What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-10 compared with 2022-05-10 · 341 added, 269 removed, 2246 unchanged (21% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2022

June 30, 2022

December 31, 2021

11 unchanged sentences

Prepaid expenses and other receivables

Receivable for common stock issued

Distributions payable

1 unchanged sentence

Incentive fees payable

Amounts payable on unsettled investment transactions

Interest payable

1 unchanged sentence

Advances received from unfunded credit facilities

Unrealized depreciation on foreign currency forward contracts

Total liabilities

11 unchanged sentences

(in thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Investment income

42 unchanged sentences

Paid-in Capital in Excess of Par

Accumulated Underdistributed/ (Overdistributed) Earnings

Accumulated Earnings (Loss)

Total Net Assets

8 unchanged sentences

Balance at March 31, 2022

Stock issued in connection with at-the-market offering

Stock issued in connection with dividend reinvestment plan

Net increase in net assets resulting from operations:

Net investment income after excise tax

Net realized gains (losses) on investments

Net change in unrealized appreciation (depreciation) on investments

Distributions declared

Balance at June 30, 2022

Paid-in Capital in Excess of Par

Accumulated Underdistributed/ (Overdistributed) Earnings

Accumulated Earnings (Loss)

Total Net Assets

8 unchanged sentences

Balance at March 31, 2021

Stock issued in connection with at-the-market offering

Stock issued in connection with dividend reinvestment plan

Net increase in net assets resulting from operations:

Net investment income after excise tax

Net realized gains (losses) on investments

Net change in unrealized appreciation (depreciation) on investments

Distributions declared

Balance at June 30, 2021

See notes to the consolidated financial statements

2 unchanged sentences

(in thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities

36 unchanged sentences

Distributions reinvested

Value of shares issued pursuant to the ATM Program

Non-cash exchanges of investments

4 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated statements of assets and liabilities that sum to the total of the same amounts presented in the consolidated statements of cash flows:

As of March 31,

As of June 30,

Cash and cash equivalents

5 unchanged sentences

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

June 30, 2022

(in thousands)

2 unchanged sentences

Debt Investments

Asset Management & Custody Banks

JZ Capital Partners Ltd.

First Lien Secured Term Loan

JZ Capital Partners Ltd.

First Lien Secured Delayed Draw Loan

Air Freight & Logistics

9 unchanged sentences

Second Lien Secured Term Loan

Education Networks of America, Inc.

First Lien Secured Term Loan

(f/k/a Newscycle Solutions, Inc.)

2 unchanged sentences

First Lien Secured Revolving Loan

Base rate+ 6.38%

Asset Management & Custody Banks

JZ Capital Partners Ltd.

First Lien Secured Term Loan

JZ Capital Partners Ltd.

First Lien Secured Delayed Draw Loan

Automotive Retail

21 unchanged sentences

First Lien Secured Term Loan

Trimlite Buyer LLC (d/b/a Trimlite LLC) (5)(7)

First Lien Secured Revolving Loan

Cable & Satellite

5 unchanged sentences

9.75% (9.25% Cash + 0.50% PIK)

Construction & Engineering

Tensar Corporation

First Lien Secured Term Loan

Construction Materials

9 unchanged sentences

First Lien Secured Revolving Loan

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

(in thousands)

Investment Type (1)

Data Processing & Outsourced Services

4 unchanged sentences

First Lien Secured Term Loan

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2022

(in thousands)

Investment Type (1)

Department Stores

2 unchanged sentences

Crown Brands LLC

First Lien Secured Term Loan

Crown Brands LLC (19)

Second Lien Secured Term Loan

20 unchanged sentences

First Lien Secured Revolving Loan

8.60% (8.10% Cash + 0.50% PIK)

EducationDynamics, LLC (4)

9 unchanged sentences

First Lien Secured Revolving Loan

RLJ Pro-Vac, Inc.

(d/b/a Pro-Vac)

First Lien Secured Term Loan

RLJ Pro-Vac, Inc.

(d/b/a Pro-Vac) (7)

First Lien Secured Revolving Loan

Health Care Facilities

8 unchanged sentences

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

June 30, 2022

(in thousands)

7 unchanged sentences

11.25% (10.75% Cash + 0.50% PIK)

IvyRehab Intermediate II, LLC (d/b/a Ivy Rehab)

First Lien Secured Term Loan

IvyRehab Intermediate II, LLC (d/b/a Ivy Rehab) (7)

First Lien Secured Delayed Draw Loan

IvyRehab Intermediate II, LLC (d/b/a Ivy Rehab) (7)

First Lien Secured Revolving Loan

Lab Logistics, LLC

28 unchanged sentences

First Lien Secured Term Loan

Household Appliances

Token Buyer, Inc.

(d/b/a Therm-O-Disc, Inc.)

First Lien Secured Term Loan

Household Products

3 unchanged sentences

First Lien Secured Revolving Loan

Industrial Machinery

Project Castle, Inc.

(d/b/a Material Handling Systems, Inc.)

First Lien Secured Term Loan

Interactive Media & Services

What If Holdings, LLC (d/b/a What If Media Group, LLC)

MSI Information Services, Inc.

First Lien Secured Term Loan

MSI Information Services, Inc.

First Lien Secured Revolving Loan

Base rate+ 6.84%

Internet & Direct Marketing Retail

10 unchanged sentences

First Lien Secured Term Loan

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2022

(in thousands)

Investment Type (1)

Investment Banking & Brokerage

4 unchanged sentences

First Lien Secured Term Loan

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

(in thousands)

Investment Type (1)

Leisure Facilities

20 unchanged sentences

9.08% (1.08% Cash + 8.00% PIK)

PlayMonster LLC (6)(7)

First Lien Secured Revolving Loan

Life Sciences Tools & Services

20 unchanged sentences

First Lien Secured Revolving Loan

Sunless, Inc.

First Lien Secured Term Loan

Research & Consulting Services

Aeyon LLC (24)

First Lien Secured Term Loan

4 unchanged sentences

11.29% (10.29% Cash + 1.00% PIK)

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2022

(in thousands)

Investment Type (1)

Specialized Consumer Services

13 unchanged sentences

First Lien Secured Delayed Draw Loan

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

(in thousands)

Investment Type (1)

Specialized Finance

9 unchanged sentences

First Lien Secured Revolving Loan

Telestream Holdings Corporation (7)

First Lien Secured Delayed Draw Loan

Total Debt Investments

22 unchanged sentences

Class A Units

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2022

(in thousands)

Investment Type (1)

Health Care Services

6 unchanged sentences

What If Media Group, LLC (4)

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

(in thousands)

Investment Type (1)

Internet & Direct Marketing Retail

15 unchanged sentences

Playmonster Group Equity, Inc.

(d/b/a PlayMonster LLC) (4)(6)(8)(22)

(d/b/a PlayMonster Group LLC) (4)(6)(8)(22)

Preferred Stock

Playmonster Group Equity, Inc.

(d/b/a PlayMonster LLC) (4)(6)(22)

(d/b/a PlayMonster Group LLC) (4)(6)(22)

Other Diversified Financial Services

9 unchanged sentences

Total Investments

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2022

(in thousands)

Forward Currency Contracts

4 unchanged sentences

(1) Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940, as amended (the “1940 Act”), and provide collateral for the Company’s credit facility.

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

March 31, 2022

(in thousands)

(2) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), which resets monthly, quarterly or semiannually, the Secured Overnight Financing Rate (“SOFR” or “SF”), the Canadian Dollar Offered Rate (“CDOR” or “C”), Canada Prime Rate (“CP”) or the U.S.

Prime Rate (“Prime” or “P”).

The one, three and six-month USD LIBOR were 0.45%, 0.96% and 1.47%, respectively, as of March 31, 2022.

The SOFR, CDOR, CP and Prime were 0.29%, 1.26%, 2.70% and 3.50%, respectively, as of March 31, 2022.

(3) The interest rate is the “all-in-rate” including the current index and spread, the fixed rate, and the payment-in-kind (“PIK”) interest rate, as the case may be.

4 unchanged sentences

(6) Investment is a non-controlled affiliate investment as defined by the 1940 Act.

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of March 31, 2022.

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of June 30, 2022.

(8) Preferred equity investment is a non-income producing security.

10 unchanged sentences

(17) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest in the amount of 3.00% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

See notes to the consolidated financial statements

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2022

(in thousands)

(18) On October 1, 2020, as part of a restructuring agreement between the Company and Arcole Acquisition Corp, the Company’s investments in first lien secured term loans to Arcole Acquisition Corp were converted into common shares of Arcole Holding Corp.

6 unchanged sentences

(23) Ownership of certain equity investments may occur through a holding company or partnership.

(24) Investment is structured as a unitranche loan in which the Company may receive additional interest on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

See notes to the consolidated financial statements

463 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

4 unchanged sentences

WhiteHorse Finance’s common stock trades on the Nasdaq Global Select Market under the symbol “WHF.”

The Company’s investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest rate based on a risk-free index rate such as LIBOR or SOFR and have a term of three to six years.

The Company’s investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest index rate such as LIBOR or SOFR and have a term of three to six years.

While the Company focuses principally on originating senior secured loans to lower middle market companies, it may also opportunistically make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests and may receive warrants to purchase common stock in connection with its debt investments.

20 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

33 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

37 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

6 unchanged sentences

Any tax positions not deemed to satisfy the more likely than not threshold are reversed and recorded as tax benefit or tax expense, as appropriate, in the current year.

Management has analyzed the Company’s tax positions, and the Company has concluded that the Company did not have any unrecognized tax benefits or unrecognized tax liabilities related to uncertain tax positions as of March 31, 2022 and December 31, 2021.

Penalties or interest that may be assessed related to any income taxes would be classified as general and administrative expenses on the consolidated statements of operations.

The Company had no amounts accrued for interest or penalties as of March 31, 2022 or December 31, 2021.

The Company had no amounts accrued for interest or penalties as of June 30, 2022 or December 31, 2021.

The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

3 unchanged sentences

Tax returns for each of the federal tax years since 2018 remain subject to examination by the Internal Revenue Service.

As of March 31, 2022 and December 31, 2021, the cost of investments for federal income tax purposes was $800,053 and $835,502 resulting in net unrealized appreciation of $319 and gross unrealized depreciation of $16,293, respectively.

This is comprised of gross unrealized appreciation of $14,763 and $10,770, and gross unrealized depreciation of $14,444 and $27,062, on a tax basis, as of March 31, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, the cost of investments for federal income tax purposes was $769,156 and $835,502 resulting in net unrealized depreciation of $2,677 and $16,293, respectively.

This is comprised of gross unrealized appreciation of $14,919 and $10,770 and gross unrealized depreciation of $17,596 and $27,062, on a tax basis, as of June 30, 2022 and December 31, 2021, respectively.

Dividends and Distributions :

15 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

3 unchanged sentences

Recent Accounting Pronouncements :

In June 2022, the FASB issued ASU No.

2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

This ASU clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction.

The guidance also requires specific disclosures related to equity securities that are subject to contractual sale restrictions.

The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within that fiscal year with early adoption permitted.

The Company is currently evaluating the impact of the adoption of ASU 2022-03 on its consolidated financial statements.

In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met.

10 unchanged sentences

The Company may choose to renew contracts quarterly unless otherwise settled by the Company or the counterparty.

The following table provides a breakdown of our forward currency contracts for the three months ended March 31, 2022 and 2021:

The following table provides a breakdown of our forward currency contracts for the three and six months ended June 30, 2022 and 2021:

For the three months ended

March 31, 2022

March 31, 2021

For the six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Realized gain (loss) on forward currency contracts

1 unchanged sentence

Total net realized and unrealized gains (losses) on forward currency contracts

The value associated with unrealized loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities.

Open contracts as of March 31, 2022 were as follows:

The value associated with unrealized gain or loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities.

Open contracts as of June 30, 2022 were as follows:

Currency to be sold

2 unchanged sentences

Morgan Stanley

The following table is a summary of the average USD notional exposure to foreign currency forward contracts for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Average USD notional outstanding

Forward currency contracts

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

The following table is a summary of the average USD notional exposure to foreign currency forward contracts for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

Average USD notional outstanding

Forward currency contracts

The foreign currency forward contracts open at the end of the period are generally indicative of the volume of activity during the period.

4 unchanged sentences

The Company’s unrealized appreciation or depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the consolidated statements of assets and liabilities.

The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of March 31, 2022.

As of March 31, 2022

As of June 30, 2022

Counterparty ($ in thousands)

17 unchanged sentences

Investments consisted of the following:

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

9 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

1 unchanged sentence

Industry ($ in thousands)

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

22 unchanged sentences

Home Furnishings

Household Appliances

Household Products

20 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

As of March 31, 2022, the portfolio companies underlying the investments are all located in the United States and its territories, except for JZ Capital Partners Ltd., which is domiciled in Guernsey, and Arcole Acquisition Corp and Trimlite Buyer, LLC, which are domiciled in Canada.

As of March 31, 2022 and December 31, 2021, the weighted average remaining term of the Company’s debt investments, excluding non-accrual investments, were approximately 3.6 years and 3.8 years, respectively.

As of March 31, 2022 there were no loans on non-accrual status.

As of June 30, 2022, the portfolio companies underlying the investments are all located in the United States and its territories, except for JZ Capital Partners Ltd., which is domiciled in Guernsey, and Arcole Acquisition Corp and Trimlite Buyer, LLC, which are domiciled in Canada.

As of June 30, 2022 and December 31, 2021, the weighted average remaining term of the Company’s debt investments, excluding non-accrual investments, were approximately 3.5 years and 3.8 years, respectively.

As of June 30, 2022 there were no loans on non-accrual status.

As of December 31, 2021, the total fair value of non-accrual loans was $10,046.

1 unchanged sentence

A controlled affiliated company is generally a portfolio company in which the Company owns more than 25% of its voting securities or has the power to exercise control over its management or policies (including through a management agreement).

The following table presents the schedule of investments in and advances to affiliated and controlled persons (as defined by the 1940 Act) as of and for the three months ended March 31, 2022:

The following table presents the schedule of investments in and advances to affiliated and controlled persons (as defined by the 1940 Act) as of and for six months ended June 30, 2022:

Dividends and

10 unchanged sentences

Playmonster Group Equity, Inc.

(d/b/a PlayMonster LLC)

(d/b/a PlayMonster)

Preferred Equity

Playmonster Group Equity, Inc.

(d/b/a PlayMonster LLC)

(d/b/a PlayMonster)

Common Equity

8 unchanged sentences

Because management of STRS JV is shared equally between the Company and STRS Ohio, the Company does not believe it controls STRS JV for purposes of the 1940 Act or otherwise.

(1) Refer to the consolidated schedule of investments for the principal amount, industry classification and other security detail of each portfolio company.

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

(1) Refer to the consolidated schedule of investments for the principal amount, industry classification and other security detail of each portfolio company.

On January 24, 2022, as part of a restructuring agreement between the Company and PlayMonster LLC, the Company’s first lien secured term loan and delayed draw loan investments to PlayMonster LLC, with a total cost basis of $7,045, converted into a new first lien secured term loan, preferred stock and common stock of Playmonster Group LLC.

On June 24, 2022, the PlayMonster LLC first lien secured revolving loan investment was fully realized.

A portion of the PlayMonster LLC first lien revolving loan investment restructured into the existing Playmonster Group LLC first lien secured term loan, with a total cost basis of $437.

For the three months ended June 30, 2022, the Company recovered $1,725 on an equity investment to the RCS Creditor Trust Class B Units and is reported as a non-controlled affiliate realized gain in the consolidated statements of operations.

The Company previously recovered $562 on the RCS Creditor Trust Class B Units during the three months ended December 31, 2021.

The following table presents the schedule of investments in and advances to affiliated and controlled persons (as defined by the 1940 Act) as of and for the year ended December 31, 2021:

19 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

3 unchanged sentences

In July 2019, STRS JV formally launched operations.

STRS JV invests primarily in lower middle market, senior secured debt facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest rate based on a risk-free index rate such as LIBOR and have a term of three to six years.

STRS JV invests primarily in lower middle market, senior secured debt facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest index rate such as LIBOR or SOFR and have a term of three to six years.

In February 2022, the Company increased its capital commitment to the STRS JV in the amount of an additional $25,000, which brings the Company’s total capital commitment to $100,000, comprised of $80,000 of subordinated notes and $20,000 of LLC equity interests.

In connection with this increase in the Company’s capital commitment, the Company and STRS Ohio’s amended economic ownership in the STRS JV is approximately 66.67% and 33.33%, respectively.

As of March 31, 2022 and December 31, 2021, STRS JV had total assets of $332,239 and $273,523, respectively.

STRS JV’s portfolio consisted of debt investments in 33 and 28 portfolio companies as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the largest investment by aggregate principal amount (including any unfunded commitments) in a single portfolio company in STRS JV’s portfolio was $20,086 and $23,483, respectively.

The five largest investments in portfolio companies by fair value in STRS JV totaled $79,609 and $83,057 as of March 31, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, STRS JV had total assets of $336,541 and $273,523, respectively.

STRS JV’s portfolio consisted of debt investments in 32 and 28 portfolio companies as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, the largest investment by aggregate principal amount (including any unfunded commitments) in a single portfolio company in STRS JV’s portfolio was $20,086 and $23,483, respectively.

The five largest investments in portfolio companies by fair value in STRS JV totaled $79,121 and $83,057 as of June 30, 2022 and December 31, 2021, respectively.

STRS JV invests in portfolio companies in the same industries in which the Company may directly invest.

The Company provides capital to STRS JV in the form of LLC equity interests and through interest-bearing subordinated notes.

As of March 31, 2022, the Company and STRS Ohio owned 66.67% and 33.33%, respectively, of the LLC equity interests of STRS JV.

As of June 30, 2022, the Company and STRS Ohio owned 66.67% and 33.33%, respectively, of the LLC equity interests of STRS JV.

As of December 31, 2021, the Company and STRS Ohio owned 60% and 40%, respectively, of the LLC equity interests of STRS JV.

The Company’s investment in STRS JV consisted of equity contributions of $20,000 and $15,000 and advances of the subordinated notes of $80,000 and $60,000 as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $20,000 and $80,000, respectively, both of which were fully funded.

The Company’s investment in STRS JV consisted of equity contributions of $20,000 and $15,000 and advances of the subordinated notes of $80,000 and $60,000 as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $20,000 and $80,000, respectively, both of which were fully funded.

As of December 31, 2021, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, respectively, both of which were fully funded.

13 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

On March 11, 2022, the terms of the STRS JV Credit Facility were further amended to, among other things, (i) permanently increase STRS Credit’s availability under the Credit Facility from $175,000 to $225,000, (ii) increase the minimum funding amount from $131,250 to $168,750, and (iii) apply an annual interest rate equal to the applicable SOFR plus 2.50% to USD borrowings greater than $175,000 in the Credit Facility.

As of March 31, 2022, the STRS JV Credit Facility had $225,000 of commitments subject to leverage and borrowing base restrictions with an interest rate based on a risk-free index rate such as LIBOR, Sterling Overnight Index Average (“SONIA”) or CDOR plus 2.35% for borrowings up to $175,000 and SOFR plus 2.50% for USD borrowings above $175,000.

As of June 30, 2022, the STRS JV Credit Facility had $225,000 of commitments subject to leverage and borrowing base restrictions with an interest rate based on a floating index rate such as LIBOR, Sterling Overnight Index Average (“SONIA”) or CDOR plus 2.35% for borrowings up to $175,000 and SOFR plus 2.50% for USD borrowings above $175,000.

The final maturity date of the STRS JV Credit Facility is July 19, 2025.

As of March 31, 2022, STRS JV had $180,065 of outstanding borrowings and an effective interest rate of 2.9% per annum under the STRS JV Credit Facility.

As of December 31, 2021, the STRS JV Credit Facility had $175,000 of commitments subject to leverage and borrowing base restrictions with an interest rate based on a risk-free index rate such as LIBOR, SONIA or CDOR plus 2.35%.

As of June 30, 2022, STRS JV had $181,678 of outstanding borrowings and an effective interest rate of 2.9% per annum under the STRS JV Credit Facility.

As of December 31, 2021, the STRS JV Credit Facility had $175,000 of commitments subject to leverage and borrowing base restrictions with an interest rate based on a floating index rate such as LIBOR, SONIA or CDOR plus 2.35%.

As of December 31, 2021, STRS JV had $146,782 of outstanding borrowings and an effective interest rate of 2.5% per annum under the STRS JV Credit Facility.

1 unchanged sentence

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

Below is a listing of STRS JV’s individual investments as of March 31, 2022:

Below is a listing of STRS JV’s individual investments as of June 30, 2022:

Investment Type (1)

23 unchanged sentences

First Lien Secured Term Loan

Tensar Corporation

First Lien Secured Term Loan

Data Processing & Outsourced Services

30 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

Investment Type (1)

Household Appliances

(d/b/a PEMCO International) (9)

First Lien Secured Term Loan

(d/b/a PEMCO International)

First Lien Secured Term Loan

(d/b/a PEMCO International) (9)

First Lien Secured Revolving Loan

(d/b/a PEMCO International)

First Lien Secured Revolving Loan

Industrial Machinery

FR Flow Control CB LLC

First Lien Secured Term Loan B

BLP Buyer, Inc.

20 unchanged sentences

Cennox Holdings Limited (d/b/a Cennox) (9)

First lien Secured Term Loan

Cennox Holdings Limited (d/b/a Cennox) (8)

First lien Secured Revolving Loan

24 unchanged sentences

First Lien Secured Term Loan

10.75% (8.75% Cash + 2.00% PIK)

Stella & Chewy's LLC (6)

First Lien Secured Delayed Draw Loan

10.94% (8.94% Cash + 2.00% PIK)

Westrock Coffee Company, LLC

1 unchanged sentence

10.00% (9.75% Cash + 0.25% PIK)

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2022

(in thousands, except share and per share data)

Investment Type (1)

Personal Products

12 unchanged sentences

First Lien Secured Revolving Loan

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

(in thousands, except share and per share data)

Investment Type (1)

Real Estate Operating Companies

42 unchanged sentences

Morgan Stanley

(1) Except as noted, all investments provide collateral for the STRS JV Credit Facility.

(2) The investments bear interest at a rate that may be determined by reference to LIBOR, which resets monthly, quarterly or semiannually, SOFR, CDOR, Canada Prime or Prime.

The one, three and six-month LIBOR were 0.45%, 0.96% and 1.47%, respectively, as of March 31, 2022.

The three month Euro Interbank Offered Rate (“EurIBOR” or “E”) and six-month GBP LIBOR were (0.46)% and 1.47%, respectively, as of March 31, 2022.

The SOFR, CDOR, Canada Prime and Prime were 0.29%, 1.26%, 2.70% and 3.50%, respectively, as of March 31, 2022.

(3) The interest rate is the “all-in-rate” including the current index and spread, the fixed rate, and the PIK interest rate, as the case may be.

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

(4) Except as otherwise noted, all of the STRS JV’s portfolio company investments, which as of the date of the portfolio represented 1,004% of STRS JV’s net assets or 94% of STRS JV’s total assets, are subject to legal restrictions on sales.

(2) The investments bear interest at a rate that may be determined by reference to LIBOR, which resets monthly, quarterly or semiannually, SOFR, CDOR, Canada Prime, Prime, Euro Interbank Offered Rate (“EurIBOR” or “E”).

(3) The interest rate is the “all-in-rate” including the current index and spread, the fixed rate, and the PIK interest rate, as the case may be.

(4) Except as otherwise noted, all of the STRS JV’s portfolio company investments, which as of the date of the portfolio represented 954% of STRS JV’s members’ equity or 95% of STRS JV’s total assets, are subject to legal restrictions on sales.

(5) The fair value of each investment was determined using significant unobservable inputs.

7 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

59 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

64 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

34 unchanged sentences

(3) The interest rate is the “all-in-rate” including the current index and spread, the fixed rate, and the payment-in-kind (“PIK”) interest rate, as the case may be.

(4) Except as otherwise noted, all of the Company’s portfolio company investments, which as of the date of the portfolio represented 998% of the Company’s net assets or 95% of the Company’s total assets, are subject to legal restrictions on sales.

(4) Except as otherwise noted, all of the Company’s portfolio company investments, which as of the date of the portfolio represented 998% of the Company’s members’ equity or 95% of the Company’s total assets, are subject to legal restrictions on sales.

(5) The fair value of each investment was determined using significant unobservable inputs.

7 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

As of March 31, 2022 and December 31, 2021, the portfolio companies underlying the STRS JV investments are all located in the United States and its territories except for Geo Logic Systems Ltd., which is domiciled in Canada, and Cennox Holdings Limited, which is domiciled in the United Kingdom.

As of March 31, 2022 and December 31, 2021, STRS JV had no investments on non-accrual status.

STRS JV had outstanding commitments to fund investments totaling $33,085, and $22,883 under delayed draw term loan commitments and undrawn revolvers as of March 31, 2022 and December 31, 2021, respectively.

Below is certain summarized financial information for STRS JV as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021;

As of June 30, 2022 and December 31, 2021, the portfolio companies underlying the STRS JV investments are all located in the United States and its territories except for Geo Logic Systems Ltd., which is domiciled in Canada, and Cennox Holdings Limited, which is domiciled in the United Kingdom.

As of June 30, 2022 and December 31, 2021, STRS JV had no investments on non-accrual status.

STRS JV had outstanding commitments to fund investments totaling $28,345, and $22,883 under delayed draw term loan commitments and undrawn revolvers as of June 30, 2022 and December 31, 2021, respectively.

Below is certain summarized financial information for STRS JV as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021:

Selected Balance Sheet Information ($ in thousands)

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

12 unchanged sentences

Three Months Ended

Six Months Ended

Selected Statement of Operations Information ($ in thousands)

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Interest income

8 unchanged sentences

Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions

Net increase in net assets resulting from operations

Net increase in members’ equity resulting from operations

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

13 unchanged sentences

Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.

During the three months ended March 31, 2022 and year ended December 31, 2021, there were no changes in the observability of valuation inputs that would have resulted in a reclassification of assets between any levels.

During the six months ended June 30, 2022 and year ended December 31, 2021, there were no changes in the observability of valuation inputs that would have resulted in a reclassification of assets between any levels.

Fair value for each investment is derived using a combination of valuation methodologies that, in the judgment of the Investment Committee are most relevant to such investment, including, without limitation, being based on one or more of the following:

2 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

The following table presents investments (as shown on the consolidated schedule of investments) that were measured at fair value as of March 31, 2022:

The following table presents investments (as shown on the consolidated schedule of investments) that were measured at fair value as of June 30, 2022:

First lien secured loans

7 unchanged sentences

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.

The Company’s investments in forward currency contracts, which were valued at ($4) as of March 31, 2022, are characterized in Level 2 of the hierarchy.

The Company’s investments in forward currency contracts, which were valued at zero as of June 30, 2022, are characterized in Level 2 of the hierarchy.

The following table presents investments (as shown on the consolidated schedule of investments) that were measured at fair value as of December 31, 2021:

8 unchanged sentences

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.

The following table presents the changes in investments measured at fair value using Level 3 inputs for the three months ended March 31, 2022:

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2022

(in thousands, except share and per share data)

The following table presents the changes in investments measured at fair value using Level 3 inputs for the three and six months ended June 30, 2022:

Notes to STRS

Three months ended June 30, 2022

Fair value, beginning of period

6 unchanged sentences

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of March 31, 2022

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2022

Notes to STRS

Six months ended June 30, 2022

Fair value, beginning of period

Funding of investments

Non-cash interest income

Accretion of discount (premium)

Proceeds from paydowns and sales

Realized gains (losses)

Net unrealized (depreciation) appreciation

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2022

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

The following table presents the changes in investments measured at fair value using Level 3 inputs for the three months ended March 31, 2021:

The following table presents the changes in investments measured at fair value using Level 3 inputs for the three and six months ended June 30, 2021:

Notes to STRS

Three months ended June 30, 2021

Fair value, beginning of period

6 unchanged sentences

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of March 31, 2021

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2021

Notes to STRS

Six months ended June 30, 2021

Fair value, beginning of period

Funding of investments

Non-cash interest income

Accretion of discount

Proceeds from paydowns and sales

Realized losses

Net unrealized (depreciation) appreciation

Fair value, end of period

Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2021

The significant unobservable inputs used in the fair value measurement of the Company’s investments are the discount rate, market quotes and exit multiples.

5 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

2 unchanged sentences

Investment Type

March 31, 2022

June 30, 2022

(Weighted Average) (1)

3 unchanged sentences

8.5% – 33.1% (12.0%)

Exit EBITDA multiple

5.5x – 15.0x (8.7x)

Recent transaction

6 unchanged sentences

97.6 – 98.9 (98.2)

Exit EBITDA multiple

5.5x – 11.0x (8.4x)

Discounted cash flows and Market quote

Discount Rate

Expected repayment

Transaction price

100.0 – 102.0 (101.2)

Second lien secured loans

1 unchanged sentence

Discount rate

11.6% – 22.9% (14.5%)

Exit EBITDA multiple

6.5x – 8.5x (8.0x)

Discounted cash flows and Recent transaction

1 unchanged sentence

Discount rate

Exit EBITDA multiple

Discounted cash flows and Market quote

Discount Rate

Subordinated Notes

1 unchanged sentence

Discounted cash flows and Recent transaction

Discount Rate

Transaction price

Exit EBITDA multiple

Preferred Equity

Similar transactions

LTM EBITDA multiple

7.9x – 10.3x (9.8x)

Discount for lack of marketability

Discounted cash flows and Guideline public companies

Discounted cash flows and Enterprise value

Discount Rate

17.0% – 24.8% (22.7%)

Exit EBITDA Multiple

LTM EBITDA Multiple

NFY EBITDA Multiple

EBITDA Multiple Range

4.4x - 5.1x (4.8x)

Discount for lack of marketability

Discounted cash flows

Discount rate

Exit EBITDA multiple

Enterprise value

EBITDA Multiple Range

6.0x – 7.9x (7.1x)

Common Equity

4 unchanged sentences

7.5x – 11.0x (9.5x)

Discount for lack of marketability

10.0% – 15.0% (10.2%)

Discounted cash flows, Guideline public companies and Similar Transactions

Discounted cash flows and Enterprise value

Discount Rate

14.0% – 16.7% (16.4%)

Exit EBITDA Multiple

6.0x – 11.0x (10.5x)

LTM EBITDA Multiple

NFY EBITDA Multiple

Discount for lack of marketability

10.0% – 12.5% (10.5%)

EBITDA Multiple Range

3.8x - 6.6x (5.2x)

Enterprise value

Discount Rate

Exit EBITDA Multiple

EBITDA Multiple Range

Collateral value and Recent transaction

Transaction price

$1.00 per share

Similar transactions

LTM EBITDA Multiple

EBITDA Multiple Range

Discount for lack of marketability

Collateral value

EBITDA Multiple Range

6.0x – 10.0x (7.9x)

Discount for lack of marketability

10.0% – 15.0% (13.8%)

Recent transaction

Recent transaction and Enterprise value

Transaction price

10.0 - 1,000.0 (215.9 per share)

EBITDA Multiple Range

6.0x – 14.5x (10.9x)

Discounted cash flows and Option-pricing method

Discount rate

Exit EBITDA multiple

Discount for lack of marketability

Discounted cash flows

Discount Rate

23.3% – 26.9% (26.8%)

1 unchanged sentence

8.6x – 10.3x (10.2x)

3.7% – 9.0% (3.8%)

Discount for lack of marketability

Total Level 3 Investments

(1) Unobservable inputs were weighted by the relative fair value of the investments.

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

79 unchanged sentences

Total Level 3 Investments

(1) Unobservable inputs were weighted by the relative fair value of the investments.

Valuation of investments may be determined by weighting various valuation techniques.

Significant judgment is required in selecting the assumptions used to determine the fair values of these investments.

The valuation methods selected for a particular investment are based on the circumstances and on the sufficiency of data available to measure fair value.

If more than one valuation method is used to measure fair value, the results are evaluated and weighted, as

The valuation methods

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

appropriate, considering the reasonableness of the range indicated by those results.

selected for a particular investment are based on the circumstances and on the sufficiency of data available to measure fair value.

If more than one valuation method is used to measure fair value, the results are evaluated and weighted, as appropriate, considering the reasonableness of the range indicated by those results.

A fair value measurement is the point within that range that is most representative of fair value in the circumstances.

11 unchanged sentences

However, a change in a valuation methodology or its application from one measurement date to another is possible if the change results in a measurement that is equally or more representative of fair value in the circumstances.

The following table presents the principal amount and fair value of the Company’s borrowings as of March 31, 2022 and December 31, 2021.

The following table presents the principal amount and fair value of the Company’s borrowings as of June 30, 2022 and December 31, 2021.

The fair value of the Credit Facility (as defined in Note 6) was estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments at the measurement date, if available.

The fair value of the Company’s 6.00% private notes due 2023 (the “6.000% 2023 Notes”), the 5.375% private notes due 2025 (the “5.375% 2025 Notes”), the 5.375% private notes due 2026 (the “5.375% 2026 Notes”), the 4.00% notes due 2026 (the “4.000% 2026 Notes”), the 5.625% private notes due 2027 (the “5.625% 2027 Notes”), and the 4.25% private notes due 2028 (the “4.250% 2028 Notes”) were estimated using discounted future cash flows to the valuation date.

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

10 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

5 unchanged sentences

As a result, the Company’s asset coverage requirements applicable to senior securities decreased from 200% to 150%, effective August 2, 2018.

As of March 31, 2022 and December 31, 2021, the Company’s asset coverage for borrowed amounts was 173.4% and 172.6%, respectively.

Total borrowings outstanding and available as of March 31, 2022, were as follows:

As of June 30, 2022 and December 31, 2021, the Company’s asset coverage for borrowed amounts was 181.0% and 172.6%, respectively.

Total borrowings outstanding and available as of June 30, 2022, were as follows:

Principal Amount Outstanding

24 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

11 unchanged sentences

The minimum borrowing requirement is $234,500.

In connection with the Credit Facility, WhiteHorse Credit pledged securities with a fair value of approximately $662,487 as of March 31, 2022 as collateral.

The Credit Facility has a maturity date of November 22, 2025.

In connection with the Credit Facility, WhiteHorse Credit pledged securities as collateral with a fair value of approximately $626,678 as of June 30, 2022 The Credit Facility has a maturity date of November 22, 2025.

Under the Credit Facility, the Company has made certain customary representations and warranties and is required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities.

As of March 31, 2022, the Company had $283,752 in outstanding borrowings and $51,248 undrawn under the Credit Facility.

Weighted average outstanding borrowings were $311,447 at a weighted average interest rate of 2.68% for the three months ended March 31, 2022.

As of March 31, 2022, the interest rate in effect on outstanding borrowings was 2.98%.

As of June 30, 2022, the Company had $238,738 in outstanding borrowings and $96,262 undrawn under the Credit Facility.

Weighted average outstanding borrowings were $257,531 and $284,340 at a weighted average interest rate of 3.28% and 2.95% for the three and six months ended June 30, 2022.

As of June 30, 2022, the interest rate in effect on outstanding borrowings was 4.03%.

The Company’s ability to draw down undrawn funds under the Credit Facility is determined by collateral and portfolio quality requirements stipulated in the credit and security agreement.

As of March 31, 2022, $51,248 was available to be drawn by the Company based on these requirements.

As of March 31, 2021, the Company had $214,563 in outstanding borrowings and $70,437 undrawn under the Credit Facility.

Weighted average outstanding borrowings were $224,326 at a weighted average interest rate of 2.72%, respectively, for the three months ended March 31, 2021.

As of March 31, 2021, the interest rate in effect on outstanding borrowings was 2.69%.

As of June 30, 2022, $96,262 was available to be drawn by the Company based on these requirements.

As of December 31, 2021, the Company had $291,637 in outstanding borrowings and $43,363 undrawn under the Credit Facility.

As of December 31, 2021, the weighted average outstanding borrowings were $245,934 at a weighted average interest rate of 2.60%.

As of December 31, 2021, the interest rate in effect on outstanding borrowings was 2.55%.

The Company’s ability to draw down undrawn funds under the Credit Facility is determined by collateral and portfolio quality requirements stipulated in the credit and security agreement.

At March 31, 2021, approximately $70,437 was available to be drawn by the Company based on these requirements.

As of December 31, 2021, $43,363 was available to be drawn by the Company based on these requirements.

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

39 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

31 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

The following table details our management fee expenses for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Management Fees ($ in thousands)

Base management fees

Base management fees waived

The following table details our management fee expenses for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

Management Fee ($ in thousands)

Base management fee

Base management fee waived

Total management fees

As of March 31, 2022 and December 31, 2021, management fees payable on the consolidated statements of assets and liabilities were $3,952 and $3,766, respectively.

As of June 30, 2022 and December 31, 2021, management fees payable on the consolidated statements of assets and liabilities were $3,908 and $3,766, respectively.

Performance-based Incentive Fee

9 unchanged sentences

The first component, which is income-based (the “Income Incentive Fee”), is calculated and payable quarterly in arrears and is determined based on Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter, subject to the Incentive Fee Cap and Deferral Mechanism.

For this purpose, “Pre-Incentive Fee Net Investment Income” means, in each case on a consolidated basis, interest income, distribution income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement (the “Administration Agreement”), any interest expense and any dividends paid on

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

any issued and outstanding preferred stock, but excluding the incentive fee).

structuring, diligence and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement (the “Administration Agreement”), any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

14 unchanged sentences

The capital gains component of the incentive fee is not subject to any minimum return to stockholders.

In accordance with GAAP, the Company is also required to include the aggregate unrealized capital appreciation on investments in the calculation and accrue a capital gains incentive fee on a quarterly basis if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

calculating the fee actually payable under the Investment Advisory Agreement.

If the Capital Gains Incentive Fee Base, adjusted as required by GAAP to include unrealized capital appreciation, is positive at the end of a reporting period, then GAAP requires the Company to accrue a Capital Gains Incentive Fee equal to 20% of such amount, less the aggregate amount of any Capital Gains Incentive Fees previously paid and Capital Gains Incentive Fees accrued under GAAP in all prior periods.

4 unchanged sentences

For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess of the Hurdle Rate, it will pay the applicable Income Incentive Fee even after incurring a loss in that quarter due to realized and unrealized capital losses.

The following table provides a breakdown of the performance-based incentive fees for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Performance-based Incentive Fees ($ in thousands)

The following table provides a breakdown of the performance-based incentive fees for the three months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

Performance-based Incentive Fee ($ in thousands)

Income incentive fee

Capital gains incentive fees

Capital gains incentive fee

Performance-based incentive fees waived

Total performance-based incentive fees

As of March 31, 2022 and December 31, 2021, incentive fees payable on the consolidated statements of assets and liabilities were $5,445 and $7,958, respectively.

As of March 31, 2022 and December 31, 2021, incentive fees payable on the consolidated statements of assets and liabilities include $1,238 and $1,803, respectively, for cumulative accruals of Capital Gains Incentive Fees under GAAP, including any amounts payable pursuant to the Investment Advisory Agreement as described above.

As of June 30, 2022 and December 31, 2021, incentive fees payable on the consolidated statements of assets and liabilities were $5,176 and $7,958, respectively.

As of June 30, 2022 and December 31, 2021, incentive fees payable on the consolidated statements of assets and liabilities include $1,132 and $1,803, respectively, for cumulative accruals of Capital Gains Incentive Fees under GAAP, including any amounts payable pursuant to the Investment Advisory Agreement as described above.

Administration Agreement :

7 unchanged sentences

To the extent that WhiteHorse Administration outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without any profit to WhiteHorse Administration.

Substantially all the Company’s payments of operating expenses to third parties were made by a related party, for which such third party received reimbursement from the Company.

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

During the three months ended March 31, 2022, the Company incurred $171 of allocated administrative service fees.

During the three months ended March 31, 2021, the Company incurred $171 of allocated administrative service fees.

Substantially all the Company’s payments of operating expenses to third parties were made by a related party, for which such third party received reimbursement from the Company.

During the three and six months ended June 30, 2022, the Company incurred $170 and $341 of allocated administrative service fees.

During the three and six months ended June 30, 2021, the Company incurred $170 and $341 of allocated administrative service fees.

Co-investments with Related Parties :

As of March 31, 2022 and December 31, 2021, no officers or employees affiliated with or employed by WhiteHorse Advisers and its related entities maintained any co-investments in the Company’s investments.

As of March 31, 2022 and December 31, 2021, certain funds affiliated with WhiteHorse Advisers and its related entities maintained co-investments in the Company’s investments of $4,400,903 and $4,502,807, respectively.

For the three months ended March 31, 2022, the Company sold $82,661 of investments to STRS JV and recognized $3 of net realized losses.

For the three months ended March 31, 2021, the Company sold $28,942 of investments to STRS JV and recognized $183 of net realized gains.

As of June 30, 2022 and December 31, 2021, no officers or employees affiliated with or employed by WhiteHorse Advisers and its related entities maintained any co-investments in the Company’s investments.

As of June 30, 2022 and December 31, 2021, certain funds affiliated with WhiteHorse Advisers and its related entities maintained co-investments in the Company’s investments of $4,386,614 and $4,502,807, respectively.

For the three and six months ended June 30, 2022, the Company sold $17,754 and $100,415 of investments to STRS JV and recognized $68 and $65 of net realized gains.

For the three and six months ended June 30, 2021, the Company sold $31,751and $60,694 of investments to STRS JV at fair value.

For the three and six months ended June 30, 2021, the Company recognized net realized losses of $26 and net realized gains of $157, respectively.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

The Company attempts to limit its credit risk by conducting extensive due diligence and obtaining collateral where appropriate.

The balance of unfunded commitments to extend credit was $43,137 and $53,113 as of March 31, 2022 and December 31, 2021, respectively.

The balance of unfunded commitments to extend credit was $34,547 and $53,113 as of June 30, 2022 and December 31, 2021, respectively.

Commitments to extend credit consist principally of the unused portions of commitments that obligate the Company to extend credit, such as revolving credit arrangements or similar transactions.

4 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

The following table summarizes the Company’s unfunded commitments as of March 31, 2022 and December 31, 2021:

The following table summarizes the Company’s unfunded commitments as of June 30, 2022 and December 31, 2021:

Unfunded Commitments (1) ($ in thousands)

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

21 unchanged sentences

Motivational Marketing, LLC (d/b/a Motivational Fulfillment)

MSI Information Services, Inc.

(f/k/a Newscycle Solutions, Inc.)

4 unchanged sentences

PG Dental New Jersey Parent, LLC

PlayMonster LLC

PPS CR Acquisition, Inc.

22 unchanged sentences

Source Code Holdings, LLC (d/b/a Source Code Corporation)

Telestream Holdings Corporation

True Blue Car Wash, LLC

4 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

As of March 31, 2022, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $20,000 and $80,000, respectively, both of which were fully funded.

As of June 30, 2022, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $20,000 and $80,000, respectively, both of which were fully funded.

As of December 31, 2021, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, respectively, both of which were fully funded.

8 unchanged sentences

COVID-19 Developments :

In addition, during the three months ended March 31, 2022 and subsequent to March 31, 2022, the current pandemic caused by the novel coronavirus (commonly known as “COVID-19”) has had a significant impact on the U.S.

In addition, during the three and six months ended June 30, 2022 and subsequent to June 30, 2022, the current pandemic caused by the novel coronavirus (commonly known as “COVID-19”) has had a significant impact on the U.S.

Certain of the Company’s portfolio companies were and may continue to be adversely impacted by the effects of the COVID-19 pandemic, which had an adverse impact on the Company’s results of operations and may continue to have an adverse impact on the Company’s future net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company’s portfolio companies.

4 unchanged sentences

The Company received net proceeds of $4,272 after deducting commissions to the sales agent, but before offering expenses.

As of March 31, 2022, the Company had $30,641 available under the ATM Program.

As of June 30, 2022, the Company had $30,641 available under the ATM Program.

As of December 31, 2021, the Company had $30,893 available under the ATM Program.

3 unchanged sentences

On November 3, 2021, the Company raised an additional $4,326 from the issuance of an additional 282,300 shares pursuant to the underwriters’ exercise of the overallotment option to purchase additional shares.

WhiteHorse Advisers agreed to bear a portion of the underwriting discounts and commissions in connection with the offering, such that the issuance of the 2,182,300 shares (which includes the additional shares issued pursuant to the overallotment option) resulted in net proceeds to the

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

Company of $33,700 before offering expenses, which was at or above the Company’s net ass value per share at the time of the offering and the overallotment option.

The following table summarizes the total shares issued and proceeds received, net of offering costs, relating to the issuance of shares of the Company’s common stock from the DRIP and pursuant to the ATM Program for the three months ended March 31, 2022 and 2021.

Three months ended March 31,

$33,700 before offering expenses, which was at or above the Company’s net ass value per share at the time of the offering and the overallotment option.

The following table summarizes the total shares issued and proceeds received, before offering expenses, relating to the issuance of shares of the Company’s common stock from the DRIP and pursuant to the ATM Program for the six months ended June 30, 2022 and 2021.

Six months ended June 30,

($ in thousands except share and per share amounts)

4 unchanged sentences

Average Price Per Share (1)

(1) The average price per share for the three months ended March 31, 2022, inclusive of offering expenses, was $14.26 per share.

(1) The average price per share for three and six months ended June 30, 2022 and 2021, inclusive of offering expenses, was $13.72 and $15.34 per share, respectively.

NOTE 10 - FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights:

Three months ended March 31,

Six months ended June 30,

Per share data:

4 unchanged sentences

Net increase in net assets resulting from operations

Issuance of common stock (5)

Distributions declared from net investment income

11 unchanged sentences

Portfolio turnover ratio

(1) Calculated using the average shares outstanding method.

(1) Based on actual number of shares outstanding at the end of the period or the weighted average shares outstanding for the period, unless otherwise noted, as appropriate.

(2) Total return is based on the change in market price per share during the period and takes into account distributions, if any, reinvested in accordance with the DRIP.

1 unchanged sentence

(4) Calculated using total expenses, including income tax provision.

(5) The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock pursuant to the ATM Program and DRIP.

The issuance of common stock at a price, net of commissions, that is greater than the net asset value per share results in an increase in net asset value per share.

The impact of the Company’s issuance of common stock on net asset value was less than $0.01 per share during the three months ended March 31, 2022 and March 31, 2021.

Financial highlights are calculated for each securities class taken as a whole.

2 unchanged sentences

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2022

June 30, 2022

(in thousands, except share and per share data)

1 unchanged sentence

The following information sets forth the computation of the basic and diluted per share net increase in net assets resulting from operations:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands except share and per share amounts)

5 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements