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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-03-10 · 491 added, 388 removed, 292 unchanged (75% of the section changed)

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 Annual Report on Form 10-K.

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 Annual Report on Form 10-K.

Forward Looking Statements

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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:

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;

changes in political, economic or industry conditions, the interest

rate environment or conditions affecting the financial and capital markets, including the liquidity of certain banks;

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 the 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 BDC and as a RIC under the Code;

the impact of fluctuations in interest rates

and foreign exchange rates on our business and our portfolio companies;

rising levels of inflation, and its impact on us, on our portfolio companies and on the industries in which we invest;

the ability of the 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, including a possible slowdown in the economy and risk of recession;

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;

our ability to continue to effectively manage our business due to the

disruptions caused by global political and economic instability;

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 BDC and as a RIC under

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;

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;

the current economic downturn, interest rate volatility, loss of key personnel, and the illiquid nature of our investments;

the risks, uncertainties and other factors we identify under “Item 1A.

loss of key personnel, and the illiquid nature of our investments;

the risks, uncertainties and other factors we identify under “Item

Risk Factors” and elsewhere in this annual report on Form 10-K.

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do not undertake to update the forward-looking statements.

Because we are a BDC, the forward-looking statements and projections contained

in this in this annual report on Form 10-K are excluded from the safe harbor protection provided by Sections 27A of the Securities Act

and Section 21E of the Exchange Act.

We are a financial services

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management investment company.

We have elected to be regulated as a BDC under the 1940 Act and, beginning with our taxable year ending

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 thereafter.

We have elected to be regulated as a BDC under the 1940 Act.

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.

On January 22, 2024, we completed

our IPO, issuing 5,450,000 shares of common stock, par value $0.001, at a public offering price of $16.45 per share.

Our common stock

began trading on the New York Stock Exchange under the symbol “PSBD” on January 18, 2024.

We are externally managed

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The Administrator has entered into the Sub-Administration Agreement to delegate certain administrative functions to the Sub-Administrator.

Our Investment Advisor is a majority-owned subsidiary of Palmer Square, which is a privately-held firm specializing in global alternative

(non-traditional) investments with a total return orientation.

Our Investment Advisor is a majority-owned subsidiary of PSCM, 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.

The Company’s 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 CLO structured credit that typically owns 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

We may also invest in other strategies and opportunities from time to time that we view as attractive.

We will continue to

evaluate other investment strategies in the ordinary course of business with no specific top-down allocation to any single investment

However, no assurance can be given that our investment

objective will be achieved, and investment results may vary substantially on a monthly, quarterly and annual basis.

The Company’s

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 CLO structured credit funds that typically own corporate debt securities,

including the equity and junior debt tranches of CLOs.

We seek to invest in credit and other assets that the Investment Advisor believes

have strong structural protections, limited downside, and low long-term beta, or volatility, in comparison to systemic risk within the

broader credit and equity markets.

A significant portion of the loans in which we may invest or obtain exposure to through our investments

in structured securities may be deemed “Covenant-Lite Loans,” which means the loans contain fewer or no maintenance covenants

compared to other loans and do not include terms which allow the lender to declare a default if certain covenants are breached.

We generate revenue primarily

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Our debt investments generally

bear interest at a floating rate usually determined on the basis of a benchmark such as 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.

bear interest at a floating rate usually determined on the basis of a benchmark.

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.

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.

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.

Our primary operating expenses

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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;

the cost of calculating our net asset value, including the cost of

any third-party valuation services;

cost of effecting sales and repurchases of shares of our common stock and other securities;

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;

agent and custodial fees;

costs incurred prior to the commencement of our operations;

● out-of-pocket

fees and expenses associated with marketing efforts;

and state registration fees and any stock exchange listing fees;

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.

● Independent

Directors’ fees and expenses;

commissions and markups;

bond, directors’ and officers’ liability insurance and other insurance premiums;

costs, such as printing, mailing, long distance telephone and staff;

and expenses associated with independent audits and outside legal costs;

associated with our reporting and compliance obligations under the 1940 Act and other applicable

federal and state securities laws;

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.

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.

Portfolio and Investment Activity

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 December 31, 2023,

our weighted average total yield to maturity of debt and income producing securities at fair value was 10.51%, and our weighted average

total yield to maturity of debt and income producing securities at amortized cost was 8.93%.

As of December 31, 2022, our

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As of December 31, 2023, we

had 204 debt and equity investments in 176 portfolio companies with an aggregate fair value of approximately $966.9 million.

had 227 debt and equity investments in 191 portfolio companies with an aggregate fair value of approximately $1.0 billion.

As of December 31, 2022, we

had 240 debt and private investments in 212 portfolio companies with an aggregate fair value of approximately $1.1 billion.

Our investment activity for

the years ended December 31, 2022 and December 31, 2021 is presented below (information presented herein is at amortized cost unless otherwise

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 years ended December 31, 2023, 2022,

and 2021 is presented below (information presented herein is at amortized cost unless otherwise indicated).

For the Year Ended

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$ 278,951,054

$ 926,351,937

sold investments

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(314,355,643 )

(401,760,802 )

Total new investments

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$ 247,233,397

$ 829,591,637

Second-lien senior secured debt investments

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Total principal amount of investments sold or repaid

Our investment activity for

the years ended December 31, 2022 and December 31, 2021 is presented below (information presented herein is at Par unless otherwise indicated).

New investment commitment refers to funded commitments in new securities made during the year that remained outstanding as of December

31, 2022 and December 31, 2021 respectively.

For the Year Ended

Number of new investment commitments

Average new investment commitment amount

Weighted average maturity for new investment commitments

Percentage of new debt investment commitments at floating rates

Percentage of new debt investment commitments at fixed rates

Weighted average interest rate of new investment commitments (1)

Weighted average spread over reference rate of new floating rate investment commitments (2)

Weighted average interest rate on investment sold or paid down

New CLO equity investments do not have an ascribed interest rate, and are therefore excluded from the calculation.

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).

Our investment activity for the years ended December 31, 2023 and December

31, 2022, is presented below (information presented herein is at par unless otherwise indicated).

New investment commitment refers to

funded commitments in new securities made during the year that remained outstanding as of December 31, 2023 and December 31, 2022 respectively.

of new investment commitments

new investment commitment amount

average maturity for new investment commitments

of new debt investment commitments at floating rates

of new debt investment commitments at fixed rates

average interest rate of new investment commitments

average spread over reference rate of new floating rate investment commitments

average interest rate on investment sold or paid down

CLO equity investments do not have an ascribed interest rate, and are therefore excluded

from the calculation.

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.

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 December 31, 2023 and December 31, 2022,

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Corporate Bonds

Convertible Bond

CLO Mezzanine

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Professional Services

Cash and Cash Equivalents

Short Term Investments

Diversified Financial Services

Hotels, Restaurants and Leisure

Building Products

Independent Power and Renewable Electricity Producers

Diversified Financial Services

Aerospace and Defense

Building Products

Construction and Engineering

Structured Subordinated Note

Healthcare Technology

Metals and Mining

Food Products

Auto Components

Oil, Gas and Consumable Fuels

Diversified Consumer Services

Structured Subordinated Note

Containers and Packaging

Structured Note

Food Products

Specialty Retail

Commercial Services and Supplies

Diversified Consumer Services

Electronic Equipment, Instruments and Components

Internet Software and Services

Energy Equipment and Services

Commercial Services and Supplies

Structured Note

Aerospace and Defense

Metals and Mining

Healthcare Technology

Oil, Gas and Consumable Fuels

Diversified Telecommunication Services

Healthcare Equipment and Supplies

Specialty Retail

Real Estate Management and Development

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Pharmaceuticals

Energy Equipment and Services

Electrical Equipment

Road and Rail

Technology Hardware, Storage and Peripherals

Industrial Conglomerates

Household Durables

Diversified Telecommunication Services

Industrial Conglomerates

Technology Hardware, Storage and Peripherals

Textiles, Apparel and Luxury Goods

Leisure Products

Electric Utilities

The table below shows the

weighted average yields and interest rate of our debt investments at fair value as of December 31, 2022 and December 31, 2021:

Weighted average total yield of debt and income producing securities

Weighted average interest rate of debt and income producing securities (1)

Weighted average spread over reference rate of all floating rate investments (2)

equity securities are considered income producing securities but do not have an ascribed interest rate, and therefore are excluded from

the calculation

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) SOFR (which can include one-, three-, or six-month SOFR), which resets periodically based on the terms of the loan agreement.

Loans that reference SOFR may include 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).

The table below shows the weighted average yields and interest rate

of our debt investments at fair value as of December 31, 2023 and December 31, 2022:

average total yield of debt and income producing securities

average interest rate of debt and income producing securities (1)

average spread over reference rate of all floating rate investments (2)

equity securities are considered income producing securities but do not have an ascribed

interest rate, and therefore are excluded from the calculation

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) SOFR (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 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 years ended December 31, 2022 and December 31, 2021:

For the Year Ended

the operating results for the years ended December 31, 2023, 2022, and 2021:

For the Year Ended December 31

Total investment income

$ 112,223,607

Net investment income

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$ 107,835,651

$ (74,482,335 )

Investment Income

Investment income for the

years ended December 31, 2022 and December 31, 2021, was as follows:

For the Year Ended

years ended December 31, 2023, 2022, and 2021, was as follows:

For the Year Ended December 31

Interest from investments

$ 107,739,382

Dividend income

Total investment income

$ 112,223,607

For the years ended December

31, 2022 and December 31, 2021, total investment income was driven by interest income from our investments.

The size of our investment

portfolio at fair value increased from $600.1 million as of December 31, 2020 to $1.1 billion as of December 31, 2021.

of our investment portfolio at fair value decreased from $1.1 billion as of December 31, 2021 to $966.9 million as of December 31, 2022.

All debt and short-term investments were income producing, and there were no loans on non-accrual status as of December 31, 2022.

Operating expenses for the

years ended December 31, 2022 and December 31, 2021, was as follows:

For the Year Ended

Interest and debt financing expenses

31, 2023, 2022, and 2021 total investment income was driven by interest income from our investments.

The size of our investment portfolio

at fair value increased from $600.1 million as of December 31, 2020 to $1.1 billion as of December 31, 2021, decreased from $1.1

billion as of December 31, 2021 to $966.9 million as of December 31, 2022, and increased from $966.9 million as of December 31,

2022 to $1.0 billion as of December 31, 2023.

All debt and short-term investments were income producing, and there were no loans on non-accrual

status as of December 31, 2023.

Operating expenses for the years ended December 31, 2023, 2022, and

2021, was as follows:

For the Year Ended December 31

Interest expense

Management fees

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the Investment Advisor.

Interest expense increased during the year ended December 31, 2023,

primarily due to increased average interest rates under our BoA Credit Facility and WF Credit Facility.

Average debt outstanding decreased

from $667.5 million to $629.6 million for the years ended December 31, 2022 and December 31, 2023, respectively.

Management fees increased

due to a higher value of average net assets during the period.

Average net assets increased from $416.4 million to $420.4 million as of

December 31, 2022 and December 31, 2023, respectively.

Net expenses for the year

ended December 31, 2022 were $33.4 million, which consisted of $23.5 million in interest and debt financing, $8.3 million in management

fees, $2.6 million in other operating expenses, and $75 thousand in directors fees offset by $1.0 million in management fee waiver from

the Investment Advisor.

Interest expense increased

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During the years ended December 31, 2023,

and December 31, 2021, net unrealized gains (losses) on our investment portfolio were comprised of the following:

2022, and 2021, net unrealized gains (losses) on our investment portfolio were comprised of the following:

For the Year Ended

Unrealized gains on investments

Unrealized (losses) on investments

(13,357,432 )

(109,068,423 )

(14,751,982 )

Net change in unrealized gains (losses) on investments

The change in unrealized appreciation

(depreciation) for the years ended December 31, 2022 and December 31, 2021 totaled $(107.4) million and $(8.5) million, respectively.

$ (107,432,980 )

$ (8,527,786 )

The change in unrealized appreciation (depreciation) for the years

ended December 31, 2023, 2022, and 2021 totaled $52.6 million, $(107.4) million, and $(8.5) million, respectively.

For the year ended

December 31, 2023, this consisted of net unrealized appreciation of $41.1 million related to existing portfolio investments and net unrealized

appreciation of $11.5 million related to exited portfolio investments (a portion of which has been reclassified to realized gains).

the year ended December 31, 2022, this consisted of net unrealized depreciation of $106.2 million related to existing portfolio investments

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Financial Condition, Liquidity and Capital

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.

We anticipate cash to be generated from registered offerings of our

common stock and other future offerings of equity and debt securities (including on-balance sheet CLO financings), 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.

On January 14, 2020, our sole stockholder approved the application of the

reduced asset coverage requirements in Section 61(a)(2) of the 1940 Act to us effective as of such date.

As a result of the reduced asset

coverage requirement, 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 year ended December 31, 2023, we experienced a net increase

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During the period, net cash provided by operating activities was $19.5 million, primarily

as a result of proceeds received from sale of investments of $314.4 million, partially offset by fundings of portfolio investments (excluding

investments in short-term money market funds) of $279.0 million.

We invested in short-term money market funds during the period, and as

of the end of the period we held $50.3 million in fair value of short-term money market funds.

During the same period, net cash used in

financing activities was $24.6 million, primarily consisting of $10.8 million of net repayments under the BoA Credit Facility and WF Credit

Facility and distributions paid in cash of $18.8 million, partially offset by proceeds from the issuance of common stock of $5.0 million.

as a result of proceeds received from sale of investments (excluding investments in short-term money market funds) of $247.1 million,

partially offset by fundings of portfolio investments (excluding investments in short-term money market funds) of $273.7 million.

in short-term money market funds during the period, and as of the end of the period we held $63.8 million in fair value of short-term

money market funds.

During the same period, net cash used in financing activities was $19.1 million, primarily consisting of $1.0 million

of net repayments under the BoA Credit Facility and WF Credit Facility, $1.8 million of payments of debt issuance costs and distributions

paid in cash of $33.9 million, partially offset by proceeds from the issuance of common stock of $17.6 million.

During the year ended December

31, 2022, we experienced a net increase in cash and cash equivalents of $557 thousand.

During the period, net cash used in operating activities

was $438 million, primarily as a result of fundings of portfolio investments (excluding investments in short-term money market funds)

of $926.4 million, partially offset by proceeds received from sale of investments of $406.8 million.

We invested in short-term money market

funds during the period, and as of the end of the period we held $78.1 million in fair value of short-term money market funds.

the same period, net cash provided by financing activities was $438.4 million, primarily consisting of $256.6 million of net borrowing

under the BoA Credit Facility and WF Credit Facility and proceeds from the issuance of common stock of $188.9 million, partially offset

by distributions paid in cash of $6.3 million.

As of December 31, 2022 and

December 31, 2021, we had cash and cash equivalents of $1.7 million and $1.1 million, respectively.

During the period, net cash provided by operating

activities was $25.1 million, primarily as a result of proceeds received from sale of investments (excluding investments in short-term

money market funds) of $314.4 million, partially offset by fundings of portfolio investments (excluding investments in short-term money

market funds) of $279.0 million.

We invested in short-term money market funds during the period, and as of the end of the period we held

$50.3 million in fair value of short-term money market funds.

During the same period, net cash used in financing activities was $24.6

million, primarily consisting of $10.8 million of net repayments under the BoA Credit Facility and WF Credit Facility and distributions

paid in cash of $18.8 million, partially offset by proceeds from the issuance of common stock of $5.0 million.

During the year ended December 31, 2021, we experienced a net increase

in cash and cash equivalents of $411 thousand.

During the period, net cash used in operating activities was $438 million, primarily as

a result of fundings of portfolio investments (excluding investments in short-term money market funds) of $926.4 million, partially offset

by proceeds received from sale of investments (excluding investments in short-term money market funds) of $406.8 million.

in short-term money market funds during the period, and as of the end of the period we held $78.1 million in fair value of short-term

money market funds.

During the same period, net cash provided by financing activities was $438.4 million, primarily consisting of $256.6

million of net borrowing under the BoA Credit Facility and WF Credit Facility and proceeds from the issuance of common stock of $188.9

million, partially offset by distributions paid in cash of $6.3 million.

As of December 31, 2023 and December 31, 2022, we had cash and cash

equivalents of $2.1 million and $1.7 million, respectively.

As of December 31, 2023, we had $504.0 million principal outstanding under

the BoA Credit Facility and $136.3 million principal outstanding under the WF Credit Facility.

As of December 31, 2022, we had $514.5

million principal outstanding under the BoA Credit Facility and $126.8 million principal outstanding under the WF Credit Facility.

of December 31, 2021, we had $552 million principal outstanding under the BoA Credit Facility and $100 million principal outstanding under

the WF Credit Facility.

During the years ended December

31, 2022 and December 31, 2021, we had aggregate capital commitments and undrawn capital commitments from investors as follows:

December 31, 2022

December 31, 2021

Unfunded Capital

During the years ended December 31, 2023, 2022, and 2021, we had aggregate

capital commitments and undrawn capital commitments from investors as follows:

Commitments (1)

$ 193,511,571

100% of the unfunded commitments were drawn down in January 2022.

(1) 100% of the unfunded commitments

were drawn down in January 2022.

As a BDC, we are required

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Capital Contributions

During the years ended December

31, 2022 and December 31, 2021, the Company issued and sold 1,716,297 shares at an aggregate purchase price of $29.2 million and 10,007,526

shares at an aggregate purchase price of $206.6 million, respectively.

These amounts include shares issued in reinvestment.

During the years ended December 31, 2023, 2022, and 2021, the Company

issued and sold 2,816,166 shares at an aggregate purchase price of $46.7 million, 1,716,297 shares at an aggregate purchase price of $29.2

million, and 10,007,526 shares at an aggregate purchase price of $206.6 million, respectively.

These amounts include shares issued in

reinvestment.

Financing Arrangements

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through a special purpose wholly-owned subsidiary, PS BDC Funding, entered into the Credit Agreement with the Lenders, BofA N.A.

administrative agent and BofA Securities, as Lead Arranger and Sole Book Manager, pursuant to which the Lenders agreed to provide us with

a revolving line of credit.

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 eurocurrency rate loans.

The base rate loans will bear interest at the base rate plus 1.30%, and the

eurocurrency rate loans will bear interest at LIBOR plus 1.30%.

The “base rate” will be equal to the highest of (a) the federal

funds rate plus 0.50%, (b) the prime rate and (c) LIBOR.

The Credit Agreement includes fallback language in the event that LIBOR becomes

Interest pursuant to base rate loans is payable quarterly in arrears, and interest pursuant to eurocurrency 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.

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

administrative agent and BofA Securities, as Lead Arranger and Sole Book Manager, pursuant to which the Lenders agreed to provide us

with a revolving line of credit.

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)

The Commitment amount for the BoA Credit Facility is currently $725 million.

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.

Prior to February 3, 2023, the loans under the BOA Credit Facility

may have been base rate loans or euro currency loans.

The base rate loans bore interest at the base rate plus 1.30%, and the eurocurrency

rate loans bore interest at 1-month or 3-month LIBOR plus 1.30%.

The “base rate” was equal to the highest of (a) the federal

funds rate plus 0.50%, (b) the prime rate, and (c) 1-month or 3-month LIBOR.

On February 3, 2023, the

Company entered into an omnibus amendment to the BoA Credit Facility that, among other things:

(i) removed LIBOR transition language and

(ii) replaced eurocurrency rate loans with SOFR loans.

As of February 3, 2023, 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%.

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

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 (Section 17, as modified by Section

57, of the 1940 Act).

The custodian of the assets pledged to BofA N.A.

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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 December 31, 2022, we

had approximately $514.5 million principal outstanding and $210.5 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.

As of December 31, 2023,

we had approximately $504.0 million principal outstanding and $221.0 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.

Wells Fargo Credit Facility

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Bank, as Collateral Agent and Custodian, pursuant to which the WF Lenders agreed to provide us with a line

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

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.

On December 18, 2023, we entered into an amendment to the WF Credit

Facility (the “WF Credit Facility Fourth Amendment”) that amends the WF Credit Facility to, among other things:

the amount available for borrowing under the WF Credit Facility from $150,000,000 to $175,000,000, (ii) extend the facility maturity date

from December 18, 2025 to December 18, 2028 and (iii) extend the reinvestment period from December 18, 2023 to December 18, 2026 (subject

to other provisions of the WF Credit Facility).

Prior to April 10, 2023 the loans under the WF Credit Facility may

have been Broadly Syndicated Loans or Middle Market loans and were eurocurrency rate loans unless

such rate was unavailable, in which case the loans were base rate loans until such rate was available.

Broadly Syndicated Loans bore interest

at the LIBOR or base rate, as applicable, plus 1.85%, and Middle Market Loans bore interest at LIBOR or base rate, as applicable, plus

The “base rate” was equal to the highest of (a) the federal funds rate plus 0.50% and (b) the prime rate.

10, 2023, the Company entered into an amendment to the WF Credit Facility that, among other things:

(i) transferred and assigned 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) referenced SOFR instead of LIBOR and (iii) removed LIBOR transition language.

As of April 10, 2023, the

loans under the WF Credit Facility may be Broadly Syndicated Loans or Middle Market Loans and will bear interest at Daily Simple SOFR

or base rate (to the extent Daily Simple SOFR is unavailable), plus 2.50%, with an interest rate floor of 0.0%.

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 Daily Simple SOFR becomes unavailable.

Interest is payable quarterly, as determined by the WFB as the administrative

Following an amendment to the WF Credit Facility on October 13, 2021, 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.

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.

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 December 31, 2022, we

had approximately $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.

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 WF Credit Facility Fourth Amendment, and 1.00% thereafter.

The applicable percentage for the advance

rate on 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.

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 (Section 17, as modified by Section 57, of the 1940 Act).

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 PSCM or its affiliates cease to directly or indirectly

own a majority of the membership interests of the Investment Advisor.

As of December 31, 2023, we had approximately $136.3 million principal

outstanding and $38.7 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

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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:

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;

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.

(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 IRS 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.

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 IRS 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.

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.

stockholder may be required to pay tax with respect to such dividends

in excess of any cash received.

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.

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.

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,

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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.

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

reinvestment plan that provides 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 the IPO, the Board

primarily used 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 the IPO 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 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

Critical Accounting Estimates

After the IPO, 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, and, if we use newly issued shares to implement the dividend reinvestment plan at a time when the

shares are trading at a price below NAV, the stockholders’ receipt of fewer shares than they would have if we had effectuated open

market purchases.

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 Equiniti, 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 Equiniti 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 Policies

Our consolidated financial

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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.

Critical accounting policies are those that require the application

of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of

matters that are inherently uncertain and that may change in subsequent periods.

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.

the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to

In addition to the discussion below, we have described our critical accounting policies in the notes to our consolidated financial

Valuation of Portfolio Investments

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subject to the board’s oversight.

Our Board has designated the Investment Advisor to serve as our valuation designee effective August

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.

Our Board has designated the Investment Advisor to serve as our valuation designee effective

August 11, 2022.

Under procedures established by our Board, 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 Advisor determines

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 Advisor 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.

Debt and equity securities that are not publicly traded or 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.

When an external event such

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company, the Investment Advisor will use the pricing indicated by the external event in connection with its fair valuation determination

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

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.

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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).

We have entered into the Advisory Agreement with the Investment Advisor

and the Administration Agreement with the Investment Advisor (in such capacity, the Administrator).

Christopher D.

Fox, each an interested member of our Board, have an indirect pecuniary interest in the Investment

The Investment Advisor is a registered investment adviser under the Advisers Act that is majority-owned by Palmer Square.

Agreements and Related Party Transactions – Administration Agreement ” and “ – Investment

Advisory Agreement ” in the notes to the accompanying consolidated financial statements.

Fox, each an executive officer of ours and an interested member of our Board, and Angie K.

Long and Scott A.

Betz, each an executive

officer of ours, 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 PSCM.

See “ Note 3.

Agreements and Related Party Transactions – Administration

Agreement ” and “ – Investment Advisory Agreement ” in the notes to the accompanying consolidated financial

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.

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 1.75% 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 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 IPO.

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.

A summary of our significant

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$ 505,417,357

$ 136,411,448

Off-Balance Sheet Arrangements

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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.

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 December 31, 2022 and December 31, 2021, we had two unfunded commitments totaling $2.6 million,

and nine unfunded commitments totaling $11.3 million, respectively.

As of December 31, 2023 and December 31, 2022, we had fifteen unfunded commitments totaling $20.1

million, and two unfunded commitments totaling $2.6 million, respectively.

See “ Note 8.

Commitments and Contingencies ” in

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What changed 10-K

Item 7. Management’s Discussion and Analysis