eligible Collateral Assets ranges from 40% for Second Lien Bank Loans to 70% for First Lien Bank Loans that are B Assets to 100% for Cash (excluding Excluded Amounts) (as each such term is defined in the Credit Agreement). For the three months ended March 31, 2023 and March 31, 2022, the components of interest expense with respect to the BoA Credit Facility were as follows: For the Three Months Ended March 31, 2023 2022 Interest expense $ 7,853,166 $ 2,244,280 Amortization of debt issuance costs 157,944 156,657 Total interest expense $ 8,011,110 $ 2,400,937 Average interest rate 5.90 % 1.45 % PS BDC Funding has pledged all of its assets to BofA N.A., in its capacity as Administrative Agent, to secure its obligations under the BoA Credit Facility. Both the Company and PS BDC Funding have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. Borrowing under the BoA Credit Facility is subject to the leverage restrictions contained in the 1940 Act and PS BDC Funding complies with 1940 Act provisions relating to affiliated transactions and custody. The custodian of the assets pledged to BofA N.A. pursuant to the BoA Credit Facility is U.S. Bank National Administration (“US Bank”). The obligations under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, including in the event of a change of control of PS BDC Funding or if the Investment Advisor ceases to serve as investment adviser to the Company. Wells Fargo Credit Facility On December 18, 2020, the Company, through a special purpose wholly-owned subsidiary, Palmer Square BDC Funding II LLC (“PS BDC Funding II” and together with the Company, the “WF Borrowers”) entered into a Loan and Security Agreement (the “Loan Agreement”) with certain financial institutions as lenders (“WF Lenders”), WFB as the administrative agent and U.S. Bank, as Collateral Agent and Custodian, pursuant to which the WF Lenders agreed to provide the Company with a line of credit (the “WF Credit Facility”). Under the WF Credit Facility, which matures on December 18, 2025, the WF Lenders have agreed to extend credit to PS BDC Funding II in an aggregate amount up to the Facility Amount (as defined in the Loan Agreement). The Facility Amount for the WF Credit Facility was $ 150.0 million as of the closing date of the Loan Agreement. The WF Borrowers’ ability to draw under the WF Credit Facility is scheduled to terminate on December 18, 2023. All amounts outstanding under the WF Credit Facility are required to be repaid by December 18, 2025. 39 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Debt obligations under the WF Credit Facility consisted of the following as of March 31, 2023: March 31, 2023 Aggregate Principal Committed Outstanding Principal Amount Available (1) Net Carrying Value (2) WF Credit Facility $ 150,000,000 $ 126,750,000 $ 23,250,000 $ 127,934,895 Total debt $ 150,000,000 $ 126,750,000 $ 23,250,000 $ 127,934,895 (1) The amount available reflects any limitations related to the WF Credit Facility’s borrowing base. (2) The carrying value of the WF Credit Facility is presented net of deferred financing costs of $ 960 thousand and accrued interest of $ 2.145 million. Debt obligations under the WF Credit Facility consisted of the following as of December 31, 2022: December 31, 2022 Aggregate Principal Committed Outstanding Principal Amount Available (1) Net Carrying Value (2) WF Credit Facility $ 150,000,000 $ 126,750,000 $ 23,250,000 $ 127,583,253 Total debt $ 150,000,000 $ 126,750,000 $ 23,250,000 $ 127,583,253 (1) The amount available reflects any limitations related to the WF Credit Facility’s borrowing base. (2) The carrying value of the WF Credit Facility is presented net of deferred financing costs of $1.047 million and accrued interest of $1.880 million. Average debt outstanding under the WF Credit Facility during the three months ended March 31, 2023 and March 31, 2022, was $ 126.8 million and $ 113.9 million, respectively. 40 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) The loans under the WF Credit Facility may be Broadly Syndicated Loans or Middle Market Loans and shall be eurocurrency rate loans unless such rate is unavailable, in which case the loans shall be base rate loans until such rate is available. Broadly Syndicated Loans will bear interest at the LIBOR or base rate, as applicable, plus 1.85%, and Middle Market Loans will bear interest at LIBOR or base rate, as applicable, plus 2.35%. The “base rate” will be equal to the highest of (a) the federal funds rate plus 0.50% and (b) the prime rate. The Loan Agreement includes fallback language in the event that LIBOR becomes unavailable. Interest is payable quarterly, as determined by the WFB as the administrative agent. Following the Second Amendment of the WF Credit Facility, the Loan Agreement requires the payment of a non-usage fee of (x) during the first thirteen months following the closing of the WF Credit Facility, 0.50% multiplied by daily unused Facility Amounts, (y) between thirteen and sixteen months following the closing of the WF Credit Facility, 0.50% multiplied by the lesser of (1) daily unused Facility Amounts and (2) 50% of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the daily unused Facility Amount and 50% of the Facility Amount and (ii) zero and, (z) thereafter, 0.50% multiplied by the lesser of (1) daily unused Facility Amounts and (2) 20% of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the daily unused Facility Amount and 20% of the Facility Amount and (ii) zero. Such fee is payable quarterly in arrears. The WF Credit Facility includes the option to downsize the facility by paying a Commitment Reduction Fee. The Fee is equal to 2.00% of the facility reduction amount prior to the one year anniversary of the closing of the WF Credit Facility, and 1.00% thereafter. The applicable percentage for PS BDC Funding II’s Eligible Loans ranges from 67.5% for Middle Market Loans to 70% for Broadly Syndicated Loans (as each such term is defined in the Loan Agreement). For the three months ended March 31, 2023 and March 31, 2022, the components of interest expense with respect to the WF Credit Facility were as follows: For the Three Months Ended March 31, 2023 2022 Interest expense $ 2,224,001 $ 663,056 Amortization of debt issuance costs 87,019 87,019 Total interest expense $ 2,311,020 $ 750,075 Average interest rate 6.67 % 2.30 % PS BDC Funding II has pledged all of its assets to U.S. Bank, in its capacity as Collateral Agent, to secure its obligations under the WF Credit Facility and U.S. Bank acts as the custodian of such assets. Both the Company and PS BDC Funding II have made customary representations and warranties and are required to comply with various covenants, reporting requirements, and other customary requirements for similar credit facilities. Borrowing under the WF Credit Facility is subject to the leverage restrictions contained in the 1940 Act and PS BDC Funding II complies with 1940 Act provisions relating to affiliated transactions and custody. The obligations under the Loan Agreement may be accelerated upon the occurrence of an event of default under the Loan Agreement, including in the event of a change of control of PS BDC Funding II, if the Investment Advisor ceases to serve as investment adviser to the Company, or if Palmer Square or its affiliates cease to directly or indirectly own a majority of the membership interests of the Investment Advisor. 41 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 7. Share Transactions Offering Proceeds During the three months ended March 31, 2023 and March 31, 2022, the Company issued and sold 688,674 shares at an aggregate purchase price of $ 11.1 million and 240,396 shares at an aggregate purchase price of $ 4.8 million, respectively. These amounts include shares issued in reinvestment. Distribution Reinvestment Plan The Company has adopted a dividend reinvestment plan that will provide for reinvestment of its dividends and other distributions on behalf of the Company’s stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board authorizes, and the Company declares, a cash dividend or other distribution, then stockholders who do not “opt out” of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions. Prior to a Listing, the Board will use newly-issued shares of the Company’s common stock to implement the dividend reinvestment plan. The number of shares of common stock to be issued to a participant prior to a Listing would be equal to the quotient determined by dividing the cash value of the dividend payable to such stockholder by the net asset value per share as of the date such dividend was declared. After a Listing, the Board intends to primarily use newly-issued shares to implement the dividend reinvestment plan, whether or not the shares are trading at a price per share at, below or above net asset value. However, the Board reserves the right to purchase shares in the open market in connection with the implementation of the dividend reinvestment plan. The Board will examine the full facts and circumstances of each such dividend to determine the approach (i.e., to use newly issued shares or effectuate open market purchases to implement the dividend reinvestment plan) that is in the best interests of stockholders taking into account the Board’s fiduciary duties to stockholders, including by weighing the potential dilution in connection with such issuance to be incurred by the Company’s stockholders against the Company’s need and usage of reinvested funds. The number of newly issued shares to be issued to a participant would be determined by dividing the total dollar amount of the dividend payable to such stockholder by the market price per share of the Company’s common stock at the close of regular trading on a national securities exchange on the dividend payment date. Shares purchased in open market transactions by US Bank, the plan administrator and the Company’s transfer agent, registrar and dividend disbursing agent, will be allocated to a participant based upon the average purchase price, excluding any brokerage charges or other charges, of all shares of the Company’s common stock purchased with respect to the dividend. A registered stockholder may elect to receive an entire distribution in cash by notifying US Bank in writing so that such notice is received by the plan administrator no later than the record date for distributions to stockholders. The plan administrator will set up an account for shares acquired through the plan for each stockholder who has not elected to receive dividends or other distributions in cash and hold such shares in noncertificated form. There will be no brokerage charges or other charges to stockholders who participate in the plan. The plan administrator’s fees will be paid by the Company. Stockholders who receive dividends and other distributions in the form of stock are generally subject to the same U.S. federal, state and local tax consequences as are stockholders who elect to receive their distributions in cash. However, since a participating stockholder’s cash dividends will be reinvested, such stockholder will not receive cash with which to pay any applicable taxes on reinvested dividends. A stockholder’s basis for determining gain or loss upon the sale of stock received in a dividend or other distribution from the Company will generally be equal to the total dollar amount of the distribution payable to the stockholder. Any stock received in a dividend or other distribution will have a new holding period for tax purposes commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account. Participants may terminate their accounts under the plan by so notifying the plan administrator by submitting a letter of instruction terminating the participant’s account under the plan to US Bank. The plan may be terminated by the Company upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any dividend by the Company. If participants withdraw from the plan or the plan is terminated, the plan administrator will cause the shares held for the participant under the plan to be delivered to the participant. If an investor holds common stock with a brokerage firm that does not participate in the plan, such investor will not be able to participate in the plan and any dividend reinvestment may be affected on different terms than those described above. 42 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 8. Commitments and Contingencies As of March 31, 2023 and December 31, 2022, the Company had an aggregate of $ 667 thousand and $ 2.6 million, respectively, of unfunded commitments to provide debt financing to its portfolio companies. As of each of March 31, 2023 and December 31, 2022, there were no capital calls or draw requests made by the portfolio companies to fund these commitments. Such commitments are generally up to the Company’s discretion to approve or are subject to the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities. A summary of the composition of the unfunded commitments as of March 31, 2023 is shown in the table below: As of Expiration Date (1) March 31, 2023 PT Intermediate Holdings III, LLC 9/2/2024 $ 666,600 Total unfunded commitments $ 666,600 (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity. A summary of the composition of the unfunded commitments as of December 31, 2022 is shown in the table below: Expiration Date (1) As of December 31, 2022 ARC Falcon I Inc. 3/30/2023 $ 636,943 Vocus Group 6/18/2023 2,000,000 Total unfunded commitments $ 2,636,943 (1) Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity. From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of March 31, 2023, management is not aware of any pending or threatened litigation. 43 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) Note 9. Earnings Per Share In accordance with the provisions of ASC Topic 260, Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. As of each of March 31, 2023 and March 31, 2022, there were no dilutive shares. The following table sets forth the computation of basic and diluted earnings per share of common stock for the three months ended March 31, 2023 and March 31, 2022. For the Three Months Ended March 31, 2023 2022 Net increase (decrease) in net assets resulting from operations $ 28,088,322 $ ( 3,430,800 ) Weighted average shares of common stock outstanding - basic and diluted 24,591,581 22,807,768 Earnings (loss) per share of common stock - basic and diluted $ 1.14 $ ( 0.15 ) Note 10. Financial Highlights The following per share of common stock data has been derived from information provided in the unaudited financial statements. The following is a schedule of financial highlights for the three months ended March 31, 2023 and March 31, 2022: For the Three Months Ended March 31, 2023 2022 Per Common Share Operating Performance Net Asset Value, Beginning of Period $ 14.96 $ 20.06 Results of Operations: Net Investment Income (1) 0.55 0.38 Net Realized and Unrealized Gain (Loss) on Investments (4) 0.61 ( 0.53 ) Net Increase (Decrease) in Net Assets Resulting from Operations 1.16 ( 0.15 ) Net Asset Value, End of Period $ 16.12 $ 19.91 Shares Outstanding, End of Period 24,975,302 22,810,727 Ratio/Supplemental Data Net assets, end of period $ 402,636,029 $ 454,190,588 Weighted-average shares outstanding 24,591,581 22,807,768 Total Return (3) 7.75 % ( 0.75 %) Portfolio turnover 7 % 13 % Ratio of operating expenses to average net assets without waiver (2) 13.42 % 5.20 % Ratio of operating expenses to average net assets with waiver (2) 13.17 % 4.95 % Ratio of net investment income (loss) to average net assets without waiver (2) 13.97 % 7.43 % Ratio of net investment income (loss) to average net assets with waiver (2) 14.22 % 7.68 % (1) The per common share data was derived by using weighted average shares outstanding. 44 Palmer Square Capital BDC Inc. Notes to Consolidated Financial Statements (Unaudited) (2) The ratios reflect an annualized amount. (3) Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share (if any), divided by the beginning NAV per share. Total return is not annualized. Assumes reinvestment of distributions. (4) Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Consolidated Statements of Operations due to share transactions during the period. Note 11. Subsequent Events The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that require recognition or disclosure in these consolidated financial statements except for the following: Amendment to WF Credit Facility On April 10, 2023, the Company entered into an amendment to the WF Credit Facility that amends the WF Credit Facility to, among other things: (i) transfer and assign U.S. Bank National Association’s rights and obligations as collateral agent and as a secured party to U.S. Bank Trust Company, National Association, (ii) reference SOFR instead of LIBOR and (iii) remove LIBOR transition language in the WF Credit Facility. On and after April 10, 2023, Broadly Syndicated Loans will bear interest at Daily Simple SOFR or base rate, as applicable, plus 2.00%, and Middle Market Loans will bear interest at Daily Simple SOFR or base rate, as applicable, plus 2.50%, with an interest rate floor of 0.0%. The amendment provides fall back language in the event that Daily Simple SOFR becomes unavailable. Issuance of Common Stock On April 1, 2023, the Company issued and sold 68,238 shares of its common stock at an aggregate purchase price of $ 1.1 million. The issuance of the shares of common stock was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof. As of May 1, 2023, the Company sold approximately $ 5.1 million of shares of its common stock (with the final number of shares of common stock to be determined based on the to-be-determined net asset value per share). The offer and sale of the shares of common stock was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof. 45 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Except as otherwise specified, references to “we,” “us,” “our,” or the “Company” refer to Palmer Square Capital BDC Inc. Forward-Looking Statements This quarterly report on Form 10-Q contains forward-looking statements that involve substantial known and unknown risks, uncertainties and other factors. Undue reliance should not be placed on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, 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. 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: ● our future operating results; ● our business prospects and the prospects of our portfolio companies; ● changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including changes from the impact of the novel coronavirus (SARS-CoV-2) and related respiratory disease (“COVID-19”) pandemic; ● uncertainty surrounding the financial and political stability of the United States, the United Kingdom, the European Union and China, and the war between Russia and Ukraine; ● the ability of Palmer Square BDC Advisor LLC (our “Investment Advisor”) to locate suitable investments for us and to monitor and administer our investments; ● the ability of the Investment Advisor and its affiliates to attract and retain highly talented professionals; ● risk associated with possible disruptions in our operations or the economy generally; ● the timing of cash flows, if any, from the operations of the companies in which we invest; ● the ability of the companies in which we invest to achieve their objectives, including as a result of adverse events, such as the COVID-19 pandemic; ● our ability to continue to effectively manage our business due to the disruptions caused by adverse events, such as the COVID-19 pandemic; ● the dependence of our future success on the general economy and its effect on the industries in which we invest; ● our ability to maintain our qualification as a business development company (“BDC”) and as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”); ● the use of borrowed money to finance a portion of our investments; ● the adequacy, availability and pricing of our financing sources and working capital; ● actual or potential conflicts of interest with the Investment Advisor and its affiliates; ● our contractual arrangements and relationships with third parties; 46 ● the current economic downturn, interest rate volatility, loss of key personnel, and the illiquid nature of our investments; and ● the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in this quarterly report on Form 10-Q. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of the assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. 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 the section entitled “Item 1A. Risk Factors” 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. Moreover, we assume no duty and do not undertake to update the forward-looking statements. Overview We are a financial services company that primarily lends to and invests in corporate debt securities of companies, including small to large private U.S. companies. We were organized as a Maryland corporation on August 26, 2019 and are structured as an externally managed, non-diversified closed-end management investment company. We have elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”) and, beginning with our taxable year ended December 31, 2020, we have elected to be treated as a RIC under Subchapter M of the Code, and we expect to qualify as a RIC annually. We are externally managed by the Investment Advisor, an investment adviser that is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940 (the “Advisers Act”), pursuant to an investment advisory agreement between us and the Investment Advisor (the “Advisory Agreement”). Subject to the supervision of our Board of Directors (the “Board”), a majority of which is comprised of directors who are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act (the “Independent Directors”), our Investment Advisor manages our day-to-day operations and provides us with investment advisory and management services and certain administrative services. The Investment Advisor, in its capacity as Administrator, provides the administrative services necessary for us to operate pursuant to an administration agreement between us and the Administrator (the “Administration Agreement”). The Administrator has entered into a sub-administration agreement to delegate certain administrative functions to U.S. Bancorp Fund Services, LLC. Our Investment Advisor is a majority-owned subsidiary of Palmer Square Capital Management LLC (“Palmer Square”), which is a privately-held firm specializing in global alternative (non-traditional) investments with a total return orientation. Our investment objective is to maximize total return, comprised of current income and capital appreciation. Our current investment focus is guided by two strategies that facilitate our investment opportunities and core competencies: (1) investing in corporate debt securities and, to a lesser extent, (2) investing in collateralized loan obligation (“CLO”) structured credit funds that typically own corporate debt securities, including the equity and junior debt tranches of CLOs. To a limited extent, we may enter into derivatives transactions, which may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates or to earn income and enhance our total returns. We may also receive or purchase warrants or rights to acquire equity or other securities in connection with making a debt investment in a company. We will continue to evaluate other investment strategies in the ordinary course of business with no specific top-down allocation to any single investment strategy. 47 Revenues We generate revenue primarily in the form of interest and fee income on debt investments we hold and capital gains, if any, on investments. Our debt investments generally bear interest at a floating rate usually determined on the basis of a benchmark such as the London Interbank Offered Rate (“LIBOR”). Interest on debt securities is generally payable quarterly or semi-annually. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments is expected to fluctuate significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We may also generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Expenses Our primary operating expenses include the payment of fees to the Investment Advisor under the Advisory Agreement, our allocable portion of overhead and rental expenses under the Administration Agreement and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, including: ● interest expense and other costs associated with our indebtedness; ● the cost of calculating our net asset value, including the cost of any third-party valuation services; ● the cost of effecting sales and repurchases of shares of our common stock and other securities; ● fees payable to third parties relating to making investments, including our Investment Advisor’s or its affiliates’ travel expenses, research costs and out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments; ● transfer agent and custodial fees; ● operating costs incurred prior to the commencement of our operations; ● out-of-pocket fees and expenses associated with marketing efforts; ● federal and state registration fees and any stock exchange listing fees; ● U.S. federal, state and local taxes; ● Independent Directors’ fees and expenses; ● brokerage commissions and markups; ● fidelity bond, directors’ and officers’ liability insurance and other insurance premiums; ● direct costs, such as printing, mailing, long distance telephone and staff; ● fees and expenses associated with independent audits and outside legal costs; ● costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; and ● other expenses incurred by the Administrator or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion (subject to the review and approval of our Board) of overhead, including rental expenses. 48 Portfolio and Investment Activity As of March 31, 2023, our weighted average total yield to maturity of debt and income producing securities at fair value was 11.25%, and our weighted average total yield to maturity of debt and income producing securities at amortized cost was 8.67%. As of December 31, 2022, our weighted average total yield to maturity of debt and income producing securities at fair value was 11.47%, and our weighted average total yield to maturity of debt and income producing securities at amortized cost was 8.70%. As of March 31, 2023, we had 201 debt and equity investments in 169 portfolio companies with an aggregate fair value of approximately $942.9 million. As of December 31, 2022, we had 204 debt and equity investments in 176 portfolio companies with an aggregate fair value of approximately $966.9 million. Our investment activity for the three months ended March 31, 2023 and March 31, 2022 presented below (information presented herein is at amortized cost unless otherwise indicated). For the Three Months Ended March 31, 2023 March 31, 2022 New investments: Gross investments $ 63,457,688 $ 158,946,164 Less: sold investments (102,138,907 ) (147,724,483 ) Total new investments (38,681,219 ) 11,221,681 Principal amount of investments funded: First-lien senior secured debt investments $ 63,457,688 $ 137,244,297 Second-lien senior secured debt investments - 14,714,618 CLO Equity - 6,987,251 Total principal amount of investments funded 63,457,688 158,946,166 Principal amount of investments sold or repaid: First-lien senior secured debt investments 99,163,344 137,913,941 Second-lien senior secured debt investments - 6,400,130 Corporate Bonds - 1,001,493 Convertible bonds - 1,021,974 CLO Equity 96,089 - Collateralized securities and structured products - debt 2,879,474 1,386,946 Total principal amount of investments sold or repaid 102,138,907 147,724,484 49 Our investment activity for the three months ended March 31, 2023 and March 31, 2022 is presented below (information presented herein is at Par unless otherwise indicated). New investment commitment refers to long-term funded commitments in new securities made during the period that remained outstanding as of March 31, 2023 and March 31, 2022, respectively. For the Three Months Ended March 31, 2023 March 31, 2022 Number of new investment commitments 15 21 Average new investment commitment amount $ 3,742,311 $ 5,053,928 Weighted average maturity for new investment commitments 5.52 years 7.05 years Percentage of new debt investment commitments at floating rates 100.00 % 100.00 % Percentage of new debt investment commitments at fixed rates 0.00 % 0.00 % Weighted average interest rate of new investment commitments (1) 9.71 % 5.58 % Weighted average spread over reference rate of new floating rate investment commitments (2) 4.88 % 4.89 % Weighted average interest rate on investment sold or paid down 8.09 % 4.55 % (1) New CLO equity investments do not have an ascribed interest rate, and are therefore excluded from the calculation. (2) Variable rate loans bear interest at a rate that may be determined by reference to either a) LIBOR (which can include one-, two-, three- or six-month LIBOR) or b) the CME Term Secured Overnight Financing Rate (“SOFR” or “S”) (which can include one-, three-, or six-month SOFR), which resets periodically based on the terms of the loan agreement. At the borrower’s option, loans may instead reference an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), which also resets periodically based on the terms of the loan agreements. Loans that reference SOFR may include a Credit Spread Adjustment (“CSA”), where the CSA is a defined additional spread amount based on the tenor of SOFR the borrower selects (making the reference rate S+CSA). As of March 31, 2023 and December 31, 2022, our investments consisted of the following: March 31, 2023 December 31, 2022 Amortized Fair Amortized Fair Cost Value Cost Value First-lien senior secured debt $ 915,825,362 $ 848,935,238 $ 951,753,250 $ 870,880,344 Second-lien senior secured debt 71,543,750 58,996,438 71,513,263 58,118,340 Corporate Bonds 1,885,372 1,377,500 1,884,529 1,332,888 CLO Mezzanine 14,823,811 12,394,815 17,589,330 14,732,721 CLO Equity 26,916,258 21,206,350 27,012,348 21,800,224 Short-term investments 99,724,576 99,733,674 50,347,215 50,347,215 Total Investments $ 1,130,719,129 $ 1,042,644,015 $ 1,120,099,935 $ 1,017,211,732 50 The table below describes investments by industry composition based on fair value as of March 31, 2023 and December 31, 2022: March 31, 2023 December 31, 2022 Software 12.9 % 12.9 % Healthcare Providers and Services 9.4 % 9.9 % IT Services 7.9 % 8.4 % Professional Services 6.0 % 5.9 % Insurance 5.4 % 5.8 % Cash and Cash Equivalents 4.9 % 4.9 % US Treasury Bill 4.7 % - % Hotels, Restaurants and Leisure 4.0 % 3.9 % Building Products 3.7 % 3.7 % Media 3.7 % 3.2 % Chemicals 3.1 % 3.3 % Diversified Financial Services 2.9 % 2.6 % Construction and Engineering 2.6 % 2.5 % Independent Power and Renewable Electricity Producers 2.6 % 2.8 % Diversified Consumer Services 2.1 % 1.6 % Structured Subordinated Note 2.0 % 2.1 % Aerospace and Defense 1.9 % 2.5 % Auto Components 1.9 % 1.9 % Electronic Equipment, Instruments and Components 1.5 % 1.2 % Containers and Packaging 1.5 % 1.5 % Food Products 1.3 % 1.3 % Specialty Retail 1.3 % 1.3 % Commercial Services and Supplies 1.2 % 1.3 % Metals and Mining 1.2 % 2.0 % Structured Note 1.2 % 1.4 % Internet Software and Services 1.2 % 1.1 % Healthcare Technology 1.0 % 2.1 % Healthcare Equipment and Supplies 0.9 % 0.9 % Machinery 0.7 % 0.6 % Oil, Gas and Consumable Fuels 0.7 % 1.7 % Real Estate Management and Development 0.6 % 0.6 % Wireless Telecommunication Services 0.6 % 0.6 % Pharmaceuticals 0.6 % 0.6 % Energy Equipment and Services 0.5 % 0.6 % Electrical Equipment 0.5 % 0.5 % Road and Rail 0.5 % 0.5 % Technology Hardware, Storage and Peripherals 0.4 % 0.4 % Diversified Telecommunication Services 0.4 % 0.3 % Household Durables 0.4 % 0.3 % Textiles, Apparel and Luxury Goods 0.1 % 0.1 % Airlines - % 0.8 % Industrial Conglomerates - % 0.4 % Total 100.0 % 100.0 % 51 The table below shows the weighted average yields and interest rate of our debt investments at fair value as of March 31, 2023 and December 31, 2022: March 31, 2023 December 31, 2022 Weighted average total yield of debt and income producing securities 11.25 % 11.47 % Weighted average interest rate of debt and income producing securities (1) 9.44 % 8.83 % Weighted average spread over reference rate of all floating rate investments (2) 4.56 % 4.47 % (1) CLO equity securities are considered income producing securities but do not have an ascribed interest rate, and therefore are excluded from the calculation. (2) Variable rate loans bear interest at a rate that may be determined by reference to either a) LIBOR (which can include one-, two-, three- or six-month LIBOR) or b) the CME Term Secured Overnight Financing Rate (“SOFR” or “S”) (which can include one-, three-, or six-month SOFR), which resets periodically based on the terms of the loan agreement. At the borrower’s option, loans may instead reference an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), which also resets periodically based on the terms of the loan agreements. Loans that reference SOFR may include a Credit Spread Adjustment (“CSA”), where the CSA is a defined additional spread amount based on the tenor of SOFR the borrower selects (making the reference rate S+CSA). Results of Operations The following table represents the operating results for the three months ended March 31, 2023 and March 31, 2022. For the Three Months Ended March 31, 2023 2022 Total investment income $ 26,185,502 $ 14,254,960 Less: Net expenses 12,592,823 5,584,387 Net investment income 13,592,679 8,670,573 Net realized gains (losses) on investments (317,446 ) (369,870 ) Net change in unrealized gains (losses) on investments 14,813,089 (11,731,503 ) Net increase (decrease) in net assets resulting from operations $ 28,088,322 $ (3,430,800 ) Investment Income Investment income for the three months ended March 31, 2023 and March 31, 2022, was as follows: For the Three Months Ended March 31, 2023 2022 Interest from investments $ 25,452,738 $ 14,157,273 Dividend income 676,868 4,646 Other income 55,896 93,041 Total investment income $ 26,185,502 $ 14,254,960 52 For the three months ended March 31, 2023 and March 31, 2022, total investment income was driven by interest income from our investments. The size of our investment portfolio at fair value decreased from $966.9 million as of December 31, 2022 to $942.9 million as of March 31, 2023. The size of our investment portfolio at fair value decreased from $1.19 billion as of December 31, 2021 to $1.16 billion as of March 31, 2022. All debt and short-term investments were income producing, and there were no loans on non-accrual status as of March 31, 2023. Expenses Operating expenses for the three months ended March 31, 2023 and March 31, 2022, were as follows: For the Three Months Ended March 31, 2023 2022 Interest expense $ 10,322,130 $ 3,151,012 Management fees 1,912,228 2,257,962 Other operating expenses 579,000 439,165 Directors fees 18,493 18,493 Management fee waiver (239,028 ) (282,245 ) Net expenses $ 12,592,823 $ 5,584,387 Net expenses for the three months ended March 31, 2023 were $12.6 million, which consisted of $10.3 million in interest expense, $1.9 million in management fees, $579 thousand in other operating expenses, and $18 thousand in directors fees offset by $239 thousand in management fee waiver from the Investment Advisor. Net expenses for the three months ended March 31, 2022 were $5.6 million, which consisted of $3.2 million in interest expense, $2.3 million in management fees, $439 thousand in other operating expenses, and $18 thousand in directors fees offset by $282 thousand in management fee waiver from the Investment Advisor. The increase in expenses for the three months ended March 31, 2023 compared to the same period in the prior year was primarily due to increased average interest rate under our BoA Credit Facility and WF Credit Facility. 53 Net Change in Unrealized Gains (Losses) on Investments We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. During the three months ended March 31, 2023 and March 31, 2022, net unrealized gains (losses) on our investment portfolio were comprised of the following: For the Three Months Ended March 31, 2023 2022 Unrealized gains on investments $ 21,968,300 $ 1,857,368 Unrealized (losses) on investments (7,155,211 ) (13,588,871 ) Net change in unrealized gains (losses) on investments $ 14,813,089 $ (11,731,503 ) The change in unrealized appreciation (depreciation) for the three months ended March 31, 2023 and March 31, 2022 totaled $14.8 million and $(11.7) million, respectively. For the three months ended March 31, 2023, this consisted of net unrealized appreciation of $13.5 million related to existing portfolio investments, and net unrealized appreciation of $1.3 million related to exited portfolio investments (a portion of which has been reclassified to realized gains). For the three months ended March 31, 2022, this consisted of net unrealized depreciation of $10.8 million related to existing portfolio investments, and net unrealized depreciation of $0.9 million related to exited portfolio investments (a portion of which has been reclassified to realized gains). Financial Condition, Liquidity and Capital Resources We anticipate cash to be generated from the private offering of our common stock and other future offerings of securities (including an initial public offering), and cash flows from operations, including interest earned from the temporary investment of cash in cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less. Additionally, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. If we are unable to obtain leverage or raise equity capital on terms that are acceptable to us, our ability to grow our portfolio could be substantially impacted. Furthermore, while any indebtedness and senior securities remain outstanding, we may be required to prohibit any distribution to our stockholders or the repurchase of shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. In connection with borrowings, our lenders, including under the BoA Credit Facility and the WF Credit Facility, may require us to pledge assets, investor commitments to fund capital calls and/or the proceeds of those capital calls. In addition, such lenders may ask us to comply with positive or negative covenants that could have an effect on our operations. During the three months ended March 31, 2023, we experienced a net increase in cash and cash equivalents of $4.6 million. During the period, net cash provided by operating activities was $27.9 million, primarily as a result of proceeds received from sale of investments of $181.2 million, partially offset by fundings of portfolio investments (excluding investments in short-term investments) of $63.5 million. We funded short-term investments during the period, and as of the end of the period we held $99.7 million in fair value of short-term investments. During the same period, net cash used in financing activities was $23.4 million, primarily consisting of $27.5 million of net repayments under the BoA Credit Facility and WF Credit Facility and distributions paid in cash of $6.9 million, partially offset by proceeds from the issuance of common stock of $11.1 million. 54 During the three months ended March 31, 2022, we experienced a net increase in cash and cash equivalents of $3.6 million. During the period, net cash used in operating activities was $8.3 million, primarily as a result of fundings of portfolio investments (excluding investments in short-term money market funds) of $158.9 million, partially offset by proceeds received from sale of investments of $147.5 million. We invested in short-term money market funds during the period, and as of the end of the period we held $46.8 million in fair value of short-term money market funds. During the same period, net cash provided by financing activities was $11.9 million, primarily consisting of $13.0 million of net borrowing under the BoA Credit Facility and WF Credit Facility and proceeds from the issuance of common stock of $4.8 million, partially offset by distributions paid in cash of $5.9 million. As of March 31, 2023 and March 31, 2022, we had cash and cash equivalents of $6.2 million and $4.7 million, respectively. As of March 31, 2023, we had $487.0 million principal outstanding under the BoA Credit Facility and $126.8 million principal outstanding under the WF Credit Facility. As of March 31, 2022, we had $546 million principal outstanding under the BoA Credit Facility and $119 million principal outstanding under the WF Credit Facility. During the three months ended March 31, 2023 and March 31, 2022, we had aggregate capital commitments and undrawn capital commitments from investors as follows: March 31, 2023 March 31, 2022 Capital Commitments Unfunded Capital Commitments (1) % of Capital Commitments Funded Capital Commitments Unfunded Capital Commitments % of Capital Commitments Funded Common stock $ 12,204,225 $ 1,100,000 91 % $ 4,823,800 $ - 100 % (1) 100% of the unfunded commitments were drawn down in April 2023. As a BDC, we are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 150%. If this ratio declines below 150%, we cannot incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so. As of March 31, 2023, our asset coverage ratio was 165%. Capital Contributions During the three months ended March 31, 2023 and March 31, 2022, the Company issued and sold 688,674 shares at an aggregate purchase price of $11.1 million and 240,396 shares at an aggregate purchase price of $4.8 million, respectively. These amounts include shares issued in reinvestment. 55 Financing Arrangements Bank of America Credit Facility On February 18, 2020, we, through a special purpose wholly-owned subsidiary, Palmer Square BDC Funding I LLC (“PS BDC Funding” and together with the Company, the “Borrowers”), entered into a Credit Agreement (the “Credit Agreement”) with certain financial institutions as lenders (the “Lenders”), Bank of America N.A. as the administrative agent (“BofA N.A.”) and BofA Securities, Inc. (“BofA Securities”), as Lead Arranger and Sole Book Manager, pursuant to which the Lenders agreed to provide us with a revolving line of credit (the “BoA Credit Facility”). Under the BoA Credit Facility, which matures on February 18, 2025, the Lenders have agreed to extend credit to PS BDC Funding in an aggregate amount up to the Commitment (as defined in the Credit Agreement) amount. The Commitment amount for the BoA Credit Facility was $200.0 million as of the closing date of the Credit Agreement, increased to $400.0 million on the one-month anniversary of the closing date, further increased to $475.0 million on October 12, 2020, and further increased to $725 million on September 29, 2021. The Borrowers’ ability to draw under the BoA Credit Facility is scheduled to terminate on February 11, 2025. All amounts outstanding under the BoA Credit Facility are required to be repaid by February 18, 2025. The loans under the BoA Credit Facility may be base rate loans or SOFR loans. The base rate loans will bear interest at the base rate plus 1.40%, and the SOFR loans will bear interest at 1-month SOFR plus 1.40% or 3-month SOFR plus 1.45%. The “base rate” will be equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate, and (c) 1-month or 3-month SOFR plus 0.10%. The Credit Agreement includes fallback language in the event that SOFR becomes unavailable. Interest pursuant to base rate loans is payable quarterly in arrears, and interest pursuant to SOFR loans is payable either quarterly or monthly, as specified by the Borrowers in a loan notice pertaining thereto. The Credit Agreement requires the payment of a commitment fee of 0.50% for unused Commitments until the four-month anniversary of the Second Amendment to the Credit Agreement. Thereafter, the commitment fee is 0.50% on unused Commitments up to 30% of the BoA Credit Facility, and 1.30% on unused Commitments in excess of 30% of the BoA Credit Facility. Such fee is payable quarterly in arrears. The advance rate for PS BDC Funding’s Eligible Collateral Assets ranges from 40% for Second Lien Bank Loans to 70% for First Lien Bank Loans that are B Assets to 100% for Cash (excluding Excluded Amounts) (as each such term is defined in the Credit Agreement). PS BDC Funding has pledged all of its assets to BofA N.A., in its capacity as Administrative Agent, to secure its obligations under the BoA Credit Facility. Both the Company and PS BDC Funding have made customary representations and warranties and are required to comply with various covenants, reporting requirements, and other customary requirements for similar credit facilities. Borrowing under the BoA Credit Facility is subject to the leverage restrictions contained in the 1940 Act and PS BDC Funding complies with 1940 Act provisions relating to affiliated transactions and custody. The custodian of the assets pledged to BofA N.A. pursuant to the BoA Credit Facility is U.S. Bank National Administration. The obligations under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, including in the event of a change of control of PS BDC Funding or if the Investment Advisor ceases to serve as investment adviser to the Company. As of March 31, 2023, we had $487.0 million principal outstanding and $238.0 million of available Commitments under the BoA Credit Facility, and PS BDC Funding was in compliance with the applicable covenants in the BoA Credit Facility on such date. 56 Wells Fargo Credit Facility On December 18, 2020, we, through a special purpose wholly-owned subsidiary, Palmer Square BDC Funding II LLC (“PS BDC Funding II” and together with the Company, the “WF Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) with certain financial institutions as lenders (the “WF Lenders”), Wells Fargo Bank, National Association as the administrative agent (“WFB”) and U.S. Bank National Association (“U.S. Bank”), as Collateral Agent and Custodian, pursuant to which the WF Lenders agreed to provide us with a line of credit (the “WF Credit Facility”). Under the WF Credit Facility, which matures on December 18, 2025, the WF Lenders have agreed to extend credit to PS BDC Funding II in an aggregate amount up to the Facility Amount (as defined in the Loan Agreement). The Facility Amount for the WF Credit Facility was $150.0 million as of the closing date of the Loan Agreement. The WF Borrowers’ ability to draw under the WF Credit Facility is scheduled to terminate on December 18, 2023. All amounts outstanding under the WF Credit Facility are required to be repaid by December 18, 2025. The loans under the WF Credit Facility may be Broadly Syndicated Loans or Middle Market Loans and shall be eurocurrency rate loans unless such rate is unavailable, in which case the loans shall be base rate loans until such rate is available. Broadly Syndicated Loans will bear interest at the LIBOR or base rate, as applicable, plus 1.85%, and Middle Market Loans will bear interest at LIBOR or base rate, as applicable, plus 2.35%. The “base rate” will be equal to the highest of (a) the federal funds rate plus 0.50% and (b) the prime rate. The Loan Agreement includes fallback language in the event that LIBOR becomes unavailable. Interest is payable quarterly, as determined by the WFB as the administrative agent. Following the Second Amendment of the WF Credit Facility, the Loan Agreement requires the payment of a non-usage fee of (x) during the first thirteen months following the closing of the WF Credit Facility, 0.50% multiplied by daily unused Facility Amounts, (y) between thirteen and sixteen months following the closing of the WF Credit Facility, 0.50% multiplied by the lesser of (1) daily unused Facility Amounts and (2) 50% of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the daily unused Facility Amount and 50% of the Facility Amount and (ii) zero, and, (z) thereafter, 0.50% multiplied by the lesser of (1) daily unused Facility Amounts and (2) 20% of the Facility Amount plus 2.00% multiplied by the greater of (i) the difference between the daily unused Facility Amount and 20% of the Facility Amount and (ii) zero. Such fee is payable quarterly in arrears. The WF Credit Facility includes the option to downsize the facility by paying a Commitment Reduction Fee. The Fee is equal to 2.00% of the facility reduction amount prior to the one year anniversary of the closing of the WF Credit Facility, and 1.00% thereafter. The applicable percentage for PS BDC Funding II’s Eligible Loans ranges from 67.5% for Middle Market Loans to 70% for Broadly Syndicated Loans (as each such term is defined in the Loan Agreement). PS BDC Funding II has pledged all of its assets to U.S. Bank, in its capacity as Collateral Agent, to secure its obligations under the WF Credit Facility and U.S. Bank acts as the custodian of such assets. Both the Company and PS BDC Funding II have made customary representations and warranties and are required to comply with various covenants, reporting requirements, and other customary requirements for similar credit facilities. Borrowing under the WF Credit Facility is subject to the leverage restrictions contained in the 1940 Act and PS BDC Funding II complies with 1940 Act provisions relating to affiliated transactions and custody. The obligations under the Loan Agreement may be accelerated upon the occurrence of an event of default under the Loan Agreement, including in the event of a change of control of PS BDC Funding II, if the Investment Advisor ceases to serve as investment adviser to the Company, or if Palmer Square or its affiliates cease to directly or indirectly own a majority of the membership interests of the Investment Advisor. As of March 31, 2023, we had $126.8 million outstanding and $23.2 million of available Commitments under the WF Credit Facility, and PS BDC Funding II was in compliance with the applicable covenants in the WF Credit Facility on such date. Distribution Policy To the extent that we have income available, we intend to distribute quarterly dividends to our stockholders. Our quarterly dividends, if any, will be determined by our Board. Any dividends to our stockholders will be declared out of assets legally available for distribution. 57 We have elected to be treated, and intend to operate in a manner so as to continuously qualify, as a RIC under the Code. To obtain and maintain RIC tax treatment, among other things, we must distribute dividends to our stockholders in respect of each taxable year of an amount at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of our net long-term capital losses (“investment company taxable income”), determined without regard to any deduction for dividends paid. In order to avoid certain excise taxes imposed on RICs, we currently intend to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of: (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for such calendar year; (2) 98.2% of our capital gains in excess of capital losses (“capital gain net income”), adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of such calendar year; and (3) any net ordinary income and capital gain net income for preceding years that were not distributed during such years and on which we previously paid no U.S. federal income tax. Under certain applicable provisions of the Code and U.S. Treasury regulations, distributions payable in cash or in shares of stock at the election of the stockholders are treated as taxable dividends. The Internal Revenue Service has published guidance indicating that this rule will apply even where the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. Under this guidance, if too many stockholders elect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (with the balance of the distribution paid in stock). If we decide to make any distributions consistent with this guidance that are payable in part in stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, shares of our stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the value of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, the Company may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. For these excise tax purposes, we will be deemed to have distributed any net ordinary taxable income or capital gain net income on which we have paid U.S. federal income tax. Depending on the level of taxable income earned in a calendar year, we may choose to carry forward taxable income for distribution in the following calendar year, and pay any applicable U.S. federal excise tax. We may not be able to achieve results that will permit the payment of cash distributions. We currently intend to distribute net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain such capital gains for investment, incur a corporate-level tax on such capital gains, and elect to treat such capital gains as deemed distributions to our stockholders. If this happens, our stockholders will be treated for U.S. federal income tax purposes as if they had received an actual distribution of the capital gains that we retain and reinvested the net after tax proceeds in us. In this situation, our stockholders would be eligible to claim a tax credit equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. We may not be able to achieve operating results that will permit us to pay any cash distributions, and if we issue senior securities, we will be prohibited from making distributions if doing so would cause us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if such distributions are limited by the terms of any of our borrowings. We have adopted a dividend reinvestment plan that will provide for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board authorizes, and we declare, a cash dividend or other distribution, then stockholders who do not “opt out” of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Prior to a Listing, the Board will use newly-issued shares of the Company’s common stock to implement the dividend reinvestment plan. The number of shares of common stock to be issued to a participant prior to a Listing would be equal to the quotient determined by dividing the cash value of the dividend payable to such stockholder by the net asset value per share as of the date such dividend was declared. 58 After a Listing, the Board intends to primarily use newly-issued shares to implement the dividend reinvestment plan, whether or not the shares are trading at a price per share at, below or above net asset value. However, the Board reserves the right to purchase shares in the open market in connection with the implementation of the dividend reinvestment plan. The Board will examine the full facts and circumstances of each such dividend to determine the approach (i.e., to use newly issued shares or effectuate open market purchases to implement the dividend reinvestment plan) that is in the best interests of stockholders taking into account the Board’s fiduciary duties to stockholders, including by weighing the potential dilution in connection with such issuance to be incurred by the Company’s stockholders against the Company’s need and usage of reinvested funds. The number of newly issued shares to be issued to a participant would be determined by dividing the total dollar amount of the dividend payable to such stockholder by the market price per share of our common stock at the close of regular trading on a national securities exchange on the dividend payment date. Shares purchased in open market transactions by US Bank, the plan administrator and our transfer agent, registrar, and dividend disbursing agent, will be allocated to a participant based upon the average purchase price, excluding any brokerage charges or other charges, of all shares of our common stock purchased with respect to the dividend. A registered stockholder may elect to receive an entire distribution in cash by notifying US Bank in writing so that such notice is received by the plan administrator no later than the record date for distributions to stockholders. The plan administrator will set up an account for shares acquired through the plan for each stockholder who has not elected to receive dividends or other distributions in cash and hold such shares in noncertificated form. Critical Accounting Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting estimates are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. The preparation of these financial statements will require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we have described our critical accounting estimates in the notes to our consolidated financial statements. Valuation of Portfolio Investments In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which permits a BDC’s board of directors to either (i) choose to continue to determine fair value in good faith, or (ii) designate its investment adviser as the valuation designee tasked with determining fair value in good faith, subject to the board’s oversight. Our Board has designated the Investment Advisor to serve as our valuation designee effective August 11, 2022. We value investments for which market quotations are readily available at such market quotations. Assets listed on an exchange will be valued at their last sales prices as reported to the consolidated quotation service at 4:00 P.M. eastern time on the date of determination. If no such sales of such securities occurred, such securities will be valued at the mean between the last available bid and ask prices as reported by an independent, third-party pricing service on the date of determination (unless the prices provided by the pricing service is believed by the Investment Advisor to be unreliable or a significant event has occurred subsequent to the provision of the prices that the Investment Adviser determines will affect the fair value of the securities). Debt and equity securities whose market prices are not readily available (or for which either of the events noted in the parenthetical immediately above occur) are valued at fair value by the Investment Advisor. Such determination of fair values may involve subjective judgments and estimates, although we will also engage independent valuation providers to review the valuation of each portfolio investment that constitutes a material portion of our portfolio and that does not have a readily available market quotation at least once annually. With respect to unquoted securities, our Investment Advisor will value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. With respect to Level 3 assets, we intend to retain one or more independent providers of financial advisory services to assist the Investment Advisor by performing certain limited third-party valuation services. We may appoint additional or different third-party valuation firms in the future. 59 When an external event such as a purchase transaction, public offering or subsequent equity sale occurs with respect to a fair-valued portfolio company or comparable company, the Investment Advisor will use the pricing indicated by the external event in connection with its fair valuation determination process. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by the Investment Advisor using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had readily available market quotations existed for such investments, and the differences could be material. Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized. Realized gains and losses from securities transactions and unrealized appreciation and depreciation of securities are determined using the identified cost basis method for financial reporting. Related Party Transactions We have entered into the Advisory Agreement with the Investment Advisor and the Administration Agreement with the Investment Advisor (in such capacity, the Administrator). Mr. Christopher D. Long and Mr. Jeffrey D. Fox, each an interested member of our Board, have an indirect pecuniary interest in the Investment Advisor. The Investment Advisor is a registered investment adviser under the Advisers Act that is majority-owned by Palmer Square. See “ Note 3. Agreements and Related Party Transactions – Administration Agreement ” and “ – Investment Advisory Agreement ” in the notes to the accompanying consolidated financial statements. Contractual Obligations We have certain contracts under which we have material future commitments. We have entered into the Advisory Agreement with the Investment Advisor in accordance with the 1940 Act. Payments for investment advisory services under the Advisory Agreement are equal to (a) a base management fee calculated at an annual rate of 2.0% of the average value of the weighted average of our total net assets at the end of the two most recently completed quarters and (b) an incentive fee based on our performance. The Investment Advisor has agreed to waive its right to receive management fees in excess of 1.75% of the total net assets during any period prior to a Listing. We have entered into an Administration Agreement with the Administrator to serve as our administrator. Pursuant to the Administration Agreement, the Administrator furnishes us with office facilities and equipment, provides us with clerical, bookkeeping and recordkeeping services at such facilities, and provides us with other services necessary for us to operate or has engaged a third-party firm to perform some or all of these functions. 60 A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at March 31, 2023 is as follows: Payments Due by Period Total Less than 1 year 1-3 years 3-5 years After 5 years BoA Credit Facility, Net $ 488,479,470 $ - $ 488,479,470 $ - $ - WF Credit Facility, Net 127,934,895 - 127,934,895 - - Total contractual obligations $ 616,414,365 $ - $ 616,414,365 $ - $ - Off-Balance Sheet Arrangements Unfunded commitments to provide funds to portfolio companies are not recorded on our consolidated statements of assets and liabilities. Our unfunded commitments may be significant from time to time. Unfunded commitments may expire without being drawn upon and the total commitment amount does not necessarily represent future cash requirements. As of March 31, 2023 and December 31, 2022, we had one unfunded commitment totaling $667 thousand and two unfunded commitments totaling $2.6 million, respectively. See “Note 8. Commitments and Contingencies” in the notes to the accompanying consolidated financial statements for specific identification of the unfunded commitments. We believe we maintain sufficient liquidity in the form of cash (including restricted cash, if any), receivables and borrowing capacity to fund these unfunded commitments should the need arise. See Financial Condition, Liquidity and Capital Resources above. Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities. Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are subject to financial market risks, including changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. 61 Assuming that the consolidated statements of assets and liabilities as of March 31, 2023 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rate. Change in Interest Rates Increase (Decrease) in Interest Income Increase (Decrease) in Interest Expense Net Increase (Decrease) in Net Investment Income Down 25 basis points $ (2,537,495 ) $ (1,534,375 ) $ (1,003,120 ) Up 100 basis points 10,090,326 6,137,500 3,952,826 Up 200 basis points 19,945,973 12,275,000 7,670,973 Up 300 basis points 29,723,415 18,412,500 11,310,915 The data in the table are based on our current statements of assets and liabilities. As of March 31, 2023, the Company had $34.1 million in net purchases that had not yet settled and $667 thousand in unfunded commitments. After settlement of these purchases, the change in interest expense will be larger as a result of the increase in the amount borrowed under the BoA Credit Facility or WF Credit Facility, as applicable. The table does not include any change in dividend income from our money market investments. In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls, and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved. We measure exposure to interest rate and currency exchange rate fluctuations on an ongoing basis and may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options, swaps and forward contracts and credit hedging contracts, such as credit default swaps, in each case, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during our fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 62 PART II—OTHER INFORMATION Item 1. Legal Proceedings. We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. Item 1A. Risk Factors. Investing in our common stock involves a number of significant risks. In addition to other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A. Risk Factors of our annual report on Form 10-K for the year ended December 31, 2022. The risks described in our annual report are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also materially and adversely affect our business, financial condition and/or operating results. Other than as set forth below, there have been no material changes during the three months ended March 31, 2023 to the risk factors discussed in Item 1A. Risk Factors of our annual report on Form 10-K for the year ended December 31, 2022. Recent strain on the banking system may adversely impact us. The financial markets recently have encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks who may have significant losses associated with investments that make it difficult to fund demands to withdraw deposits and other liquidity needs. Although the federal government has announced measures to assist these banks and protect depositors, some banks have already been impacted and others may be materially and adversely impacted. A significant adverse development with one or more national or regional banks, financial institutions or other participants in the financial or capital markets may spread to others and lead to significant concentrated or market-wide problems (such as defaults, liquidity problems, impairment charges, additional bank runs and/or losses) for other participants in these markets. Future developments, including actions taken by the U.S. Department of Treasury, Federal Deposit Insurance Corporation (“FDIC”) and Federal Reserve Board, and systemic risk in the U.S. and global banking sectors and broader economies in general, are difficult to assess and quantify, and the form and magnitude of such developments or other actions could have an adverse effect on our business, financial condition and results of operations. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the three months ended March 31, 2023, the Company issued and sold 688,674 shares of its common stock at an aggregate purchase price of $11.1 million. These amounts include shares issued in reinvestment. The issuance of the shares of common stock was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof. The Company relied, in part, upon representations from the investors in the subscription agreements that each investor was an accredited investor as defined in Regulation D under the Securities Act. We did not engage in general solicitation or advertising, and did not offer securities to the public, in connection with such issuances and sales. Item 3. Default Upon Senior Securities. None. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. None. 63 Item 6. Exhibits. The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this Report. Exhibit Index 3.1 Form of Articles of Amendment and Restatement (Incorporated by reference to Exhibit 3.1 to Registrant’s Amendment No. 1 to Registration Statement on Form 10 (File No. 000-56126) filed on January 16, 2020) 3.2 Bylaws (Incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form 10 (File No. 000-56126) filed on November 27, 2019) 10.1 Omnibus Amendment to Loan Documents, dated February 3, 2023, by and among Palmer Square BDC Funding I LLC, as the borrower, Bank of America, N.A., as administrative agent and as lender, U.S. Bank Trust Company, National Association, as the collateral administrator, and U.S. Bank National Association, as the intermediary (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 814-01334) filed on February 9, 2023). 31.1* Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith 64 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Palmer Square Capital BDC Inc. Date: May 11, 2023 /s/ Christopher D. Long Name: Christopher D. Long Title: Chief Executive Officer and Director (Principal Executive Officer) Date: May 11, 2023 /s/ Jeffrey D. Fox Name: Jeffrey D. Fox Title: Chief Financial Officer and Director (Principal Financial and Accounting Officer) 65