Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 814-00971
STELLUS CAPITAL INVESTMENT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Maryland
46-0937320
(State or Other Jurisdiction ofIncorporation or Organization)
(I.R.S. EmployerIdentification No.)
4400 Post Oak Parkway, Suite 2200
Houston, Texas 77027
(Address of Principal Executive Offices) (Zip Code)
(713) 292-5400
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
SCM
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the issuer’s Common Stock, par value $0.001 per share, outstanding as of November 10, 2025 was 28,947,254.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
1
Consolidated Statements of Assets and Liabilities as of September 30, 2025 (unaudited) and December 31, 2024
Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2025 and 2024 (unaudited)
2
Consolidated Statements of Changes in Net Assets for the three and nine-month periods ended September 30, 2025 and 2024 (unaudited)
3
Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2025 and 2024 (unaudited)
4
Consolidated Schedules of Investments as of September 30, 2025 (unaudited) and December 31, 2024
5
Notes to Unaudited Financial Statements
35
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
67
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
86
Item 4.
Controls and Procedures
87
PART II. OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
88
Item 5.
Other Information
Item 6.
Exhibits
89
SIGNATURES
90
PART I — FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
Item 1. Financial Statements
September 30, 2025
(unaudited)
December 31, 2024
ASSETS
Controlled investments at fair value (amortized cost of $33,202,703 and $17,934,808, respectively)
$
13,568,095
7,652,436
Non-controlled, non-affiliated investments, at fair value (amortized cost of $986,914,541 and $943,853,898, respectively)
996,641,541
945,845,252
Cash and cash equivalents
9,024,020
20,058,594
Receivable for sales and repayments of investments
437,552
335,689
Interest receivable
7,047,686
4,947,765
Income tax receivable
1,522,198
1,301,965
Other receivables
99,111
87,995
Related party receivable
22,500
3,687
Prepaid expenses
281,634
666,866
Total Assets
1,028,644,337
980,900,249
LIABILITIES
Notes Payable
172,522,707
99,444,355
Credit Facility payable
163,995,602
172,314,315
SBA-guaranteed debentures
295,805,634
321,251,939
Dividends payable
3,858,669
3,663,233
Management fees payable
4,401,305
4,034,109
Income incentive fees payable
2,642,033
3,109,560
Interest payable
5,912,375
5,281,343
Related party payable
136,535
—
Unearned revenue
640,637
548,626
Administrative services payable
507,139
393,513
Other accrued expenses and liabilities
491,374
937,316
Total Liabilities
650,914,010
610,978,309
Commitments and contingencies (Note 7)
Net Assets
377,730,327
369,921,940
NET ASSETS
Common stock, par value $0.001 per share (100,000,000 shares authorized; 28,947,254 and 27,481,118 shares issued and outstanding, respectively)
28,947
27,481
Paid-in capital
399,410,630
379,549,272
Total distributable loss
(21,709,250)
(9,654,813)
Total Liabilities and Net Assets
Net Asset Value Per Share
13.05
13.46
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the three months ended
For the nine months ended
September 30, 2024
INVESTMENT INCOME
From controlled investments:
Interest income
81,636
From non-controlled, non-affiliated investments
23,634,587
24,403,375
69,923,357
72,969,302
Payment-in-kind interest income
1,378,166
934,986
3,870,717
2,490,854
Other income
1,262,956
1,159,898
3,129,895
3,579,415
Total Investment Income
26,275,709
26,498,259
76,923,969
79,121,207
OPERATING EXPENSES
Management fees
3,959,554
12,735,472
11,664,020
Valuation fees
172,364
151,535
368,760
343,753
Administrative services expenses
592,409
469,274
1,515,991
1,441,436
Income incentive fees
2,166,047
2,564,922
6,460,613
7,616,562
Professional fees
395,098
312,034
1,125,937
847,866
Directors’ fees
93,250
297,750
315,750
Insurance expense
99,248
126,362
295,006
376,840
Interest expense and other fees
8,949,075
7,956,403
25,892,109
23,840,473
Income tax expense
515,686
360,192
1,444,184
1,304,948
Other general and administrative expenses
227,037
245,043
945,690
908,185
Total Operating Expenses
17,611,519
16,238,569
51,081,512
48,659,833
Income incentive fee waiver
(471,251)
(2,643,020)
(1,826,893)
Total Operating Expenses, net of fee waivers
17,140,268
48,438,492
46,832,940
Net Investment Income
9,135,441
10,259,690
28,485,477
32,288,267
Net realized loss on controlled investments
(1,132,576)
Net realized gain (loss) on non-controlled, non-affiliated investments
2,867,155
(3,297,615)
(2,827,517)
(21,689,864)
Net realized loss on foreign currency translations
(9,422)
(22,095)
(59,080)
(76,990)
Loss on debt extinguishment
(164,762)
Net change in unrealized appreciation on controlled investments
51,367
248,746
1,397,134
923,505
Net change in unrealized (depreciation) appreciation on non-controlled, non-affiliated investments
(5,187,426)
8,255,272
(3,906,233)
25,512,422
Net change in unrealized (depreciation) appreciation on foreign currency translations
(325)
14,588
38,540
5,099
Benefit for taxes on net unrealized depreciation on investments
188,893
Benefit for taxes on net realized loss on investments
2,221
Net Increase in Net Assets Resulting from Operations
6,692,028
15,460,807
21,830,983
37,153,553
Net Investment Income Per Share—basic and diluted
0.32
0.39
1.01
1.29
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted
0.23
0.59
0.78
1.48
Weighted Average Shares of Common Stock Outstanding—basic and diluted
28,480,472
26,326,426
28,168,527
25,066,626
Distributions Per Share—basic and diluted
0.40
1.20
1.21
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
Common Stock
Total
Number
Par
Paid-in
distributable
of shares
value
capital
(loss)
Balances at December 31, 2023
24,125,642
24,125
335,918,984
(16,003,321)
319,939,788
Net investment income
10,235,916
Net realized loss on investments
(20,384,731)
(25,106)
Net change in unrealized appreciation on investments
23,518,590
Net change in unrealized depreciation on foreign currency translations
(3,602)
Provision for taxes on unrealized appreciation on investments
(192,607)
Distributions from net investment income
(9,647,844)
Balances at March 31, 2024
(12,502,705)
323,440,404
11,792,661
Net realized gain on investments
1,992,482
(29,789)
Net change in unrealized depreciation on investments
(5,586,681)
(5,887)
Benefit for taxes on unrealized depreciation on investments
381,500
(10,049,073)
Issuance of common stock, net of offering costs(1)
1,855,356
1,856
25,248,020
25,249,876
Balances at June 30, 2024
25,980,998
25,981
361,167,004
(14,007,492)
347,185,493
Net realized loss on foreign currency translation
8,504,018
Net change in unrealized appreciation on foreign currency translations
(10,625,512)
1,058,366
1,058
14,263,441
14,264,499
Balances at September 30, 2024
27,039,364
27,039
375,430,445
(9,172,197)
366,285,287
Balances at December 31, 2024
27,481,118
9,788,809
(5,967,221)
(29,655)
1,193,293
8,319
(11,087,389)
656,085
656
8,937,430
8,938,086
Balances at March 31, 2025
28,137,203
28,137
388,486,702
(15,748,657)
372,766,182
9,561,227
(860,027)
(20,003)
1,433,667
30,546
(11,363,618)
278,945
279
3,822,637
3,822,916
Balances at June 30, 2025
28,416,148
28,416
392,309,339
(16,966,865)
375,370,890
(5,136,059)
(11,434,413)
531,106
531
7,101,291
7,101,822
Balances at September 30, 2025
28,947,254
(1) See Note 4 to the consolidated financial statements contained herein for more information on offering costs.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Cash Flows from Operating Activities
Net increase in net assets resulting from operations
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments
(141,983,167)
(112,624,812)
Proceeds from sales and repayments of investments
85,635,632
87,308,914
Net change in unrealized depreciation (appreciation) on investments
2,509,099
(26,435,927)
(37,811)
(5,099)
Increase in investments due to PIK
(3,870,717)
(2,490,856)
Amortization of premium and accretion of discount, net
(2,172,972)
(2,045,992)
Deferred tax benefit
(188,893)
Amortization of loan structure fees
954,033
825,891
Amortization of deferred financing costs
447,751
335,345
Amortization of discount on Notes Payable
63,395
Amortization of loan fees on SBA-guaranteed debentures
553,695
784,763
3,960,093
21,689,864
164,762
Changes in other assets and liabilities
Increase in interest receivable
(2,099,921)
(1,389,856)
Increase in income tax receivable
(220,233)
(228,663)
Increase in other receivables
(11,116)
(25,000)
Increase in related party receivables
(18,813)
Decrease in prepaid expenses
385,232
349,950
Increase in management fees payable
367,196
1,041,018
(Decrease) increase in income incentive fees payable
(467,527)
269,396
Increase (decrease) in administrative services payable
113,626
(1,118)
Increase (decrease) in interest payable
631,032
(3,988,133)
Increase in related party payable
1,898,854
Increase in unearned revenue
92,011
152,623
(Decrease) increase in other accrued expenses and liabilities
(445,942)
718,139
Net Cash (Used) Provided in Operating Activities
(33,483,144)
3,103,961
Cash Flows from Financing Activities
Proceeds from the issuance of common stock
20,588,960
40,370,901
Sales load for common stock issued
(308,998)
(606,145)
Offering costs paid for common stock issued
(417,138)
(243,067)
Stockholder distributions paid
(33,689,984)
(26,718,082)
Proceeds from issuance of Notes Payable
125,000,000
Repayment of Notes Payable
(50,000,000)
Premium from issuance of Notes Payable
648,000
Discount from issuance of Notes Payable
(770,250)
Financing costs paid on Notes Payable
(2,475,306)
Repayments of SBA-guaranteed debentures
(26,000,000)
Financing costs paid on Credit Facility
(1,525,014)
(101,348)
Borrowings under Credit Facility
198,900,000
122,400,000
Repayments of Credit Facility
(207,501,700)
(125,751,700)
Net Cash Provided by Financing Activities
22,448,570
9,350,559
Net (Decrease) Increase in Cash and Cash Equivalents
(11,034,574)
12,454,520
Cash and Cash Equivalents Balance at Beginning of Period
26,125,741
Cash and Cash Equivalents Balance at End of Period
38,580,261
Supplemental and Non-Cash Activities
Cash paid for interest expense
24,940,287
25,882,607
Income and excise tax paid
1,664,417
1,533,611
Exchange of investments
1,663,301
8,256,411
Stellus Capital Investment Corporation
Consolidated Schedule of Investments
Principal
% of
Investment
Headquarters/
Amount/
Amortized
Fair
Net
Investments
Footnotes
Security(2)
Coupon
Floor
Cash
PIK(8)
Date
Maturity
Industry
Shares(3)
Cost
Value(1)
Assets
Control investments (23)
EH Real Estate Services, LLC
Skokie, IL
Term Loan A-1
(16)
First Lien
15.00
%
-
9/3/2021
9/3/2026
FIRE: Real Estate
1,882,226
178,811
0.05
Term Loan A-2
4/3/2023
650,943
61,840
0.02
Term Loan A-3
6/7/2023
230,678
21,914
0.01
Term Loan A-4
7/12/2023
1,505,537
Term Loan A-5
1/8/2024
5,880,756
1.56
Revolver
(16)(22)
10/3/2023
63,597
EH Holdco, LLC Common Units
Equity
15,356
0.00
EH Holdco, LLC Series A Preferred Units
7,892
7,891,642
18,105,382
7,712,455
2.06
J.R. Watkins, LLC
San Francisco
Term Loan (SBIC)
(4)(19)
4.09
12/22/2017
12/31/2026
Consumer Goods: Non-Durable
10,034,958
2,107,341
0.56
5.00
3,562,250
748,073
0.20
Priority Revolver (SBIC)
5/3/2024
1,500,113
3,000,226
0.79
J.R. Watkins Ultimate Holdings, LLC Class A Units (SBIC)
(4)
4/9/2025
500
15,097,321
5,855,640
1.55
Total Control investments
33,202,703
3.61
Non-controlled, non-affiliated investments
(4)(5)
2X LLC
Berwyn, PA
Term Loan
(11)
3M SOFR+
2.00
9.00
6/5/2023
6/5/2028
Services: Business
5,390,204
5,306,951
5,363,253
1.42
10/31/2023
1,419,420
1,396,059
1,412,323
0.37
12/2/2024
3,822,742
3,776,972
3,803,628
(9)(11)
42,500
42,288
2X Investors LP Class A Units
43,875
176,915
1,275,364
0.34
10,699,397
11,896,856
3.15
Ad.Net Acquisition, LLC
(9)
Los Angeles, CA
Term Loan (SBIC II)
(5)(11)
6.00
1.00
10.26
5/7/2021
5/7/2026
14,925,735
14,891,318
3.95
854,217
Ad.Net Holdings, Inc. Series A Common Stock (SBIC II)
(5)
7,794
77,941
0
Ad.Net Holdings, Inc. Series A Preferred Stock (SBIC II)
7,015
701,471
523,329
0.14
16,524,947
16,303,281
4.32
AdCellerant LLC
Denver, CO
Term A Loan (SBIC II)
1M SOFR+
10.16
12/12/2023
12/12/2028
Media: Advertising, Printing & Publishing
9,825,000
9,686,224
9,775,875
2.59
AdCellerant Holdings, LLC Series A Units
728,710
581,560
0.15
10,414,934
10,357,435
2.74
ADS Group Opco, LLC
Lakewood, CO
(5)(25)
6/4/2021
12/31/2027
Aerospace & Defense
12,851,659
12,806,678
10,538,360
2.79
Priority Revolver (SBIC II)
(5)(9)(25)
9/30/2024
35,305
70,610
ADS Group Topco, LLC Class A Units
77,626
288,691
ADS Group Topco, LLC Class B Units
56,819
211,309
ADS Group Topco, LLC Class D Units
432
ADS Group Topco, LLC Class Y Units
4/11/2023
48,216
165,027
ADS Group Topco, LLC Class Z Units
6/15/2022
72,043
267,929
13,774,939
10,608,970
2.81
Advanced Barrier Extrusions, LLC
Rhinelander, WI
Term Loan B (SBIC)
(4)(11)(13)
9.50
11/30/2020
11/30/2026
Containers, Packaging, & Glass
16,843,750
16,765,188
Super Priority Term Loan (SBIC)
(4)(13)
12/6/2024
795,882
970,378
2,077,252
0.55
2/5/2025
875,000
2,283,750
0.60
3/26/2025
500,000
1,305,000
0.35
Term Loan A (SBIC)
2,607,637
565,204
Revolver (SBIC)
1,558,434
337,790
GP ABX Holdings Partnership, L.P. Partner Interests
8/8/2018
644,737
528,395
GP ABX Holdings Partnership, L.P. Series B Preferred Interests
1/5/2023
1,562
156,182
20,698,137
5,666,002
1.50
PIK
AGT Robotique Inc.
(7)(27)
Trois Rivieres, Canada
7.50
6/24/2024
6/22/2029
Capital Equipment
10,592,844
10,423,517
10,380,987
2.75
American Refrigeration, LLC
Jacksonville, FL
(4)(11)
6.25
10.25
3/31/2023
3/31/2028
8,068,786
7,952,902
2.14
Delayed Draw Term Loan
98,500
97,677
0.03
AR-USA Holdings, LLC Class A Units
(6)
141
129,350
230,449
0.06
8,179,929
8,397,735
2.23
AMII Acquisition, LLC
Coral Gables, FL
Term Loan (SBIC II )
4.50
8.50
12/4/2024
12/4/2029
Services: Consumer
8,753,322
8,639,426
8,709,555
2.31
AMII Holdings, LP Class B Units
12/3/2024
14,246
142,460
167,804
0.04
8,781,886
8,877,359
2.35
Amika OpCo LLC
Brooklyn, NY
6M SOFR+
5.25
0.75
9.27
7/1/2022
7/1/2029
94,638
93,452
5.75
10.19
12/5/2023
9,536,040
9,393,862
2.52
Ishtar Co-Invest-B LP Partnership Interests
77,778
38,133
288,702
0.08
Oshun Co-Invest-B LP Partnership Interests
22,222
21,141
82,485
9,546,588
10,001,865
2.65
Anne Lewis Strategies, LLC
SG AL Investment, LLC Common Units
3/5/2021
Washington, DC
1,000
327,192
2,680,825
0.71
SG AL Investment, LLC Common-A Units
12/22/2023
239
482,200
985,826
0.26
809,392
3,666,651
0.97
APE Holdings, LLC
Deer Park, TX
Class A Units
9/5/2014
Chemicals, Plastics, & Rubber
375,000
26,037
Atmosphere Aggregator Holdings II, L.P.
Atlanta, GA
Common Units
1/26/2016
254,250
2,374,938
0.63
Stratose Aggregator Holdings, L.P. Common Units
6/30/2015
750,000
8,708,106
11,083,044
2.94
ArborWorks, LLC
Oakhurst, CA
6.50
10.75
11/6/2023
11/6/2028
Environmental Industries
3,885,033
1.03
1,152,118
0.31
ArborWorks Intermediate Holdco, LLC Class A-1 Preferred Units
16,037
3,610,847
5,804,957
1.54
ArborWorks Intermediate Holdco, LLC Class B-1 Preferred Units
ArborWorks Intermediate Holdco, LLC Class A-1 Common Units
1,923
8,647,998
10,842,108
2.88
Arctiq, Inc.
Irvine, CA
10.00
8/8/2023
8/8/2028
High Tech Industries
10,946,847
10,768,700
10,892,113
11/6/2024
1,287,000
1,266,447
1,280,565
400,985
397,611
398,980
0.11
Green Topco Holdings, LLC Class A Units
271,401
202,628
307,896
12,635,386
12,879,554
3.41
Axis Portable Air, LLC
Phoenix, AZ
5.50
3/22/2022
3/22/2028
9,333,750
9,246,171
2.47
4/17/2023
1,860,472
1,838,974
0.49
15,000
98,250
97,752
Axis Air Parent, LLC Preferred Units
4,436
443,636
1,803,893
0.48
11,641,533
13,111,365
3.47
Baker Manufacturing Company, LLC
Evansville, IN
BSC Blue Water Holdings, LLC Series A Units (SBIC II)
7/5/2022
743,770
999,787
6
Bart & Associates, LLC
McLean, VA
(4)(10)(12)
9.67
8/16/2024
8/16/2030
8,853,273
8,719,494
2.34
(10)(12)
1,729,054
1,714,489
0.46
B&A Partners Holding, LLC Series A Preferred Units
722,411
791,832
0.21
11,156,394
11,374,159
3.01
BL Products Parent, L.P.
Houston, TX
2/1/2022
879,060
983,608
1,248,562
0.33
Café Valley, Inc.
CF Topco LLC Units
8/28/2019
Beverage & Food
9,160
916,015
2,102,347
Camp Profiles LLC
Boston, MA
9.40
9,840,000
9,795,182
2.61
2,233,125
2,214,041
CIVC VI-A 829 Blocker, LLC Units
250
250,000
897,020
0.24
12,259,223
12,970,145
3.44
Carolinas Buyer, Inc.
Charlotte, NC
12/20/2024
12/20/2030
6,796,831
6,689,171
6,660,894
1.76
Carolinas Holding, L.P. Class A Units
466
465,637
478,613
0.13
7,154,808
7,139,507
1.89
CEATI International Inc.
(7)(9)
Montreal, Canada
2/19/2021
8,371,416
8,354,781
2.22
3,174,963
3,153,097
0.84
CEATI Holdings, LP Class A Units
132,919
281,049
0.07
11,640,797
11,827,428
3.13
Cerebro Buyer, LLC
Columbia, SC
9.16
3/15/2023
3/15/2029
Healthcare & Pharmaceuticals
4,526,683
4,451,615
Cerebro Holdings Partnership, L.P. Series A Partner Interests
62,961
75,984
Cerebro Holdings Partnership, L.P. Series B Partner Interests
341,091
328,640
411,638
4,843,216
5,014,305
1.33
CF Arch Holdings LLC
8/10/2022
100,000
88,511
167,828
CF512, Inc.
Blue Bell, PA
10.36
9/1/2021
9/1/2026
13,256,558
13,196,179
13,190,275
3.49
2,862,695
2,855,923
2,848,382
10.18
9,000
8,955
StellPen Holdings, LLC Membership Interests
220,930
161,651
16,282,032
16,209,263
4.28
Champion Services Acquireco LLC
Round Rock, TX
9.02
9/19/2025
9/19/2030
Construction & Building
12,000,000
11,760,000
3.11
Champion Services Holdings LLC Class A-1 Units
268,889
12,028,889
3.18
Channel Partners Intermediateco, LLC
Tampa Bay, FL
6.75
11.23
2/24/2022
2/7/2027
Retail
13,016,567
12,974,459
3.46
3/27/2023
1,659,782
1,652,908
0.44
11.20
53,333
20,000
11.28
10,000
11.06
6,667
14,717,367
14,766,349
3.92
7
CompleteCase, LLC
Seattle, WA
CompleteCase Holdings, Inc. Class A Common Stock (SBIC II)
12/21/2020
417
CompleteCase Holdings, Inc. Series A Preferred Stock (SBIC II)
522
521,734
167,494
CompleteCase Holdings, Inc. Class A Common Stock
4/27/2023
CompleteCase Holdings, Inc. Series C Preferred Stock
111
111,408
111,409
633,148
278,903
Compost 360 Acquisition, LLC
Tampa, FL
8/2/2023
8/2/2028
9,445,255
9,292,194
8,878,540
1,039,830
1,028,846
977,440
12.49
5,000
4,700
12.50
301
283
Compost 360 Investments, LLC Class A Units
3,124
300,041
86,180
Compost 360 Investments, LLC Preferred Units
8/29/2025
614
27,630
34,555
10,654,012
9,981,698
2.64
COPILOT Provider Support Services, LLC
Maitland, FL
10.40
11/22/2022
11/22/2027
4,850,000
4,801,124
1.28
QHP Project Captivate Blocker, Inc. Common Stock
285,714
376,376
0.10
5,086,838
5,226,376
1.38
Craftable Intermediate II Inc.
Dallas, TX
9.75
6/30/2023
6/30/2028
9,907,250
9,783,558
2.62
Gauge Craftable LP Partnership Interests
626,690
1,098,180
0.29
10,410,248
11,005,430
2.91
Curion Holdings, LLC
Chicago, IL
0.25
7/29/2022
7/29/2027
12,689,339
12,582,369
12,562,446
3.34
101,578
100,562
SP CS Holdings LLC Class A Units
739,999
640,603
0.17
13,423,946
13,303,611
3.54
DFO Enterprises, LLC
Rochester, MN
9.25
9/22/2025
9/22/2030
11,580,474
11,377,816
DFO Ultimate Holding, LP Class A Units
8,931
412,252
11,790,068
3.12
DMD Systems Recovery, LLC
Tempe, AZ
8/22/2025
8/22/2031
6,100,000
5,994,353
1.59
Phoenix Parent LLC Common Units
8/19/2025
180,000
6,174,353
1.64
DTE Holding Company, LLC
Roselle, IL
Class A-2 Units
4/13/2018
Energy: Oil & Gas
776,316
466,204
Class AA Units
723,684
1,189,888
EHI Buyer, Inc.
Grand Prarie, TX
EHI Group Holdings, L.P. Class A Units
7/31/2023
618
221,764
1,243,019
Elder Care Opco LLC
Scarsdale, NY
7/31/2025
7/31/2030
7,785,007
7,653,258
7,652,326
2.03
Rallyday Elder Care Co-Investors LP Partnership Interests
910,966
916,719
8,569,977
8,569,045
2.27
Elliott Aviation, LLC
Moline, IL
8.00
12.48
1/31/2020
12/31/2025
9,302,742
8,605,036
2.28
SP EA Holdings LLC Term Loan
Unsecured
10/26/2023
73,467
4.31
4/25/2025
59,179
53,261
Revolver A
1,537,015
0.41
Revolver B
3/1/2023
723,780
0.19
Revolver C (Priority)
3/7/2025
988,246
SP EA Holdings LLC Class A Units
105,938,486
901,594
13,586,023
11,907,338
8
Environmental Remedies, LLC
Hayward, CA
1/15/2025
1/15/2030
7,294,108
7,165,370
7,148,226
ERI Parent Holdings, LLC Class A Units
163,109
150,200
7,328,479
7,298,426
1.93
Equine Network, LLC
Boulder, CO
Term A Loan (SBIC)
10.78
5/22/2023
5/22/2028
Hotel, Gaming, & Leisure
6,966,875
6,854,372
1.84
Term A Loan
7/28/2025
2,122,453
2,072,036
116,667
98,400
9,141,475
9,304,395
2.46
Eskola LLC
Morristown, TN
10.23
12/19/2024
12/19/2029
7,501,661
7,386,009
7,276,611
2,777,794
2,759,457
2,694,460
Eskola Holdings, LLC Class A Units
314
893,747
509,173
Eskola Holdings, LLC Class C Units
6/4/2025
28
56,349
29,780
11,095,562
10,510,024
2.78
evolv Consulting, LLC
10.79
12/7/2023
12/7/2028
9,685,044
2.60
evolv Holdco, LLC Preferred Units
473,485
498,613
10,158,529
10,323,613
2.73
Evriholder Acquisition, Inc.
Anaheim, CA
(5)(9)(11)
11.01
1/23/2023
1/24/2028
Consumer Goods: Durable
12,185,051
12,020,223
12,124,126
3.21
KEJ Holdings LP Class A Units
873,333
975,775
12,893,556
13,099,901
Exacta Land Surveyors, LLC
(20)
Cleveland, OH
9.90
2/8/2019
16,309,329
15,575,410
4.13
7/15/2022
991,967
947,328
4/22/2024
6/30/2026
100,211
82,674
SP ELS Holdings LLC Class A Units
1,338,661
1,124,414
285,594
18,525,921
16,891,006
4.48
Exigo, LLC
10.51
3/16/2022
3/16/2027
8,654,024
8,610,148
2.29
Gauge Exigo Coinvest, LLC Common Units
377,535
371,512
8,987,683
9,025,536
2.39
FairWave Holdings, LLC
Kansas City, MO
4/1/2024
4/1/2029
7,501,036
7,371,597
1.99
514,030
2,647,795
2,622,191
0.70
GRC Java Holdings, LLC Class A Units
2,985
304,909
394,430
10,812,727
11,057,291
2.93
FiscalNote Boards LLC
Toronto, Canada
9.41
3/11/2024
3/12/2029
3,691,304
3,635,937
3,654,391
FCP-Connect Holdings LLC Class A Common Shares
5/28/2024
284
FCP-Connect Holdings LLC Series A Preferred Shares
190,382
166,619
3,826,319
3,821,010
General LED OPCO, LLC
San Antonio, TX
Second Lien
13.10
5/1/2018
3/31/2026
4,500,000
4,493,395
4,410,000
1.17
GS HVAM Intermediate, LLC
Carlsbad, CA
10.85
10/18/2019
12,155,917
12,152,376
3.22
10.76
1,767,677
0.47
HV GS Acquisition, LP Class A Interests
10/2/2019
2,144
563,209
4,819,404
14,483,262
18,742,998
4.97
9
GSF Buyer, LLC
North Andover, MA
9.31
4/30/2025
4/30/2031
4,260,028
4,199,479
1.13
GSF Group Holdings, L.P. Class A2 Units
241
240,595
246,256
4,440,074
4,506,284
Guidant Corp.
Erie, PA
10.50
9,878,780
9,617,931
422,283
Titan Meter Topco LP Class A Units
574,863
581,608
807,073
10,621,822
11,108,136
Heartland Business Systems, LLC
Little Chute, WI
10.70
8/26/2022
8/26/2027
9,725,000
9,639,048
2.57
48,875
48,630
AMCO HBS Holdings, LP Class A Units
2,861
168,655
824,744
0.22
9,856,333
10,598,619
2.80
Husk AcquireCo Inc.
(7)
Vaughan, Canada
11/14/2024
11/15/2029
5,277,346
5,209,526
5,224,573
SK Spectra Holdings LP Class A Units
11/15/2024
298
297,765
274,780
5,507,291
5,499,353
1.45
HV Watterson Holdings, LLC
Schaumburg, IL
12.00
12/17/2021
12/17/2026
13,609,537
13,534,610
11,295,916
2.99
99,975
82,979
330,617
329,559
274,412
HV Watterson Parent, LLC Class A Units
1,632
1,631,591
15,595,735
11,653,307
3.08
I2P Holdings, LLC
Series A Preferred Units
1/31/2018
1,862,581
Identity Theft Guard Solutions, Inc.
Portland, OR
9.66
2/28/2025
2/28/2030
8,679,273
8,521,651
8,592,480
IDX Parent, LLC Class A-2 Units
352,915
625,270
8,874,566
9,217,750
2.44
Impact Home Services LLC
4/28/2023
4/28/2028
5,819,939
5,734,091
5,703,540
1.51
10/11/2023
530,438
522,066
519,829
264,543
260,535
259,252
(11)(17)
82,500
80,850
Impact Holdings Georgia LLC Class A Units
375
375,156
Impact Holdings Georgia LLC Class A-1 Units
1/31/2024
38
37,962
41,701
7,012,310
6,605,172
1.75
Infolinks Media Buyco, LLC
Ridgewood, NJ
11/1/2021
11/1/2026
7,168,033
7,130,176
1.90
6/6/2024
2,440,641
2,422,249
0.65
1,451,588
1,445,970
0.38
Tower Arch Infolinks Media, LP LP Interests
(6)(15)
10/28/2021
459,200
205,642
606,542
0.16
11,204,037
11,666,804
3.09
Informativ, LLC
Fresno, CA
9.65
7/30/2021
7/30/2026
8,329,705
8,297,767
2.21
3/31/2022
6,279,817
6,252,494
1.66
Credit Connection Holdings, LLC Series A Units
804,384
682,150
1,474,614
15,232,411
16,084,136
4.26
10
Inoapps Bidco, LLC
Term Loan B
3M SONIA+
9.88
2/15/2022
2/15/2027
£
9,675,000
13,035,109
12,942,420
3.43
10.03
99,500
10.32
80,833
80,548
80,429
Inoapps Holdings, LLC Series A-1 Preferred Units
739,844
783,756
1,068,014
0.28
13,999,413
14,190,363
3.76
iNovex Information Systems Incorporated
Columbia, MD
12/17/2024
12/17/2030
7,465,768
7,364,414
7,391,110
1.96
International Cybernetics Acquisition, LLC
Largo, FL
6/3/2025
6/3/2030
4,736,133
4,657,494
4,688,772
1.24
International Cybernetics Holdings, LP Class B Units
6/2/2025
1,051
105,113
83,678
4,762,607
4,772,450
1.26
Invincible Boat Company LLC
Opa Locka, FL
3.81
5,301,351
4,585,669
4,893,555
4,232,925
1.12
6/1/2021
1,088,880
941,881
11.81
1,063,830
920,213
Warbird Parent Holdco, LLC Class A Units
1,362,575
1,299,691
13,647,307
10,680,688
2.82
Ledge Lounger, Inc.
Katy, TX
11.95
11/9/2021
11/9/2027
7,438,972
7,418,864
6,749,474
1.79
83,865
84,079
76,091
SP L2 Holdings LLC Class A Units (SBIC)
SP L2 Holdings LLC Class C Units (SBIC)
10/9/2024
140,834
34,504
7,912,447
6,825,565
1.81
Lightning Intermediate II, LLC
10.17
6/6/2022
6/6/2027
11,544,230
11,453,181
11,428,788
3.03
Gauge Vimergy Coinvest, LLC Units
399
391,274
374,206
11,844,455
11,802,994
Luxium Solutions, LLC
Deerfield Beach, OH
5/10/2024
12/1/2027
8,190,058
8,108,382
2.17
1,185,247
1,179,121
9,287,503
9,375,305
2.48
MacKenzie-Childs Acquisition, Inc.
Aurora, NY
9/2/2022
9/2/2027
88,553
87,953
9.96
9.57
13,333
MacKenzie-Childs Investment, LP Partnership Interests
169,201
241,286
311,087
Madison Logic Holdings, Inc.
New York, NY
7.00
11.16
12/30/2022
12/30/2028
3,615,967
3,560,030
3,417,089
0.90
903,992
890,008
854,272
BC Partners Glengarry Co-Investment LP Class 1 Interests
7/7/2023
394,767
137,667
4,844,805
4,409,028
MBH Management LLC
9,405,667
9,244,630
9,311,610
MBH Parent, LLC Common Units
646,944
898,591
9,891,574
10,210,201
2.71
11
MedLearning Group, LLC
3/26/2024
12/30/2027
4,274,241
4,218,113
4,210,127
1.11
2,505,173
2,472,275
2,467,595
2,045,737
2,018,947
2,015,051
0.53
8/5/2025
997,500
983,449
982,538
2,436,635
2,414,521
2,400,085
0.64
12,107,305
12,075,396
3.19
Michelli, LLC
New Orleans, LA
12/21/2023
12/21/2028
4,912,500
4,842,383
1.30
3,847,337
3,817,316
1.02
SP MWM Holdco LLC Class A Units
509,215
492,228
9,168,914
9,252,065
2.45
Microbe Formulas LLC
Meridian, ID
10.01
4/4/2022
4/3/2028
6,062,357
6,033,241
1.60
11/20/2024
4,222,431
4,205,787
10,239,028
10,284,788
2.72
Mobotrex Acquisition, LLC
Davenport, IA
6/7/2030
Wholesale
5,111,355
5,041,283
5,060,241
1.34
45,547
45,215
45,092
5,086,498
5,105,333
1.35
MOM Enterprises, LLC
Richmond, CA
6.48
10.48
5/19/2021
5/19/2026
15,232,974
15,185,259
15,156,810
4.02
MBliss SPC Holdings, LLC Units
933,333
804,755
16,118,592
15,961,565
4.23
Monarch Behavioral Therapy, LLC
Addison, TX
6/6/2030
6,680,077
6,568,792
6,646,677
216,815
215,731
9.19
144,543
143,820
9.22
72,272
71,911
9.14
36,136
35,955
603,326
597,848
600,309
158,602
157,162
157,809
144,184
142,875
143,463
BI Investors, LLC Class A Units
4,286
424,738
403,679
8,361,181
8,419,354
2.24
Monitorus Holding, LLC
London, UK
5/24/2022
5/24/2027
Media: Diversified & Production
105,498
105,119
104,443
6/27/2025
€
1,470,000
1,677,570
1,709,730
0.45
53,249
58,032
57,452
57,748
57,171
105,748
106,733
105,666
Sapphire Aggregator S.a r.l. Convertible Bonds
(14)
7.76
12/21/2025
12,560
14,041
14,607
1/31/2025
8,977
9,454
10,441
Sapphire Aggregator S.a r.l. Class A Shares
9/1/2022
557,689
11,156
7,693
Sapphire Aggregator S.a r.l. Class B Shares
557,682
Sapphire Aggregator S.a r.l. Class C Shares
Sapphire Aggregator S.a r.l. Class D Shares
Sapphire Aggregator S.a r.l. Class E Shares
Sapphire Aggregator S.a r.l. Class F Shares
Sapphire Aggregator S.a r.l. Class G Shares
Sapphire Aggregator S.a r.l. Class H Shares
Sapphire Aggregator S.a r.l. Class I Shares
Sapphire Aggregator S.a r.l. Class 2 Ordinary Shares
3/31/2025
1,230,022
6,651
15,750
Sapphire Aggregator S.a r.l. Shares
6/30/2025
2,713,016
15,898
32,062
2,151,650
2,176,559
12
Morgan Electrical Group Intermediate Holdings, Inc.
Freemont, CA
10.41
8/3/2023
8/3/2029
4,281,876
4,212,124
4,239,057
1,692,715
1,678,262
1,675,788
Morgan Electrical Group Holdings, LLC Series A-2 Preferred Units
380
380,330
252,971
6,270,716
6,167,816
1.63
Naumann/Hobbs Material Handling Corporation II, Inc.
8/30/2019
8,042,557
7,841,493
2.08
5,071,666
4,944,874
1.31
1,776,256
1,731,850
Naumann Hobbs Holdings, L.P. Class A-1 Units
9/29/2022
123
220,379
Naumann Hobbs Holdings, L.P. Class A-2 Units
Naumann Hobbs Holdings, L.P. Class B Units
12/27/2024
142
142,200
458,907
0.12
Naumann Hobbs Holdings, L.P. Class W-1 Units
5/27/2025
57
Naumann Hobbs Holdings, L.P. Class W-2 Units
49
182,867
15,473,437
15,159,991
NINJIO, LLC
Westlake Village, CA
10/12/2022
10/12/2027
4,962,500
4,915,071
99,388
NINJIO Holdings, LLC Units
184
313,253
341,302
0.09
Gauge NINJIO Blocker LLC Preferred Units
9/22/2023
14
14,470
21,616
5,342,182
5,425,418
1.44
Norplex Micarta Acquisition, Inc.
Postville, IA
9.56
10/31/2024
10/31/2029
12,902,500
12,682,376
12,773,475
3.38
83,333
Norplex Micarta Parent, LP Preferred Units
739,804
652,487
13,505,513
13,508,462
3.57
NS412, LLC
8.25
12.35
5/6/2019
5/6/2027
7,615,000
7,612,364
2.02
NS Group Holding Company, LLC Class A Units
782
795,002
969,847
8,407,366
8,584,847
NuSource Financial Acquisition, Inc.
Eden Prairie, MN
13.75
1/29/2021
1/31/2027
6,771,450
6,746,889
NuSource Holdings, Inc. Warrants (SBIC II)
54,966
948,410
7,719,860
2.04
Onpoint Industrial Services, LLC
11/16/2022
11/16/2027
12,288,436
12,164,180
3.25
Spearhead TopCo, LLC Class A Units
606,742
1,069,791
12,770,922
13,358,227
3.53
Pacific Shoring Holdings, LLC
Santa Rosa, CA
1/10/2025
1/10/2030
8,457,500
8,326,590
8,330,638
PSP Ultimate Holding, LP Class A Units
10,606
498,491
591,719
8,825,081
8,922,357
2.37
PCP MT Aggregator Holdings, L.P.
Oak Brook, IL
3/29/2019
Finance
825,020
5,948,068
1.57
PCS Software, Inc.
Shenandoah, TX
0.50
7/1/2019
6/30/2027
Transportation & Logistics
13,798,505
13,729,512
3.63
1,809,640
1,800,592
439
430
437
954,205
949,434
PCS Software Parent, LLC Class A Common Units
9/16/2022
471,211
9,995
317,081
16,572,775
16,797,056
4.44
Pearl Media Holdings, LLC
(24)
Garland, TX
8/31/2022
8/31/2027
8,612,522
8,536,205
8,440,272
13
Peltram Group Holdings LLC
Auburn, WA
12/30/2021
508,516
451,142
879,389
Plus Delta Buyer LLC
1/16/2025
1/16/2031
7,363,000
7,228,103
7,289,370
Plus Delta Parent LLC Class A Units
325,765
325,764
341,792
7,553,867
7,631,162
Premiere Digital Services, Inc.
11/3/2021
11/3/2026
Media: Broadcasting & Subscription
12,101,792
12,085,987
3.20
Premiere Digital Holdings, Inc. Common Stock
10/18/2018
3,068,540
0.81
15,170,332
4.01
Red's All Natural, LLC
Franklin, TN
(5)(10)(12)
9.60
1/31/2023
1/31/2029
8,815,327
8,701,726
2.33
Centeotl Co-Invest B, LP Common Units
710,600
415,704
9,412,326
9,231,031
RIA Advisory Borrower, LLC
9.95
5/1/2023
8/2/2027
5,850,000
5,790,499
85,982
RIA Advisory Aggregator, LLC Class A Units
104,425
165,078
234,764
RIA Products Aggregator, LLC Class A Units
81,251
78,390
39,195
6,119,949
6,209,941
Said Intermediate, LLC
6/13/2024
6/13/2029
7,387,013
7,270,230
7,313,143
1.94
FCP-Said Holdings, LLC Class A Common Shares
804
FCP-Said Holdings, LLC Series A Preferred Shares
852
350,649
281,309
7,620,879
7,594,452
2.01
Sales Benchmark Index, LLC
10.20
1/7/2020
7/7/2026
12,040,777
443,820
SBI Holdings Investments LLC Class A Units
66,573
665,730
564,450
13,150,327
13,049,047
Service Minds Company, LLC
Bradenton, FL
(26)
2/7/2022
2/7/2028
5,324,759
5,279,117
3,434,470
0.91
(18)(26)
83,115
53,609
Priority Revolver
7/2/2024
20,223
40,446
9/13/2024
40,000
11/12/2024
45,000
90,000
1/3/2025
2/7/2025
31,000
62,000
98,473
97,985
63,515
5,586,440
3,804,040
Simpler Trading, LLC
Austin, TX
12/28/2021
3/21/2030
Education
2,796,011
2,812,710
0.74
Simpler Trading, LLC Preferred Units (SBIC)
3/21/2025
1,657
1,656,650
580,163
Simpler Ultimate Holdings, LLC Class A Units (SBIC)
281,936
4,751,296
3,376,174
0.89
Solid Surface Holdco, LLC
6/6/2025
5,680,037
5,572,132
5,594,836
Carolina Topco Holdings, LP Class A-1 Units
3,774
377,437
415,446
5,949,569
6,010,282
Strategus, LLC
Englewood, CO
1/27/2025
1/27/2031
7,781,935
7,657,206
7,626,296
CIVC Strategus Blocker, LLC Class A Units
170
170,362
193,724
7,827,568
7,820,020
2.07
TAC LifePort Holdings, LLC
Woodland, WA
3/1/2021
546,543
488,173
1,651,159
Teckrez, LLC
5/24/2024
11/30/2028
4,250,946
4,202,484
4,229,691
1,297,999
1,291,509
144,222
143,501
HH-Teckrez Parent, LP Preferred Units
90,139
133,543
5,734,844
5,798,244
The Hardenbergh Group, Inc.
Livonia, MI
10.60
8/7/2023
8/7/2028
10,291,860
10,124,981
795,991
783,466
BV HGI Holdings, L.P. Class A Units
677,548
645,862
11,585,995
11,733,713
3.10
The Millennium Alliance LLC
7/31/2031
11,500,000
11,330,327
11,331,072
3.00
BV MA Blocker, Inc. Class A-2 Common Stock
52
515,556
11,845,883
11,846,628
3.14
Tiger 21, LLC
12/30/2024
12/30/2030
11,910,000
11,694,547
11,850,450
Tiger 21 Blocker, Inc. Class A-3 Common Stock
565
564,635
739,756
12,259,182
12,590,206
Tilley Distribution, Inc.
Baltimore, MD
10.15
4/1/2022
82,861
82,471
79,961
9,016
8,974
8,700
13,043
12,586
104,488
101,247
TradePending OpCo Aggregator, LLC
Carrboro, NC
3/2/2021
3/2/2026
9,453,535
9,431,488
2.50
8/4/2023
2,417,579
2,407,235
33,333
674,985
673,465
0.18
TradePending Holdings, LLC Series A Units
908,333
947,699
1,965,044
0.52
TradePending Holdings, LLC Series A-1 Units
132,783
260,254
390,381
13,753,474
14,934,857
TriplePoint Acquisition Holdings LLC
Columbus, OH
5/31/2024
5/31/2029
5,289,535
5,206,395
1.40
4/8/2025
1,764,940
1,733,139
TriplePoint Holdco LLC Class A Units
557,968
521,584
1,662,972
7,461,118
8,717,447
Unicat Catalyst Holdings, LLC
(21)
Alvin, TX
4/27/2021
4/27/2026
6,703,125
6,684,599
1.77
Unicat Catalyst, LLC Class A Units
7,500
605,471
Unicat Catalyst, LLC Class A-1 Units
12/13/2023
974
58,446
63,589
7,493,045
7,372,185
1.95
U.S. Expediters, LLC
Stafford, TX
10.45
12/22/2021
12/22/2026
14,348,318
14,266,043
13,272,194
3.51
Cathay Hypnos LLC Units
1,737,087
1,353,155
161,766
15,619,198
13,433,960
3.55
USDTL AcquisitionCo, Inc.
Des Plaines, IL
12/9/2024
12/9/2030
5,955,000
5,847,964
5,865,675
USDTL Holdings, LLC Preferred Units
110
110,000
144,257
5,957,964
6,009,932
15
Venbrook Buyer, LLC
13.25
4.25
3/13/2020
3/13/2026
15,567,454
15,541,641
14,399,896
177,127
176,833
163,842
2,750,080
2,543,824
0.67
5,308,287
5,303,174
4,910,165
Venbrook Holdings, LLC Convertible Term Loan
12/20/2028
117,483
Venbrook Holdings, LLC Common Units
822,758
819,262
24,708,473
22,017,727
5.82
WER Holdings, LLC
Sugar Hill, GA
4/11/2024
4/11/2030
2,670,362
2,626,848
2,657,010
5/30/2025
425,817
419,754
423,688
9.69
137,346
136,659
9.82
9.78
49,445
49,198
9.64
818,201
810,778
814,110
511,484
506,844
508,927
884,786
878,150
880,362
Blade Landscape Investments, LLC Class A Units
1,803
180,300
283,203
5,884,157
6,026,475
Whisps Holdings LP
Elgin, IL
4/18/2019
Class A-1 Units
3/6/2023
280,939
182,610
682,610
Xanitos, Inc.
Newtown Square, PA
10.65
6/25/2021
6/25/2026
12,256,000
12,212,736
3.24
55,000
10.68
30,000
2,159,481
2,155,343
0.57
Pure TopCo, LLC Class A Units
442,133
1,053,478
3,101,184
0.82
15,546,557
17,641,665
4.66
Total Non-control, non-affiliated investments
986,914,541
263.83
Total Investments
1,020,117,244
1,010,209,636
267.44
LIABILITIES IN EXCESS OF OTHER ASSETS
(632,479,309)
(167.44)
100.00
16
Unused
Unfunded
Commitment
Security
Fee
57,500
0.50%
June 5, 2028
444,803
May 7, 2026
875,995
December 12, 2028
34,148
0.00%
December 31, 2027
March 31, 2028
December 4, 2029
Amika OpCo LLC *
July 1, 2028
901,432
November 6, 2028
Axis Portable Air LLC
85,000
March 22, 2028
September 3, 2026
2,216,358
1.00%
December 20, 2030
1,130,707
March 15, 2029
91,000
September 1, 2026
September 19, 2030
February 7, 2027
78,333
August 2, 2028
November 22, 2027
June 30, 2028
20,285
July 29, 2027
September 22, 2030
1,000,000
August 22, 2031
2,500,000
0.75%
July 31, 2030
2,681,986
January 15, 2030
50,000
May 22, 2028
Eskola, LLC
Delayed Draw Term Loan**
3,918,298
December 19, 2029
1,363,636
December 7, 2028
January 24, 2028
March 16, 2027
628,259
April 1, 2029
627,139
March 12, 2029
391,962
883,838
November 30, 2026
2,847,136
April 30, 2031
633,424
25
December 17, 2026
February 28, 2030
July 30, 2026
December 17, 2030
17
3,561,003
June 3, 2030
531,915
46,667
September 2, 2027
52,632
December 30, 2027
November 15, 2029
1,296,076
December 21, 2028
April 3, 2028
63,765
June 7, 2030
May 19, 2026
173,452
June 6, 2030
252,951
August 3, 2029
October 12, 2027
416,667
October 31, 2029
January 10, 2030
1,317,704
June 30, 2027
3,753,955
January 16, 2031
576,923
November 3, 2026
14,018
August 2, 2027
1,168,831
June 13, 2029
July 7, 2026
March 21, 2030
4,270,705
2,524,737
January 27, 2031
August 6, 2028
July 31, 2031
December 30, 2030
86,957
December 31, 2026
66,667
March 2, 2026
1,339,123
May 31, 2029
743,957
December 22, 2026
December 9, 2030
1,408,896
April 11, 2030
73,263
WER Holdings, LLC***
362,594
75,000
June 25, 2026
Total Unfunded Debt Commitments
53,765,452
A
* Included in this investment is a Line of Credit in the amount of $4,861, with a Line of Credit rate of 5.25% and a maturity of July 1, 2028.
** This a last-out delayed draw term loan with contractual rates higher than the applicable rates.
*** Included in this investment is a Line of Credit in the amount of $42,138, with Line of Credit rate of 5.50% and a maturity of April 11, 2030.
18
Gross Additions
Gross Reductions
Amount of Realized
Amount of Unrealized
Interest Income
Value
(a)
(b)
Gain (Loss)
Appreciation (Depreciation)
(c)
254,101
(75,290)
87,877
(26,037)
31,142
(9,228)
5,710,182
170,574
2,855,414
236,250
375,113
2,388,863
Class A Preferred
1,132,576
Total Control Investments
10,744,100
545,687
3,410,884
(a) Gross additions include increases in the cost basis of investments resulting from new investments, follow-on investments, payment-in-kind interest or dividends, the amortization of any unearned income or discounts on debt investments, as applicable.
(b) Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales and return of capital.
(c) Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in the “Control” category.
Abbreviation Legend
PIK — Payment-In-Kind
PRIME — U.S. Prime Rate
SOFR — Secured Overnight Financing Rate
SONIA — Sterling Overnight Index Average
19
17,934,808
9.33
5,431,456
5,329,224
5,404,299
1.46
1,430,283
1,401,610
1,423,132
3,851,702
3,795,049
3,832,443
1.04
12,500
12,438
58,949
589,496
779,253
11,127,879
11,451,565
10.59
15,042,647
14,971,098
4.07
68,620
617,581
16,604,727
16,583,065
4.49
10.38
9,900,000
9,734,838
9,850,500
2.66
AdCellerant Holdings, LLC Serires A Units
633,353
10,463,548
10,483,853
2.83
12,764,381
10,474,102
Revolver (SBIC II)
9,260
7,547
13,706,597
10,481,649
16,718,372
12,464,374
604,622
447,420
18,007,571
12,911,794
9.58
10,673,296
10,476,264
10,513,197
2.84
10.58
8,130,853
7,985,352
2.20
99,250
98,216
135,778
193,132
8,219,346
8,423,235
20
4.75
9.08
8,819,468
8,688,867
8,831,327
93,260
10.33
9,608,834
9,444,289
228,190
65,196
9,596,823
9,996,858
5/9/2028
9,096,354
9,044,354
4/15/2022
2,838,697
2,818,874
0.77
416,800
3,794,487
492,905
0.27
12,772,933
16,715,364
4.53
25,745
2,779,048
8,197,783
10,976,831
2.97
3,461,538
3,288,461
(9)(17)
700,195
665,185
2,750,612
7,772,580
6,704,258
9,405,000
9,293,207
2.54
1,874,674
1,847,626
0.51
99,000
98,368
1,596,690
0.43
11,682,837
12,975,364
920,343
8,920,366
8,770,557
8,875,764
2.40
104,668
104,145
418,671
393,458
9,293,896
9,373,367
1,443,497
7.24
11.57
8/28/2026
15,372,619
15,372,618
4.16
1,801,833
16,288,633
17,174,452
4.65
21
9.73
9,916,875
9,839,972
2.68
2,250,000
2,217,644
0.61
770,951
12,307,616
12,937,826
3.50
6,677,886
Carolinas Holdings, L.P. Class A Units
465,633
7,143,523
7,143,519
8,439,915
8,394,322
10.35
3,200,000
3,171,714
0.87
272,853
11,698,955
11,912,768
9.36
4,439,292
1.22
71,365
333,925
386,619
4,836,178
4,984,667
197,987
10.69
13,360,125
13,256,520
13,293,324
3.59
10.52
2,885,002
2,873,374
2,870,577
181,659
16,350,824
16,345,560
4.42
11.93
13,117,995
13,054,902
12,986,815
1,672,682
1,662,516
1,655,955
11.44
81,667
14,799,085
14,723,620
3.98
10.98
6,584,450
6,553,762
6,551,528
137,569
29,376
7,186,910
6,718,474
1.82
10.83
9,475,162
9,289,539
9,190,907
1,037,841
1,024,868
1,006,706
86,000
83,420
222,957
10,700,448
10,503,990
4,887,500
4,823,845
4,863,063
28,333
28,191
184,176
5,137,892
5,075,430
1.37
22
9,982,878
9,830,912
2.70
991,476
10,457,602
10,974,354
10.73
12,766,151
12,619,342
12,702,320
86,211
85,780
795,702
13,445,552
13,583,802
3.67
DRS Holdings III, Inc.
St. Louis, MO
10.71
11/1/2019
11/1/2025
8,586,464
8,571,140
2.32
430,653
1,073,808
8,712,311
8,709,082
8,276,695
1/31/2026
65,807
49,355
1,439,463
1,367,490
677,843
643,951
1,048,896
901,489
11,793,684
10,337,491
EOS Fitness Holdings, LLC
Class A Preferred Units
12/30/2014
118
Class B Common Units
3,017
889,366
7,020,201
6,881,178
10.97
133,333
11.35
99,150
7,113,661
7,252,684
1.97
Last Out Term Loan
7,558,348
7,426,077
Last Out Delayed Draw Term Loan
9.94
2,798,784
2,777,793
2,749,805
893,991
893,738
11,097,861
11,069,620
11.09
9,733,850
430,948
10,207,335
10,281,448
12,426,869
12,213,973
3.36
1,376,994
13,087,306
13,803,863
3.73
23
16,313,133
16,313,132
15,334,344
5..75
991,945
932,428
80,169
227,350
18,529,702
16,574,291
8,721,980
8,657,351
8,678,370
2.36
353,743
9,034,886
9,032,113
7,558,150
7,406,992
7,444,778
656,817
646,965
1,688,532
1,669,955
1,663,204
2,856
285,572
371,158
10,019,336
10,126,105
9.61
4,279,247
4,204,427
4,193,662
218,894
4,394,809
4,412,556
1.19
Florachem Corporation
4/29/2022
4/29/2028
9,750,000
9,630,079
53,213
SK FC Holdings, L.P. Class A Units
362
362,434
613,507
10,112,393
10,483,387
13.43
4,484,133
Green Intermediateco II, Inc.
11,030,624
10,814,754
10,920,318
2.95
1,296,750
1,271,726
1,283,783
404,046
399,952
400,006
219,664
362,217
12,706,096
12,966,324
11.24
2/28/2026
12,260,275
12,251,602
3.31
2,174,242
4,852,169
14,989,053
19,286,686
5.21
9,954,000
9,648,493
2.69
515,578
774,031
10,164,071
10,728,031
2.90
9,775,000
9,658,966
49,125
48,799
219,823
616,165
9,927,588
10,440,290
24
(7)(11)
5,317,225
5,239,463
5,537,228
4.00
13,372,834
13,256,191
13,105,377
97,994
96,034
324,861
323,234
318,364
394,674
15,309,010
13,914,449
3.77
3,618,142
0.98
5,847,846
5,740,907
5,643,171
1.53
532,972
522,558
514,318
265,811
260,822
256,508
(11)(27)
79,613
23,001
7,019,905
6,516,611
9.83
7,107,521
2,411,660
0.66
1,462,725
1,453,825
452,781
208,809
682,924
11,181,815
11,754,323
9.98
8,394,781
8,335,177
6,328,624
6,277,694
1.71
1,456,662
15,417,255
16,180,067
4.37
10.56
13,094,801
12,114,950
3.28
10.22
80,000
81,458
81,032
1,001,613
14,039,589
13,278,021
9.63
7,522,184
7,409,351
28,000
27,580
7,437,351
7,436,931
12.01
5,342,606
5,328,007
5,182,328
4,931,637
4,918,069
4,783,688
1,096,691
1,092,703
1,063,790
1,031,915
367,676
13,702,300
12,429,397
San Francisco,CA
5/3/2026
13,597,208
13,597,207
(4)(9)(19)
1,125,000
J.R. Watkins Holdings, Inc. Class A Preferred Stock
1,133
15,854,783
3,091,664
0.83
7,439,791
7,376,964
7,030,602
58,443
55,229
7,844,911
7,085,831
1.91
11.03
12,899,115
12,758,237
12,834,619
125,618
13,149,511
12,960,237
Deerfield, OH
8,252,261
8,147,122
8,211,000
1,194,249
1,186,357
1,188,278
9,333,479
9,399,278
87,756
100,282
187,756
188,835
11.34
3,579,241
3,507,484
3,471,864
0.94
11.84
894,810
876,871
867,966
214,870
4,779,122
4,554,700
1.23
9,476,743
9,291,975
2.51
9,938,919
4,306,952
4,234,800
4,242,348
1.15
2,524,493
2,482,201
2,486,626
2,061,314
2,026,873
2,030,394
489,038
484,148
481,702
9,228,022
9,241,070
10.08
4,950,000
4,866,492
4,925,250
3,876,499
3,840,682
3,857,117
589,463
9,216,389
9,371,830
2.53
10.21
7,575,773
7,530,069
2.05
4,254,419
4,233,579
11,763,648
11,830,192
10.81
15,890,333
15,787,537
15,810,880
4.27
37,500
37,313
746,138
16,758,370
16,594,331
26
6,730,812
6,605,639
6,663,504
1.80
9.34
35,775
382,715
378,952
378,888
434,111
7,445,465
7,512,278
11.59
106,248
105,711
105,186
106,498
115,781
114,623
107,237
106,165
11/15/2023
6,030
6,473
6,216
3/1/2024
12,241
13,291
12,620
11,629
13,002
11,989
12,326
461,899
467,733
Fremont, CA
10.61
4,395,044
4,313,186
4,373,069
1.18
1,705,604
1,688,941
1,697,076
308,668
6,382,457
6,378,813
1.72
11.08
8/30/2025
8,125,763
8,116,850
8,044,505
5,124,136
5,118,576
5,072,895
1,763,033
1,745,403
937,078
15,581,417
15,799,881
4,900,478
99,204
314,702
56,585
5,360,738
5,467,120
1.49
9.84
13,000,000
12,746,682
3.45
13,486,486
3.65
8.75
13.18
5/6/2026
7,589,599
7,538,850
598,221
8,384,601
8,137,071
27
6,484,567
6,448,091
6,452,144
1.74
11.33
12,351,615
12,190,355
986,938
12,797,097
13,338,553
119,281
5,092,459
1/1/2026
13,882,311
13,882,310
13,812,899
1,820,631
1,811,528
571,195
568,339
960,000
955,200
384,522
17,244,131
17,532,488
4.73
8,680,556
8,577,517
8,593,750
492,499
693,537
9.59
12,196,092
12,170,577
3.30
2,118,619
14,314,711
3.87
Last Out Term Loan (SBIC II)
8,681,968
2.38
818,825
9,392,568
9,634,152
11.22
5,895,000
5,815,274
26,114
127,378
6,084,856
6,126,882
1.65
Rogers Mechanical Contractors, LLC
10.91
4/28/2021
9/28/2028
8,668,481
8,619,680
8,581,796
9.86
7,443,117
7,307,325
7,331,470
1.98
290,102
7,657,974
7,621,572
10.53
12,148,958
12,144,103
627,734
12,809,833
12,776,692
(11)(26)
PRIME+
5,431,921
5,373,590
3,340,631
(11)(18)(26)
83,533
51,373
99,116
98,498
60,956
5,640,844
3,538,183
0.96
513,825
804,951
11.21
4,283,396
4,225,574
4,261,979
721,110
717,504
127,187
5,036,823
5,106,670
10.93
10,370,624
10,168,144
802,021
786,798
434,504
337,963
11,389,446
11,510,608
9.32
12,324,635
3.33
92,610
91,943
89,369
Trade Education Acquisition, L.L.C.
(4)(28)
12/28/2027
9,944,460
9,836,078
5,320,286
(9)(28)
39,000
20,865
Trade Education Holdings, L.L.C. Class A Units
662,660
10,537,738
5,341,151
9,527,778
9,473,791
2.58
2,436,128
2,411,250
680,137
676,477
1,973,113
520,010
13,802,804
15,170,499
4.10
5,329,708
5,232,677
5,303,059
1.43
549,818
953,034
5,782,495
6,256,093
1.69
10.96
6,843,750
6,801,773
1.85
819,105
701
38,683
53,090
7,590,456
7,715,945
29
14,460,123
14,331,044
14,315,522
975,688
15,684,199
15,291,210
6,000,000
5,881,196
19,604
109,998
6,011,196
6,010,798
5.48
14,603,639
14,541,079
13,873,457
3.75
166,160
165,448
157,852
2,579,814
2,450,823
4,979,640
4,967,241
4,730,658
108,991
23,181,835
21,212,790
5.73
2,690,643
2,641,658
2,650,283
0.72
133,870
131,862
9.87
824,382
816,172
812,016
192,289
3,772,000
3,786,450
12,352,000
12,267,321
140,000
2,176,309
2,168,201
1,245,129
15,629,000
15,913,438
943,853,898
255.69
961,788,706
953,497,688
257.76
(583,575,748)
(157.76)
30
31
87,500
60,149
1,526,600
June 22, 2029
May 9, 2028
1,325,032
942,010
August 16, 2030
1,733,387
18,333
166,667
December 21, 2025
14,000
71,667
35,499
909,091
November 1, 2025
Eskola, LLC**
976,811
485,473
April 29, 2028
477,273
February 28, 2026
1,055,707
2,006
1,571,984
April 28, 2028
32
February 15, 2027
72,000
337,433
May 3, 2026
24,915
November 9, 2027
June 6, 2027
1,956,150
62,500
701,036
686,582
1,145,662
746,948
January 1, 2026
73,886
September 28, 2028
1,109,551
July 26, 2026
November 30, 2028
41,000
December 28,2027
514,059
267,739
60,000
40,989,533
* Included in this investment is Line of Credit in the amount of $4,861, with Line of Credit rate of 5.25% and a maturity of July 1, 2028.
*** Included in this investment is Line of Credit in the amount of $41,071, with Line of Credit rate of 5.50% and a maturity of April 11, 2030.
33
Amount of Interest
December 31, 2023
Credited to Income
Gain (loss)
(1,628,125)
Term Loan A-1 (SBIC)
3,042,204
(5,255,564)
2,213,360
325,059
80,664
(317,846)
Term Loan A-2 (SBIC)
650,118
(1,140,558)
490,440
111,979
34,223
(115,060)
Term Loan A-3 (SBIC)
223,959
(392,910)
168,951
496,828
1,003,691
5,018
Term Loan A-4 (SBIC)
993,654
(1,003,691)
10,037
332,190
68,434
(337,027)
(3)
6,175,994
8,779,420
(8,129,750)
826,772
(c) Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in the Control category.
BSBY — Bloomberg Short-Term Bank Yield Index
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Stellus Capital Investment Corporation (“we”, “us”, “our” and the “Company”) was formed as a Maryland corporation on May 18, 2012 (“Inception”) and is an externally managed, closed-end, non-diversified investment management company. The Company is applying the guidance of Accounting Standards Codification (“ASC”) Topic 946, Financial Services Investment Companies (“ASC Topic 946”). The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and has elected to be treated, qualifies, and intends to qualify annually to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes. The Company’s investment activities are managed by the Company’s investment adviser, Stellus Capital Management, LLC (“Stellus Capital” or the “Advisor”).
As of September 30, 2025, the Company had issued a total of 28,947,254 shares and raised $419,105,333 in gross proceeds since Inception, incurring an aggregate of $12,903,815 in offering expenses and underwriting fees. Additionally, the Company has received $672,917 in offering expenses reimbursements from the Advisor for net proceeds from offerings of $406,874,435. The Company’s shares are currently listed on the New York Stock Exchange under the symbol “SCM”. See Note 4 to the consolidated financial statements contained herein for further details.
The Company has established the following wholly owned subsidiaries: SCIC — Consolidated Blocker, Inc., SCIC — Invincible Blocker 1, Inc., SCIC — SKP Blocker 1, Inc., SCIC — APE Blocker 1, Inc., SCIC — Venbrook Blocker, Inc., SCIC — CC Blocker 1, Inc., SCIC — ERC Blocker 1, Inc., and SCIC — Hollander Blocker 1, Inc., which are structured as Delaware entities, to hold equity or equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass-through entities) (collectively, the “Taxable Subsidiaries”). The Taxable Subsidiaries are consolidated for U.S. generally accepted accounting principles (“U.S. GAAP”) reporting purposes, and the portfolio investments held by them are included in the consolidated financial statements.
On June 14, 2013, the Company formed Stellus Capital SBIC, LP (the “SBIC I subsidiary”), a Delaware limited partnership, and its general partner, Stellus Capital SBIC GP, LLC, a Delaware limited liability company, as wholly owned subsidiaries of the Company. On June 20, 2014, the SBIC I subsidiary received a license from the U.S. Small Business Administration (“SBA”) to operate as a small business investment company (“SBIC”) under Section 301(c) of the Small Business Investment Company Act of 1958, as amended (the “SBIC Act”). The SBIC I subsidiary and its general partner are consolidated for U.S. GAAP reporting purposes, and the portfolio investments held by it are included in the consolidated financial statements.
On November 29, 2018, the Company formed Stellus Capital SBIC II, LP (the “SBIC II subsidiary”), a Delaware limited partnership. On August 14, 2019, the SBIC II subsidiary received a license from the SBA to operate as an SBIC under Section 301(c) of the SBIC Act. The SBIC II subsidiary and its general partner, Stellus Capital SBIC GP, LLC, are consolidated for U.S. GAAP reporting purposes, and the portfolio investments held by it are included in the consolidated financial statements.
The SBIC licenses allow the SBIC I subsidiary and SBIC II subsidiary (together, “the SBIC subsidiaries”) to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten-year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, will have a superior claim to the SBIC subsidiaries’ assets over the Company’s stockholders in the event the Company liquidates one or both of the SBIC subsidiaries or the SBA exercises its remedies under the SBA-guaranteed debentures issued by the SBIC subsidiaries upon an event of default. For the SBIC I subsidiary, SBA regulations limit the amount that the SBIC I subsidiary may borrow to a maximum of $150,000,000 when it has at least $75,000,000 in regulatory capital, as such term is defined by the SBA. For the SBIC II subsidiary, SBA regulations limit the amounts that the SBIC II subsidiary may borrow to
$175,000,000 when the licensee has at least $87,500,000 in regulatory capital, as such term is defined by the SBA. For two or more SBICs under common control, the maximum amount of outstanding SBA-guaranteed debentures cannot exceed $350,000,000. As of both September 30, 2025 and December 31, 2024, the SBIC I subsidiary had $75,000,000 in regulatory capital. As of both September 30, 2025 and December 31, 2024, the SBIC II subsidiary had $87,500,000 in regulatory capital.
As of September 30, 2025 and December 31, 2024, the SBIC I subsidiary had $124,000,000 and $150,000,000 of SBA-guaranteed debentures outstanding, respectively. As of both September 30, 2025 and December 31, 2024, the SBIC II subsidiary had $175,000,000 of SBA-guaranteed debentures outstanding. See footnotes (4) and (5) of the Consolidated Schedule of Investments for additional information regarding the treatment of investments in the SBIC subsidiaries with respect to the Credit Facility (as defined in Note 9).
Under the 1940 Act, the Company is allowed to incur a maximum asset coverage ratio of 150% if certain requirements are met, including the approval of a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Company’s Board of Directors (the “Board”) and the approval of the Company’s stockholders. On April 4, 2018, the Board, including a “required majority” of the Board, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. At the Company’s 2018 annual meeting of stockholders, the Company’s stockholders also approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the asset coverage ratio requirement applicable to the Company was decreased from 200% to 150%, effective June 29, 2018. The amount of leverage that the Company employs at any time depends on its assessment of the market and other factors at the time of any proposed borrowing. As of September 30, 2025, the Company’s asset coverage ratio was 210%.
The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments in lower middle-market companies. The Company seeks to achieve its investment objective by originating and investing primarily in private U.S. lower middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien, second lien, unitranche and unsecured debt financings, often with corresponding equity co-investments. The Company sources investments primarily through the extensive network of relationships that the principals of Stellus Capital have developed with financial sponsor firms, financial institutions, lower middle-market companies, management teams and other professional intermediaries.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in conformity with generally accepted accounting principles in the U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, certain disclosures accompanying the annual financial statements prepared in accordance with U.S. GAAP are omitted. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of the financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2025, are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2024.
In accordance with Regulation S-X under the Exchange Act, the Company does not consolidate portfolio company investments. The accounting records of the Company are maintained in U.S. dollars.
36
Economic Developments
Economic activity has continued to accelerate across sectors and regions. Nonetheless, the Company has observed and continues to observe supply chain interruptions, labor resource shortages, commodity inflation, fluctuating interest rates, bank impairments and failures, economic sanctions in response to international conflicts and instances of geopolitical, economic and financial market instability in the United States and abroad, including as a result of the imposition of tariffs in the United States or its trading partners and the prolonged shutdown of the government. One or more of these factors may contribute to increased market volatility and may have long- and short-term effects in the United States and worldwide financial markets.
Portfolio Investment Classification
The Company classifies its portfolio investments in accordance with the requirements of the 1940 Act as follows: (a) “Control Investments” are defined as investments in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation, (b) “Affiliate Investments” are defined as investments in which the Company owns between 5% and 25% of the voting securities and does not have rights to maintain greater than 50% of the board representation, and (c) “Non-controlled, non-affiliate investments” are defined as investments that are neither Control Investments or Affiliate Investments.
Cash and Cash Equivalents
Cash consists of bank demand deposits. The Company deems certain money market mutual funds, U.S. Treasury Bills, and other high-quality, short-term debt securities as cash equivalents.
As of September 30, 2025, cash balances totaling $5,174, including foreign currency of $657 (acquisition cost of $657), did not exceed Federal Deposit Insurance Corporation ("FDIC") insurance protection levels of $250,000. In addition, as of September 30, 2025, the Company held $9,018,846 in cash equivalents in money market mutual funds, which are carried at net asset value, which is considered a Level 1 valuation technique. All of the Company’s cash deposits are held at large established high credit quality financial institutions, and management believes that risk of loss associated with any uninsured balances is remote.
Fair Value Measurements
The Company accounts for all of its financial instruments at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its financial instruments related to receivables and payables approximate the fair value of these items due to the short maturity of these instruments, which are considered Level 2 in the fair value hierarchy.
The Credit Facility, SBA-guaranteed debentures, and Notes Payable (as defined in Note 11) are carried at amortized cost in the Consolidated Statements of Assets and Liabilities. As of September 30, 2025, the estimated fair value of the Credit Facility approximates the carrying value because the interest rates adjust to the current market interest rate (Level 3 classification). Valuation techniques and significant inputs used to determine fair value include company details; credit, market and liquidity risk and events; financial health of the company; place in the capital structure; interest rate; and terms and conditions of the Credit Facility. The estimated fair value of the SBA-guaranteed debentures and Notes Payable was determined by discounting projected remaining payments using market interest rates for borrowings of the Company and entities with similar credit risks at the measurement date. At the measurement date, the estimated fair values of the SBA-guaranteed debentures, 2026 Notes Payable (as defined below) and 2030 Notes Payable (as defined below) as prepared for disclosure purposes was $288,459,825 (Level 3 classification), $49,610,950 (Level 2 classification) and $122,633,470 (Level 3
37
classification), respectively. See Note 6 to the consolidated financial statements contained herein for further discussion regarding the fair value measurements and hierarchy.
Consolidation
As permitted under Regulation S-X under the Exchange Act and ASC Topic 946, the Company generally does not consolidate its investments in a portfolio company other than an investment company subsidiary. Accordingly, the Company consolidated the results of the SBIC subsidiaries and the Taxable Subsidiaries. All intercompany balances have been eliminated upon consolidation.
Use of Estimates
The preparation of the Consolidated Statements of Assets and Liabilities in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. Additionally, as explained in Note 1, the consolidated financial statements include investments in the portfolio whose values have been determined in good faith by the Board, pursuant to procedures approved by the Board, in the absence of readily ascertainable market values. Because of the inherent uncertainty of the investment portfolio valuations, those estimated values may differ materially from the values that would have been determined had a ready market for the securities existed.
Deferred Financing Costs
Deferred financing costs, prepaid loan fees on SBA-guaranteed debentures and prepaid loan structure fees consist of fees and expenses paid in connection with the closing of the Company’s Credit Facility, Notes Payable and SBA-guaranteed debentures and are capitalized at the time of payment. These costs are amortized using the straight line method over the term of the respective instrument and are presented as an offset to the corresponding debt on the Consolidated Statements of Assets and Liabilities.
Offering Costs
Deferred offering costs consist of fees and expenses incurred in connection with the offer and sale of the Company’s common stock, including legal, accounting, printing fees and other related expenses, as well as costs incurred in connection with the filing of a shelf registration statement. These costs are capitalized when incurred and recognized as a reduction of offering proceeds when the offering is consummated and shown on the Consolidated Statements of Changes in Net Assets as a reduction to Paid-in capital. As of September 30, 2025, there was no such costs on the Consolidated Statement of Assets and Liabilities.
Rule 2a-5 under the 1940 Act (“Rule 2a-5”) establishes requirements for determining the fair value of a BDC’s investments in good faith for purposes of the 1940 Act. Rule 2a-5 permits boards of directors of BDCs to designate certain parties to perform fair value determinations, subject to oversight of the board of directors and compliance with certain conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a board of directors must determine the fair value of a security. Rule 31a-4 under the 1940 Act (“Rule 31a-4”) establishes additional recordkeeping requirements related to fair value determinations. While the Board has not elected to designate the Advisor as the valuation designee, the Company has adopted certain revisions to its valuation policies and procedures in order to comply with the applicable requirements of Rule 2a-5 and Rule 31a-4.
As a BDC, the Company will generally invest in illiquid loans and securities, including debt and equity securities of private lower middle-market companies. Section 2(a)(41) of the 1940 Act requires that a BDC value its assets as follows: (i) the third-party price for securities for which a market quotation is readily available; and (ii) for all other securities and assets, fair value, as determined in good faith under procedures adopted by a BDC’s board or valuation designee, as applicable. Under procedures established by the Board, the Company values investments for which market quotations are readily available at such market quotations. The Company obtains these market values from an independent pricing service or at the midpoint of the bid and ask prices obtained from at least two brokers or dealers (if available; otherwise, by a principal market maker or a primary market dealer). Debt and equity securities that are not publicly traded or whose market prices are not readily available will be valued at fair value as determined in good faith by the Board. Such determination of fair value may involve subjective judgments and estimates. The Company also engages independent valuation providers to review the valuation of each portfolio investment that does not have a readily available market quotation at least twice annually.
Debt and equity investments purchased within approximately 90 days of the valuation date will be valued at cost plus accreted discount, or minus amortized premium, which approximates fair value. With respect to unquoted securities, the Board values each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Board uses the pricing indicated by the external event to corroborate and/or assist in the valuation. Because the Company expects that there will not be a readily available market quotation for many of the investments in its portfolio, the Company expects to value most of its portfolio investments at fair value as determined in good faith by the Board using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market quotation, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. In following these approaches, the types of factors that will be taken into account in fair value pricing investments include, as relevant, but are not limited to:
39
Revenue Recognition
The Company records interest income on an accrual basis to the extent such interest is deemed collectible. Payment-in-kind (“PIK”) interest represents contractual interest accrued and added to the loan balance that generally becomes due at maturity. The Company will not accrue any form of interest on loans and debt securities if it has reason to doubt its ability to collect such interest. Loan origination fees, original issue discount and market discount or premium are capitalized, and the Company then accretes or amortizes such amounts using the effective interest method as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination fee is recorded as interest income. The Company records prepayment premiums on loans and debt securities as other income. Dividend income, if any, will be recognized on the ex-dividend date.
A presentation of the interest income the Company has earned from portfolio companies for the three and nine months ended September 30, 2025 and 2024 is as follows:
Loan interest
22,752,870
23,489,366
67,234,416
69,960,767
PIK income
Fee amortization income(1)
799,208
734,121
2,351,134
2,256,653
Fee income acceleration(2)
82,509
179,888
337,807
833,518
Total Interest Income
25,012,753
25,338,361
73,794,074
75,541,792
To maintain the Company’s treatment as a RIC, substantially all of this income must be paid to stockholders in the form of distributions, even if the Company has not collected any cash.
Management considers portfolio company specific circumstances as well as other economic factors in determining collectability of interest income. As of September 30, 2025, the Company had loans to five portfolio companies that were on non-accrual status, which represented approximately 6.7% of the Company’s loan portfolio at cost and 3.7% at fair value. As of December 31, 2024, the Company had loans to seven portfolio companies that were on non-accrual status, which represented approximately 8.3% of the Company’s loan portfolio at cost and 5.4% at fair value. As of September 30, 2025 and December 31, 2024, $9,656,621 and $6,509,852, respectively, of income from investments on non-accrual had not been accrued. If a loan or debt security’s status significantly improves regarding the debtor’s ability to service the debt or other obligations, or if a loan or debt security is sold or written off, the Company will remove it from non-accrual status.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the repayment, sale or disposition and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
Foreign currency amounts are translated into U.S. Dollars (USD) on the following basis:
40
Investment Transaction Costs
Costs that are material and associated with an investment transaction, including legal expenses, are included in the cost basis of purchases and deducted from the proceeds of sales unless such costs are reimbursed by the borrower.
Receivables and Payables for Unsettled Securities Transactions
The Company records all investments on a trade date basis.
U.S. Federal Income Taxes
The Company has elected and intends to qualify annually to be treated as a RIC under Subchapter M of the Code. To qualify as a RIC, among other things, the Company generally is required to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. So long as the Company maintains its status as a RIC, it generally will not be subject to U.S. federal income tax on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the Company represents obligations of the Company’s investors and will not be reflected in the Consolidated Financial Statements of the Company.
To avoid a 4% U.S federal excise tax on undistributed earnings, the Company is required to distribute each calendar year the sum of (i) 98% of its ordinary income for such calendar year, (ii) 98.2% the amount by which the Company’s capital gain exceeds its capital loss (adjusted for certain ordinary losses) for the one-year period ending October 31 in that calendar year, and (iii) certain undistributed amounts from previous years on which the Company paid no U.S. federal income tax, or the “Excise Tax Avoidance Requirement”. For this purpose, however, any net ordinary income or capital gain net income retained by the Company that is subject to U.S. federal income tax for the tax year ending in that calendar year will be considered to have been distributed by year end (or earlier if estimated taxes are paid). The Company, at its discretion, may choose not to distribute all its taxable income for the calendar year and pay a non-deductible 4% excise tax on this income. If the Company chooses to do so, all other things being equal, this would increase expenses and reduce the amount of cash available to be distributed to stockholders. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, the Company accrues excise taxes on estimated excess taxable income as taxable income is earned.
Current income tax expense for the three months ended September 30, 2025 and 2024 of $515,686 and $360,192, respectively, was mostly related to excise and franchise taxes. Income tax expense for the nine months ended September 30, 2025 and 2024 of $1,444,184 and $1,304,948, respectively, was mostly related to excise and franchise taxes.
The Company evaluates tax positions taken or expected to be taken while preparing its tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the applicable period. As of September 30, 2025 and December 31, 2024, the Company had not recorded a liability for any unrecognized tax positions. Management’s evaluation of uncertain tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company’s policy is to include interest and penalties related to income taxes, if applicable, in general and administrative expenses. Any expenses for the three and nine months ended September 30, 2025 and 2024 were de minimis.
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The Taxable Subsidiaries are direct wholly owned subsidiaries of the Company that have elected to be treated as corporations for U.S. federal income tax purposes, and as a result, the income of the Taxable Subsidiaries is subject to U.S. federal income tax at corporate rates. The Taxable Subsidiaries permit the Company to hold equity investments in portfolio companies that are “pass through” entities for tax purposes and continue to comply with the “source-of-income” requirements contained in RIC tax provisions of the Code. The Taxable Subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in the Company’s consolidated financial statements.
The Taxable Subsidiaries use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
For both the three and nine months ended September 30, 2025, the Company recorded deferred income tax benefit of $0 related to the Taxable Subsidiaries. For the three and nine months ended September 30, 2024, the Company recorded deferred income tax benefit of $0 and $188,893, respectively, related to the Taxable Subsidiaries. In addition, as of both September 30, 2025 and December 31, 2024, the Company had a net deferred tax liability of $0.
Earnings per Share
Basic per share calculations are computed utilizing the weighted average number of shares of the Company’s common stock outstanding for the period. The Company has no common stock equivalents. As a result, there is no difference between diluted earnings per share and basic per share amounts.
Paid-In Capital
The Company records the proceeds from the sale of shares of its common stock on a net basis to (i) capital stock and (ii) paid-in capital in excess of par value, excluding all commissions and marketing support fees.
Distributable (Loss) Earnings
The components that make up distributable (loss) earnings on the Consolidated Statements of Assets and Liabilities as of September 30, 2025 and December 31, 2024 are as follows:
Accumulated net realized loss from investments, net of cumulative dividends of $30,352,761 for both periods
(45,392,562)
(41,267,707)
(272,381)
(213,301)
Net unrealized depreciation on non-controlled, non-affiliated investments and cash equivalents, net of deferred tax liability of $0 for both periods
(9,821,399)
(7,312,300)
Net unrealized appreciation (depreciation) on foreign currency translations
23,321
(15,219)
Accumulated undistributed net investment income
33,753,771
39,153,714
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Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in this update require more disaggregated information on income taxes paid. ASU 2023-09 is effective for years beginning after December 15, 2024. Early adoption is permitted; however, the Company has not elected to adopt this provision as of the date of the financial statements contained in this quarterly report on Form 10-Q. The Company is still assessing the impact of the new guidance. However, it does not expect ASU 2023-09 to have a material impact on the consolidated financial statements and the notes thereto.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (“ASU 2024-03”), which requires disaggregated disclosure of certain costs and expenses, including purchases of inventory, employee compensation, depreciation, amortization and depletion, within relevant income statement captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning with the first quarter ended March 31, 2028. Early adoption and retrospective application is permitted. The Company is currently assessing the impact of this guidance; however, the Company does not expect a material impact on its consolidated financial statements.
See Note 13 to the consolidated financial statements contained herein for further discussion regarding recently issued accounting standards.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. The Company believes the impact of the recently issued standards and any that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.
NOTE 2 — RELATED PARTY ARRANGEMENTS
Investment Advisory Agreement
The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with Stellus Capital, pursuant to which Stellus Capital serves as its investment adviser. Pursuant to this agreement, the Company has agreed to pay to Stellus Capital an annual base management fee of 1.75% of gross assets, including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents, and an incentive fee.
For the three and nine months ended September 30, 2025, the Company recorded an expense for base management fees of $4,401,305 and $12,735,472, respectively. For the three and nine months ended September 30, 2024, the Company recorded an expense for base management fees of $3,959,554 and $11,664,020, respectively. As of September 30, 2025 and December 31, 2024, $4,401,305 and $4,034,109 of such management fees, respectively, were payable to Stellus Capital.
The incentive fee has two components, the investment income incentive fee and the capital gains incentive fee, as follows:
Investment Income Incentive Fee
The investment income component of the incentive fee (“Income Incentive Fee”) is calculated, and payable to the Advisor, quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter, subject to a cumulative total return requirement and to deferral of non-cash amounts. The pre-incentive fee net investment income, which is expressed as a rate of return on the value of the Company’s net assets attributable to the Company’s common stock for the immediately preceding calendar quarter, will have a 2.0% (which is 8.0% annualized) hurdle rate (also referred to as the “Hurdle”). Pre-incentive fee net investment income means interest income, dividend income and any other income accrued during the calendar quarter, minus the Company’s operating expenses for the quarter, excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon
43
securities), accrued income that the Company has not yet received in cash. The Advisor receives no incentive fee for any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the Hurdle. Subject to the cumulative total return requirement described below, the Advisor receives 100% of the Company’s pre-incentive fee net investment income for any calendar quarter with respect to that portion of the pre-incentive net investment income for such quarter, if any, that exceeds the Hurdle but is less than 2.5% (which is 10.0% annualized) of net assets (also referred to as the “Catch-up”) and 20.0% of the Company’s pre-incentive fee net investment income for such calendar quarter, if any, greater than 2.5% (10.0% annualized) of net assets.
The foregoing Income Incentive Fee is subject to a total return requirement, which provides that no incentive fee in respect of the Company’s pre-incentive fee net investment income is payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding quarters. In other words, any Income Incentive Fee that is payable in a calendar quarter is limited to the lesser of (i) 20% of the amount by which the Company’s pre-incentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the Catch-up, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of pre-incentive fee net investment income, realized gains and losses and unrealized appreciation and depreciation of the Company for the then-current and 11 preceding calendar quarters. In addition, the Advisor is not paid the portion of such incentive fee that is attributable to deferred interest until the Company actually receives such interest in cash.
For the three and nine months ended September 30, 2025, the Company incurred $2,166,047 and $6,460,613 of Income Incentive Fees, respectively. For the three and nine months ended September 30, 2024, the Company incurred $2,564,922 and $7,616,562 of Income Incentive Fees, respectively. As of September 30, 2025 and December 31, 2024, $2,642,033 and $3,109,560, respectively, of such Income Incentive Fees were payable to the Advisor, of which $1,589,170 and $2,351,703, respectively, were currently payable (as explained below). As of September 30, 2025 and December 31, 2024, $1,052,863 and $757,857, respectively, of Income Incentive Fees incurred but not paid by the Company were generated from deferred interest (i.e. PIK, certain discount accretion and deferred interest) and are not payable until such amounts are received by the Company in cash. For the three and nine months ended September 30, 2025, $471,251 and $2,643,020, respectively, of Income Incentive Fees accrued but not paid by the Company were permanently written off due to the Cumulative Pre-Incentive Fee Net Return limitation. For the three and nine months ended September 30, 2024, $0 and $1,826,893, respectively, of Income Incentive Fees accrued but not paid by the Company were permanently written off due to the Cumulative Pre-Incentive Fee Net Return limitation.
Capital Gains Incentive Fee
The Company also pays the Advisor an incentive fee based on capital gains (the “Capital Gains Incentive Fee”). The Capital Gains Incentive Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date). The Capital Gains Incentive Fee is equal to 20.0% of the Company’s cumulative aggregate realized capital gains from Inception through the end of that calendar year, computed net of the cumulative aggregate realized capital losses and cumulative aggregate unrealized capital depreciation through the end of such year. The aggregate amount of any previously paid Capital Gains Incentive Fees is subtracted from such Capital Gains Incentive Fee calculated.
U.S. GAAP requires that the Capital Gains Incentive Fee accrual considers the cumulative aggregate realized gains and losses and unrealized capital appreciation or depreciation of investments and other financial instruments in the calculation, as an incentive fee would be payable if such unrealized capital appreciation or depreciation were realized, even though such realized gains and losses and unrealized capital appreciation or depreciation is not permitted to be considered in calculating the Capital Gains Incentive Fee actually payable under the Investment Advisory Agreement. There can be no assurance that unrealized appreciation or depreciation will be realized in the future. Accordingly, such fees, as calculated and accrued, may not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of incentive fees in subsequent periods.
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For both the three and nine months ended September 30, 2025 and 2024, the Company did not incur any Capital Gains Incentive Fee. As of both September 30, 2025 and December 31, 2024, no Capital Gains Incentive Fees were accrued.
The following tables summarize the components of the incentive fees discussed above:
Investment income incentive fees incurred
Income incentive fees waived
Incentive fees expense
1,694,796
3,817,593
5,789,669
Investment income incentive fee currently payable
1,589,170
2,351,703
Investment income incentive fee deferred
1,052,863
757,857
Incentive fee payable
Director Fees
For the three and nine months ended September 30, 2025, the Company recorded an expense relating to independent director fees of $93,250 and $297,750, respectively. For the three and nine months ended September 30, 2024, the Company recorded an expense relating to independent director fees of $93,250 and $315,750, respectively. As of both September 30, 2025 and December 31, 2024, the Company had no unpaid independent director fees.
Co-Investment Pursuant to SEC Order
On May 9, 2022, the Company received a new exemptive order (the “Order”) that superseded prior co-investment exemptive relief orders and permits the Company to co-invest with additional types of private funds, other BDCs, and registered investment companies managed by Stellus Capital or an adviser that is controlled, controlling, or under common control with Stellus Capital, subject to the conditions included therein. Pursuant to the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Company’s independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching of the Company or its stockholders on the part of any person concerned; (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with its investment objectives and strategies; (3) the investment by the Company’s affiliates would not disadvantage the Company, and the Company’s participation would not be on a basis different from or less advantageous than that on which the Company’s affiliates are investing and (4) the proposed investment by the Company would not benefit the Advisor, the other affiliated funds that are participating in the investment, or any affiliated person of any of them (other than parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.
The Company co-invests, subject to the conditions in the Order, with a private BDC and private credit funds managed by Stellus Capital or an affiliate thereof that have investment strategies that are similar or identical to the Company’s investment strategy, and the Company may co-invest with other BDCs, registered investment companies and private credit funds managed by Stellus Capital or an adviser that is controlled, controlling, or under common control with Stellus Capital in the future. The Company believes that such co-investments may afford it additional investment opportunities and an ability to achieve greater diversification.
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Administrative Agent
The Company serves as the administrative agent on certain investment transactions, including co-investments with its affiliates under the Order. As of September 30, 2025, there was $136,535 due to related parties related to interest paid by a borrower to the Company as administrative agent, which is included in “Related party payable” on the Consolidated Statement of Assets and Liabilities. As of December 31, 2024, there was no cash due to related parties related to interest paid by a borrower to a Company as administrative agent. Additionally, as of September 30, 2025, there was $30,000 due to other investment funds related to interest paid by a borrower to the Company as administrative agent, which is included in “Other accrued expenses and liabilities” on the Consolidated Statement of Assets and Liabilities. As of December 31, 2024, there was no cash due to other investment funds related to interest paid by a borrower to the Company as administrative agent.
License Agreement
The Company has entered into a license agreement with Stellus Capital under which Stellus Capital has agreed to grant the Company a non-exclusive, royalty-free license to use the name “Stellus Capital.” Under this agreement, the Company has a right to use the “Stellus Capital” name for so long as Stellus Capital or one of its affiliates remains its investment adviser. Other than with respect to this limited license, the Company has no legal right to the “Stellus Capital” name. This license agreement will remain in effect for so long as the Investment Advisory Agreement with Stellus Capital is in effect.
Administration Agreement
The Company has entered into an administration agreement (the “Administration Agreement”) with Stellus Capital, pursuant to which Stellus Capital furnishes the Company with office facilities and equipment and provides the Company with the clerical, bookkeeping, recordkeeping and other administrative services necessary to conduct day-to-day operations. Under this Administration Agreement, Stellus Capital performs, or oversees the performance of, its required administrative services, which includes, among other things, being responsible for the financial records which the Company is required to maintain and preparing reports to its stockholders and reports filed with the SEC.
For the three and nine months ended September 30, 2025, the Company recorded expenses of $489,176 and $1,258,279, respectively, related to the Administration Agreement that are included in “Administrative services expenses” on the Company’s Consolidated Statements of Operations. For the three and nine months ended September 30, 2024, the Company recorded expenses of $388,874 and $1,200,178, respectively, related to the Administration Agreement that are included in “Administrative services expenses” on the Company’s Consolidated Statements of Operations. As of September 30, 2025 and December 31, 2024, $489,176 and $389,502, respectively, remained payable to Stellus Capital related to the Administration Agreement and were included in “Administrative services payable” on the Company’s Consolidated Statements of Assets and Liabilities.
Indemnification
The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations under the Investment Advisory Agreement, Stellus Capital and its officers, managers, partners, agents, employees, controlling persons and members, and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Stellus Capital’s services under the Investment Advisory Agreement or otherwise as the Company’s investment adviser.
The Company has also entered into indemnification agreements with its directors. The indemnification agreements are intended to provide the Company’s directors the maximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that the Company shall indemnify the director who is a party to the agreement (an “Indemnitee”), including the
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advancement of legal expenses, if, by reason of his or her corporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding, other than a proceeding by or in the right of the Company.
NOTE 3 — DISTRIBUTIONS
Distributions are generally declared by the Company’s Board each calendar quarter and recognized as distribution liabilities on the declaration date. Stockholder distributions, if any, will be determined by the Board. Any distribution to stockholders is declared out of assets legally available for distribution.
For the three and nine months ended September 30, 2025, the Company declared aggregate distributions of $0.40 and $1.20 per share on its common stock, respectively. For the three and nine months ended September 30, 2024, the Company declared aggregate distributions of $0.40 and $1.20 per share on its common stock, respectively. The distributions declared for the three and nine months ended September 30, 2024 differ from the amounts disclosed in the Statements of Operations as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period-end. The Company has declared aggregate distributions of $17.75 per share on its common stock since Inception as described below:
Date Declared
Record Date
Payment Date
Per Share(1)
Fiscal 2012
Fiscal 2013
1.36
Fiscal 2014
Fiscal 2015
Fiscal 2016
Fiscal 2017
Various
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
1.14
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
January 9, 2025
January 31, 2025
February 14, 2025
0.1333
February 28, 2025
March 14, 2025
March 31, 2025
April 15, 2025
April 4, 2025
April 30, 2025
May 15, 2025
May 30, 2025
June 13, 2025
June 30, 2025
July 15, 2025
July 2, 2025
July 31, 2025
August 15, 2025
August 29, 2025
September 15, 2025
October 15, 2025
17.75
The Company has adopted an “opt-out” dividend reinvestment plan (“DRIP”), pursuant to which a stockholder whose shares are held in his own name will receive distributions in shares of the Company’s common stock under the Company’s DRIP unless he elects to receive distributions in cash. Stockholders whose shares are held in the name of a broker or the nominee of a broker may have distributions
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reinvested only if such service is provided by the broker or the nominee, or if the broker of the nominee permits participation in the Company’s DRIP.
Although distributions paid in the form of additional shares of the Company’s common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, investors participating in the Company’s DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes. Any distributions reinvested through the issuance of shares through the Company’s DRIP will increase the Company’s gross assets on which the base management fee and the incentive fee are determined and paid to Stellus Capital. The Company did not issue any new shares in connection with the DRIP during either of the three and nine months ended September 30, 2025 or 2024.
NOTE 4 — EQUITY OFFERINGS AND RELATED EXPENSES
The table below illustrates the number of common stock shares the Company issued since Inception through various equity offerings and pursuant to the Company’s DRIP.
Average
Number of
Gross
Underwriting
Offering
Fees Covered
Issuance of Common Stock
Shares
Proceeds(1)(2)
fees
Expenses
by Advisor
Proceeds(3)
Price
Year ended December 31, 2012
12,035,023
180,522,093
4,959,720
835,500
174,726,873
14.90
Year ended December 31, 2013
63,998
899,964
14.06
Year ended December 31, 2014
380,936
5,485,780
75,510
29,904
5,380,366
14.47
Year ended December 31, 2017
3,465,922
48,741,406
1,358,880
307,021
47,075,505
Year ended December 31, 2018
7,931
93,737
11.85
Year ended December 31, 2019
3,177,936
45,862,995
1,015,127
559,261
37,546
44,326,153
14.43
Year ended December 31, 2020
354,257
5,023,843
5,680
84,592
66,423
4,999,994
14.40
Year ended December 31, 2021
31,592
449,515
6,744
53,327
4,255
393,699
14.23
Year ended December 31, 2022
149,174
2,070,935
31,066
530,842
87,605
1,596,632
13.88
Year ended December 31, 2023
4,458,873
62,871,349
943,248
247,701
477,088
62,157,488
14.10
Year ended December 31, 2024
3,355,476
46,494,756
698,166
435,390
45,361,200
13.86
Three months ended March 31, 2025
9,256,982
138,908
179,987
8,938,087
14.11
Three months ended June 30, 2025
3,896,384
58,556
14,913
3,822,915
13.97
Three months ended September 30, 2025
7,435,594
111,534
222,238
14.00
419,105,333
9,403,139
3,500,676
672,917
406,874,435
On November 16, 2021, the Company entered into an equity distribution agreement, as amended and restated on August 29, 2022 (the “2021 Equity Distribution Agreement”), with Keefe Bruyette & Woods, Inc. and Raymond James & Associates, Inc., as sales agents and/or principal thereunder. Under the 2021 Equity Distribution Agreement, the Company was permitted to issue and sell, from time to time, up to $50,000,000 in aggregate offering price of shares of common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with its investment objective and strategies.
On August 11, 2023, the Company entered into an equity distribution agreement (the “2023 Equity Distribution Agreement”) with Keefe Bruyette & Woods, Inc. and Raymond James & Associates, Inc., as sales agents and/or principal thereunder. Under the 2023 Equity
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Distribution Agreement, the Company may issue and sell, from time to time, up to $100,000,000 in aggregate offering price of shares of common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with its investment objective and strategies. Upon execution of the 2023 Equity Distribution Agreement, the Company no longer sold any shares under the 2021 Equity Distribution Agreement.
On September 9, 2025, the Company entered into an equity distribution agreement (the “2025 Equity Distribution Agreement” and together with the 2023 Equity Distribution Agreement and the 2021 Equity Distribution Agreement, the “Equity Distribution Agreements”) with Keefe Bruyette & Woods, Inc. and Raymond James & Associates, Inc., as sales agents and/or principal thereunder. Under the 2025 Equity Distribution Agreement, the Company may issue and sell, from time to time, up to $100,000,000 in aggregate offering price of shares of common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with its investment objective and strategies. Upon execution of the 2025 Equity Distribution Agreement, the Company no longer sold any shares under the 2023 Equity Distribution Agreement. The Company refers to its issuance and sale of shares under the Equity Distribution Agreements as the “ATM Program”.
The Company issued 531,106 and 1,466,136 shares during the three and nine months ended September 30, 2025, respectively, under the ATM Program, for gross proceeds of $7,435,594 and $20,588,960 and underwriting fees and other expenses of $333,772 and $726,136, respectively. The average per share offering price of shares issued in the ATM Program during the three and nine months ended September 30, 2025 was $14.00 and $14.04, respectively. The Advisor agreed to reimburse the Company for underwriting fees and expenses to the extent the per share price of the shares to the public, less underwriting fees, was less than the then-current net asset value per share. For the three and nine months ended September 30, 2025, the Advisor was not required to reimburse underwriting fees as all shares were issued at a premium to net asset value.
NOTE 5 — NET INCREASE IN NET ASSETS PER COMMON SHARE
The following information sets forth the computation of net increase in net assets resulting from operations per common share for the three and nine months ended September 30, 2025 and 2024.
Weighted average common shares
Net increase in net assets resulting from operations per share
NOTE 6 — PORTFOLIO INVESTMENTS AND FAIR VALUE
In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which significant inputs are observable, either directly or indirectly; and
Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management.
The Company considers whether the volume and level of activity for the asset or liability have significantly decreased and identifies transactions that are not orderly in determining fair value. Accordingly, if the Company determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances.
At September 30, 2025, the Company had investments in 115 portfolio companies. The composition of the Company’s investments as of September 30, 2025 was as follows:
Fair Value
Senior Secured – First Lien(1)
938,399,987
901,964,292
Senior Secured – Second Lien
12,105,759
12,025,000
Unsecured Debt
7,061,545
6,879,172
62,549,953
89,341,172
At December 31, 2024, the Company had investments in 105 portfolio companies. The composition of its investments as of December 31, 2024 was as follows:
884,322,462
856,096,255
12,073,732
11,948,850
6,755,866
6,612,493
58,636,646
78,840,090
The Company’s investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of September 30, 2025 and December 31, 2024, the Company had 73 and 71 of such investments, respectively, with aggregate unfunded commitments of $54,056,252 and $41,286,752, respectively. The Company maintains sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded loan commitments should the need arise.
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The aggregate gross unrealized appreciation and depreciation and the aggregate cost and fair value of the Company’s portfolio company securities as of September 30, 2025 and December 31, 2024 were as follows:
Aggregate cost of portfolio company securities
Gross unrealized appreciation of portfolio company securities
60,129,946
47,590,719
Gross unrealized depreciation of portfolio company securities
(69,951,344)
(54,903,019)
Gross unrealized appreciation on foreign currency translations of portfolio company securities
32,293
3,973
Gross unrealized depreciation on foreign currency translations of portfolio company securities
(118,503)
(982,691)
Aggregate fair value of portfolio company securities
The fair values of the Company’s investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of September 30, 2025 were as follows:
Quoted Prices
in Active
Markets
Significant Other
Significant
for Identical
Observable
Unobservable
Securities
Inputs
(Level 1)
(Level 2)
(Level 3)
Senior Secured – First Lien
The fair values of the Company’s investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of December 31, 2024 were as follows:
51
The change in aggregate values of Level 3 portfolio investments during the nine months ended September 30, 2025 was as follows:
Senior Secured
Loans-First
Loans-Second
Lien
Debt
Fair value at beginning of period
136,414,727
7,222,288
143,646,469
PIK interest
3,559,279
305,636
5,802
Sales and redemptions
(82,373,846)
(21,325)
(4,917,571)
(87,312,742)
Realized gains
(5,651,669)
1,602,792
(4,048,877)
Change in unrealized (depreciation) appreciation included in earnings(1)
(9,091,167)
44,123
(42,401)
6,580,346
(2,509,099)
Change in unrealized appreciation on foreign currency included in earnings
881,684
3,399
7,425
892,508
2,129,029
32,027
11,916
2,172,972
Fair value at end of period
There were no Level 3 transfers during the nine months ended September 30, 2025.
The change in aggregate values of Level 3 portfolio investments during the year ended December 31, 2024 was as follows:
774,789,320
21,957,500
5,956,280
71,757,583
874,460,683
213,545,132
117,066
7,492,735
221,154,933
2,824,403
485,708
3,310,111
(126,924,841)
(9,782,348)
(14,985,096)
(151,692,285)
Realized (losses) gains
(1,580,768)
(20,475,000)
6,212,362
(15,843,406)
(9,026,597)
20,187,185
40,312
8,369,509
19,570,409
Change in unrealized depreciation on foreign currency included in earnings
(169,778)
(1,778)
(7,003)
(178,559)
2,639,384
61,513
14,905
2,715,802
There were no Level 3 transfers during the year ended December 31, 2024.
The following is a summary of geographical concentration of the Company’s investment portfolio as of September 30, 2025:
% of Total
Investments at
California
183,748,258
182,402,421
18.06
Texas
165,321,802
163,325,964
16.17
Florida
102,127,944
96,923,046
New York
59,415,026
59,803,255
5.92
Pennsylvania
53,149,808
56,855,920
5.63
Illinois
68,541,548
56,534,711
5.60
Colorado
41,158,916
38,090,820
Ohio
35,274,542
36,846,339
Arizona
34,205,338
36,548,056
3.62
Canada
31,397,924
31,528,778
North Carolina
26,857,851
28,084,646
Massachusetts
24,320,176
25,070,881
Tennessee
20,507,888
19,741,055
Minnesota
18,536,957
19,509,928
Iowa
18,592,011
18,613,795
Georgia
17,109,519
Wisconsin
30,554,470
16,264,621
1.61
District of Columbia
10,700,966
13,876,852
Michigan
1.16
New Jersey
Virginia
Missouri
1.09
Idaho
Louisiana
0.92
Oregon
7,468,902
7,492,357
South Carolina
Washington
1,572,463
2,809,451
United Kingdom
Indiana
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The following is a summary of geographical concentration of the Company’s investment portfolio as of December 31, 2024:
at Fair Value
159,028,754
154,041,942
16.15
160,285,777
152,583,692
16.00
108,434,730
104,718,969
66,486,029
56,591,435
5.94
53,271,774
54,438,594
5.71
43,552,887
46,839,063
4.91
36,116,358
36,306,098
33,645,676
35,847,804
32,107,256
32,375,749
3.40
31,283,806
28,218,186
2.96
27,935,159
23,352,084
22,711,852
26,654,283
12,391,680
23,345,077
20,946,327
22,314,018
20,490,429
20,703,772
19,965,590
20,559,398
2.16
18,590,476
18,712,569
1.41
8,193,234
8,216,962
0.86
7,529,294
7,526,300
0.68
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The following is a summary of industry concentration of the Company’s investment portfolio as of September 30, 2025:
257,044,495
268,333,506
26.56
98,769,131
102,228,098
10.13
97,569,805
98,333,947
9.74
78,989,683
79,467,419
7.87
61,756,420
64,102,926
6.35
53,409,113
58,278,811
5.77
62,845,984
53,906,852
5.34
42,680,332
40,740,527
4.03
37,307,427
38,303,565
3.79
34,694,596
30,917,241
3.06
27,212,890
26,806,175
27,849,135
24,167,467
19,523,774
22,066,825
2.18
11,811,710
1.10
0.76
7,493,832
7,601,977
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The following is a summary of industry concentration of the Company’s investment portfolio as of December 31, 2024:
219,665,133
234,908,112
24.64
91,135,577
93,468,792
9.81
85,300,317
85,478,418
8.97
71,318,416
72,291,584
7.58
64,052,951
68,902,142
7.23
67,123,135
54,473,282
49,388,222
46,066,301
4.83
41,322,214
43,647,466
4.58
43,393,413
42,094,390
4.41
36,693,101
36,907,602
32,374,992
32,979,859
26,014,106
21,624,091
18,903,681
18,282,056
1.92
11,353,959
8,142,050
0.85
0.80
5,822,637
5,934,853
0.62
56
The following provides quantitative information about Level 3 fair value measurements as of September 30, 2025:
Description:
Valuation Technique
Unobservable Inputs
Range (Average)(1)(3)
First lien debt
844,074,850
Income approach(2)
HY credit spreads
-9.47% to 9.11% (-0.27%)
Risk free rates
-1.06% to 2.01% (-0.38%)
Market approach(2)
Market multiples
3.4x to 26.9x (12.5x)(4)
57,889,442
Transaction value
Transaction price
N/A
Second lien debt
-0.20% to 0.07% (-0.10%)
-0.69% to -0.05% (-0.29%)
6.7x to 13.7x (11.1x)(4)
Unsecured debt
-0.62% to 0.97% (0.96%)
-0.70% to -0.21% (-0.69%)
Equity investments
67,756,963
Market approach(5)
EBITDA multiple
3.3x to 18.2x (10.3x)
Revenue multiple
6.9x to 9.2x (7.8x)
4,049,594
Enterprise value
17,534,615
Total Long Term Level 3 Investments
The following provides quantitative information about Level 3 fair value measurements as of December 31, 2024:
778,177,769
-3.39% to 8.32% (-0.54%)
-1.18% to 2.44% (0.19%)
4.6x to 26.3x (13.3x)(4)
77,918,486
-0.72% to -0.32% (-0.46%)
-0.35% to 0.14% (-0.04%)
5.3 to 11.8x (9.4x)(4)
6,581,668
0.18% to 0.18% (0.18%)
-0.18% to -0.18% (-0.18%)
30,825
64,002,282
3.5x to 18.3x (10.4x)
14,837,808
NOTE 7 — COMMITMENTS AND CONTINGENCIES
The Company is currently not subject to any material legal proceedings, nor, to the Company’s knowledge, is any material legal proceeding threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with the Company’s portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon the Company’s business, financial condition or results of operations.
As of September 30, 2025, the Company had $53,765,452 in unfunded debt commitments and $290,800 in unfunded equity commitments to 73 existing portfolio companies. As of December 31, 2024, the Company had $40,989,533 in unfunded debt commitments and $297,219 in unfunded equity commitments to 71 existing portfolio companies. As of September 30, 2025, the Company
58
had sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded loan commitments should the need arise.
NOTE 8 — FINANCIAL HIGHLIGHTS
Per Share Data:(1)
Net asset value at beginning of period
13.26
Change in unrealized (depreciation) appreciation on investments
(0.09)
1.05
Net realized loss
(0.13)
(0.87)
(0.01)
Total from operations
Sales load
(0.02)
Offering costs
Stockholder distributions from:
(1.20)
(1.21)
Accretive effect of stock offerings (issuing shares above net asset value per share)
Other(6)
Net asset value at end of period
13.55
Per share market value at end of period
13.06
13.69
Total return based on market value(2)
14.97
Weighted average shares outstanding for the period
Ratio/Supplemental Data:(1)
Net assets at end of period
Weighted average net assets
374,769,974
334,932,796
Annualized ratio of gross operating expenses to net assets(5)
18.22
19.30
Annualized ratio of net operating expenses to net assets(5)
17.28
18.57
Annualized ratio of interest expense and other fees to net assets
9.24
9.48
Annualized ratio of net investment income before fee waiver to net assets(5)
12.12
Annualized ratio of net investment income to net assets(5)
12.84
Portfolio turnover(3)
8.69
13.07
Notes payable
175,000,000
100,000,000
167,638,569
157,374,851
299,000,000
325,000,000
Asset coverage ratio(4)
2.10
x
2.42
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NOTE 9 — CREDIT FACILITY
On October 11, 2017, the Company entered into a senior secured revolving credit agreement, as amended, dated as of October 10, 2017, that was amended and restated on December 21, 2021, February 28, 2022, May 13, 2022, November 21, 2023, October 30, 2024 and September 11, 2025 with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the “Credit Facility”).
The Credit Facility provides for borrowings up to a maximum of $335,000,000 on a committed basis with an accordion feature that allows the Company to increase the aggregate commitments up to $365,000,000, subject to new or existing lenders agreeing to participate in the increase and other customary conditions.
Pursuant to the Sixth Amendment to Amended and Restated Senior Secured Revolving Credit Agreement, the Credit Facility will bear interest, subject to the Company’s election, on a per annum basis equal to (i) term SOFR plus 2.25% (or 2.50% during certain periods in which the Company’s asset coverage ratio is equal to or below 1.90 to 1.00) with a 0.25% SOFR floor, or (ii) 1.25% (or 1.50% during certain periods in which the Company’s asset coverage ratio is equal to or below 1.90 to 1.00) plus an alternate base rate based on the highest of the prime rate (subject to a 3% floor), Federal Funds Rate plus 0.50% and one-month term SOFR plus 1.00%. The Company pays unused commitment fees of 0.50% per annum on the unused lender commitments under the Credit Facility. The commitment to fund the revolver expires on September 11, 2029, after which the Company may no longer borrow under the Credit Facility and must begin repaying principal equal to 1/12 of the aggregate amount outstanding under the Credit Facility each month. Any amounts borrowed under the Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on September 11, 2030.
The Company’s obligations to the lenders are secured by a first priority security interest in its portfolio of securities and cash not held at the SBIC subsidiaries, but excluding short term investments. The Credit Facility contains certain covenants, including but not limited to: (i) maintaining a minimum liquidity test of at least $10,000,000, including cash, liquid investments and undrawn availability, (ii) maintaining an asset coverage ratio of at least 1.67 to 1.00, (iii) maintaining a minimum stockholder’s equity, and (iv) maintaining a minimum interest coverage ratio of at least 1.75 to 1.00. As of September 30, 2025 and December 31, 2024, the Company was in compliance with these covenants.
As of September 30, 2025 and December 31, 2024, $167,638,569 and $175,386,301, respectively, was outstanding under the Credit Facility. The carrying amount of the amount outstanding under the Credit Facility approximates its fair value. The fair value of the Credit Facility is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Credit Facility is estimated based upon market interest rates for the Company’s own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of September 30, 2025, the Company has incurred costs of $8,846,541 in connection with the current Credit Facility, which are being amortized over the life of the facility. Additionally, $341,979 of costs from a prior credit facility will continue to be amortized over the life of the Credit Facility. As of September 30, 2025 and December 31, 2024, $3,642,967 and $3,071,986, respectively, of such prepaid loan structure fees and administration fees had yet to be amortized. These prepaid loan fees are presented on the Company’s Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following is a summary of the Credit Facility, net of prepaid loan structure fees:
175,386,301
Prepaid loan structure fees
(3,642,967)
(3,071,986)
Credit Facility payable, net of prepaid loan structure fees
60
Interest is paid monthly or quarterly in arrears. The following table summarizes the interest expense and amortized loan fees on the Credit Facility for the three and nine months ended September 30, 2025 and 2024:
Interest expense
3,085,157
3,471,508
9,842,739
10,372,179
Loan fee amortization
319,287
281,512
954,032
Total interest and financing expenses
3,404,444
3,753,020
10,796,771
11,198,070
Weighted average interest rate
7.4
8.2
7.3
8.3
Effective interest rate (including fee amortization)
8.1
8.9
8.0
9.0
Average debt outstanding
166,138,980
168,397,547
179,383,336
166,056,580
Cash paid for interest and unused fees
3,103,346
3,617,115
9,816,233
10,531,396
NOTE 10 — SBA-GUARANTEED DEBENTURES
Due to the SBIC subsidiaries’ status as licensed SBICs, the Company has the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the regulations applicable to SBIC funds, a single licensee can have outstanding debentures guaranteed by the SBA subject to a regulatory leverage limit, up to two times the amount of “regulatory capital”, as such term is defined by the SBA. As of both September 30, 2025 and December 31, 2024, the SBIC I subsidiary had $75,000,000 regulatory capital and $124,000,000 and $150,000,000 of SBA-guaranteed debentures outstanding, respectively.
As of both September 30, 2025 and December 31, 2024, the SBIC II subsidiary had $87,500,000 in regulatory capital. As of both September 30, 2025 and December 31, 2024, the SBIC II subsidiary had $175,000,000 of SBA-guaranteed debentures outstanding.
On August 12, 2014, the Company obtained exemptive relief from the SEC to permit it to exclude the debt of the SBIC subsidiaries guaranteed by the SBA from its asset coverage test under the 1940 Act. The exemptive relief provides the Company with increased flexibility under the asset coverage test by permitting it to borrow up to $325,000,000 more than it would otherwise be able to absent the receipt of this exemptive relief.
On a stand-alone basis, the SBIC subsidiaries held $483,769,103 and $510,105,270 in assets at September 30, 2025 and December 31, 2024, respectively, which accounted for approximately 47.0% and 52.0% of the Company’s total consolidated assets, respectively.
Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year U.S. Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. SBA-guaranteed debentures drawn before October 1, 2019 incur upfront fees of 3.425%, which consists of a 1.00% commitment fee and a 2.425% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. SBA-guaranteed debentures are also subject to certain fees payable by the SBICs at the time such debentures are drawn. SBA-guaranteed debenturesdrawn after October 1, 2019 incur upfront fees of 3.435%, which consists of a 1.00% commitment fee and a 2.435% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. Once pooled, which occurs in March and September of each applicable year, the SBA-guaranteed debentures bear interest at a fixed rate that is set to the current 10-year treasury rate plus a spread at each pooling date.
61
The following tables summarize the SBIC subsidiaries’ aggregate SBA-guaranteed debentures outstanding as of September 30, 2025:
Issuance Date
Licensee
Maturity Date
Debenture Amount
Interest Rate
SBA Annual Charge
October 22, 2015
SBIC I subsidiary
March 1, 2026
6,500,000
0.36
1,500,000
November 10, 2015
8,800,000
November 18, 2015
November 25, 2015
December 16, 2015
2,200,000
December 29, 2015
9,700,000
November 28, 2017
March 1, 2028
25,000,000
April 27, 2018
September 1, 2028
40,000,000
July 30, 2018
17,500,000
September 25, 2018
March 1, 2029
Total SBIC I subsidiary SBA-guaranteed Debentures
124,000,000
October 17, 2019
SBIC II subsidiary
March 1, 2030
November 15, 2019
5,000,000
December 17, 2020
March 1, 2031
9,000,000
1.67
February 16, 2021
13,500,000
February 26, 2021
10,000,000
March 2, 2021
April 21, 2021
September 1, 2031
May 14, 2021
6,700,000
May 28, 2021
7,300,000
July 23, 2021
16,000,000
February 25, 2022
March 1, 2032
March 29, 2022
September 1, 2032
April 1, 2022
6,670,000
April 12, 2022
6,665,000
April 21, 2022
June 30, 2022
3,600,000
July 28, 2022
6,400,000
September 9, 2022
March 1, 2033
5.17
November 9, 2022
7,600,000
August 8, 2023
September 1, 2033
9,120,000
5.69
September 19, 2023
March 1, 2034
2,280,000
5.04
Total SBIC II subsidiary SBA-guaranteed Debentures
Total SBA-guaranteed Debentures
The fair values of the SBA-guaranteed debentures are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair values of the SBA-guaranteed debentures are estimated based upon market interest rates for our own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of September 30, 2025 and December 31,
62
2024, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6 to the consolidated financial statements contained herein.
As of both September 30, 2025 and December 31, 2024, the Company has incurred $11,148,750 in financing costs related to the SBA-guaranteed debentures since receiving its licenses, which were recorded as prepaid loan fees and are being amortized over the life of the debentures. As of September 30, 2025 and December 31, 2024, $3,194,366 and $3,748,061 of prepaid financing costs had yet to be amortized, respectively. These prepaid loan fees are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following is a summary of the SBA-guaranteed debentures, net of prepaid loan fees:
SBA-guaranteed Debentures payable
Prepaid loan fees
(3,194,366)
(3,748,061)
SBA-guaranteed Debentures, net of prepaid loan fees
The following table summarizes the interest expense and amortized fees on the SBA-guaranteed debentures for the three and nine months ended September 30, 2025 and 2024:
2,494,181
2,637,331
7,526,849
7,860,045
Debenture fee amortization
182,435
234,704
2,676,616
2,872,035
8,080,544
8,644,808
3.2
3.3
3.5
3.6
305,252,717
308,083,333
Cash paid for interest
5,039,393
5,268,363
10,228,054
10,470,211
NOTE 11 — NOTES
On January 14, 2021, the Company issued $100,000,000 in aggregate principal amount of 4.875% fixed-rate notes due 2026 (the “2026 Notes Payable”). The 2026 Notes Payable will mature on March 30, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after December 31, 2025, at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest on the 2026 Notes Payable is payable semi-annually beginning September 30, 2021. As of September 30, 2025 and December 31, 2024, the aggregate carrying amount of the 2026 Notes Payable was approximately $49,889,237 and $99,444,355, respectively. The 2026 Notes Payable are institutional, non-traded notes.
In connection with the issuance and maintenance of the 2026 Notes Payable, the Company incurred $2,327,835 of fees, which are being amortized over the term of the 2026 Notes Payable. On September 30, 2025, the Company prepaid $50,000,000 in aggregate principal of the 2026 Notes. For the three and nine months ended September 30, 2025, the Company recorded a make-whole payment of $54,000 and accelerated $110,762 of unamortized upfront fees which are recognized as a loss on debt extinguishment in the Consolidated Statemements of Operations. As of September 30, 2025 and December 31, 2024, $110,763 and $555,645 of prepaid financing costs had yet to be amortized, respectively. These financing costs are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
On April 1, 2025 and September 25, 2025, the Company issued $75,000,000 and $50,000,000, respectively, in aggregate principal amount of 7.250% fixed-rate notes due 2030 (the “2030 Notes Payable” and together with the 2026 Notes Payable, the “Notes Payable”).
63
The 2030 Notes Payable will mature on April 1, 2030 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after October 1, 2029, at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest on the 2030 Notes Payable is payable semi-annually beginning October 1, 2025. As of September 30, 2025, the aggregate carrying amount of the 2030 Notes Payable was approximately $122,633,470. The 2030 Notes Payable are institutional, non-traded notes.
In connection with the issuance and maintenance of the 2030 Notes Payable, the Company incurred $2,597,556 of fees, which are being amortized over the term of the 2030 Notes Payable. As of September 30, 2025, $2,366,530 of prepaid financing costs had yet to be amortized. These financing costs are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following table summarizes the interest expense and deferred financing costs on the 2026 Notes Payable for the three and nine months ended September 30, 2025 and 2024:
1,217,979
1,218,750
3,655,479
3,662,250
Deferred financing costs
112,598
334,122
1,330,577
1,331,348
3,989,601
3,997,595
4.9
4.8
5.3
99,456,522
99,816,850
2,443,500
2,437,500
4,881,000
The following is a summary of the 2026 Notes Payable, net of deferred financing costs:
2026 Notes Payable
50,000,000
(110,763)
(555,645)
2026 Notes Payable, net of deferred financing costs and discount
49,889,237
The following table summarizes the interest expense and deferred financing costs on the 2030 Notes Payable for the three and nine months ended September 30, 2025:
1,419,792
2,794,167
85,685
167,629
Discount amortization
31,959
1,537,436
3,025,191
7.2
%(1)
7.8
7.9
78,260,870
76,639,344
(1)
(1) Calculated for the period from April 1, 2025, the date of the 2030 Notes Payable offering, through September 30, 2025.
64
The following is a summary of the 2030 Notes Payable, net of deferred financing costs:
2030 Notes Payable
(2,307,677)
Premium on 2030 Notes Payable
Discount on 2030 Notes Payable
(706,853)
2030 Notes Payable, net of deferred financing costs and discount
122,633,470
The indenture and supplements thereto relating to the Notes Payable contain certain covenants, including but not limited to (i) a requirement that the Company comply with the asset coverage requirements of the 1940 Act or any successor provisions, and (ii) a requirement to provide financial information to the holders of the notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Exchange Act. As of September 30, 2025 and 2024, the Company was in compliance with these covenants.
NOTE 12 — SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that require recognition or disclosure in these financial statements except for the following described below.
Investment Portfolio
The Company invested in the following portfolio companies subsequent to September 30, 2025:
Activity Type
Company Name
Company Description
Investment Amount
Instrument Type
Add-On Investment
October 1, 2025
The Hardenbergh Group, Inc.*
Provider of patient safety, clinical risk mitigation, and healthcare compliance solutions
October 3, 2025
EH Real Estate Services, LLC*
Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyersand sellers
183,470
October 17, 2025
J.R. Watkins, LLC*
Manufacturer and distributor of home and personal care products
18,000
Priority Revolver Commitment
New Investment
Fidus Systems Inc.
Provider of outsourced electronic product development and engineering services
4,759,099
3,172,733
Delayed Draw Term Loan Commitment
Revolver Commitment
267,728
November 6, 2025
Mobotrex Acquisition, LLC*
Distributor and manufacturer of intelligent traffic solution equipment
3,523,787
1,549,698
73,776
Ad.Net Acquisition, LLC*
A digital marketing company that targets high-conversion consumers through cost-per-click digital media advertising
1,896,568
85,027
* Existing portfolio company
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The Company realized the following portfolio company investment subsequent to September 30, 2025:
Proceeds Received
Realized Gain
Full Repayment
October 25, 2025
End-to-end information technologies solutions provider
November 3, 2025
Provider of technology integration and installation of teller machines, maintenance services, and security solutions
7,014,746
Full Realization
1,066,715
Warrants
Credit Facility
The outstanding balance under the Credit Facility as of November 10, 2025 was $182,800,000.
Dividends Declared
On October 8, 2025, the Board declared a regular monthly dividend for each of October 2025, November 2025, and December 2025 as follows:
Ex-Dividend
Record
Payment
Amount per
Declared
Share
10/8/2025
10/31/2025
11/14/2025
11/28/2025
12/15/2025
1/15/2026
NOTE 13 — REPORTABLE SEGMENTS
ASU 2023-07
In November 2023, the FASB issued ASU 2023-07 - Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances the disclosures required for reportable segments on an annual and interim basis. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 as of December 31, 2024 and has applied ASU 2023-07 retrospectively for the three and nine months ended September 30, 2024. The adoption of ASU 2023-07 impacted the financial statement disclosures of the Company and did not impact the Company’s financial position or the results of its operations. An operating segment is defined as a component of a public entity that engages in business activities from which it may recognize revenues and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information available. The Company operates under one operating segment and reporting unit, investment management. The CODM is the Chief Executive Officer of the Company, who is responsible for determining the Company’s investment strategy, capital allocation, expense structure, and significant transactions impacting the Company. The operating expenses as disclosed on the consolidated statement of operations represent the significant expense categories that are provided to the CODM. Key metrics considered by the CODM in making decisions on the allocation of invested capital include, but are not limited to, net investment income and net increase in net assets resulting from operations that is reported on the Consolidated Statement of Operations, fair value of investments as disclosed on the Consolidated Schedule of Investments, as well as distributions made to the Company’s shareholders.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements, which relate to future events or Stellus Capital Investment Corporation’s (“we”, “us”, “our” and the “Company”) future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as to:
Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words.
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or U.S. Securities and Exchange Commission (“SEC”) rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview
We were organized as a Maryland corporation on May 18, 2012, and formally commenced operations on November 7, 2012. Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through debt and related equity investments in lower middle-market companies.
We are an externally managed, non-diversified, closed-end investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment activities are managed by our investment adviser, Stellus Capital.
As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets. Qualifying assets include investments in “eligible portfolio companies” (as defined in the 1940 Act). Under the relevant SEC rules, the term “eligible portfolio company” includes all private operating companies, operating companies whose securities are not listed on a national securities exchange, and certain public operating companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized and with their principal place of business in the United States.
We have elected, qualified, and intend to continue to qualify annually to be treated for tax purposes as a RIC under Subchapter M of the internal Revenue Code of 1986, as amended (the “Code”). To maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. As of September 30, 2025, we were in compliance with the RIC requirements. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income we distribute to our stockholders.
On March 23, 2018, the Small Business Credit Availability Act (the “SBCAA”) was signed into law, which included various changes to regulations under the federal securities laws that impact BDCs. The SBCAA included changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement to 150% from 200% subject to certain circumstances.
On April 4, 2018, our board of directors (the “Board”), including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. At our 2018 annual meeting of stockholders our stockholders also approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the asset coverage ratio applicable to us was decreased from 200% to 150%, effective June 29, 2018, which effectively increased the amount of leverage we may incur. As of September 30, 2025, our asset coverage ratio was 210%. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing.
Economic activity has continued to accelerate across sectors and regions. Nonetheless, we have observed and continue to observe supply chain interruptions, labor resource shortages, commodity inflation, fluctuating interest rates, bank impairments and failures, economic sanctions in response to international conflicts and instances of geopolitical, economic and financial market instability in the United States and abroad, including as a result of the imposition of tariffs in the United States or its trading partners and the prolonged shutdown of the government. One or more of these factors may contribute to increased market volatility and may have long- and short-term effects in the United States and worldwide financial markets.
Portfolio Composition and Investment Activity
Portfolio Composition
We originate and invest primarily in privately held lower middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA) with a focus on investing through first lien (including unitranche) loans, often with a corresponding equity investmen.
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As of September 30, 2025, we had $1,010.2 million (at fair value) invested in 115 portfolio companies. As of September 30, 2025, our portfolio included approximately 89% of first lien debt, 1% of second lien debt, 1% of unsecured debt and 9% of equity investments at fair value. The composition of our investments at cost and fair value as of September 30, 2025 was as follows:
Total Investments at Fair Value
As of December 31, 2024, we had $953.5 million (at fair value) invested in 105 portfolio companies. As of December 31, 2024, our portfolio included approximately 90% of first lien debt, 1% of second lien debt, 1% of unsecured debt and 8% of equity investments at fair value. The composition of our investments at cost and fair value as of December 31, 2024 was as follows:
Our investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms and conditions of the underlying loan agreements. As of September 30, 2025 and December 31, 2024, we had unfunded commitments of $54.1 million and $41.3 million, respectively, to provide financing to 73 and 71 portfolio companies, respectively. As of September 30, 2025, we had sufficient liquidity (through cash on hand and available borrowings under the Credit Facility (as defined below)) to fund such unfunded commitments should the need arise.
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The following is a summary of geographical concentration of our investment portfolio as of September 30, 2025:
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The following is a summary of geographical concentration of our investment portfolio as of December 31, 2024:
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The following is a summary of industry concentration of our investment portfolio as of September 30, 2025:
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The following is a summary of industry concentration of our investment portfolio as of December 31, 2024:
At September 30, 2025, our average portfolio company investment at amortized cost and fair value was approximately $8.9 million and $8.8 million, respectively, and our largest portfolio company investment at amortized cost and fair value was approximately $24.7 million and $22.0 million, respectively. At December 31, 2024, our average portfolio company investment at amortized cost and fair value was approximately $9.2 million and $9.2 million, respectively, and our largest portfolio company investment at amortized cost and fair value was approximately $23.2 million and $21.2 million, respectively.
At September 30, 2025 and December 31, 2024, 90.4% and 94.5% of our debt investments bore interest based on floating rates (subject to interest rate floors), respectively, and 9.6% and 5.5% bore interest at fixed rates, respectively.
The weighted average yield on all of our debt investments as of September 30, 2025 and December 31, 2024 was approximately 10.0% and 10.3%, respectively. The weighted average yield on all of our investments, including non-income producing equity positions, as of September 30, 2025 and December 31, 2024 was approximately 9.4% and 9.7%, respectively. The weighted average yield was computed using the effective interest rates for all of our debt investments, including accretion of original issue discount. The weighted average yield of our debt investments is not the same as a return on investment for our stockholders, but rather relates to a portion of our investment portfolio and is calculated before the payment of all of our subsidiaries’ fees and expenses.
As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $9.0 million and $20.1 million, respectively.
Investment Activity
During the nine months ended September 30, 2025, we made an aggregate of $142.0 million of investments in 14 new portfolio companies and 18 existing portfolio companies. During the nine months ended September 30, 2025, we received an aggregate of $85.6 million in proceeds from repayments of our investments.
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During the nine months ended September 30, 2024, we made an aggregate of $112.6 million of investments in 12 new portfolio companies and 18 existing portfolio companies. During the nine months ended September 30, 2024, we received an aggregate of $87.3 million in proceeds from repayments of our investments.
Our level of investment activity can vary substantially from period to period depending on many factors, including the amount of debt and equity capital to lower middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.
Asset Quality
In addition to various risk management and monitoring tools, Stellus Capital uses an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in our portfolio. This investment rating system uses a five-level numeric scale. The following is a description of the conditions associated with each investment category:
As of September 30, 2025
As of December 31, 2024
(dollars in millions)
Portfolio
Investment Category
Companies(1)
261.2
227.2
571.8
564.5
143.5
112.0
27.8
41.3
5.9
8.5
1,010.2
100
117
953.5
106
Loans and Debt Securities on Non-Accrual Status
We will not accrue interest on loans and debt securities if we have reason to doubt our ability to collect such interest. As of September 30, 2025, we had loans to five portfolio companies that were on non-accrual status, which represented approximately 6.7% of our loan portfolio at cost and 3.7% at fair value. As of December 31, 2024, we had loans to seven portfolio companies that were on non-accrual status, which represented approximately 8.3% of our loan portfolio at cost and 5.4% at fair value. As of September 30, 2025 and December 31, 2024, $9.7 million and $6.5 million of income from investments on non-accrual had not been accrued, respectively.
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Results of Operations
An important measure of our financial performance is net increase (decrease) in net assets resulting from operations, which includes net investment income (loss), net realized gain (loss) and net unrealized appreciation (depreciation). Net investment income (loss) is the difference between our income from interest, dividends, fees and other investment income and our operating expenses, including interest on borrowed funds. Net realized gain (loss) on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost. Net unrealized appreciation (depreciation) on investments is the net change in the fair value of our investment portfolio.
Comparison of the Three and Nine months Ended September 30, 2025 and 2024
Revenues
We generate revenue in the form of interest income on debt investments and capital gains and distributions, if any, on investment securities that we may acquire in portfolio companies. Our debt investments typically have a term of five to seven years and bear interest primarily at floating rates. Interest on our debt securities is generally payable quarterly. Payments of principal on our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments may pay interest in-kind, or PIK interest. Any outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted average yield of our investments. We expect that the total dollar amount of interest and any dividend income that we earn will increase as the size of our investment portfolio increases. In addition, we may generate revenue in the form of prepayment fees, commitment, loan origination, structuring or due diligence fees, fees for providing significant managerial assistance and consulting fees.
The following shows the breakdown of investment income for the three and nine months ended September 30, 2025 and 2024 (in millions).
Interest income(1)
23.6
24.2
69.6
72.2
1.4
0.9
3.9
2.5
Miscellaneous fees(1)
1.3
4.4
26.3
26.5
76.9
79.1
The decrease in investment income for the three and nine months ended September 30, 2025 was due primarily to a decrease in prevailing market rates on our loans, typically in reference to the Secured Overnight Financing Rate (“SOFR”), partially offset by an increase in our principal debt outstanding.
Our primary operating expenses include the payment of fees to Stellus Capital under the Investment Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, which may include:
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The following shows the breakdown of operating expenses for the three and nine months ended September 30, 2025 and 2024 (in millions).
Operating Expenses
12.8
11.7
0.2
0.1
0.4
0.3
0.6
0.5
1.5
2.2
2.6
6.5
7.6
1.1
0.8
25.9
23.9
17.6
16.2
51.1
48.7
(0.5)
(2.7)
(1.9)
17.1
48.4
46.8
The increase in operating expenses for the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024 was due to increased management fees and interest expense due to overall portfolio growth.
For the three months ended September 30, 2025, net investment income was $9.1 million, or $0.32 per common share (based on 28,480,472 weighted average shares outstanding for the three months ended September 30, 2025).
For the three months ended September 30, 2024, net investment income was $10.3 million, or $0.39 per common share (based on 26,326,426 weighted average shares outstanding for the three months ended September 30, 2024).
For the nine months ended September 30, 2025, net investment income was $28.5 million, or $1.01 per common share (based on 28,168,527 weighted average shares outstanding for the nine months ended September 30, 2025).
For the nine months ended September 30, 2024, net investment income was $32.3 million, or $1.29 per common share (based on 25,066,626 weighted average shares outstanding for the nine months ended September 30, 2024).
The decrease in net investment income over the respective three and nine months periods was due to decreased interest income as explained in the “Revenues” section above, as well as higher operating expenses as explained in the “Expenses” section above.
Net Realized Gains and Losses
We measure net realized gains or losses by the difference between the net proceeds from the repayment, sale or other disposition and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized.
Proceeds from repayments of investments and amortization of certain other investments for the three months ended September 30, 2025 totaled $39.0 million and net realized gains totaled $2.9 million.
Proceeds from repayments of investments and amortization of certain other investments for the three months ended September 30, 2024 totaled $15.5 million and net realized losses totaled ($3.3) million.
Proceeds from repayments of investments and amortization of certain other investments for the nine months ended September 30, 2025 totaled $85.6 million and net realized losses totaled ($4.0) million.
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Proceeds from repayments of investments and amortization of certain other investments for the nine months ended September 30, 2024 totaled $87.3 million and net realized losses totaled ($21.7) million.
Net Change in Unrealized Appreciation (Depreciation) of Investments
Net change in unrealized (depreciation) appreciation primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded appreciation or depreciation when gains or losses are realized.
Net change in unrealized (depreciation) appreciation on investments and cash equivalents for the three months ended September 30, 2025 and 2024 totaled ($5.1) million and $8.5 million, respectively.
The change in unrealized appreciation over the respective periods was due to reversals of previous write-downs that were realized and company-specific investment write-ups, offset by company-specific write-downs.
Net change in unrealized (depreciation) appreciation on investments and cash equivalents for the nine months ended September 30, 2025 and 2024 totaled ($2.5) million and $26.4 million, respectively.
The change in unrealized (depreciation) appreciation over the respective periods was due to reversals of previous write-ups that were realized and company-specific investment write-downs, offset by company-specific write-ups.
Benefit for Taxes on Unrealized Investments
We have direct wholly owned subsidiaries that have elected to be taxable entities (the “Taxable Subsidiaries”). The Taxable Subsidiaries permit us to hold equity investments in portfolio companies, which are “pass through” entities for U.S. federal income tax purposes and continue to comply with the “source income” requirements contained in RIC tax provisions of the Code. The Taxable Subsidiaries are not consolidated with us for U.S. federal income tax purposes and may generate U.S. federal income tax expense, benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. The U.S. federal income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in our consolidated financial statements. For both the three and nine months ended September 30, 2025, we recognized a benefit for income tax on unrealized investments of $0.0 million for the Taxable Subsidiaries. For the three and nine months ended September 30, 2024, we recognized a benefit for income tax on unrealized investments of $0.0 million and $0.2 million for the Taxable Subsidiaries, respectively. As of both September 30, 2025 and December 31, 2024, there was $0.0 million of deferred tax liabilities on the Consolidated Statements of Assets and Liabilities.
For the three months ended September 30, 2025, net increase in net assets resulting from operations totaled $6.7 million, or $0.23 per common share (based on 28,480,472 weighted average shares outstanding for the three months ended September 30, 2025).
For the three months ended September 30, 2024, net increase in net assets resulting from operations totaled $15.5 million, or $0.59 per common share (based on 26,326,426 weighted average shares outstanding for the three months ended September 30, 2024).
The net decrease in net assets between the respective periods was due to higher unrealized depreciation, offset by higher realized gains in the current year.
For the nine months ended September 30, 2025, net increase in net assets resulting from operations totaled $21.8 million, or $0.78 per common share (based on 28,168,527 weighted average shares outstanding for the nine months ended September 30, 2025).
For the nine months ended September 30, 2024, net increase in net assets resulting from operations totaled $37.2 million, or $1.48 per common share (based on 25,066,626 weighted average shares outstanding for the nine months ended September 30, 2024).
The net decrease in net assets between the respective periods was due to higher unrealized depreciation and lower net investment income, offset by decreased net realized losses in the current year.
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Financial Condition, Liquidity and Capital Resources
Cash Flows from Operating and Financing Activities
Our operating activities used net cash of $33.5 million for the nine months ended September 30, 2025, primarily in connection with the purchase of portfolio investments, offset by the net increase in net assets resulting from operations and sales and repayments of portfolio investments. Our financing activities for the nine months ended September 30, 2025 provided cash of $22.4 million, primarily from proceeds from the issuance of common stock, proceeds from the issuance of 2030 Notes Payable (as defined below), offset by net paydowns on our Credit Facility, repayment of 2026 Notes Payable (as defined below), repayment of SBA-guaranteed debentures and shareholder distributions.
Our operating activities provided net cash of $3.1 million for the nine months ended September 30, 2024, primarily in connection with the purchase of portfolio investments, offset by sales and repayments of portfolio investments. Our financing activities for the nine months ended September 30, 2024 provided cash of $9.4 million, primarily from proceeds from the issuance of common stock, offset by net paydowns on our Credit Facility and shareholder distibutions.
Liquidity and Capital Resources
Our liquidity and capital resources are derived from the Credit Facility, Notes Payable (as defined below), SBA-guaranteed debentures and cash flows from operations, including investment sales and repayments, the ATM Program (as defined below), and income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as the payment of dividends to the holders of our common stock. We used, and expect to continue to use, these capital resources as well as proceeds from turnover within our portfolio and from public and private offerings of securities to finance our investment activities.
Although we expect to fund the growth of our investment portfolio through the net proceeds from future public and private equity offerings and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act, our plans to raise capital may not be successful. In this regard, if our common stock trades at a price below our then-current net asset value per share, we may be limited in our ability to raise equity capital given that we cannot sell our common stock at a price below net asset value per share unless our stockholders approve such a sale and our Board makes certain determinations in connection therewith. A proposal approved by our stockholders at our 2025 annual stockholders meeting authorizes us to sell up to 25% of our outstanding common shares at a price equal to or below the then-current net asset value per share in one or more offerings. This authorization will expire on the earlier of (i) June 17, 2026, the one-year anniversary of our 2025 annual stockholders meeting, and (ii) the date of our 2026 annual stockholder meeting. We would need similar future approval from our stockholders to issue shares below the then-current net asset value per share any time after the expiration of the current approval. In addition, we intend to distribute between 90% and 100% of our taxable income to our stockholders in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. Consequently, we may not have the funds or the ability to fund new investments, to make additional investments in our portfolio companies, to fund our unfunded commitments to portfolio companies or to repay borrowings. In addition, the illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.
Also, as a BDC, we generally are required to meet an asset coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, over the aggregate amount of the senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 150% effective June 29, 2018 (at least 200% prior to June 29, 2018). This requirement limits the amount that we may borrow. We have received exemptive relief from the SEC to permit us to exclude the debt of the Stellus Capital SBIC, LP (the “SBIC I subsidiary”) and Stellus Capital SBIC II, LP (the “SBIC II subsidiary”) (collectively, the “SBIC subsidiaries”) guaranteed by the U.S. Small Business Administration (“SBA”) from the definition of senior securities in the asset coverage test under the 1940 Act. We were in compliance with the asset coverage ratios at all times. As of September 30, 2025 and December 31, 2024, our asset coverage ratio was 210% and 234%, respectively. The amount of leverage that we employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing, such as the maturity, covenant package and rate structure of the proposed borrowings, our ability to raise funds through the issuance of shares of our common stock and the risks of such borrowings within the context of our investment outlook. Ultimately, we only intend to use leverage if the expected returns from borrowing to make investments will exceed the cost of such borrowing. As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $9.0 million and $20.1 million, respectively.
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On October 11, 2017, we entered into a senior secured revolving credit agreement, as amended, dated as of October 10, 2017, that was amended and restated on December 21, 2021, February 28, 2022, May 13, 2022, November 21, 2023, October 30, 2024 and September 11, 2025 with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (the “Credit Facility”).
The Credit Facility provides for borrowings up to a maximum of $335.0 million on a committed basis with an accordion feature that allows us to increase the aggregate commitments up to $365.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions.
Our obligations to the lenders are secured by a first priority security interest in our portfolio of securities and cash not held at the SBIC subsidiaries, but excluding short term investments. The Credit Facility contains certain covenants, including but not limited to: (i) maintaining a minimum liquidity test of at least $10.0 million, including cash, liquid investments and undrawn availability, (ii) maintaining an asset coverage ratio of at least 1.67 to 1.0, (iii) maintaining a minimum stockholder’s equity, and (iv) maintaining a minimum interest coverage ratio of at least 1.75 to 1.00. As of September 30, 2025 and December 31, 2024, we were in compliance with these covenants.
As of September 30, 2025 and December 31, 2024, $167.6 million and $175.4 million, respectively, was outstanding under the Credit Facility. The carrying amount of the amount outstanding under the Credit Facility approximates its fair value. The fair value of the Credit Facility is determined in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Credit Facility is estimated based upon market interest rates for our own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. We incurred costs of $8.8 million in connection with the current Credit Facility, which are being amortized over the life of the facility. Additionally, $0.3 million of costs from a prior credit facility will continue to be amortized over the remaining life of the Credit Facility. As of September 30, 2025 and December 31, 2024, $3.6 million and $3.1 million of such prepaid loan structure fees and administration fees had yet to be amortized, respectively. These prepaid loan fees are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
Interest is paid monthly or quarterly in arrears. The following table summarizes the interest expense and amortized loan fees on the Credit Facility for the three and nine months ended September 30, 2025 and 2024 (dollars in millions):
3.1
9.8
10.4
1.0
3.4
3.8
10.8
11.2
166.1
168.4
179.4
10.5
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SBA-Guaranteed Debentures
Due to the SBIC subsidiaries’ status as small business investment companies (“SBICs”), we have the ability to issue debentures guaranteed by the SBA at favorable interest rates (“SBA-guaranteed debentures”). Under the regulations applicable to SBICs, a single licensee can have outstanding SBA-guaranteed debentures, subject to a regulatory leverage limit, up to two times the amount of regulatory capital. As of both September 30, 2025 and December 31, 2024, the SBIC I subsidiary had $75.0 million in “regulatory capital,” as such term is defined by the SBA, and $124.0 million and $150.0 million of SBA-guaranteed debentures outstanding, respectively.
As of both September 30, 2025 and December 31, 2024, the SBIC II subsidiary had $87.5 million in regulatory capital. As of both September 30, 2025 and December 31, 2024, the SBIC II subsidiary had $175.0 million of SBA-guaranteed debentures outstanding.
On August 12, 2014, we obtained exemptive relief from the SEC to permit us to exclude the debt of the SBIC subsidiaries guaranteed by the SBA from our 150% asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the 150% asset coverage test by permitting us to borrow up to $325.0 million more than we would otherwise be able to absent the receipt of this exemptive relief.
On a stand-alone basis, the SBIC subsidiaries held $483.8 million and $510.1 million in assets at September 30, 2025 and December 31, 2024, respectively, which accounted for approximately 47.0% and 52.0% of our total consolidated assets, respectively.
SBA-guaranteed debentures have fixed interest rates that equal prevailing 10-year U.S. Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may be pre-paid at any time with no prepayment penalty. SBA-guaranteed debentures drawn before October 1, 2019 incur upfront fees of 3.425%, which consists of a 1.00% commitment fee and a 2.425% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. SBA-guaranteed debentures drawn after October 1, 2019 incur upfront fees of 3.435%, which consists of a 1.00% commitment fee and a 2.435% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. Once pooled, which occurs in March and September of each applicable year, the SBA-guaranteed debentures bear interest at a fixed rate that is set to the current 10-year treasury rate plus a spread at each pooling date.
The fair values of the SBA-guaranteed debentures are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the SBA-guaranteed debentures is estimated based upon market interest rates for our own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. At September 30, 2025 and December 31, 2024, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6 to the Consolidated Financial Statements.
As of September 30, 2025, we have incurred $11.1 million in financing costs related to the SBA-guaranteed debentures since the SBIC subsidiaries received their licenses, which were recorded as prepaid loan fees. As of September 30, 2025 and December 31, 2024, $3.2 million and $3.7 million of prepaid financing costs had yet to be amortized, respectively. These prepaid loan fees are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following table summarizes the interest expense and amortized fees on the SBA-guaranteed debentures for the three and nine months ended September 30, 2025 and 2024 (dollars in millions):
7.5
0.7
2.7
2.9
8.6
305.3
325.0
308.1
5.0
10.2
81
Notes Offering
On January 14, 2021, we issued $100.0 million in aggregate principal amount of 4.875% fixed-rate notes due 2026 (the “ 2026 Notes Payable”). The 2026 Notes Payable will mature on March 30, 2026 and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2025 at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest is payable semi-annually beginning September 30, 2021.
On September 30, 2025, the Company prepaid $50.0 million in aggregate principal of the 2026 Notes. For the three and nine months ended September 30, 2025, the Company recorded a make-whole payment of $0.1 million and accelerated $0.1 million of unamortized upfront fees which are recognized as a loss on debt extinguishment in the Consolidated Statements of Operations. As of September 30, 2025 and December 31, 2024, the aggregate carrying amount of the 2026 Notes Payable was approximately $49.9 million and $99.4 million, respectively. The 2026 Notes Payable are institutional, non-traded notes.
In connection with the issuance of the 2026 Notes Payable, we have incurred $2.3 million of fees, which are being amortized over the term of the 2026 Notes Payable, of which $0.1 million and $0.6 million remains to be amortized as of September 30, 2025 and December 31, 2024, respectively. These financing costs are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following table summarizes the interest expense and deferred financing costs on the 2026 Notes Payable for the three and nine months ended September 30, 2025 and 2024 (dollars in millions):
1.2
3.7
4.0
99.5
100.0
99.8
2.4
On April 1, 2025 and September 25, 2025, we issued $75.0 million and $50.0 million, respectively, in aggregate principal amount of 7.250% fixed-rate notes due 2030 (the “2030 Notes Payable” and together with the 2026 Notes Payable, the “Notes Payable”). The 2030 Notes Payable will mature on April 1, 2030 and may be redeemed in whole or in part at any time or from time to time at our option on or after October 1, 2029, at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest on the 2030 Notes Payable is payable semi-annually beginning October 1, 2025. As of September 30, 2025, the aggregate carrying amount of the 2030 Notes Payable was approximately $122.6 million. The Notes Payable are institutional, non-traded notes.
In connection with the issuance and maintenance of the 2030 Notes Payable, we have incurred $2.6 million of fees, which are being amortized over the term of the 2030 Notes Payable. As of September 30, 2025, $2.4 million of prepaid financing costs had yet to be amortized. These financing costs are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
82
2.8
3.0
78.3
76.6
(1)
ATM Program
On August 11, 2023, the Company entered into an equity distribution agreement (the “2023 Equity Distribution Agreement”) with Keefe Bruyette & Woods, Inc. and Raymond James & Associates, Inc., as sales agents and/or principal thereunder. Under the 2023 Equity Distribution Agreement, the Company may issue and sell, from time to time, up to $100,000,000 in aggregate offering price of shares of common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with its investment objective and strategies. Upon execution of the 2023 Equity Distribution Agreement, the Company no longer sold any shares under the 2021 Equity Distribution Agreement.
On September 9, 2025, we entered into an equity distribution agreement (the “2025 Equity Distribution Agreement” and together with the 2023 Equity Distribution Agreement and the 2021 Equity Distribution Agreement, the “Equity Distribution Agreements”) with Keefe Bruyette & Woods, Inc. and Raymond James & Associates, Inc., as sales agents and/or principal thereunder. Under the 2025 Equity Distribution Agreement, we may issue and sell, from time to time, up to $100,000,000 in aggregate offering price of shares of our common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with its investment objective and strategies. We refer to our issuance and sale of shares under the Equity Distribution Agreements as the “ATM Program.”
We issued 531,106 and 1,466,136 shares during the three and nine months ended September 30, 2025 under the ATM Program, respectively, for gross proceeds of $7.4 million and $20.6 million, respectively, and underwriting fees and other expenses of $0.3 million and $0.7 million, respectively. The average per share offering price of shares issued in the ATM Program during the three and nine months ended September 30, 2025 was $14.00 and $14.04, respectively. We issued 1,058,366 and 2,913,722 shares during the three and nine months ended September 30, 2024 under the ATM Program, respectively, for gross proceeds of $14.6 million and $40.4 million and underwriting fees and other expenses of $0.3 million and $0.9 million, respectively. The average per share offering price of shares issued in the ATM Program during the three and nine months ended September 30, 2024 was $13.79 and $13.86, respectively. The Advisor has agreed to reimburse us for underwriting fees and expenses to the extent the per share price of the shares to the public, less underwriting fees, was less than the then-current net asset value per share. For the three and nine months ended September 30, 2025, the Advisor was not required to reimburse underwriting fees as all shares were issued at a premium to net asset value.
83
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of September 30, 2025, we had $53.8 million in unfunded debt commitments and $0.3 million in unfunded equity commitments to 73 portfolio companies. As of December 31, 2024, we had $41.0 million in unfunded debt commitments and $0.3 million in unfunded equity commitments to 71 portfolio companies. As of September 30, 2025, we had sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded loan commitments should the need arise.
RIC Status and Dividends
We have elected, have qualified, and intend to qualify annually to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. So long as we maintain our qualification as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to stockholders as dividends on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation until realized. Distributions declared and paid by us in a year may differ from taxable income for that year, as such dividends may include the distribution of current year taxable income or the distribution of prior year taxable income carried forward into and distributed in the current year. Distributions also may include returns of capital.
To qualify for RIC tax treatment, we must, among other things, distribute, with respect to each taxable year, at least 90% of our investment company net taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any). If we maintain our qualification as a RIC, we must also satisfy certain distribution requirements each calendar year in order to avoid a federal excise tax on our undistributed earnings of a RIC. As of December 31, 2024, we had $45.2 million of undistributed taxable income that will be carried forward toward distributions paid during the year ending December 31, 2025.
We intend to distribute to our stockholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income). However, the covenants contained in the Credit Facility may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement. In addition, we may retain for investment some or all of our net taxable capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal taxable year fall below the total amount of our dividends for that fiscal year, a portion of those dividend distributions may be deemed a return of capital to our stockholders.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a business development company under the 1940 Act and due to provisions in Credit Facility. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
In accordance with certain applicable U.S. Treasury regulations and private letter rulings issued by the Internal Revenue Service (the “IRS”), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC, subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash must receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20% of his or her entire distribution in cash.
If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock. We have no current intention of paying dividends in shares of our stock in accordance with these U.S. Treasury regulations or private letter rulings. However, we continue to monitor the Company’s liquidity position and the overall economy and will continue to assess whether it would be in our and our shareholders best interest to take advantage of the IRS rulings.
84
Recent Accounting Pronouncements
See Note 1 to the consolidated financial statements contained herein for a description of recent accounting pronouncements, if any, including the expected dates of adoption and the anticipated impact on the financial statements.
Critical Accounting Policies
See Note 1 to the consolidated financial statements contained herein for a description of our critical accounting policies.
Subsequent Events
Our management has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that require recognition or disclosure in these financial statements except for the following described below.
We invested in the following portfolio companies subsequent to September 30, 2025:
We realized the following portfolio company investment subsequent to September 30, 2025:
The outstanding balance under the Credit Facility as of November 10, 2025 was $182.8 million.
85
Dividend Declared
Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. In March 2022, the Federal Reserve raised interest rates for the first time since December 2018, and subsequently raised interest rates several times, most recently in July 2023, bringing the target for the federal funds rate to 5.25% - 5.50%, the highest since January 2001. In September 2024, the Federal Reserve began easing its policy, most recently lowering the federal funds rate to a target range of 4.25% - 4.50% in December 2024 and 4.00% - 4.25% in September 2025. As of September 30, 2025 and December 31, 2024, 90.4% and 94.5% of the loans in our portfolio bore interest at a floating rate, respectively. These floating rate loans typically bear interest in reference to SOFR, which is indexed to 30-day or 90-day SOFR rates, subject to an interest rate floor. As of both September 30, 2025 and December 31, 2024, the weighted average interest rate floor on our floating rate loans was 1.43%.
Assuming that the consolidated statement of assets and liabilities as of September 30, 2025 was to remain constant and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annual impact on net income of changes in interest rates:
($ in millions)
Interest
Net Interest
Change in Basis Points(2)
Income
Expense(3)
Income(1)
Up 200 basis points
16.8
(3.4)
13.4
Up 150 basis points
12.6
(2.5)
10.1
Up 100 basis points
8.4
(1.7)
6.7
Up 50 basis points
4.2
(0.8)
Down 50 basis points
(4.2)
Down 100 basis points
(8.4)
1.7
(6.7)
Down 150 basis points
(12.6)
(10.1)
Down 200 basis points
(16.8)
(13.4)
Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contacts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments. For the three and nine months ended September 30, 2025 and 2024, we did not engage in hedging activities.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, under the supervision and with the participation of various members of management, including its Chief Executive Officer and its Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
The Company’s management did not identify any change in the Company’s internal control over financial reporting that occurred during the three and nine months ended September 30, 2025 that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1.Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or our subsidiaries. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
Item 1A.Risk Factors
Investing in our securities involves a number of significant risks. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the risk factors discussed below and in “Item 1A. Risk Factors” of Annual Report on Form 10-K filed with the SEC on March 4, 2025, all of which could materially affect our business, financial condition and/or results of operations. Although the risks described in our other SEC filings referenced above represent the principal risks associated with an investment in us, they are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, might materially and adversely affect our business, financial condition and/or results of operations.
Our investments in the high tech industry are subject to unique risks relating to technological developments, regulatory changes and changes in customer preferences.
As of September 30, 2025, our investment in portfolio companies operating in this sector represents 10.13% of our total portfolio. There are risks in investing in companies that operate in this market, including the negative impact of regulation, changing technology, a competitive marketplace and difficulty in obtaining financing. Any of these factors could materially and adversely affect the operations of a portfolio company in this industry and, in turn, impair our ability to timely collect principal and interest payments owed to us.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
We did not engage in unregistered sales of equity securities during the three months ended September 30, 2025.
No shares were issued under the distribution reinvestment program during either of the three and nine months ended September 30, 2025 and 2024.
Item 3.Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Item 5.Other Information
During the three and nine months ended September 30, 2025, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Item 6.Exhibits.
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits filed with the SEC:
ExhibitNumber
Description
Articles of Amendment and Restatement (Incorporated by reference to Exhibit (a)(1) to the Registrant’s Registration Statement on Form N-2 (File No. 333-184195), filed on October 23, 2012).
Bylaws (Incorporated by reference to Exhibit (b)(1) to the Registrant’s Registration Statement on Form N-2 (File No. 333-184195), filed on October 23, 2012).
4.1
Form of Stock Certificate (Incorporated by reference to Exhibit (d) to the Registrant’s Registration Statement on Form N-2 (File No. 333-184195), filed on October 23, 2012).
Fourth Supplemental Indenture, dated as of April 1, 2025, by and between Stellus Capital Investment Corporation and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 814-00971) filed on September 26, 2025).
4.3
Form of Global Note with respect to the 7.250% Notes due 2030 (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No.814-00971) filed on September 26, 2025).
Equity Distribution Agreement, dated September 9, 2025, by and among Stellus Capital Investment Corporation and Stellus Capital Management, LLC, on the one hand, and Keefe, Bruyette & Woods, Inc. and Raymond James & Associates, Inc., on the other hand (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.814-00971), filed on September 10, 2025).
Sixth Amendment to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of September 11, 2025, between Stellus Capital Investment Corporation, the lenders party thereto, and Zions Bancorporation, N.A., d/b/a Amegy Bank, as Administrative Agent, Swingline Lender, Issuing Bank and Multicurrency Lender (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.814-00971), filed on September 15, 2025).
31.1
Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Chief Financial Officer Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
Chief Executive Officer Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2
Chief Financial Officer Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.1
Notice of Redemption of 4.875% Notes due 2026 (Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No.814-00971), filed on August 28, 2025).
101.INS*
XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File — The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
*
Filed herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 10, 2025
By:
/s/ Robert T. Ladd
Name:
Robert T. Ladd
Title:
Chief Executive Officer and President
/s/ W. Todd Huskinson
W. Todd Huskinson
Chief Financial Officer