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 March 31, 2026
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 May 11, 2026 was 28,947,254.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Statements of Assets and Liabilities as of March 31, 2026 (unaudited) and December 31, 2025
1
Consolidated Statements of Operations for the three month periods ended March 31, 2026 and 2025 (unaudited)
2
Consolidated Statements of Changes in Net Assets for the three month periods ended March 31, 2026 and 2025 (unaudited)
3
Consolidated Statements of Cash Flows for the three month periods ended March 31, 2026 and 2025 (unaudited)
4
Consolidated Schedules of Investments as of March 31, 2026 (unaudited) and December 31, 2025
5
Notes to Consolidated Financial Statements
39
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
72
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
90
Item 4.
Controls and Procedures
91
PART II. OTHER INFORMATION
Legal Proceedings
92
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
93
SIGNATURES
94
PART I — FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
March 31, 2026
December 31, 2025
ASSETS
Controlled investments, at fair value (amortized cost of $34,432,893 and $33,603,521, respectively)
$
12,237,127
14,953,132
Non-controlled, affiliated investments, at fair value (amortized cost of $4,878,960 and $4,806,660, respectively)
3,378,350
3,750,674
Non-controlled, non-affiliated investments, at fair value (amortized cost of $976,006,465 and $987,729,505, respectively)
974,379,087
988,919,589
Cash and cash equivalents
3,376,525
25,050,156
Receivable for sales and repayments of investments
492,000
581,509
Interest receivable
6,611,848
6,375,996
Income tax receivable
—
1,385,387
Other receivables
149,189
85,000
Related party receivable
20
Deferred offering costs
75,000
Prepaid expenses
574,127
150,843
Total Assets
1,001,273,253
1,041,252,306
LIABILITIES
Notes Payable
122,758,915
122,671,409
Credit Facility payable
238,276,659
233,167,360
SBA-guaranteed debentures
257,151,049
295,984,063
Dividends payable
3,279,724
3,858,669
Management fees payable
4,392,357
4,442,705
Income incentive fees payable
2,413,077
2,317,429
Interest payable
5,729,215
6,138,076
Related party payable
2,335,513
Unearned revenue
539,630
582,007
Administrative services payable
579,529
539,338
Income tax payable
93,492
Other accrued expenses and liabilities
728,572
372,294
Total Liabilities
638,277,732
670,073,350
Commitments and contingencies (Note 7)
Net Assets
362,995,521
371,178,956
NET ASSETS
Common stock, par value $0.001 per share (100,000,000 shares authorized; 28,947,254 and 28,947,254 shares issued and outstanding, respectively)
28,947
Paid-in capital
397,829,793
Total distributable loss
(34,863,219)
(26,679,784)
Total Liabilities and Net Assets
Net Asset Value Per Share
12.54
12.82
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the three months ended
March 31, 2025
INVESTMENT INCOME
From non-controlled, affiliated investments
Interest income
45
Payment-in-kind interest income
72,300
From non-controlled, non-affiliated investments
20,578,575
20,817,005
1,602,087
3,310,111
Other income
1,039,927
824,542
Total Investment Income
23,292,934
24,951,658
OPERATING EXPENSES
Management fees
4,054,726
Valuation fees
166,119
157,889
Administrative services expenses
649,120
449,298
Income incentive fees
106,709
2,136,491
Professional fees
817,727
418,031
Directors’ fees
129,250
111,250
Insurance expense
93,056
97,090
Interest expense and other fees
8,851,541
8,263,019
Income tax expense
360,471
499,547
Other general and administrative expenses
239,617
218,351
Total Operating Expenses
15,805,967
16,405,692
Income incentive fee waiver
(11,061)
(1,242,843)
Total Operating Expenses, net of fee waivers
15,794,906
15,162,849
Net Investment Income
7,498,028
9,788,809
Net realized gain on non-controlled, non-affiliated investments
750,410
(5,967,221)
Net realized gain (loss) on foreign currency translations
3,664
(29,655)
Net change in unrealized (depreciation) appreciation on controlled investments
(3,545,377)
55,276
Net change in unrealized depreciation on non-controlled, affiliated investments
(444,624)
Net change in unrealized (depreciation) appreciation on non-controlled, non-affiliated investments
(2,558,345)
1,138,017
Net change in unrealized (depreciation) appreciation on foreign currency translations
(48,020)
8,319
Net Increase in Net Assets Resulting from Operations
1,655,736
4,993,545
Net Investment Income Per Share—basic and diluted
0.26
0.35
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted
0.06
0.18
Weighted Average Shares of Common Stock Outstanding—basic and diluted
28,947,254
27,602,612
Distributions Per Share—basic and diluted
0.34
0.40
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, 2024
27,481,118
27,481
379,549,272
(9,654,813)
369,921,940
Net investment income
Net realized loss on investments
Net realized loss on foreign currency translations
Net change in unrealized appreciation on investments
1,193,293
Net change in unrealized depreciation on foreign currency translations
Distributions from net investment income
(11,087,389)
Issuance of common stock, net of offering costs(1)
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
Balances at December 31, 2025
Net realized gain on investments
Net realized gain on foreign currency translation
Net change in unrealized depreciation on investments
(6,548,346)
(9,839,171)
Balances at March 31, 2026
(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
(27,664,251)
(55,415,263)
Proceeds from sales and repayments of investments
41,713,484
14,986,423
Net change in unrealized depreciation (appreciation) on investments
6,548,346
(1,193,293)
Net change in unrealized depreciation (appreciation) on foreign currency translations
48,020
(8,319)
Increase in investments due to payment-in-kind income
(1,674,387)
(976,479)
Amortization of premium and accretion of discount, net
(713,561)
(715,755)
Amortization of loan structure fees
254,298
315,618
Amortization of deferred financing costs
134,684
110,150
Amortization of discount on Notes Payable
33,248
Amortization of premium on Notes Payable
(30,426)
Amortization of loan fees on SBA-guaranteed debentures
166,986
188,984
Net realized (gain) loss on investments
(750,410)
5,967,221
Changes in other assets and liabilities
Increase in interest receivable
(235,852)
(1,281,507)
Decrease (increase) in income tax receivable
(1,081,760)
Increase in other receivables
(64,189)
(20,755)
Decrease in related party receivables
3,687
(Increase) decrease in prepaid expenses
(423,284)
90,313
(Decrease) increase in management fees payable
(50,348)
20,617
Increase (decrease) in income incentive fees payable
95,648
(1,458,054)
Increase (decrease) in administrative services payable
40,191
(12,990)
Decrease in interest payable
(408,861)
(3,788,915)
Increase in related party payable
1,290,893
(Decrease) increase in unearned revenue
(42,377)
72,177
Increase in income tax payable
Increase in other accrued expenses and liabilities
356,278
989,436
Net Cash Provided by (Used in) Operating Activities
22,803,385
(36,924,026)
Cash Flows from Financing Activities
Proceeds from the issuance of common stock
9,256,982
Sales load for common stock issued
(138,908)
Offering costs paid for common stock issued
(75,000)
(179,988)
Stockholder distributions paid
(10,418,116)
(10,999,933)
Financing costs paid on Notes Payable
(50,000)
Repayments of SBA-guaranteed debentures
(39,000,000)
(16,250,000)
Borrowings under Credit Facility
58,100,000
67,700,000
Repayments of Credit Facility
(53,033,900)
(21,633,900)
Net Cash (Used in) Provided by Financing Activities
(44,477,016)
27,754,253
Net Decrease in Cash and Cash Equivalents
(21,673,631)
(9,169,773)
Cash and Cash Equivalents Balance at Beginning of Period
20,058,594
Cash and Cash Equivalents Balance at End of Period
10,888,821
Supplemental and Non-Cash Activities
Cash paid for interest expense
8,701,862
11,437,182
Income and excise tax refund, net
(1,118,408)
1,581,307
Exchange of investments
1,999,529
1,663,301
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
(22)
EH Real Estate Services, LLC
Skokie, IL
Term Loan A-5
(16)
First Lien
15.00
%
-
1/8/2024
9/3/2026
FIRE: Real Estate
5,734,549
516,109
0.14
Term Loan A-6
10/3/2025
1,096,456
0.30
Term Loan A-7
11/12/2025
9/30/2026
1,644,685
0.45
Term Loan A-8
1/20/2026
816,517
0.22
Term Loan A-9
2/18/2026
899,683
0.25
Term Loan A-10
3/3/2026
1,032,440
0.28
Revolver
(16)(21)
10/3/2023
63,597
0.02
EH Holdco, LLC Common Units
Equity
15,356
0.00
EH Holdco, LLC Series A Preferred Units
9/3/2021
7,892
7,891,642
19,179,572
6,069,487
1.66
J.R. Watkins, LLC
San Francisco, CA
Term Loan (SBIC)
(4)(19)
4.09
12/22/2017
12/31/2026
Consumer Goods: Non-Durable
9,957,036
2,090,978
0.58
5.00
3,640,172
764,436
0.21
Priority Revolver (SBIC)
5/3/2024
1,656,113
3,312,226
0.91
J.R. Watkins Ultimate Holdings, LLC Class A Units (SBIC)
(4)
4/9/2025
500
15,253,321
6,167,640
1.70
Total Control investments
34,432,893
3.36
Non-controlled, affiliated investments
(23)
Simpler Trading, LLC
(9)
Austin, TX
10.00
12/28/2021
3/21/2030
Education
2,940,374
0.81
Simpler Trading, LLC Preferred Units (SBIC)
3/21/2025
1,657
1,656,650
437,976
0.12
Simpler Ultimate Holdings, LLC Class A Units (SBIC)
281,936
4,878,960
0.93
Total Non-controlled, affiliated investments
Non-controlled, non-affiliated investments
(4)(5)
2X LLC
Berwyn, PA
Term Loan
(11)
3M SOFR+
2.00
8.70
6/5/2023
6/5/2028
Services: Business
5,362,703
5,292,915
1.48
10/31/2023
1,412,178
1,392,589
0.39
12/2/2024
3,803,435
3,765,276
1.05
(9)(11)
87,500
2X Investors LP Class A Units
43,875
176,915
1,215,590
0.33
10,715,195
11,881,406
3.27
Ad.Net Acquisition, LLC
Los Angeles, CA
Term Loan (SBIC II)
(5)(11)
6.00
1.00
9.96
5/7/2021
5/7/2028
16,734,880
16,701,784
16,651,207
4.59
129,902
129,252
0.04
9.98
649,510
646,262
Ad.Net Holdings, Inc. Series A Common Stock (SBIC II)
(5)
8,644
86,444
0
Ad.Net Holdings, Inc. Series A Preferred Stock (SBIC II)
7,780
777,995
670,308
18,345,635
18,097,029
4.99
AdCellerant LLC
Denver, CO
Term A Loan (SBIC II)
1M SOFR+
9.67
12/12/2023
12/12/2028
Media: Advertising, Printing & Publishing
9,775,000
9,654,877
9,726,125
2.68
AdCellerant Holdings, LLC Series A Units
728,710
585,505
0.16
10,383,587
10,311,630
2.84
ADS Group Opco, LLC
Lakewood, CO
6/4/2021
12/31/2027
Aerospace & Defense
13,350,981
13,335,678
12,950,452
3.57
Priority Revolver (SBIC II)
(5)(9)
9/30/2024
15,895
31,790
0.01
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
73,705
ADS Group Topco, LLC Class Z Units
6/15/2022
72,043
267,929
14,284,529
13,055,947
3.60
PIK
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
16,797,975
1,515,939
0.42
Super Priority Term Loan (SBIC)
(4)(13)
12/6/2024
795,882
970,378
2,387,646
0.66
2/5/2025
875,000
2,625,000
0.72
3/26/2025
500,000
1,500,000
0.41
Term Loan A (SBIC)
2,607,637
565,204
234,687
Revolver (SBIC)
1,558,434
337,790
140,259
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
20,730,924
8,403,531
2.31
AGT Robotique Inc.
(7)(27)
Trois Rivieres, Canada
7.50
9.20
6/24/2024
6/22/2029
Capital Equipment
10,539,209
10,388,993
10,328,425
2.85
American Refrigeration, LLC
Jacksonville, FL
(4)(11)
1.50
3/31/2023
3/31/2028
8,027,407
7,932,493
2.21
Delayed Draw Term Loan
98,000
97,326
0.03
AR-USA Holdings, LLC Class A Units
(6)
141
126,223
255,101
0.07
8,156,042
8,380,508
AMII Acquisition, LLC
Coral Gables, FL
Term Loan (SBIC II )
4.50
8.20
12/4/2024
12/4/2029
Services: Consumer
8,709,224
8,606,973
8,665,678
2.39
AMII Holdings, LP Class B Units
12/3/2024
14,246
142,460
201,204
8,749,433
8,866,882
2.45
Amika OpCo LLC
Brooklyn, NY
6M SOFR+
5.25
0.75
9.14
7/1/2022
7/1/2029
94,638
93,587
5.75
9.63
12/5/2023
9,487,510
9,361,122
2.61
Ishtar Co-Invest-B LP Partnership Interests
77,778
38,133
322,593
0.09
Oshun Co-Invest-B LP Partnership Interests
22,222
21,141
92,168
9,513,983
9,996,909
2.76
Anne Lewis Strategies, LLC
SG AL Investment, LLC Common Units
3/5/2021
Washington, DC
1,000
327,192
3,436,836
0.95
SG AL Investment, LLC Common-A Units
12/22/2023
239
470,656
985,826
0.27
797,848
4,422,662
1.22
APE Holdings, LLC
Deer Park, TX
Class A Units
9/5/2014
Chemicals, Plastics, & Rubber
375,000
66,072
ArborWorks, LLC
Oakhurst, CA
6.50
10.28
11/6/2023
11/6/2028
Environmental Industries
4,178,171
1.15
1,908,170
0.53
ArborWorks Intermediate Holdco, LLC Class A-1 Preferred Units
16,037
3,610,847
8,157,677
2.25
ArborWorks Intermediate Holdco, LLC Class B-1 Preferred Units
ArborWorks Intermediate Holdco, LLC Class A-1 Common Units
1,923
9,697,188
14,244,018
3.93
Arctiq, Inc.
Irvine, CA
Green Topco Holdings, LLC Class A Units
8/8/2023
High Tech Industries
288,000
219,226
751,544
Green Topco Holdings, LLC Common Units
2/3/2026
16,598
Atmosphere Aggregator Holdings II, L.P.
Atlanta, GA
Common Units
1/26/2016
254,250
2,342,141
0.65
Stratose Aggregator Holdings, L.P. Common Units
6/30/2015
750,000
8,848,087
2.44
11,190,228
3.09
Axis Portable Air, LLC
Phoenix, AZ
3/22/2022
12/31/2030
9,286,250
9,215,322
2.56
4/17/2023
1,851,004
1,833,421
0.51
97,750
97,345
Axis Air Parent, LLC Preferred Units
4,436
443,636
2,966,777
0.82
11,589,724
14,201,781
3.92
6
Baker Manufacturing Company, LLC
Evansville, WI
BSC Blue Water Holdings, LLC Series A Units (SBIC II)
7/5/2022
743,770
1,087,673
Bart & Associates, LLC
McLean, VA
(4)(10)(12)
9.12
8/16/2024
8/16/2030
8,808,516
8,685,981
2.43
1/2/2026
1,995,000
1,960,084
0.55
(10)(12)
1,720,387
1,707,061
0.47
B&A Partners Holding, LLC Series A Preferred Units
722,411
905,066
B&A Partners Holding, LLC Series B Preferred Units
35,585
43,413
13,118,950
13,428,969
3.70
BL Products Parent, L.P.
Houston, TX
2/1/2022
879,060
983,608
1,062,555
0.29
Café Valley, Inc.
CF Topco LLC Units
8/28/2019
Beverage & Food
9,160
916,015
1,653,928
0.46
Carolinas Buyer, Inc.
Charlotte, NC
8.95
12/20/2024
12/20/2030
6,762,846
6,663,689
6,593,775
1.82
Carolinas Holding, L.P. Class A Units
466
465,637
367,569
0.10
7,129,326
6,961,344
1.92
CEATI International Inc.
(7)(9)
Montreal, Canada
9.70
2/19/2021
7,782,246
2.14
2,956,298
2,940,009
CEATI Holdings, LP Class A Units
250,000
132,919
297,723
0.08
10,855,174
11,036,267
3.03
Cerebro Buyer, LLC
Columbia, SC
8.67
3/15/2023
3/15/2029
Healthcare & Pharmaceuticals
4,526,683
4,460,479
1.25
11/12/2024
150,761
149,652
226,141
224,477
Cerebro Holdings Partnership, L.P. Series A Partner Interests
62,961
68,130
Cerebro Holdings Partnership, L.P. Series B Partner Interests
341,091
328,640
369,090
5,226,209
5,340,805
1.47
CF Arch Holdings LLC
8/10/2022
100,000
77,583
168,595
0.05
CF512, Inc.
Blue Bell, PA
9.86
9/1/2021
9/1/2026
13,187,513
13,156,922
13,121,575
3.61
9.89
2,847,824
2,844,393
2,833,585
0.78
9.69
9,000
8,955
StellPen Holdings, LLC Membership Interests
220,930
169,636
16,231,245
16,133,751
4.44
Champion Services Acquireco LLC
Round Rock, TX
9/19/2025
9/19/2030
Construction & Building
11,040,000
10,836,870
10,764,000
2.97
Champion Services Holdings LLC Class A-1 Units
268,889
220,359
11,105,759
10,984,359
Channel Partners Intermediateco, LLC
Tampa Bay, FL
6.75
10.64
2/24/2022
2/7/2027
Retail
12,948,948
12,921,323
3.56
3/27/2023
1,651,182
1,646,632
10.67
54,070
23,656
14,645,681
14,677,856
4.03
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
135,234
CompleteCase Holdings, Inc. Class A Common Stock
4/27/2023
89
CompleteCase Holdings, Inc. Series C Preferred Stock
111
111,408
111,409
633,148
246,643
Compost 360 Acquisition, LLC
Tampa, FL
8/2/2023
8/2/2028
9,517,017
9,386,405
8,993,581
2.48
1,047,731
1,038,171
990,106
8.50
12.20
12,163
11,494
48,868
46,180
Compost 360 Investments, LLC Class A Units
3,124
300,041
71,921
Compost 360 Investments, LLC Preferred Units
8/29/2025
614
27,630
40,281
10,813,278
10,153,563
2.79
COPILOT Provider Support Services, LLC
Maitland, FL
6.25
10.10
11/22/2022
11/22/2027
4,825,000
4,786,453
1.33
QHP Project Captivate Blocker, Inc. Common Stock
285,714
389,789
0.11
5,072,167
5,214,789
1.44
Craftable Intermediate II Inc.
Dallas, TX
5.50
6/30/2023
6/30/2028
9,856,832
9,753,183
2.72
40,000
Gauge Craftable LP Partnership Interests
626,690
1,151,341
0.32
10,419,873
11,048,173
3.05
Curion Holdings, LLC
Chicago, IL
7/29/2022
12/31/2028
12,624,039
12,544,848
12,497,799
3.43
40,570
40,164
SP CS Holdings LLC Class A Units
867,173
758,724
13,452,591
13,296,687
3.65
DFO Enterprises, LLC
Rochester, MN
9/22/2025
9/22/2030
11,522,572
11,336,998
11,407,346
3.14
DFO Ultimate Holding, LP Class A Units
8,931
412,252
901,709
11,749,250
12,309,055
3.39
DMD Systems Recovery, LLC
Tempe, AZ
8/22/2025
8/22/2031
6,100,000
6,001,156
6,008,500
Phoenix Parent LLC Common Units
8/19/2025
180,000
220,615
6,181,156
6,229,115
1.72
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
Elder Care Opco LLC
Scarsdale, NY
4.75
8.45
7/31/2025
7/31/2030
7,765,545
7,647,713
7,649,062
2.11
Rallyday Elder Care Co-Investors LP Partnership Interests
910,966
916,719
1,096,600
8,564,432
8,745,662
2.41
Elliott Aviation, LLC
Moline, IL
8.00
11.82
1/31/2020
4/30/2026
9,881,671
8,745,279
SP EA Holdings LLC Term Loan
Unsecured
10/26/2023
6/30/2026
79,127
4.31
4/25/2025
60,480
53,525
Revolver A
1,632,666
Revolver B
3/1/2023
768,822
Revolver C (Priority)
3/7/2025
1,049,747
SP EA Holdings LLC Class A Units
105,938,486
901,594
14,374,107
12,250,039
3.37
8
Environmental Remedies, LLC
Hayward, CA
1/15/2025
1/15/2030
7,257,454
7,141,174
7,112,305
1.96
ERI Parent Holdings, LLC Class A Units
163,109
160,347
123,316
7,301,521
7,235,621
1.99
Equine Network, LLC
Boulder, CO
Term A Loan (SBIC)
5/22/2023
5/22/2028
Hotel, Gaming, & Leisure
6,931,491
6,837,814
1.91
Term A Loan
7/28/2025
2,111,673
2,069,731
166,667
97,900
9,172,112
9,307,731
2.57
Eskola LLC
Morristown, TN
9.71
12/19/2024
12/19/2029
7,693,747
7,589,472
7,078,247
1.95
9.87
2,849,838
2,833,315
2,621,851
Eskola Holdings, LLC Class A Units
314
893,747
11,846
Eskola Holdings, LLC Class C Units
6/4/2025
28
56,349
1,224
Eskola Holdings, LLC Class D Units
3/24/2026
1,014
101,429
53,480
11,474,312
9,766,648
evolv Consulting, LLC
10.16
12/7/2023
12/7/2028
9,335,314
9,219,715
evolv Holdco, LLC Preferred Units
481,521
650,797
9,701,236
9,986,111
2.75
Evriholder Acquisition, Inc.
Anaheim, CA
(5)(9)(11)
10.60
1/23/2023
1/24/2028
Consumer Goods: Durable
11,943,233
11,812,602
11,883,517
3.26
KEJ Holdings LP Class A Units
873,333
941,928
12,685,935
12,825,445
3.52
Exacta Land Surveyors, LLC
(20)
Cleveland, OH
9.60
2/8/2019
16,306,780
15,654,510
7/15/2022
991,982
952,303
4/22/2024
115,243
80,670
SP ELS Holdings LLC Class A Units
1,338,661
1,124,414
169,759
18,538,419
16,857,242
4.64
Exigo, LLC
10.02
3/16/2022
3/16/2027
8,608,719
8,579,109
8,436,545
2.32
Gauge Exigo Coinvest, LLC Common Units
377,535
134,603
8,956,644
8,571,148
2.36
FairWave Holdings, LLC
Kansas City, MO
10.45
4/1/2024
4/1/2029
7,462,960
7,348,917
7,425,645
2.05
12/31/2025
103,461
101,764
102,944
494,992
492,517
609,221
606,175
0.17
2,634,468
2,611,957
2,621,296
566,354
561,613
563,522
GRC Java Holdings, LLC Class A Units
3,229
347,692
509,000
12,076,156
12,321,099
3.41
Fidus Systems Inc.
Ottawa, Canada
10/17/2025
10/17/2031
4,747,201
4,668,460
4,675,993
1.29
Fidus Investments Holdings, L.P. Common Units
268
267,728
292,465
4,936,188
4,968,458
1.37
FiscalNote Boards LLC
Toronto, Canada
8.92
3/11/2024
3/12/2029
3,189,592
3,147,438
3,141,748
0.87
FCP-Connect Holdings LLC Class A Common Shares
5/28/2024
284
FCP-Connect Holdings LLC Series A Preferred Shares
190,382
150,112
3,337,820
3,291,860
9
General LED OPCO, LLC
San Antonio, TX
Second Lien
9.00
12.80
5/1/2018
4/30/2027
4,500,000
4,410,000
1.21
GS HVAM Intermediate, LLC
Carlsbad, CA
10.27
10/18/2019
12,091,429
12,089,052
12,030,972
3.31
441,919
439,709
176,768
175,884
10.32
2,032,828
2,022,664
0.56
HV GS Acquisition, LP Class A Interests
10/2/2019
2,144
563,209
2,128,229
0.59
15,303,776
16,797,458
4.63
GSF Buyer, LLC
North Andover, MA
8.42
4/30/2025
4/30/2031
4,238,674
4,182,609
4,196,287
1.16
GSF Group Holdings, L.P. Class A2 Units
241
240,595
210,727
4,423,204
4,407,014
Guidant Corp.
Erie, PA
10.20
9,828,634
9,599,511
2.70
422,283
Titan Meter Topco LP Class A Units
574,863
581,608
986,653
10,603,402
11,237,570
HV Watterson Holdings, LLC
(29)
Schaumburg, IL
12.00
12/17/2021
12/17/2026
13,568,717
13,523,185
7,869,856
2.17
99,975
57,986
329,632
328,984
191,187
HV Watterson Parent, LLC Class A Units
1,632
1,631,591
15,583,735
8,119,029
2.24
I2P Holdings, LLC
Series A Preferred Units
1/31/2018
1,252,762
Identity Theft Guard Solutions, Inc.
Portland, OR
9.17
2/28/2025
2/28/2030
8,635,658
8,493,222
8,549,301
IDX Parent, LLC Class A-2 Units
352,915
563,339
8,846,137
9,112,640
2.52
Impact Home Services LLC
4/28/2023
4/28/2028
5,790,254
5,719,353
5,703,400
1.57
10/11/2023
527,740
520,819
519,824
263,193
259,881
259,245
(11)(17)
82,500
81,263
Impact Holdings Georgia LLC Class A Units
375
375,156
Impact Holdings Georgia LLC Class A-1 Units
1/31/2024
38
37,962
52,350
6,995,671
6,616,082
1.81
Infolinks Media Buyco, LLC
Ridgewood, NJ
9.45
11/1/2021
5/1/2028
7,168,033
7,145,998
7,096,353
6/6/2024
2,440,641
2,429,831
2,416,235
0.67
1,444,163
1,440,887
1,429,721
Tower Arch Infolinks Media, LP LP Interests
(6)(15)
10/28/2021
506,165
252,349
233,340
11,269,065
11,175,649
3.07
Informativ, LLC
Fresno, CA
7/30/2021
7/30/2027
8,286,321
8,273,391
2.28
3/31/2022
6,247,279
6,236,208
Credit Connection Holdings, LLC Series A Units
804,384
300,783
1,507,414
14,810,382
16,041,014
4.42
10
Inoapps Bidco, LLC
Term Loan B
3M SONIA+
9.59
2/15/2022
8/15/2028
£
9,625,000
12,996,305
12,654,978
3.48
9.53
20,000
9.68
80,417
80,229
Inoapps Holdings, LLC Series A-1 Preferred Units
739,844
783,756
1,107,638
0.31
13,880,290
13,863,033
3.82
iNovex Information Systems Incorporated
Columbia, MD
12/17/2024
12/17/2030
7,428,157
7,334,817
7,316,735
2.02
8.93
5,000
4,925
8,865
7,348,817
7,330,525
International Cybernetics Acquisition, LLC
Largo, FL
6/3/2025
6/3/2030
4,712,393
4,640,750
4,641,707
1.28
International Cybernetics Holdings, LP Class B Units
6/2/2025
1,051
105,113
90,896
4,745,863
4,732,603
1.31
Invincible Boat Company LLC
Opa Locka, FL
3.32
5,395,913
4,451,628
1.23
4,980,843
4,109,195
1.13
6/1/2021
1,108,303
914,350
11.32
1,595,745
1,316,490
0.36
Warbird Parent Holdco, LLC Class A Units
1,362,575
1,299,691
14,380,495
10,791,663
Ledge Lounger, Inc.
Katy, TX
11.35
11/9/2021
11/9/2027
8,116,889
8,094,115
7,264,616
91,508
81,900
SP L2 Holdings LLC Class A Units
11/3/2025
398,972
SP L2 Holdings LLC Class A Units (SBIC)
50,596,837
389,832
SP L2 Holdings LLC Class C Units (SBIC)
10/9/2024
140,834
34,504
8,609,959
7,346,516
Lightning Intermediate II, LLC
9.85
6/6/2022
11,214,012
11,149,499
11,157,942
Gauge Vimergy Coinvest, LLC Units
399
391,274
255,289
11,540,773
11,413,231
MacKenzie-Childs Acquisition, Inc.
Aurora, NY
9.35
9/2/2022
9/2/2027
86,331
85,882
16,667
MacKenzie-Childs Investment, LP Partnership Interests
201,375
202,549
304,373
Madison Logic Holdings, Inc.
New York, NY
7.00
12/30/2022
12/30/2028
3,638,939
3,594,472
3,238,656
0.89
11.17
909,735
898,618
809,664
BC Partners Glengarry Co-Investment LP Class 1 Interests
7/7/2023
404,964
51,867
4,898,054
4,100,187
1.12
MBH Management LLC
11/15/2024
11/15/2029
9,358,283
9,213,864
2.58
MBH Parent, LLC Common Units
646,944
614,511
999,978
9,828,375
10,358,261
2.86
MedLearning Group, LLC
3/26/2024
12/30/2027
4,252,433
4,207,685
4,231,171
1.17
2,492,293
2,466,066
2,479,832
0.68
2,035,353
2,013,996
2,025,176
8/5/2025
992,500
981,341
987,538
2,424,410
2,406,841
2,412,288
12,075,929
12,136,005
3.34
11
Michelli, LLC
New Orleans, LA
12/21/2023
12/21/2028
4,887,500
4,826,683
1.35
3,827,896
3,801,453
SP MWM Holdco LLC Class A Units
509,215
806,469
9,137,351
9,521,865
2.62
Microbe Formulas LLC
Meridian, ID
9.27
4/4/2022
4/3/2028
5,099,275
5,079,165
1.40
11/20/2024
4,201,105
4,187,407
9,266,572
9,300,380
Mobotrex Acquisition, LLC
Davenport, IA
6/7/2031
Wholesale
5,131,044
5,069,473
5,079,734
3,578,584
3,535,642
3,542,798
0.98
11,585
11,469
5,793
5,735
11/6/2025
256,165
254,660
253,603
8,877,153
8,893,339
MOM Enterprises, LLC
Richmond, CA
5/19/2021
5/19/2028
15,076,148
15,064,114
14,925,388
4.10
MBliss SPC Holdings, LLC Units
933,333
908,758
15,997,447
15,834,146
4.35
Monarch Behavioral Therapy, LLC
Addison, TX
6/6/2030
6,646,254
6,544,713
6,613,023
614,310
611,238
901,587
894,095
897,079
BI Investors, LLC Class A Units
4,343
430,481
590,501
8,483,599
8,711,841
2.40
Monitorus Holding, LLC
(7)
London, UK
10.21
5/24/2022
5/24/2027
Media: Diversified & Production
104,998
104,728
102,898
6/27/2025
€
1,458,975
1,674,647
1,639,718
106,498
115,781
113,465
105,976
103,856
Sapphire Aggregator S.a r.l. Class A Shares
9/1/2022
557,689
11,156
3,366
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 3 Ordinary Shares
3/31/2025
8,422,591
48,774
44,279
2,150,310
2,034,510
Morgan Electrical Group Intermediate Holdings, Inc.
Freemont, CA
9.92
8/3/2023
8/3/2029
4,054,417
3,995,173
4,013,873
1.11
1,602,969
1,590,698
1,586,939
0.44
Morgan Electrical Group Holdings, LLC Series A-2 Preferred Units
380
380,330
237,839
5,966,201
5,838,651
1.62
12
Naumann/Hobbs Material Handling Corporation II, Inc.
8/30/2019
8,007,016
7,886,911
5,049,254
4,973,515
1,789,578
1,762,734
0.49
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
623,904
Naumann Hobbs Holdings, L.P. Class W-1 Units
5/27/2025
57
Naumann Hobbs Holdings, L.P. Class W-2 Units
49
248,616
15,428,806
15,495,680
4.27
NINJIO, LLC
Westlake Village, CA
10/12/2022
10/12/2027
4,962,500
4,925,487
99,521
NINJIO Holdings, LLC Units
184
313,253
333,639
Gauge NINJIO Blocker LLC Preferred Units
9/22/2023
14
14,470
21,705
5,372,731
5,437,844
1.51
Norplex Micarta Acquisition, Inc.
Postville, IA
10/31/2024
10/31/2029
12,837,500
12,640,621
12,709,125
3.50
165,000
Norplex Micarta Parent, LP Preferred Units
739,804
737,285
0.20
13,547,092
13,611,410
3.75
NS412, LLC
8.25
12.05
5/6/2019
5/6/2027
7,615,000
2.10
NS Group Holding Company, LLC Class A Units
782
795,002
892,605
8,410,002
8,507,605
2.35
Onpoint Industrial Services, LLC
1.75
11/16/2022
11/16/2027
12,225,256
12,127,451
Spearhead TopCo, LLC Class A Units
606,742
1,290,894
12,734,193
13,516,150
3.73
Pacific Shoring Holdings, LLC
Santa Rosa, CA
1/10/2025
1/10/2030
8,415,000
8,297,372
8,330,850
2.30
8.71
19,800
PSP Ultimate Holding, LP Class A Units
10,606
498,491
648,873
8,815,863
8,999,523
2.49
PCP MT Aggregator Holdings, L.P.
Oak Brook, IL
3/29/2019
Finance
825,020
5,704,257
PCS Software, Inc.
Shenandoah, TX
0.50
7/1/2019
6/30/2027
Transportation & Logistics
13,892,190
13,753,268
3.78
1,821,927
1,803,708
6,063
6,002
960,683
951,076
PCS Software Parent, LLC Class A Common Units
9/16/2022
471,211
9,995
255,043
16,690,858
16,769,097
4.61
Pearl Media Holdings, LLC
(24)
Montclair, NJ
8/31/2022
8/31/2027
8,597,389
8,539,928
8,468,428
2.33
Peltram Group Holdings LLC
Auburn, WA
12/30/2021
508,516
451,142
677,889
0.19
Pilot Power Group Acquisition, Inc.
San Diego, CA
(5)(10)(12)
9.93
12/18/2025
12/18/2030
12,000,000
11,798,120
11,820,000
BCM Pilot Opportunity Parent, LLC Class A Common Interests
(28)
4,423
366,868
495,555
12,164,988
12,315,555
3.40
13
Plus Delta Buyer LLC
1/16/2025
1/16/2031
7,326,000
7,201,558
7,216,110
Plus Delta Parent LLC Class A Units
325,765
325,764
320,219
7,527,322
7,536,329
2.08
Precision Strategies, LLC
3/3/2031
6,176,011
6,084,573
6,084,544
1.68
Premiere Digital Services, Inc.
11/3/2021
11/3/2026
Media: Broadcasting & Subscription
12,038,926
12,029,788
Premiere Digital Holdings, Inc. Common Stock
10/18/2018
2,825,755
14,864,681
Pure Upper Holdco LLC
Newtown Square, PA
12/3/2025
12/3/2031
9,975,000
9,879,456
9,875,250
Xanitos Topco, LLC Class A Units
246,667
257,410
10,126,123
10,132,660
Recharged Opco, LLC
Bradenton, FL
(26)
12.50
2/7/2022
2/7/2028
5,324,759
5,287,947
3,114,984
0.86
(18)(26)
83,115
48,622
Priority Revolver
7/2/2024
20,223
40,446
9/13/2024
45,000
90,000
1/3/2025
10,000
2/7/2025
31,000
62,000
10/22/2025
120,000
240,000
(9)(18)(26)
12/15/2025
32,500
65,000
98,473
98,077
57,607
Recharged Holdings, LLC Common Units
11/13/2025
61,182
5,747,862
3,778,659
Red's All Natural, LLC
Franklin, TN
8.96
1/31/2023
1/31/2029
8,815,327
8,715,947
8,727,174
Centeotl Co-Invest B, LP Common Units
710,600
333,829
9,426,547
9,061,003
RIA Advisory Borrower, LLC
9.31
5/1/2023
8/2/2027
5,820,000
5,774,991
1.60
33,064
RIA Advisory Aggregator, LLC Class A Units
104,425
165,078
271,691
RIA Products Aggregator, LLC Class A Units
81,251
69,342
39,195
6,042,475
6,163,950
1.69
Said Intermediate, LLC
Boston, MA
6/13/2024
6/13/2029
7,349,610
7,246,218
7,312,862
2.01
FCP-Said Holdings, LLC Class A Common Shares
804
FCP-Said Holdings, LLC Series A Preferred Shares
852
350,649
365,864
7,596,867
7,678,726
Sales Benchmark Index, LLC
9.90
1/7/2020
7/7/2026
11,968,656
3.30
443,820
SBI Holdings Investments LLC Class A Units
66,573
665,730
411,089
13,078,206
12,823,565
3.53
Silver Corporate Holdings LLC
Hendersonville, TN
1/9/2026
1/9/2031
7,112,476
6,992,741
6,992,773
1.93
Silver Parent LLC Class A Units
30,780
498,641
7,491,382
7,491,414
2.07
Solid Surface Holdco, LLC
6/6/2025
5,651,566
5,553,093
1.56
4,260,028
4,219,128
Carolina Topco Holdings, LP Class A-1 Units
6,881
688,137
828,141
0.23
10,460,358
10,739,735
2.96
Spectra Confectionery Limited
Vaughan, Canada
9.51
11/14/2024
5,250,760
5,189,909
5,171,999
1.42
SK Spectra Holdings LP Class A Units
298
297,765
208,221
5,487,674
5,380,220
Strategus, LLC
Englewood, CO
1/27/2025
1/27/2031
7,742,928
7,627,879
7,626,784
9,850
CIVC Strategus Blocker, LLC Class A Units
170
170,362
186,321
7,808,241
7,822,955
2.15
Synergy Health Partners MSO, LLC
Troy, MI
3/6/2026
3/6/2031
4,000,000
3,940,779
3,940,760
1.09
37,500
37,222
36,945
Synergy Health Partners Holdings, LLC Common Units
436,580
136,634
4,114,635
4,114,339
1.14
TAC LifePort Holdings, LLC
Woodland, WA
3/1/2021
546,543
189,094
1,220,748
Teckrez, LLC
10.52
5/24/2024
11/30/2028
4,229,313
4,187,496
4,208,166
473,873
471,504
0.13
144,222
143,501
HH-Teckrez Parent, LP Preferred Units
90,139
182,132
4,895,730
5,005,303
1.38
The Hardenbergh Group, Inc.
Livonia, MI
10.30
8/7/2023
8/7/2028
10,239,350
10,097,720
2.82
791,971
781,353
10/1/2025
497,500
489,031
BV HGI Holdings, L.P. Class A Units
677,548
707,510
12,045,652
12,236,331
The Millennium Alliance LLC
7/31/2031
11,442,500
11,282,207
11,213,650
BV MA Blocker, Inc. Class A-2 Common Stock
52
515,556
579,428
11,797,763
11,793,078
3.25
Tiger 21, LLC
12/30/2024
12/30/2030
11,850,000
11,651,664
Tiger 21 Blocker, Inc. Class A-3 Common Stock
565
564,635
849,344
12,216,299
12,699,344
3.49
Tilley Distribution, Inc.
Baltimore, MD
4/1/2022
84,275
84,023
80,904
9.82
13,043
12,521
97,066
93,425
TradePending OpCo Aggregator, LLC
Carrboro, NC
3/2/2021
4/16/2026
9,404,040
9,357,020
8/4/2023
2,405,213
2,393,187
33,333
33,166
671,550
668,192
TradePending Holdings, LLC Series A Units
908,333
947,699
1,624,453
TradePending Holdings, LLC Series A-1 Units
132,783
260,254
329,123
13,722,089
14,405,141
3.97
15
TriplePoint Acquisition Holdings LLC
Columbus, OH
5/31/2024
5/31/2029
5,262,752
5,189,212
1.45
4/8/2025
1,756,071
1,728,089
0.48
TriplePoint Holdco LLC Class A Units
557,968
508,733
2,315,726
0.64
7,426,034
9,334,549
Unicat Catalyst Holdings, LLC
Alvin, TX
Unicat Catalyst, LLC Class A Units
4/27/2021
7,500
785,503
Unicat Catalyst, LLC Class A-1 Units
12/13/2023
974
58,446
60,746
808,446
846,249
0.24
U.S. Expediters, LLC
Stafford, TX
10.15
12/22/2021
12/22/2026
14,273,781
14,223,759
13,845,568
3.81
Cathay Hypnos LLC Units
1,737,087
1,353,155
276,274
15,576,914
14,121,842
3.89
USDTL AcquisitionCo, Inc.
Des Plaines, IL
12/9/2024
12/9/2030
5,925,000
5,826,643
5,806,500
19,600
USDTL Holdings, LLC Preferred Units
110
110,000
88,178
5,976,643
5,933,878
1.64
Valor Buyco, LLC
Leesburg, VA
12/23/2025
12/23/2031
6,000,000
5,941,930
5,940,000
Valor Holdco LLC Voting Common Units
4,306
430,556
386,382
6,372,486
6,326,382
Venbrook Buyer, LLC
(4)(25)
13.50
3/13/2020
5/27/2026
14,611,018
9,204,941
2.54
(25)
177,127
111,590
1,898,736
0.52
12/5/2025
471,156
296,828
2/25/2026
1,256,415
628,201
2,750,080
1,732,550
5,308,287
3,344,221
0.92
Venbrook Holdings, LLC Convertible Term Loan
(14)(25)
12/20/2028
117,483
Venbrook Holdings, LLC Common Units
822,758
819,262
28,037,765
18,473,482
5.09
WER Holdings, LLC
Sugar Hill, GA
4/11/2024
4/11/2030
2,656,841
2,617,363
2,616,988
5/30/2025
423,683
418,194
417,328
241,729
238,103
1,322,992
1,311,926
1,303,147
884,786
878,737
871,514
Blade Landscape Investments, LLC Class A Units
1,803
180,300
225,927
5,648,249
5,673,007
Whisps Holdings LP
Elgin, IL
4/18/2019
Class A-1 Units
3/6/2023
280,939
182,610
682,610
Total Non-control, non-affiliated investments
976,006,465
268.44
Total Investments
1,015,318,318
989,994,564
272.73
LIABILITIES IN EXCESS OF OTHER ASSETS
(626,999,043)
(172.73)
100.00
16
17
Unused
Unfunded
Commitment
Security
Fee
12,500
0.50%
June 5, 2028
519,608
May 7, 2028
875,995
December 12, 2028
55,198
0.00%
December 31, 2027
March 31, 2028
December 4, 2029
Amika OpCo LLC*
July 1, 2028
172,730
November 6, 2028
Axis Portable Air LLC
December 31, 2030
2,216,358
1.00%
December 20, 2030
753,805
March 15, 2029
91,000
September 1, 2026
September 19, 2030
57,449
February 7, 2027
24,167
August 2, 2028
November 22, 2027
60,000
June 30, 2028
60,855
December 31, 2028
September 22, 2030
1,000,000
August 22, 2031
2,500,000
0.75%
July 31, 2030
2,681,986
January 15, 2030
1,363,636
December 7, 2028
January 24, 2028
March 16, 2027
38,076
April 1, 2029
12,872
3,172,733
October 17, 2031
391,962
March 12, 2029
2,847,136
April 30, 2031
633,424
February 28, 2030
July 30, 2027
80,000
August 15, 2028
86,000
December 17, 2030
3,561,003
June 3, 2030
18
83,333
September 2, 2027
52,632
December 30, 2027
November 15, 2029
1,296,076
December 21, 2028
0.38%
April 3, 2028
1,292,891
June 7, 2031
156,398
May 19, 2028
173,452
June 6, 2030
108,408
August 3, 2029
October 12, 2027
333,333
October 31, 2029
January 10, 2030
1,318,136
June 30, 2027
3,753,955
January 16, 2031
March 3, 2031
576,923
November 3, 2026
December 3, 2031
February 7, 2028
66,936
August 2, 2027
1,168,831
June 13, 2029
January 9, 2031
March 21, 2030
138,000
2,524,737
January 27, 2031
462,500
March 6, 2031
824,126
November 30, 2028
August 6, 2028
July 31, 2031
December 30, 2030
86,957
December 31, 2026
66,667
August 16, 2026
743,957
May 31, 2029
30,000
December 22, 2026
December 9, 2030
Valor Buyco LLC
December 23, 2031
1,408,896
April 11, 2030
WER Holdings, LLC**
582,348
Total Unfunded Debt Commitments
47,157,985
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.
** Included in this investment is a Line of Credit in the amount of $81,144, with a Line of Credit rate of 5.50% and a maturity of April 11, 2030.
19
Gross Additions
Gross Reductions
Amount of Realized
Amount of Unrealized
Interest Income
Value
(a)
(b)
Loss
Appreciation (Depreciation)
(c)
Term Loan A-1
(265,092)
265,092
Term Loan A-2
(154,848)
154,848
Term Loan A-3
(62,791)
62,791
Term Loan A-4
1,159,263
(1,505,537)
346,274
4,415,603
(3,899,494)
816,516
1,032,441
3,399,302
(543,888)
2,855,414
3,174,226
69,000
Class A Preferred
Total control investments
2,817,640
(1,988,268)
(a) Gross additions include increases in the cost basis of investments resulting from new investments, follow-on investments, PIK 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.
2,868,074
72,345
Trade Education Holdings, L.L.C. Class A Units
882,600
Total non-controlled, affiliated investments
(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.
(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 non-controlled, affiliated investments category.
Abbreviation Legend
PIK — Payment-In-Kind
SOFR — Secured Overnight Financing Rate
SONIA — Sterling Overnight Index Average
21
4/3/2023
6/7/2023
7/12/2023
1,505,537
1.19
18,419,200
8,379,604
2.26
10,082,316
2,520,579
3,514,892
878,723
1,587,113
15,184,321
6,573,528
1.78
33,603,521
4.04
0.77
4,806,660
1.01
5,376,454
5,299,849
1,415,799
1,394,300
0.38
3,813,089
3,771,087
1.03
62,500
1,220,397
10,704,651
11,888,239
3.21
16,778,592
16,730,161
16,778,593
4.52
783,313
17,594,600
17,561,906
4.73
9.72
9,800,000
9,670,440
9,751,000
2.63
567,340
0.15
10,399,150
10,318,340
2.78
13,101,406
13,071,113
11,856,773
3.19
15,698
31,396
14,019,767
11,888,169
3.20
22
16,781,420
2,331,934
0.63
2,563,750
0.69
1,465,000
20,714,369
6,360,684
1.71
10,566,027
10,406,341
10,354,707
8,048,097
7,942,571
98,250
97,500
129,350
224,577
8,169,421
8,370,924
8.17
8,731,273
8,623,147
8,687,618
2.34
176,331
8,765,607
8,863,949
93,519
9,511,775
9,377,401
311,230
88,922
9,530,194
10,006,565
2.69
3,162,656
0.85
482,200
809,392
4,148,482
40,530
10.34
4,031,455
1,815,868
6,317,213
9,458,170
12,164,536
3.28
8/8/2028
10,918,921
10,754,010
2.94
11/6/2024
1,283,750
1,264,755
399,965
396,842
271,401
202,628
365,976
12,618,235
12,968,612
2.38
3.01
23
9,310,000
9,230,695
2.51
1,855,738
1,836,176
97,548
2,882,638
11,608,055
14,146,376
1,000,036
9.09
8,830,894
8,702,680
1,724,720
1,710,769
837,967
11,135,860
11,393,581
1,142,767
1,736,816
Camp Profiles LLC
9.07
9,814,375
9,780,539
2.64
2,227,500
2,213,033
0.60
CIVC VI-A 829 Blocker, LLC Units
250
900,363
12,243,572
12,942,238
6,779,838
6,676,390
6,610,342
367,446
7,142,027
6,977,788
1.88
8,349,501
8,342,798
3,166,966
3,147,329
268,648
11,623,046
11,785,115
3.17
8.72
4,455,979
68,499
371,091
4,847,580
4,966,273
1.34
88,511
150,931
13,222,035
13,176,452
13,155,926
3.54
2,855,259
2,850,147
2,840,983
9.74
177,046
16,256,529
16,182,910
4.36
11,970,000
11,740,066
11,730,600
3.16
253,825
12,008,955
11,984,425
3.23
24
10.84
12,982,758
12,947,843
1,655,482
1,649,757
10.82
20,276
10.94
10,138
10.74
6,759
10.86
27,035
14,715,878
14,756,518
151,068
262,477
9,481,462
9,339,450
9,007,390
1,043,816
1,033,534
991,625
12.19
19,000
12.17
11,368
10,800
92,336
38,086
10,732,023
10,159,237
2.74
10.07
4,837,500
4,793,779
1.30
376,673
5,079,493
5,214,173
9.42
9,882,041
9,768,247
2.66
1,132,360
10,434,937
11,054,401
2.98
12,656,689
12,563,484
12,530,123
3.38
756,722
13,471,227
13,327,009
3.59
11,551,523
11,357,330
11,378,251
538,122
11,769,582
11,916,373
5,997,713
169,710
6,177,713
6,178,210
1.67
7,785,007
7,660,131
7,668,232
1,056,301
8,576,850
8,724,533
25
11.87
1/21/2026
9,594,927
9,115,182
2.46
1/31/2026
76,245
13,724
59,833
56,841
1,585,290
0.43
746,513
1,019,285
13,983,687
12,536,835
7,275,781
7,153,358
7,166,644
140,928
7,316,467
7,307,572
1.97
10.33
6,949,183
6,845,973
1.87
2,117,063
2,070,832
0.57
98,150
9,181,622
9,331,063
11.90
7,482,765
7,372,876
6,996,385
2,770,797
2,753,379
2,590,695
0.70
58,588
14,041
11,076,351
9,659,709
2.60
10.49
9,211,059
473,485
498,613
9,684,544
9,833,927
2.65
10.57
12,104,445
11,956,146
12,043,924
3.24
940,212
12,829,479
12,984,136
9.57
16,308,509
15,656,170
4.22
992,002
952,322
99,685
208,826
18,540,168
16,917,003
4.57
8,631,371
8,594,584
328,204
8,972,119
8,959,575
2.42
10.42
7,481,998
7,360,162
7,444,588
103,720
101,905
103,201
514,030
511,460
2,641,131
2,617,056
2,627,925
0.71
2,985
304,909
421,889
10,898,062
11,109,063
3.00
4,759,099
4,677,532
1.26
4,945,260
26
8.97
3,503,162
3,453,695
3,468,130
176,211
3,644,077
3,644,341
12.77
4,496,653
12,123,673
12,121,297
1,944,444
10.51
10.50
88,384
4,468,228
1.20
15,336,022
19,243,417
5.18
8.84
4,249,351
4,191,024
233,513
4,431,619
4,482,864
10.17
9,853,707
9,608,518
801,170
10,612,409
11,077,160
Husk AcquireCo Inc.
5,264,053
5,199,682
5,185,092
226,274
5,497,447
5,411,366
1.46
13,508,378
9,023,198
66,483
328,777
219,205
15,568,721
9,308,886
1,587,652
9.22
8,657,465
8,507,362
8,614,178
588,521
8,860,277
9,202,699
5,805,097
5,726,630
5,688,995
1.53
529,089
521,434
518,507
263,868
260,204
258,591
80,850
35,526
7,003,886
6,582,469
1.77
27
11/1/2026
7,138,013
7,132,193
2,425,985
2,428,438
1,447,875
1,443,421
1,440,636
460,943
207,385
475,679
11,214,804
11,476,946
8,308,013
8,285,463
6,263,548
6,244,249
1,371,768
0.37
14,830,495
15,943,329
4.30
9.88
2/15/2027
9,650,000
13,015,616
12,903,217
9.58
80,625
80,388
1,088,044
13,959,760
14,151,886
7,446,962
7,349,332
7,372,492
8.98
72,000
71,280
PRIME+
4.25
11.00
4,950
7,426,332
7,448,722
4,724,263
4,649,089
4,677,020
93,640
4,754,202
4,770,660
5,351,146
4,682,253
4,939,520
4,322,080
1,099,108
961,720
11.37
1,489,362
1,303,192
14,178,827
11,269,245
11.55
7,893,466
7,862,441
7,064,652
1.90
88,989
79,645
8,375,766
7,144,297
11,137,405
3.02
339,006
11,528,679
11,553,018
3.11
Luxium Solutions, LLC
Deerfield Beach, OH
5/10/2024
12/1/2027
8,169,324
8,095,857
2.20
1,182,247
1,176,738
9,272,595
9,351,571
9.32
85,813
171,068
185,813
257,399
10.72
3,627,720
3,577,518
3,319,364
11.22
906,930
894,380
829,841
45,355
4,876,862
4,194,560
9,381,975
9,229,172
9,335,066
986,162
9,876,116
10,321,228
4,263,337
4,212,827
4,220,704
2,498,733
2,469,128
2,473,746
2,040,545
2,016,437
2,020,140
0.54
995,000
982,379
985,050
2,430,523
2,410,657
2,406,218
12,091,428
12,105,858
4,900,000
4,834,556
1.32
3,837,617
3,809,613
560,167
9,153,384
9,297,784
2.50
5,305,649
5,282,425
1.43
4,211,768
4,196,582
9,479,007
9,517,417
6/6/2031
5,143,936
5,079,288
5,092,497
3,587,553
3,542,465
3,551,677
0.96
14,481
14,336
8.69
8,689
8,602
256,807
255,226
254,239
8,900,149
8,921,351
6.48
15,046,351
15,000,768
850,956
15,979,684
15,851,724
6,663,165
6,556,702
6,629,849
1.79
289,087
287,642
216,815
215,731
8.73
72,272
71,911
36,136
35,955
903,847
895,984
899,328
4,286
424,738
525,713
8,491,734
8,666,129
29
10.18
105,248
104,923
103,669
1,462,650
1,673,913
1,691,278
114,044
106,228
104,635
Sapphire Aggregator S.a r.l. Convertible Bonds
(14)
1/31/2025
3/31/2026
8,977
9,454
10,380
5,431
6,458,506
37,512
68,931
2,148,215
2,141,816
9.97
4,065,515
4,002,647
4,024,860
1.08
1,607,266
1,594,242
1,591,193
246,772
5,977,219
5,862,825
1.58
8,054,946
7,934,122
5,079,479
5,003,287
546,782
217,884
15,506,961
15,464,809
4.17
4,920,208
99,453
340,673
5,347,384
5,424,878
12,870,000
12,661,385
12,805,651
3.45
50,000
49,750
690,496
13,451,189
13,545,897
12.02
1,036,196
8,651,196
12,256,846
12,145,661
1,078,794
12,752,403
13,335,640
8,436,250
8,312,084
8,351,888
610,672
8,810,575
8,962,560
30
6,187,401
13,816,136
13,747,056
1,811,952
1,802,892
440
431
438
955,424
950,647
289,993
16,593,938
16,791,026
4.53
8,620,067
8,553,265
8,447,666
799,295
9.95
11,790,000
3.18
12,156,868
7,344,500
7,214,782
7,271,055
340,885
7,540,546
7,611,940
12,070,359
12,057,869
3,126,233
0.84
15,196,592
10,000,000
9,901,043
2.67
10,147,710
5,283,494
2,901,994
45,298
98,030
53,668
5,743,362
3,558,406
9.13
8,708,727
2.37
352,910
9,419,327
9,168,237
2.47
5,835,000
5,782,654
73,915
277,592
78,390
6,100,037
6,225,702
31
7,368,312
7,258,150
7,294,629
323,546
7,608,799
7,618,175
2.06
12,004,716
458,148
13,114,266
12,906,684
3.47
5,665,801
5,562,303
5,637,472
1.52
2,220,766
2,198,813
2,209,662
1,736,753
1,719,585
1,728,069
313,185
310,089
311,619
4,935
493,470
866,935
10,284,260
10,753,757
2.90
7,762,432
7,642,498
7,645,996
203,173
7,812,860
7,849,169
1,543,947
4,240,129
4,194,947
4,218,928
885,936
881,506
162,373
5,315,244
5,406,308
10,265,605
10,110,799
2.77
793,981
782,369
498,750
489,484
697,242
12,060,200
12,255,578
11,471,250
11,306,226
11,356,539
3.06
656,334
11,821,782
12,012,873
11,880,000
11,673,028
770,506
12,237,663
12,650,506
82,617
82,299
79,725
9,016
8,981
8,700
12,586
104,323
101,011
32
3/2/2026
9,428,788
9,417,687
2,411,396
2,406,156
673,267
672,497
1,812,352
365,808
13,737,626
14,724,944
5,276,143
5,197,842
1,760,506
1,730,596
1,876,311
7,437,171
8,912,960
639,521
59,014
698,535
10.12
14,311,049
14,244,794
13,523,942
3.64
200,084
15,597,949
13,724,026
3.69
5,837,398
5,880,600
156,484
5,967,398
6,056,884
1.63
8.44
6,370,556
15,567,454
15,554,413
10,352,358
176,979
117,789
942,301
626,630
313,319
1,828,803
5,305,704
3,530,011
26,137,378
16,768,910
4.51
2,663,602
2,622,140
2,650,284
424,750
418,979
422,626
461,483
459,176
1,326,339
1,314,855
1,319,707
878,440
880,362
245,968
5,876,197
5,978,123
1.61
987,729,505
266.42
1,026,139,686
1,007,623,395
271.47
(636,444,439)
(171.47)
33
34
1,299,020
Amika OpCo LLC *
250,895
September 3, 2026
1,130,707
16,897
52,500
Delayed Draw Term Loan**
3,918,298
December 19, 2029
628,259
579,226
December 17, 2026
February 15, 2027
23,000
35
106,383
June 7, 2030
150,606
450,000
1,317,703
26,085
July 7, 2026
412,063
March 2, 2026
WER Holdings, LLC***
362,594
52,991,159
* 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.
** This a last-out delayed draw term loan with contractual rates higher than the applicable rates.
*** Included in this investment is Line of Credit in the amount of $81,144, with Line of Credit rate of 5.50% and a maturity of April 11, 2030.
36
254,101
(1,617,134)
1,363,033
87,877
(496,095)
408,218
31,142
(167,887)
136,745
(346,274)
5,710,182
24,368
(1,318,947)
543,888
236,250
462,113
2,475,863
(1,132,576)
1,132,576
10,744,100
3,227,622
(2,281,116)
4,395,102
(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.
5,320,286
217,434
(1,579,771)
(5,605,667)
4,515,792
226,424
20,865
7,000
(46,000)
18,135
(662,660)
662,660
(774,050)
(281,936)
5,341,151
2,163,020
(6,314,327)
4,140,601
(c) Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included he non-controlled, affiliated investments category.
37
BSBY — Bloomberg Short-Term Bank Yield Index
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 its investment adviser, Stellus Capital Management, LLC (“Stellus Capital” or the “Advisor”).
As of March 31, 2026, 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 $13,093,525 in offering expenses and sales load fees. Additionally, the Company has received $672,917 in offering expenses reimbursements from the Advisor for net proceeds from offerings of $406,684,725. 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 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 the SBIC I subsidiary 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 the SBIC II subsidiary are included in the consolidated financial statements.
The SBIC licenses allow the SBIC I subsidiary and the 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 it 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 aggregate amount of outstanding SBA-guaranteed debentures cannot exceed $350,000,000.
As of March 31, 2026 and December 31, 2025, the SBIC I subsidiary had $73,625,000 and $75,000,000 in regulatory capital, respectively.
As of both March 31, 2026 and December 31, 2025, the SBIC II subsidiary had $87,500,000 in regulatory capital.
As of March 31, 2026 and December 31, 2025, the SBIC I subsidiary had $85,000,000 and $124,000,000 of SBA-guaranteed debentures outstanding, respectively. As of both March 31, 2026 and December 31, 2025, 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 provisions of the 1940 Act, the Company is permitted, as a BDC that has satisfied certain requirements, to issue senior securities in amounts such that its asset coverage ratio, as defined in the 1940 Act, equals at least 150% of its gross assets, less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. As of March 31, 2026, the Company’s asset coverage ratio was 199%.
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 months ended March 31, 2026 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, 2025.
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.
40
Economic Developments
Economic activity has continued to accelerate across sectors and regions. Nonetheless, the Company has observed and continues to observe macroeconomic uncertainty as a result of various events and trends, including labor resource shortages, commodity inflation, fluctuating interest rates, 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 on the United States or its trading partners, and the global conflict in the Middle East, including Iran. 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 nor 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 March 31, 2026, cash balances totaling $52,985, including foreign currency of $33,089 (acquisition cost of $33,089), did not exceed Federal Deposit Insurance Corporation ("FDIC") insurance protection levels of $250,000. In addition, as of March 31, 2026, the Company held $3,323,540 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 March 31, 2026, 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. Notes Payable for which readily available market quotations do not exist are valued using prices provided by independent pricing services, which may incorporate matrix pricing and/or independent broker quotations. At the measurement date, the estimated fair values of the SBA-guaranteed debentures and Notes Payable as prepared for disclosure purposes was $232,838,812 (Level 3 classification) and $124,875,000 (Level 2 classification),
41
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 available market quotations. 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 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 and related prospectuses. 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 March 31, 2026, there was $75,000 of such costs, which are included in “Deferred offering 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 of directors of the Company (the “Board”) has not elected to designate the Advisor as
42
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 quotations 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 quotations 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 determining 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:
43
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 discounts or premiums 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 its portfolio companies for the three months ended March 31, 2026 and 2025 is as follows:
Loan interest
19,465,129
22,350,506
PIK income
1,674,387
976,479
Fee amortization income(1)
764,447
761,383
Fee income acceleration(2)
349,044
38,748
Total Interest Income
22,253,007
24,127,116
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 the collectability of interest income. As of March 31, 2026, the Company had loans to six portfolio companies that were on non-accrual status, which represented approximately 9.2% of the Company’s total investments at cost and 5.2% at fair value. As of December 31, 2025, the Company had loans to five portfolio companies that were on non-accrual status, which represented approximately 7.5% of the Company’s total investments at cost and 4.1% at fair value. As of March 31, 2026 and December 31, 2025, $13,208,429 and $11,182,515, 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:
44
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 its 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.
The Company generally is subject to a nondeductible 4% U.S. federal excise tax if it does not distribute to its stockholders in a timely manner in each taxable year, an amount at least equal to 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. 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 March 31, 2026 of $360,471 was mostly related to excise and franchise taxes. Income tax expense for the three months ended March 31, 2025 of $499,547 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 March 31, 2026 and December 31, 2025, 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 months ended March 31, 2026 and 2025 were de minimis.
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 of the Taxable Subsidiaries 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 months ended March 31, 2026 and 2025, the Company did not record deferred income tax benefit or provision related to the Taxable Subsidiaries. In addition, as of both March 31, 2026 and December 31, 2025, 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 March 31, 2026 and December 31, 2025 were as follows:
Accumulated net realized loss from investments, net of cumulative dividends of $30,352,761 for both periods
(39,212,808)
(39,963,218)
(278,481)
(282,145)
Net unrealized depreciation on investments and cash equivalents, net of deferred tax liability of $0 for both periods
(24,967,577)
(18,419,231)
Net unrealized (depreciation) appreciation on foreign currency translations
(30,166)
17,854
Accumulated undistributed net investment income
29,625,813
31,966,956
Recently Issued Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 enhances income tax disclosures, including
46
disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company’s adoption of ASU 2023-09 did not have a material impact on the consolidated financial statements.
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 the new guidance.
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 its 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 months ended March 31, 2026, the Company recorded an expense for base management fees of $4,392,357. For the three months ended March 31, 2025, the Company recorded an expense for base management fees of $4,054,726. As of March 31, 2026 and December 31, 2025, $4,392,357 and $4,442,705 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 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
47
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 months ended March 31, 2026, the Company incurred $106,709 of Income Incentive Fees. For the three months ended March 31, 2025, the Company incurred $2,136,491 of Income Incentive Fees. As of March 31, 2026 and December 31, 2025, $2,413,077 and $2,317,429, respectively, of such Income Incentive Fees were payable to the Advisor, of which $1,628,496 and $1,539,724, respectively, were currently payable (as explained below). As of March 31, 2026 and December 31, 2025, $784,581 and $777,705, 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 months ended March 31, 2026 and 2025, $11,061 and $1,242,843, 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 Fee 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 realized gains and losses and unrealized capital appreciation or depreciation were realized, even though such 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.
For both the three months ended March 31, 2026 and 2025, the Company did not incur any Capital Gains Incentive Fee. As of March 31, 2026 and December 31, 2025, no Capital Gains Incentive Fee was accrued.
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The following tables summarize the components of the incentive fees discussed above:
Investment income incentive fees incurred
Income incentive fees waived
Incentive fees expense
893,648
Investment income incentive fee currently payable
1,628,496
1,539,724
Investment income incentive fee deferred
784,581
777,705
Incentive fee payable
Director Fees
For the three months ended March 31, 2026, the Company recorded an expense relating to independent director fees of $129,250. For the three months ended March 31, 2025, the Company recorded an expense relating to independent director fees of $111,250. As of both March 31, 2026 and December 31, 2025, 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 Order 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.
Administrative Agent
The Company serves as the administrative agent on certain investment transactions, including co-investments with its affiliates under the Order. As of March 31, 2026, there was $2,335,513 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, 2025, there was no cash due to related parties related to interest paid by a borrower to a Company as administrative agent.
Additionally, as of both March 31, 2026 and December 31, 2025, there was $0 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 Stellus Capital or one of its affiliates remains the Company's investment adviser.
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 months ended March 31, 2026 and 2025, the Company recorded expenses of $531,593 and $370,974, respectively, related to the Administration Agreement, which are included in “Administrative services expenses” on the Consolidated Statements of Operations. As of March 31, 2026 and December 31, 2025, $531,593 and $530,739, respectively, remained payable to Stellus Capital relating to the Administration Agreement, which are included in “Administrative services payable” on the 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 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.
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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, are determined by the Board. Any distribution to stockholders will be declared out of assets legally available for distribution.
For the three months ended March 31, 2026 and 2025, the Company declared aggregate distributions of $0.34 per share and $0.40 per share on its common stock, respectively. The Company has declared aggregate distributions of $18.49 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
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
January 16, 2026
January 30, 2026
February 13, 2026
0.1133
February 27, 2026
March 13, 2026
April 15, 2026
18.49
The Company has adopted an “opt out” dividend reinvestment plan (“DRIP”), pursuant to which a stockholder whose shares are held in their own name will receive distributions in shares of the Company’s common stock under the Company’s DRIP unless they elect 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 reinvested only if such service is provided by the broker or the nominee, or if the broker of the nominee permits participation in the 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 months ended March 31, 2026 or 2025.
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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.The Company did not issue any common stock shares during the three months ended March 31, 2026.
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
13.65
Year ended December 31, 2025
1,466,136
20,588,960
308,998
606,848
19,673,114
13.83
419,105,333
9,403,139
3,690,386
672,917
406,684,725
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 Distribution Agreement, the Company was permitted to 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 did not issue any shares during the three months ended March 31, 2026 under the ATM Program. The Company issued 656,085 shares during the three months ended March 31, 2025 under the ATM Program, for gross proceeds of $9,256,982 and underwriting fees and other expenses of $318,896. The average per share offering price of shares issued in the ATM Program during the three months ended March 31, 2025 was $14.11.
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 months ended March 31, 2026 and 2025.
Weighted average common shares
Net increase in net assets resulting from operations per common 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 Board 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 Board 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.
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At March 31, 2026, the Company had investments in 116 portfolio companies. The composition of its investments as of March 31, 2026 was as follows:
Fair Value
Senior Secured – First Lien(1)
940,012,590
891,688,561
Senior Secured – Second Lien
12,115,000
12,025,000
Unsecured Debt
311,853
62,878,875
86,200,333
At December 31, 2025, the Company had investments in 115 portfolio companies. The composition of its investments as of December 31, 2025 was as follows:
951,615,061
908,669,800
12,111,653
318,425
123,789
62,094,547
86,804,806
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 both March 31, 2026 and December 31, 2025, the Company had 76 of such investments with aggregate unfunded commitments of $47,501,619 and $53,380,015, respectively. The Company maintains sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded commitments should the need arise.
The aggregate gross unrealized appreciation and depreciation and the aggregate cost and fair value of the Company’s portfolio company securities as of March 31, 2026 and December 31, 2025 were as follows:
Aggregate cost of portfolio company securities
Gross unrealized appreciation of portfolio company securities
57,996,806
59,298,870
Gross unrealized depreciation of portfolio company securities
(82,964,383)
(77,718,103)
Gross unrealized (depreciation) appreciation on foreign currency translations of portfolio company securities
(17,731)
26,900
Gross unrealized depreciation on foreign currency translations of portfolio company securities
(338,446)
(123,958)
Aggregate fair value of portfolio company securities
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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 March 31, 2026 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, 2025 were as follows:
The aggregate values of Level 3 portfolio investments changed during the three months ended March 31, 2026 as follows:
Senior Secured
Loans-First
Loans-Second
Lien
Debt
Fair value at beginning of period
26,571,073
1,104,429
27,675,502
PIK interest
1,670,654
3,733
Sales and redemptions
(40,554,410)
(10,305)
(1,039,222)
(41,603,937)
Realized gains
719,121
Change in unrealized depreciation included in earnings(1)
(5,125,399)
(3,347)
(35,479)
(1,384,121)
Change in unrealized depreciation on foreign currency included in earnings
(253,371)
(1,068)
(4,680)
(259,119)
710,214
3,347
713,561
Fair value at end of period
There were no Level 3 transfers during the three months ended March 31, 2026.
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The aggregate values of Level 3 portfolio investments changed during the year ended December 31, 2025 as follows:
856,096,255
11,948,850
6,612,493
78,840,090
953,497,688
186,821,022
8,904,074
195,734,550
5,188,864
561,606
5,802
5,756,272
(121,906,047)
(7,021,819)
(12,566,138)
(141,494,004)
Realized (losses) gains
(5,651,690)
7,114,167
1,462,477
Change in unrealized (depreciation) appreciation included in earnings(1)
(15,593,776)
38,229
(53,944)
4,502,560
(11,106,931)
Change in unrealized appreciation on foreign currency included in earnings
874,729
2,680
4,251
881,660
2,840,443
37,921
13,319
2,891,683
There were no Level 3 transfers during the year ended December 31, 2025.
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The following is a summary of geographical concentration in the Company’s investment portfolio as of March 31, 2026:
% of Total
Investments at
California
189,529,089
181,459,980
18.33
Texas
149,271,130
146,181,261
14.77
Florida
101,785,470
95,795,089
New York
59,269,009
59,775,558
6.04
Illinois
70,439,146
51,373,377
5.19
Pennsylvania
47,675,965
49,385,387
Colorado
41,648,469
40,498,263
Arizona
34,115,701
37,580,504
3.80
Ohio
25,964,453
27,444,553
Canada
35,005,849
35,005,230
North Carolina
31,311,773
32,106,220
Massachusetts
12,020,071
12,085,740
Iowa
22,424,245
22,504,749
2.27
New Jersey
19,808,993
19,644,077
1.98
Tennessee
28,392,241
26,319,065
Virginia
19,491,436
19,755,351
Georgia
16,863,235
District of Columbia
16,710,796
20,865,467
Michigan
16,160,287
16,350,670
1.65
Minnesota
1.24
Missouri
Idaho
0.94
Louisiana
Oregon
7,445,883
7,423,950
Wisconsin
21,474,694
9,491,204
South Carolina
Washington
1,273,384
2,145,280
United Kingdom
The following is a summary of geographical concentration in the Company’s investment portfolio as of December 31, 2025:
at Fair Value
199,175,312
192,583,333
19.12
149,955,251
147,396,649
14.63
102,086,659
96,730,609
59,320,592
59,952,294
5.95
69,282,731
55,796,619
5.54
47,721,299
49,296,019
4.89
41,413,399
39,386,741
3.91
34,208,744
37,526,211
3.72
35,249,934
36,769,186
36,116,171
36,140,789
31,163,913
32,456,489
3.22
24,283,990
25,043,277
22,351,338
22,467,248
2.23
19,768,069
19,924,612
20,495,678
18,827,946
17,506,416
17,764,137
1.76
17,168,351
10,685,508
14,469,710
1.18
1.10
7,530,655
7,549,733
21,458,139
7,360,720
0.73
2,605,719
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The following is a summary of industry concentration in the Company’s investment portfolio as of March 31, 2026:
279,930,309
279,261,336
28.21
97,090,678
97,046,413
9.80
83,330,629
86,899,397
8.78
61,564,601
65,891,385
6.66
66,726,987
65,691,326
6.64
55,445,308
56,582,066
5.72
61,572,096
52,712,306
5.32
42,752,415
40,715,215
4.11
36,423,448
36,602,096
35,878,938
31,267,997
28,847,730
26,526,734
20,510,466
24,397,581
19,723,334
19,622,459
11,793,290
0.90
7,523,041
7,472,354
0.61
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The following is a summary of industry concentration in the Company’s investment portfolio as of December 31, 2025:
265,116,204
266,803,107
26.48
103,212,518
106,937,496
10.61
92,736,458
92,182,392
9.15
78,965,841
79,030,004
7.84
61,644,736
65,191,527
6.47
54,323,129
58,129,551
5.77
61,701,885
53,502,252
5.31
42,793,668
40,569,003
36,950,838
37,219,214
35,569,885
31,655,077
28,192,548
25,968,951
20,190,193
22,323,773
2.22
20,054,202
19,792,281
11,802,297
0.83
7,495,599
7,566,694
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The following provides quantitative information about the Company’s Level 3 fair value measurements as of March 31, 2026. During the three months ended March 31, 2026, investments valued at $38,546,162 changed valuation methods from transaction value to the income and market approaches due to the transaction price no longer being reflective of current market conditions.
Description:
Valuation Technique
Unobservable Inputs
Range (Weighted Average)
First lien debt
771,026,046
Income approach(1)(2)
HY credit spreads
-1.65% to 14.75% (0.47%)
Risk free rates
-0.85% to 1.46% (-0.05%)
103,607,493
Market approach(1)
EBITDA multiple
5.0x to 10.6x (7.8x)(3)
17,055,022
Transaction value
Transaction price
N/A
Second lien debt
0.51% to 0.51% (0.51%)
0.15% to 0.15% (0.15%)
6.5x to 6.5x (6.5x)(3)
Unsecured debt
6.9x to 9.5x (8.3x)(3)
Equity investments
71,024,059
Market approach(4)
3.6x to 17.9x (10.1x)
Revenue multiple
6.5x to 8.7x (7.4x)
15,176,274
Total Long Term Level 3 Investments
61
The following provides quantitative information about Level 3 fair value measurements as of December 31, 2025.
788,539,535
-1.89% to 11.20% (-0.14%)
-2.03% to 1.73% (-0.33%)
87821690
4.4x to 10.1x (6.8x)(3)
32,308,575
-0.17% to 2.35% (0.75%)
-0.16% to -0.10% (-0.14%)
-0.59% to -0.59% (-0.59%)
-0.31% to -0.31% (-0.31%)
113,409
4.4x to 8.7x (8.5x)(3)
$66,907,041
3.2x to 18.2x (10.2x)
7.0x to 9.0x (7.7x)
19,897,765
NOTE 7 — COMMITMENTS AND CONTINGENCIES
The Company is currently not subject to any material legal proceedings, nor, to its knowledge, is any material legal proceeding threatened against it. 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 its rights under contracts with its 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 its business, financial condition or results of operations.
As of March 31, 2026, the Company had $47,157,985 in unfunded debt commitments and $343,634 in unfunded equity commitments to 76 existing portfolio companies. As of December 31, 2025, the Company had $52,991,159 in unfunded debt commitments and $388,856 in unfunded equity commitments to 77 existing portfolio companies. As of both March 31, 2026 and December 31, 2025, the Company did not record any fair value adjustments that resulted in any unrealized appreciated (depreciation) on these positions. As of
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March 31, 2026, the Company 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
13.46
Change in unrealized (depreciation) appreciation on investments
(0.23)
Change in unrealized appreciation (depreciation) on foreign currency translation
Net realized gain (loss)
(0.21)
Gain (loss) on debt extinguishment
Benefit (provision) for taxes on net realized losses (gains) on investments
Benefit (provision) for taxes on net unrealized depreciation (appreciation) on investments
Total from operations
Sales load
(0.01)
Offering costs
Stockholder distributions from:
(0.34)
(0.40)
Net realized capital gains
Accretive effect of stock offerings (issuing shares above net asset value per share)
Other(6)
Net asset value at end of period
13.25
Per share market value at end of period
9.21
14.00
Total return based on market value(2)
(24.96)
4.60
Weighted average shares outstanding for the period
Ratio/Supplemental Data:(1)
Net assets at end of period
Weighted average net assets
371,088,029
371,525,216
Annualized ratio of gross operating expenses to net assets(5)
17.27
17.91
Annualized ratio of net operating expenses to net assets(5)(6)
17.26
16.55
Annualized ratio of interest expense and other fees to net assets
9.02
Annualized ratio of net investment income before fee waiver to net assets(5)
8.18
9.33
Annualized ratio of net investment income to net assets(5)
8.19
10.69
Portfolio turnover(3)
1.54
Notes payable
125,000,000
100,000,000
241,504,289
221,813,920
260,000,000
308,750,000
Asset coverage ratio(4)
x
2.16
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NOTE 9 — CREDIT FACILITY
The Company entered into a senior secured revolving credit agreement, dated as of October 10, 2017, with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders (as amended and restated on September 18, 2020 and subsequently amended on December 22, 2021, February 28, 2022, May 13, 2022, November 21, 2023, October 30, 2024 and September 11, 2025, 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 its terms, 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 March 31, 2026 and December 31, 2025, the Company was in compliance with these covenants.
As of March 31, 2026 and December 31, 2025, $241,504,289 and $236,649,288, 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 March 31, 026, the Company has incurred costs of $8,944,051 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 March 31, 2026 and December 31, 2025, $3,227,630 and $3,481,928 of such prepaid loan structure fees and administration fees had yet to be amortized, respectively. 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:
236,649,288
Prepaid loan structure fees
(3,227,630)
(3,481,928)
Credit Facility payable, net of prepaid loan structure fees
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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 months ended March 31, 2026 and 2025:
Interest expense
3,743,733
3,889,157
Loan fee amortization
Total interest and financing expenses
3,998,031
4,204,775
Weighted average interest rate
6.3
7.2
Effective interest rate (including fee amortization)
6.7
7.7
Average debt outstanding
241,440,480
220,384,693
Cash paid for interest and unused fees
3,898,077
3,811,021
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. 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 SBA-guaranteed debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. SBA-guaranteed debentures are also subject to certain fees payable by the SBICs at the time such debentures are drawn. 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.
As of March 31, 2026 and December 31, 2025, the SBIC I subsidiary had $73,625,000 and $75,000,000 in regulatory capital and $85,000,000 and $124,000,000 of SBA-guaranteed debentures outstanding, respectively. During the three months ended ended March 31, 2026, the SBIC I subsidiary repaid $39,000,000 of SBA-guaranteed debentures that matured during the period and returned $1,375,000 of capital to the Company. As of both March 31, 2026 and December 31, 2025, the SBIC II subsidiary had $87,500,000 in regulatory capital and $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 $457,244,131 and $492,710,365 in assets at March 31, 2026 and December 31, 2025, respectively, which accounted for approximately 45.7% and 47.3% of the Company’s total consolidated assets, respectively.
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The following tables summarize the SBIC subsidiaries’ aggregate SBA-guaranteed debentures outstanding as of March 31, 2026:
Issuance Date
Licensee
Maturity Date
Debenture Amount
Interest Rate
SBA Annual Charge
November 28, 2017
SBIC I subsidiary
March 1, 2028
25,000,000
April 27, 2018
September 1, 2028
40,000,000
3.55
July 30, 2018
17,500,000
September 25, 2018
March 1, 2029
Total SBIC I subsidiary SBA-guaranteed Debentures
85,000,000
October 17, 2019
SBIC II subsidiary
March 1, 2030
November 15, 2019
5,000,000
December 17, 2020
March 1, 2031
9,000,000
6,500,000
February 16, 2021
13,500,000
February 26, 2021
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
4.26
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
175,000,000
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 March 31, 2026 and December 31, 2025, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6.
As of both March 31, 2026 and December 31, 2025, 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. As of March 31, 2026 and December 31, 2025, $2,848,951 and $3,015,937 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.
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The following is a summary of the SBA-guaranteed debentures, net of prepaid loan fees:
SBA-guaranteed Debentures payable
299,000,000
Prepaid loan fees
(2,848,951)
(3,015,937)
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 months ended March 31, 2026 and 2025:
2,282,892
2,540,360
Debenture fee amortization
2,449,878
2,729,344
3.3
3.5
284,700,000
316,694,444
Cash paid for interest
4,803,285
5,188,661
NOTE 11 — NOTES
The Notes Payable are institutional, non-traded notes. The Notes Payable are carried at cost. As of March 31, 2026, the estimated fair value of the Notes Payable as prepared for disclosure purposes was $124,875,000. See Note 1 to the Consolidated Financial Statements for further discussion regarding the fair value measurements and hierarchy.
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”). On September 30, 2025, the Company prepaid $50,000,000 in aggregate principal of the 2026 Notes Payable. On December 31, 2025, the Company prepaid the remaining $50,000,000 in aggregate principal of the 2026 Notes Payable in full.
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. As of both March 31, 2026 and December 31, 2025, $0 of prepaid financing costs had yet to be amortized.
The 2026 Notes Payable were redeemable 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 was payable semi-annually beginning September 30, 2021.
The Company used the net proceeds from the 2026 Notes Payable offering to fully redeem the Company’s 5.75% fixed-rate notes due September 15, 2022 (the “2022 Notes Payable”) and repay a portion of the amount outstanding under the Credit Facility.
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”). 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 March 31, 2026, the aggregate carrying amount of the 2030 Notes Payable was approximately $124,875,000.
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In connection with the issuance and maintenance of the 2030 Notes Payable, the Company incurred $2,746,803 of fees, which are being amortized over the term of the 2030 Notes Payable. As of March 31, 2026 and December 31, 2025, $2,241,085 and $2,328,591 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.
The following table summarizes the interest expense and deferred financing costs on the 2026 Notes Payable for the three months ended March 31, 2026 and 2025:
1,218,750
Deferred financing costs
1,328,900
4.9
5.4
2,437,500
The following is a summary of the 2030 Notes Payable, net of deferred financing costs:
2030 Notes Payable
(2,187,895)
(2,272,580)
Premium on 2030 Notes Payable
587,719
618,145
Discount on 2030 Notes Payable
(640,909)
(674,156)
2030 Notes Payable, net of deferred financing costs and discount
The following table summarizes the interest expense and deferred financing costs on the 2030 Notes Payable for the three months ended March 31, 2026:
2,265,625
Discount amortization
Premium amortization
(30,425)
2,403,132
7.4
7.8
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 March 31, 2026, the Company was in compliance with these covenants.
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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 March 31, 2026:
Activity Type
Company Name
Company Description
Investment Amount
Instrument Type
Add-On Investment
April 1, 2026
EH Real Estate Services, LLC*
Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyersand sellers
190,093
New Investment
April 3, 2026
VeloSource Purchaser, LLC
Locum tenens staffing agency
200,000
Delayed Draw Term Loan Commitment
Revolver Commitment
18,605
April 13, 2026
Venbrook Buyer, LLC*
An independent insurance services broker
Solomon AcquisitionCo, LLC
An innovative process automation and digital systems integrator
4,196,557
186,807
April 27, 2026
Project Freeze**
Manufacturer of walk-in coolers, freezers, and refrigeration systems
324,074
April 28, 2026
502,566
Advanced Barrier Extrusions, LLC*
Manufacturer of flexible packaging
330,250
* Existing portfolio company
** The name of this portfolio company is not disclosed at this time due to confidentiality restrictions. The name of this portfolio company will be disclosed in the Company’s quarterly report for the quarter ending June 30, 2026.
The Company realized the following portfolio company investment subsequent to March 31, 2026:
Proceeds Received
Realized Loss
Full Repayment
April 17, 2026
Provider of revenue growth management consulting services for private equity-owned and large enterprise clients
Full Realization
486,925
(178,805)
April 24, 2026
Provider of equine competitions, content, products, and services
9,043,164
April 30, 2026
Manufacturer of single-use electrodes for medical procedures
376,902
Credit Facility
The outstanding balance under the Credit Facility as of May 11, 2026 was $238,400,000.
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Dividends Declared
On April 14, 2026, the Board declared a regular monthly dividend for each of April 2026, May 2026, and June 2026 as follows:
Ex-Dividend
Record
Payment
Amount per
Declared
Share
4/14/2026
5/15/2026
5/29/2026
6/15/2026
7/15/2026
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NOTE 13 — REPORTABLE SEGMENTS
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 March 31, 2026, 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.
Under the provisions of the 1940 Act, we are permitted, as a BDC that has satisfied certain requirements, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of our gross assets, less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. As of March 31, 2026, our asset coverage ratio was 199%. 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 macroeconomic uncertainty as a result of various events and trends, including labor resource shortages, commodity inflation, fluctuating interest rates, 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 on the United States or against its trading partners, and the global conflict in the Middle East, including Iran. 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) through first lien (including unitranche), second lien, and unsecured debt financing, often with a corresponding equity investment.
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As of March 31, 2026, we had $990.0 million (at fair value) invested in 116 portfolio companies. As of March 31, 2026, our portfolio included approximately 90% of first lien debt (including unitranche investments), 1% of second lien debt, 0% of unsecured debt and 9% of equity investments at fair value. The composition of our investments at cost and fair value as of March 31, 2026 was as follows:
Total Investments at Fair Value
As of December 31, 2025, we had $1,007.6 million (at fair value) invested in 115 portfolio companies. As of December 31, 2025, our portfolio included approximately 90% of first lien debt (including unitranche investments), 1% of second lien debt, 0% of unsecured debt and 9% of equity investments at fair value. The composition of our investments at cost and fair value as of December 31, 2025 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 March 31, 2026 and December 31, 2025, we had unfunded commitments of $48.2 million and $53.4 million, respectively, to provide financing to 76 and 77 portfolio companies, respectively. As of March 31, 2026, 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 in our investment portfolio as of March 31, 2026:
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The following is a summary of geographical concentration of in investment portfolio as of December 31, 2025:
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The following is a summary of industry concentration in our investment portfolio as of March 31, 2026:
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The following is a summary of industry concentration in our investment portfolio as of December 31, 2025:
At March 31, 2026, our average portfolio company investment at amortized cost and fair value was approximately $8.8 million and $8.5 million, respectively, and our largest portfolio company investment at amortized cost and fair value was approximately $28.0 million and $18.5 million, respectively. At December 31, 2025, our average portfolio company investment at amortized cost and fair value was approximately $8.9 million and $8.7 million, respectively, and our largest portfolio company investment at amortized cost and fair value was approximately $26.1 million and $19.2 million, respectively.
At March 31, 2026 and December 31, 2025, 91.5% and 91.6% of our debt investments bore interest based on floating rates (subject to interest rate floors), such as the Secured Overnight Financing Rate (“SOFR”), respectively, and 8.5% and 8.4% bore interest at fixed rates, respectively.
The weighted average yield on all of our debt investments as of March 31, 2026 and December 31, 2025 was approximately 9.0% and 9.3%, respectively. The weighted average yield on all of our investments, including non-income producing equity positions, as of March 31, 2026 and December 31, 2025 was approximately 8.5% and 8.7%, 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 March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $3.4 million and $25.1 million, respectively.
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Investment Activity
During the three months ended March 31, 2026, we made an aggregate of $27.7 million of investments in three new portfolio companies and nine existing portfolio companies. During the three months ended March 31, 2026, we received an aggregate of $41.7 million in proceeds from repayments of our investments.
During the three months ended March 31, 2025, we made an aggregate of $55.4 million of investments in seven new portfolio companies and five existing portfolio companies. During the three months ended March 31, 2025, we received an aggregate of $15.0 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 available to lower middle-market companies, the level of merger and acquisition activity in that sector, 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 March 31, 2026
As of December 31, 2025
(dollars in millions)
Portfolio
Investment Category
Companies(1)
199.7
227.3
597.4
590.2
141.8
148.4
43.0
35.1
8.1
6.6
990.0
100
119
1,007.6
117
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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 March 31, 2026, we had loans to six portfolio companies that were on non-accrual status, which represented approximately 9.2% of our total investments at cost and 5.2% at fair value. As of December 31, 2025, we had loans to five portfolio companies that were on non-accrual status, which represented approximately 7.5% of our total investments at cost and 4.1% at fair value. As of March 31, 2026 and December 31, 2025, $13.2 million and $11.2 million of income from investments on non-accrual had not been accrued, respectively.
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 Months Ended March 31, 2026 and 2025
Revenues
We generate revenue in the form of interest income on debt investments and capital gains and distributions, if any, on equity 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 investments 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 months ended March 31, 2026 and 2025 (in millions).
Interest income(1)
20.2
23.1
1.7
1.0
Miscellaneous fees(1)
1.4
0.9
23.3
25.0
The decrease in investment income for the three months ended March 31, 2026 was due primarily to a decrease in prevailing market rates on our loans, typically in reference to the SOFR.
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 months ended March 31, 2026 and 2025 (in millions).
Operating Expenses
4.4
4.1
0.2
0.6
0.4
0.1
2.1
0.8
8.9
8.3
0.5
15.8
16.4
(1.2)
15.2
The decrease in gross operating expenses for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was due to the decrease in income incentive fees, offset by higher management fees and interest expense due to overall portfolio growth, and increased professional fees. The increase in net operating expenses for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was due to the decrease in income incentive fees waived.
For the three months ended March 31, 2026, net investment income was $7.5 million, or $0.26 per common share (based on 28,947,254 weighted average shares outstanding for the three months ended March 31, 2026).
For the three months ended March 31, 2025, net investment income was $9.8 million, or $0.35 per common share (based on 27,602,612 weighted average shares outstanding for the three months ended March 31, 2025).
Net investment income for the three months ended March 31, 2026 decreased compared to the three months ended March 31, 2025 as a result of decreased interest income as explained in the “Revenues” section above and 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 March 31, 2026 totaled $41.7 million and net realized gains totaled $0.8 million.
Proceeds from repayments of investments and amortization of certain other investments for the three months ended March 31, 2025 totaled $15.0 million and net realized losses totaled ($6.0) 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.
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Net change in unrealized (depreciation) appreciation on investments and cash equivalents for the three months ended March 31, 2026 and 2025 totaled ($6.5) million and $1.2 million, respectively.
The change in unrealized (depreciation) appreciation over the respective periods was primarily due to company-specific write-downs, partially offset by realizations on investments previously written up.
Provision 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 months ended March 31, 2026 and 2025, we recognized a provision for income tax on unrealized investments of $0.0 million for the Taxable Subsidiaries. As of both March 31, 2026 and December 31, 2025, there was $0.0 million of deferred tax liabilities on the Consolidated Statements of Assets and Liabilities.
For the three months ended March 31, 2026, net increase in net assets resulting from operations totaled $1.7 million, or $0.06 per common share (based on 28,947,254 weighted average shares outstanding for the three months ended March 31, 2026).
For the three months ended March 31, 2025, net increase in net assets resulting from operations totaled $5.0 million, or $0.18 per common share (based on 27,602,612 weighted average shares outstanding for the three months ended March 31, 2025).
The net decrease in net assets between the respective periods was due to higher unrealized depreciation, partially offset by higher realized gains in the current year.
Financial Condition, Liquidity and Capital Resources
Cash Flows from Operating and Financing Activities
Our operating activities provided net cash of $22.8 million for the three months ended March 31, 2026, primarily in connection with sales and repayments of portfolio investments, partially offset by the purchase of portfolio investments. Our financing activities for the three months ended March 31, 2026 used cash of $44.5 million, primarily from repayments of SBA-guaranteed debentures.
Our operating activities used net cash of $36.9 million for the three months ended March 31, 2025, primarily in connection with the purchase of portfolio investments, partially offset by and sales and repayments of portfolio investments. Our financing activities for the three months ended March 31, 2025 provided cash of $27.8 million, primarily from proceeds from our ATM Program and net borrowings on our Credit Facility, partially offset by repayments of SBA-guaranteed debentures.
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
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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 available to allow us 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.
Under the provisions of the 1940 Act, we are permitted, as a BDC that has satisfied certain requirements, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of our gross assets, less all liabilities and indebtedness not represented by senior securities after each issuance of senior securities. As of March 31, 2026 and December 31, 2025, our asset coverage ratio was 199% and 203%, 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 March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $3.4 million and $25.1 million, respectively.
We have entered into a senior secured revolving credit agreement, dated as of October 10, 2017, with Zions Bancorporation, N.A., dba Amegy Bank and various other lenders thereto (as amended and restated on September 18, 2020 and amended on December 21, 2021, February 28, 2022, May 13, 2022, November 21, 2023, October 30, 2024 and September 11, 2025.
The Credit Facility provides for borrowings up to a maximum of $315.0 million on a committed basis with an accordion feature that allows us to increase the aggregate commitments up to $350.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions.
Pursuant to its terms, the Credit Facility will bear interest, subject to our election, on a per annum basis equal to (i) term SOFR plus 2.25% (or 2.50% during certain periods in which our 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 our 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%. We pay 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 we 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. 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 1.00, (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 March 31, 2026 and December 31, 2025, we were in compliance with these covenants.
As of March 31, 2026 and December 31, 2025, $241.5 million and $236.6 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 $8.9 million in connection with the current Credit Facility, which are being amortized over the life of the facility.
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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 March 31, 2026 and December 31, 2025, $3.2 million and $3.5 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 quarterly in arrears. The following table summarizes the interest expense and amortized loan fees on the Credit Facility for the three months ended March 31, 2026 and 2025 (dollars in millions):
3.7
3.9
0.3
4.0
4.2
241.4
220.4
3.8
SBA-Guaranteed Debentures
Due to the SBIC subsidiaries’ status as licensed SBICs, we can issue debentures guaranteed by the SBA at favorable interest rates. 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 March 31, 2026 and December 31, 2025, the SBIC I subsidiary had 73.6 million and $75.0 million in “regulatory capital,” respectively, as such term is defined by the SBA, and $85.0 million and $124.0 million of SBA-guaranteed debentures outstanding, respectively. During the three months ended March 31, 2026, the SBIC I subsidiary repaid $39.0 million of SBA-guaranteed debentures that matured during the period. As of both March 31, 2026 and December 31, 2025, the SBIC II subsidiary had $87.5 million in regulatory capital and $175.0 million of SBA-guaranteed debentures outstanding.
On August 12, 2014, we obtained exemptive relief from the SEC to permit us to exclude debt of the SBIC subsidiaries guaranteed by the SBA for purposes of complying with 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 $457.2 million and $492.7 million in assets at March 31, 2026 and December 31, 2025, respectively, which accounted for approximately 45.7% and 47.3% of our total consolidated assets, respectively.
SBA-guaranteed debentures have fixed interest rates that equal the prevailing rate for 10-year U.S. Treasury Notes plus a market spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the SBA-guaranteed debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. SBA-guaranteed debentures are also subject to certain fees payable by the SBIC subsidiaries calculated at the time such debentures are drawn. As of December 31, 2025 and 2024, the SBIC subsidiaries had $299.0 million and $325.0 million of the SBA-guaranteed debentures outstanding, respectively.
As of March 31, 2026 and December 31, 2025, the carrying amount of the SBA-guaranteed debentures was $257.2 million and $296.0 million, respectively. At the measurement date, the estimated fair value of the SBA-guaranteed debentures as prepared for disclosure purposes was $232.8 million. The fair value of the SBA-guaranteed debentures 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 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 March 31, 2026 and December 31, 2025, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6 to our Consolidated Financial Statements.
As of March 31, 2026, 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 March 31, 2026 and December 31, 2025, $2.8 million
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and $3.0 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 months ended March 31, 2026 and 2025 (dollars in millions):
2.2
2.5
2.4
2.7
284.7
316.7
4.8
5.2
The Notes Payable are institutional, non-traded notes. As of March 31, 2026 and December 31, 2025, the carrying amount of the Notes Payable was $122.8 million million and $122.7 million, respectively. As of March 31, 2026, the estimated fair value of the Notes Payable as prepared for disclosure purposes was $124.9 million.
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 were redeemable 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 on the 2026 Notes Payable was payable semi-annually beginning September 30, 2021. We used the net proceeds from the 2026 Notes Payable offering to fully redeem the 5.75% fixed-rate notes due September 15, 2022 and repay a portion of the amount outstanding under the Credit Facility.
On September 30, 2025, we prepaid $50.0 million in aggregate principal of the 2026 Notes Payable. On December 31, 2025, we prepaid the remaining $50.0 million in aggregate principal of the 2026 Notes Payable in full. In connection with the issuance and maintenance of the 2026 Notes Payable, we incurred $2.3 million of fees, which were amortized over the term of the 2026 Notes Payable. For the year ended December 31, 2025, we recorded a make-whole payment of less than $0.1 million and accelerated $0.2 million of unamortized upfront fees, which are recognized as a loss on debt extinguishment in the Consolidated Statements of Operations.
On April 1, 2025 and September 25, 2025, we issued $75.0 million and $50.0 million, respectively, in aggregate principal amount of the 2030 Notes Payable (together with the 2026 Notes Payable, the “Notes Payable”). The 2030 Notes Payable are institutional, non-traded notes that 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. We used the net proceeds from the 2030 Notes Payable offering to fully redeem the 2026 Notes Payable and repay a portion of the amount outstanding under the Credit Facility.
In connection with the issuance and maintenance of the 2030 Notes Payable, we have incurred $2.7 million of fees, which are being amortized over the term of the 2030 Notes Payable, of which $2.2 million and $2.3 million remains to be amortized as of March 31, 2026 and December 31, 2025, respectively. These financing costs are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
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The following table summarizes the interest expense and deferred financing costs on the 2026 Notes Payable for the three months ended March 31, 2026 and 2025 (dollars in millions):
1.2
1.3
100.0
The following table summarizes the interest expense and deferred financing costs on the 2030 Notes Payable for the three months ended March 31, 2026 (dollars in millions):
2.3
125.0
ATM Program
On November 16, 2021, we 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, we were permitted to issue and sell, from time to time, up to $50.0 million 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 our investment objective and strategies.
On August 11, 2023, we 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, we were permitted issue and sell, from time to time, up to $100.0 million 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 our investment objective and strategies. Upon execution of the 2023 Equity Distribution Agreement, we 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 $100.0 million 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. Upon execution of the 2025 Equity Distribution Agreement, we no longer sold any shares under the 2023 Equity Distribution Agreement. We refer to our issuance and sale of shares under the Equity Distribution Agreements as the “ATM Program.
We did not issue any shares during the three months ended March 31, 2026 under the ATM Program. We issued 656,085 shares during the three months ended March 31, 2025 under the ATM Program for gross proceeds of $9.3 million and underwriting fees and other expenses of $0.3 million. The average per share offering price of shares issued in the ATM Program during the three months ended March
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31, 2025 was $14.11. 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 months ended March 31, 2025, the Advisor was not required to reimburse underwriting fees as all shares were issued at a premium to net asset value.
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 March 31, 2026, we had $47.8 million in unfunded debt commitments and $0.3 million in unfunded equity commitments to 76 portfolio companies. As of December 31, 2025, we had $53.0 million in unfunded debt commitments and $0.4 million in unfunded equity commitments to 77 portfolio companies. As of March 31, 2026, 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 to be treated and intend to qualify annually as a RIC under subchapter M of the Code. So long as we maintain our qualification as a RIC, we will not be subject to U.S. federal income tax to the extent that we timely distribute our investment company taxable income and realized net capital gains to stockholders as dividends.
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 generally must, among other things, distribute to our stockholders, 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 to avoid a U.S. federal excise tax on our undistributed earnings of a RIC. As of December 31, 2025, we had $37.0 million of undistributed taxable income that will be carried forward toward distributions paid during the year ending December 31, 2026.
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 Annual Distribution Requirement. In addition, we may retain for investment some or all 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 shares of 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 BDC under the 1940 Act and due to provisions in the 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 publicly offered 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 shares of our common stock). In no event will any stockholder, electing to receive cash, receive less than 20% of his or her entire distribution in cash, except as described below.
88
If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in shares of our common 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 common 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 stockholders’ best interest to take advantage of the IRS rulings.
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 March 31, 2026:
We realized the following portfolio company investments subsequent to March 31, 2026:
The outstanding balance under the Credit Facility as of May 11, 2026 was $238.4 million.
Dividend Declared
Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. In March 2022, the Federal Reserve raised interest rates for the first time since December 2018, and subsequently raised interest rates several times, most recently in July 2023, bringing the target for the federal funds rate to 5.25% - 5.50%, the highest since January 2001. In September 2024, the Federal Reserve began easing its policy, lowering the federal funds rate to a target range of 4.25% - 4.50% in December 2024, 4.00% - 4.25% in September 2025, 3.75% - 4.00% in October 2025 and 3.50% - 3.75% in December 2025. Since December 2025, the Federal Reserve has kept the interest rate at 3.50% - 3.75%. As of December 31, 2025 and December 31, 2024, 91.6% and 94.5% of the loans in our portfolio bore interest at floating rates, respectively. These floating rate loans typically bear interest in reference to SOFR, which is indexed to 30-day or 90-day SOFR rates, subject to an interest rate floor. As of March 31, 2026 and December 31, 2025, the weighted average interest rate floor on our floating rate loans was 1.42% and 1.46%, respectively.
Assuming that the consolidated statement of assets and liabilities As of March 31, 2026 was to remain constant and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annual impact on net income of changes in interest rates:
($ in millions)
Interest
Net Interest
Change in Basis Points(2)
Income
Expense(3)
Income(1)
Up 200 basis points
16.7
(4.8)
11.9
Up 150 basis points
12.5
(3.6)
Up 100 basis points
8.4
(2.4)
6.0
Up 50 basis points
3.0
Down 50 basis points
(4.2)
(3.0)
Down 100 basis points
(8.4)
(6.0)
Down 150 basis points
(12.5)
3.6
(8.9)
Down 200 basis points
(16.7)
(11.9)
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 months ended March 31, 2026 and 2025, 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, 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 months ended March 31, 2026 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 in “Item 1A. Risk Factors” of Annual Report on Form 10-K filed with the SEC on March 11, 2026, 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.
During the three months ended March 31, 2026, there have been no material changes to the risk factors discussed in our SEC filings referenced above.
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 March 31, 2026.
No shares were issued under the distribution reinvestment program during either of the three months ended March 31, 2026 and 2025.
Item 3.Defaults Upon Senior Securities
Not applicable.
Item 4.Mine Safety Disclosures
Item 5.Other Information
During the three months ended March 31, 2026, 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
3.1
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).
3.2
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).
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 April 2, 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 April 2, 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*
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 Section 13 or 15(d) 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: May 11, 2026
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