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 June 30, 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 August 10, 2026 was 28,479,937.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
1
Consolidated Statements of Assets and Liabilities as of June 30, 2026 (unaudited) and December 31, 2025
Consolidated Statements of Operations for the three and six-month periods ended June 30, 2026 and 2025 (unaudited)
2
Consolidated Statements of Changes in Net Assets for the three and six-month periods ended June 30, 2026 and 2025 (unaudited)
3
Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2026 and 2025 (unaudited)
4
Consolidated Schedules of Investments as of June 30, 2026 (unaudited) and December 31, 2025
5
Notes to Unaudited Financial Statements
39
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
73
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
92
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
93
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
94
Item 6.
Exhibits
SIGNATURES
95
PART I — FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
Item 1.Financial Statements
(unaudited)
June 30, 2026
December 31, 2025
ASSETS
Controlled investments, at fair value (amortized cost of $34,691,986 and $33,603,521, respectively)
$
11,573,435
14,953,132
Non-controlled, affiliated investments, at fair value (amortized cost of $29,323,333 and $4,806,660, respectively)
32,257,658
3,750,674
Non-controlled, non-affiliated investments, at fair value (amortized cost of $913,612,730 and $987,729,505, respectively)
924,415,324
988,919,589
Cash and cash equivalents
5,138,950
25,050,156
Receivable for sales and repayments of investments
2,166,620
581,509
Interest receivable
5,973,539
6,375,996
Income tax receivable
—
1,385,387
Other receivables
66,430
85,000
Related party receivable
20
Deferred offering costs
75,000
Prepaid expenses
457,821
150,843
Total Assets
982,124,777
1,041,252,306
LIABILITIES
2030 Notes Payable
122,897,963
122,671,409
Credit Facility payable
219,221,522
233,167,360
SBA-guaranteed debentures
257,304,593
295,984,063
Dividends payable
3,248,641
3,858,669
Management fees payable
4,393,771
4,442,705
Income incentive fees payable
889,986
2,317,429
Interest payable
5,569,922
6,138,076
Unearned revenue
496,577
582,007
Administrative services payable
517,253
539,338
Income tax payable
56,518
Other accrued expenses and liabilities
570,085
372,294
Total Liabilities
615,166,831
670,073,350
Commitments and contingencies (Note 7)
Net Assets
366,957,946
371,178,956
NET ASSETS
Common stock, par value $0.001 per share (100,000,000 shares authorized; 28,672,911 and 28,947,254 shares issued and outstanding, respectively)
28,673
28,947
Paid-in capital
395,382,385
397,829,793
Total distributable loss
(28,453,112)
(26,679,784)
Total Liabilities and Net Assets
Net Asset Value Per Share
12.80
12.82
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the three months ended
For the six months ended
June 30, 2025
INVESTMENT INCOME
From non-controlled, affiliated investments
Interest income
1,016
1,061
Payment-in-kind interest income
559,310
631,610
From non-controlled, non-affiliated investments
19,864,060
23,134,800
39,811,025
46,285,437
1,159,038
1,519,405
3,392,735
2,495,884
Other income
719,448
1,042,397
1,759,375
1,866,939
Total Investment Income
22,302,872
25,696,602
45,595,806
50,648,260
OPERATING EXPENSES
Management fees
4,393,770
4,279,441
8,786,127
8,334,167
Valuation fees
44,995
38,507
211,114
196,396
Administrative services expenses
550,235
474,284
1,199,355
923,582
Income incentive fees
150,863
2,158,075
257,572
4,294,566
Professional fees
283,474
312,808
1,101,201
730,839
Directors’ fees
84,250
93,250
213,500
204,500
Insurance expense
102,057
98,668
195,113
195,758
Interest expense and other fees
8,585,467
8,680,015
17,437,008
16,943,034
Income tax expense
29,685
428,951
390,156
928,498
Other general and administrative expenses
585,510
500,302
825,127
718,653
Total Operating Expenses
14,810,306
17,064,301
30,616,273
33,469,993
Income incentive fee waiver
(38,583)
(928,926)
(49,644)
(2,171,769)
Total Operating Expenses, net of fee waivers
14,771,723
16,135,375
30,566,629
31,298,224
Net Investment Income
7,531,149
9,561,227
15,029,177
19,350,036
Net realized loss on controlled investments
(1,132,576)
Net realized (loss) gain on non-controlled, non-affiliated investments
(7,243,523)
272,549
(6,493,113)
(5,694,672)
Net realized (loss) gain on foreign currency translations
(1,811)
(20,003)
1,853
(49,658)
Net change in unrealized (depreciation) appreciation on controlled investments
(922,785)
1,290,491
(4,468,162)
1,345,767
Net change in unrealized appreciation on non-controlled, affiliated investments
3,913,525
3,468,901
Net change in unrealized appreciation on non-controlled, non-affiliated investments
12,908,698
143,176
10,350,353
1,281,193
Net change in unrealized appreciation (depreciation) on foreign currency translations
21,045
30,546
(26,975)
38,865
Net Increase in Net Assets Resulting from Operations
16,206,298
10,145,410
17,862,034
15,138,955
Net Investment Income Per Share—basic and diluted
0.26
0.34
0.52
0.69
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted
0.56
0.36
0.62
0.54
Weighted Average Shares of Common Stock Outstanding—basic and diluted
28,869,028
28,412,849
28,907,925
28,009,969
Distributions Per Share—basic and diluted
0.40
0.68
0.80
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
9,788,809
Net realized loss on investments
(5,967,221)
Net realized loss on foreign currency translations
(29,655)
Net change in unrealized appreciation on investments
1,193,293
Net change in unrealized depreciation on foreign currency translations
8,319
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
(860,027)
1,433,667
Net change in unrealized appreciation on foreign currency translations
Provision for taxes on unrealized appreciation on investments
(11,363,618)
278,945
279
3,822,637
3,822,916
Balances at June 30, 2025
28,416,148
28,416
392,309,339
(16,966,865)
375,370,890
Balances at December 31, 2025
28,947,254
7,498,028
Net realized gain on investments
750,410
Net realized gain on foreign currency translation
3,664
Net change in unrealized depreciation on investments
(6,548,346)
(48,020)
(9,839,171)
Balances at March 31, 2026
(34,863,219)
362,995,521
Net realized loss on foreign currency translation
15,899,438
(9,796,191)
Repurchase of common stock, net of commissions(1)
(274,343)
(274)
(2,447,408)
(2,447,682)
Balances at June 30, 2026
28,672,911
(1) See Note 4 to the consolidated financial statements contained herein for more information on offering costs and commissions.
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
(45,678,450)
(78,230,159)
Proceeds from sales and repayments of investments
90,888,206
46,638,287
(9,351,092)
(2,626,960)
Net change in unrealized depreciation (appreciation) on foreign currency translations
26,975
(38,865)
Increase in investments due to payment-in-kind income
(3,392,735)
(2,492,551)
Amortization of premium and accretion of discount, net
(1,383,610)
(1,437,223)
Amortization of loan structure fees
511,422
634,745
Amortization of deferred financing costs
270,866
303,468
Amortization of discount on Notes Payable
67,121
31,434
Amortization of premium on Notes Payable
(61,432)
Amortization of loan fees on SBA-guaranteed debentures
320,530
371,260
6,493,113
6,827,248
Changes in other assets and liabilities
Decrease (increase) in interest receivable
402,457
(921,344)
Decrease (increase) in income tax receivable
(743,732)
Decrease in other receivables
18,570
70,495
Decrease in related party receivables
3,687
(Increase) decrease in prepaid expenses
(306,978)
218,975
(Decrease) increase in management fees payable
(48,934)
245,332
Decrease in income incentive fees payable
(1,427,443)
(1,057,366)
(Decrease) increase in administrative services payable
(22,085)
22,297
(Decrease) increase in interest payable
(568,154)
1,248,079
Increase in related party payable
1,088,287
(Decrease) increase in unearned revenue
(85,430)
127,664
Increase in income tax payable
Increase in other accrued expenses and liabilities
197,791
1,322,363
Net Cash Provided by (Used in) Operating Activities
56,174,667
(13,255,624)
Cash Flows from Financing Activities
Proceeds from the issuance of common stock
13,153,366
Sales load for common stock issued
(197,464)
Offering costs paid for common stock issued
(75,000)
(303,959)
Payment for repurchase of common stock
(2,436,708)
Commission for repurchase of common stock
(10,975)
Stockholder distributions paid
(20,245,390)
(22,326,367)
Financing costs paid on Notes Payable
(50,000)
(1,698,806)
Repayments of SBA-guaranteed debentures
(39,000,000)
(16,250,000)
Borrowings under Credit Facility
92,200,000
104,400,000
Repayments of Credit Facility
(106,467,800)
(117,817,800)
Net Cash (Used in) Provided by Financing Activities
(76,085,873)
33,188,720
Net (Decrease) Increase in Cash and Cash Equivalents
(19,911,206)
19,933,096
Cash and Cash Equivalents Balance at Beginning of Period
20,058,594
Cash and Cash Equivalents Balance at End of Period
39,991,690
Supplemental and Non-Cash Activities
Cash paid for interest expense
16,896,905
14,354,048
Income and excise tax refund, net
(1,051,749)
1,672,230
Exchange of investments
8,670,888
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
4,756,430
0.00
Term Loan A-6
10/3/2025
1,096,456
1,069,045
0.29
Term Loan A-7
11/12/2025
9/30/2026
1,644,685
1,603,568
0.44
Term Loan A-8
1/20/2026
816,517
796,104
0.22
Term Loan A-9
2/18/2026
899,683
877,191
0.24
Term Loan A-10
3/3/2026
1,032,440
1,006,629
0.27
Term Loan A-11
4/1/2026
1,168,212
1,139,007
0.31
Revolver
(16)(21)
10/3/2023
63,597
EH Holdco, LLC Common Units
Equity
15,356
EH Holdco, LLC Series A Preferred Units
9/3/2021
7,892
7,891,642
19,369,665
6,491,544
1.77
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
1,194,844
0.33
5.00
3,640,172
436,821
0.12
Priority Revolver (SBIC)
5/3/2024
1,725,113
3,450,226
0.94
J.R. Watkins Ultimate Holdings, LLC Class A Units (SBIC)
(4)
4/9/2025
500
15,322,321
5,081,891
1.39
Total Control investments
34,691,986
3.16
Non-controlled, affiliated investments
(23)
ArborWorks, LLC
Oakhurst, CA
Term Loan
(11)
1M SOFR+
6.50
1.00
10.24
11/6/2023
11/6/2028
Environmental Industries
4,329,900
1.18
(9)
2,005,343
0.55
ArborWorks Intermediate Holdco, LLC Class A-1 Preferred Units
16,037
3,610,847
9,758,586
2.66
ArborWorks Intermediate Holdco, LLC Class B-1 Preferred Units
ArborWorks Intermediate Holdco, LLC Class A-1 Common Units
1,923
9,946,090
16,093,829
4.39
Recharged Opco, LLC
Bradenton, FL
(26)
12.50
2/7/2022
2/7/2028
Services: Consumer
5,324,759
5,292,478
3,114,984
0.85
83,115
48,622
0.01
Priority Revolver
7/2/2024
20,223
40,446
9/13/2024
20,000
40,000
11/12/2024
45,000
90,000
0.02
1/3/2025
10,000
2/7/2025
31,000
62,000
10/22/2025
120,000
240,000
0.07
(18)(26)
12/15/2025
32,500
65,000
Delayed Draw Term Loan
98,473
98,125
57,607
Recharged Holdings, LLC Common Units
11/13/2025
61,182
5,752,441
3,778,659
1.04
Simpler Trading, LLC
Austin, TX
10.00
12/28/2021
3/21/2030
Education
3,015,328
0.82
Simpler Trading, LLC Preferred Units (SBIC)
3/21/2025
1,657
1,656,650
698,954
0.19
Simpler Ultimate Holdings, LLC Class A Units (SBIC)
281,936
4,953,914
3,714,282
1.01
Watterson Renewalco Holdings, LLC
Schaumburg, IL
6.00
6/30/2026
7/2/2029
Services: Business
5,774,974
1.57
Common Units
3,675
Preferred Units
2,895,914
0.79
2.36
Total Non-controlled, affiliated investments
29,323,333
8.80
PIK
Non-controlled, non-affiliated investments
(4)(5)
2X LLC
Berwyn, PA
3M SOFR+
2.00
8.73
6/5/2023
6/5/2028
5,348,953
5,286,156
1.46
10/31/2023
1,408,558
1,390,928
0.38
12/2/2024
3,793,782
3,759,540
1.03
2X Investors LP Class A Units
43,875
176,915
1,220,895
10,613,539
11,772,188
3.20
Ad.Net Acquisition, LLC
Los Angeles, CA
Term Loan (SBIC II)
(5)(11)
9.99
5/7/2021
5/7/2028
16,691,168
16,669,315
16,524,257
4.50
129,902
128,603
0.04
649,510
643,015
0.18
Ad.Net Holdings, Inc. Series A Common Stock (SBIC II)
(5)
8,644
86,444
Ad.Net Holdings, Inc. Series A Preferred Stock (SBIC II)
7,780
777,995
493,166
0.13
18,313,166
17,789,041
4.85
AdCellerant LLC
Denver, CO
Term A Loan (SBIC II)
9.64
12/12/2023
12/12/2028
Media: Advertising, Printing & Publishing
9,750,000
9,639,539
AdCellerant Holdings, LLC Series A Units
728,710
575,713
0.16
10,368,249
10,325,713
2.82
ADS Group Opco, LLC
Lakewood, CO
6/4/2021
12/31/2027
Aerospace & Defense
13,606,150
13,334,027
3.63
Priority Revolver (SBIC II)
(5)(9)
9/30/2024
16,097
32,194
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
116,613
0.03
ADS Group Topco, LLC Class Z Units
6/15/2022
72,043
267,929
14,555,203
13,482,834
3.67
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
16,814,860
3,368,751
0.92
Super Priority Term Loan (SBIC)
(4)(13)
12/6/2024
795,882
970,378
2,387,646
0.65
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
521,527
0.14
First Priority Bridge Loan
(13)
4/28/2026
129,530
Revolver (SBIC)
1,558,434
337,790
311,687
0.08
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
20,877,339
10,844,141
2.96
AGT Robotique Inc.
(7)(27)
Trois Rivieres, Canada
5.50
9.23
6/24/2024
6/22/2029
Capital Equipment
10,512,392
10,372,626
10,302,145
2.81
American Refrigeration, LLC
Jacksonville, FL
(4)(11)
1.50
3/31/2023
3/31/2028
8,006,718
7,922,677
2.18
97,750
97,153
AR-USA Holdings, LLC Class A Units
(6)
141
126,223
323,389
0.09
8,146,053
8,427,857
2.30
AMII Acquisition, LLC
Coral Gables, FL
Term Loan (SBIC II )
8.23
12/4/2024
12/4/2029
8,687,176
8,590,906
2.37
AMII Holdings, LP Class B Units
12/3/2024
14,246
142,460
219,049
0.06
8,733,366
8,906,225
2.43
6
Amika OpCo LLC
Brooklyn, NY
6M SOFR+
5.25
0.75
9.14
7/1/2022
7/1/2029
94,638
93,656
5.75
9.63
12/5/2023
9,463,246
9,345,030
2.58
(9)(11)
8.99
7/1/2028
11,500
Ishtar Co-Invest-B LP Partnership Interests
77,778
38,133
331,708
Oshun Co-Invest-B LP Partnership Interests
22,222
21,141
94,773
9,509,460
9,995,865
2.73
Anne Lewis Strategies, LLC
SG AL Investment, LLC Common Units
3/5/2021
Washington, DC
1,000
327,192
3,394,663
0.93
SG AL Investment, LLC Common-A Units
12/22/2023
239
442,629
985,826
769,821
4,380,489
1.20
APE Holdings, LLC
Deer Park, TX
Class A Units
9/5/2014
Chemicals, Plastics, & Rubber
375,000
97,278
Arctiq, Inc.
Irvine, CA
Green Topco Holdings, LLC Class A Units
8/8/2023
High Tech Industries
288,000
195,103
362,196
0.10
Green Topco Holdings, LLC Common Units
2/3/2026
16,598
691,729
1,053,925
Atmosphere Aggregator Holdings II, L.P.
Atlanta, GA
1/26/2016
254,250
2,351,670
0.64
Stratose Aggregator Holdings, L.P. Common Units
6/30/2015
750,000
8,884,086
2.42
11,235,756
3.06
Axis Portable Air, LLC
Phoenix, AZ
4.75
8.48
3/22/2022
12/31/2030
9,262,500
9,200,054
9,216,189
2.51
4/17/2023
1,846,270
1,830,713
1,837,039
0.50
19,900
8.49
30,000
29,850
97,500
97,143
97,013
Axis Air Parent, LLC Preferred Units
4,436
443,636
2,933,583
11,621,546
14,133,574
3.86
Baker Manufacturing Company, LLC
Evansville, WI
BSC Blue Water Holdings, LLC Series A Units (SBIC II)
7/5/2022
743,770
1,088,491
0.30
Bart & Associates, LLC
McLean, VA
(4)(10)(12)
9.22
8/16/2024
8/16/2030
8,786,137
8,669,399
2.39
1/2/2026
1,990,000
1,955,164
(10)(12)
1,716,053
1,703,365
0.47
B&A Partners Holding, LLC Series A Preferred Units
722,411
842,339
0.23
B&A Partners Holding, LLC Series B Preferred Units
35,585
43,413
50,621
13,093,752
13,385,150
3.64
BL Products Parent, L.P.
Houston, TX
2/1/2022
879,060
983,608
1,219,407
Café Valley, Inc.
CF Topco LLC Units
8/28/2019
Beverage & Food
9,160
916,015
1,664,830
0.45
Carolinas Buyer, Inc.
Charlotte, NC
8.98
12/20/2024
12/20/2030
6,745,854
6,651,069
6,610,937
1.80
Carolinas Holding, L.P. Class A Units
466
465,637
376,233
7,116,706
6,987,170
1.90
CEATI International Inc.
(7)(9)
Montreal, Canada
9.73
2/19/2021
7,750,671
2.11
2,948,813
2,934,741
CEATI Holdings, LP Class A Units
250,000
132,919
280,074
10,818,331
10,979,558
2.99
7
Cerebro Buyer, LLC
Columbia, SC
Cerebro Holdings Partnership, L.P. Series A Partner Interests
3/15/2023
Healthcare & Pharmaceuticals
62,961
47,521
60,392
Cerebro Holdings Partnership, L.P. Series B Partner Interests
341,091
242,637
327,174
290,158
387,566
0.11
CF Arch Holdings LLC
8/10/2022
100,000
77,583
162,138
CF512, Inc.
Blue Bell, PA
9.85
9/1/2021
9/1/2026
13,152,991
13,137,594
13,087,227
3.57
9.92
2,840,388
2,838,660
2,826,186
0.77
9.66
9,000
8,955
StellPen Holdings, LLC Membership Interests
220,930
150,926
16,206,184
16,073,294
4.38
Champion Services Acquireco LLC
Round Rock, TX
9/19/2025
9/19/2030
Construction & Building
11,012,256
10,818,282
10,681,889
2.91
Champion Services Holdings LLC Class A-1 Units
268,889
111,074
11,087,171
10,792,963
2.94
Channel Partners Intermediateco, LLC
Tampa Bay, FL
6.75
10.64
2/24/2022
2/7/2027
Retail
12,915,139
12,894,908
3.51
3/27/2023
1,646,882
1,643,535
10.65
18,587
13,518
10,138
10.67
54,070
23,656
14,658,412
14,681,990
3.99
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
224,804
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
336,213
Compost 360 Acquisition, LLC
Tampa, FL
8/2/2023
8/2/2028
9,553,103
9,434,251
9,123,214
2.49
1,051,703
1,042,886
1,004,376
8.50
12.23
24,804
23,688
Compost 360 Investments, LLC Class A Units
3,124
300,041
65,734
Compost 360 Investments, LLC Preferred Units
8/29/2025
614
27,630
44,317
10,829,612
10,261,329
2.80
COPILOT Provider Support Services, LLC
Maitland, FL
6.25
10.13
11/22/2022
11/22/2027
4,812,500
4,779,450
1.31
33,333
QHP Project Captivate Blocker, Inc. Common Stock
285,714
355,593
5,098,497
5,201,426
1.42
Craftable Intermediate II Inc.
Dallas, TX
6/30/2023
6/30/2028
9,831,622
9,738,373
2.68
Gauge Craftable LP Partnership Interests
626,690
1,157,415
0.32
10,365,063
10,989,037
3.00
Curion Holdings, LLC
Chicago, IL
7/29/2022
12/31/2028
12,591,389
12,526,468
3.42
40,570
SP CS Holdings LLC Class A Units
867,173
943,488
13,434,211
13,575,447
3.69
DFO Enterprises, LLC
Rochester, MN
9/22/2025
9/22/2030
11,493,621
11,316,824
3.13
DFO Ultimate Holding, LP Class A Units
8,931
412,252
1,026,686
0.28
11,729,076
12,520,307
3.41
8
DMD Systems Recovery, LLC
Tempe, AZ
8/22/2025
8/22/2031
6,100,000
6,004,681
1.66
666,667
661,730
Phoenix Parent LLC Common Units
8/19/2025
180,000
404,145
6,846,411
7,170,812
1.95
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
7/31/2025
7/31/2030
7,746,082
7,630,425
7,629,891
2.08
512,500
508,162
504,813
Rallyday Elder Care Co-Investors LP Partnership Interests
910,966
916,719
1,040,939
9,055,306
9,175,643
2.50
Elliott Aviation, LLC
Moline, IL
8.00
11.79
1/31/2020
7/15/2026
10,179,258
10,179,259
8,805,059
2.40
SP EA Holdings LLC Term Loan
Unsecured
10/26/2023
8/14/2026
82,021
4.31
4/25/2025
61,141
52,887
Revolver A
1,681,834
0.46
Revolver B
3/1/2023
791,975
Revolver C (Priority)
3/7/2025
1,081,360
SP EA Holdings LLC Class A Units
105,938,486
901,594
14,779,184
12,413,115
3.38
Environmental Remedies, LLC
Hayward, CA
1/15/2025
1/15/2030
7,239,128
7,129,702
7,094,345
1.93
ERI Parent Holdings, LLC Class A Units
163,109
159,238
118,625
7,288,940
7,212,970
1.96
Eskola LLC
Morristown, TN
9.69
12/19/2024
12/19/2029
7,891,613
7,793,101
7,339,200
9.84
2,924,247
2,908,642
2,719,550
0.74
Eskola Holdings, LLC Class A Units
314
893,747
10,482
Eskola Holdings, LLC Class C Units
6/4/2025
28
56,349
940
Eskola Holdings, LLC Class D Units
3/24/2026
1,014
101,429
49,075
11,753,268
10,119,247
2.75
evolv Consulting, LLC
10.23
12/7/2023
12/7/2028
9,335,314
9,228,648
2.54
350,649
487,013
evolv Holdco, LLC Preferred Units
481,521
679,090
10,547,831
10,852,066
Evriholder Acquisition, Inc.
Anaheim, CA
(5)(9)(11)
10.85
1/23/2023
1/24/2028
Consumer Goods: Durable
11,634,053
11,522,557
11,575,884
3.14
KEJ Holdings LP Class A Units
873,333
1,005,329
12,395,890
12,581,213
Exacta Land Surveyors, LLC
(20)
Cleveland, OH
2/8/2019
16,305,500
15,816,335
7/15/2022
991,990
962,230
4/22/2024
115,243
103,142
SP ELS Holdings LLC Class A Units
1,338,661
1,124,414
182,059
0.05
18,537,147
17,063,766
4.65
Exigo, LLC
3/16/2022
3/16/2027
8,586,067
8,563,723
7,469,878
2.04
Gauge Exigo Coinvest, LLC Common Units
377,535
8,941,258
9
FairWave Holdings, LLC
Kansas City, MO
10.48
4/1/2024
4/1/2029
7,443,921
7,337,867
2.03
12/31/2025
103,201
101,626
1,104,213
2,627,805
2,606,894
564,938
560,537
0.15
GRC Java Holdings, LLC Class A Units
3,229
347,692
526,401
12,058,829
12,370,479
3.37
Fidus Systems Inc.
Ottawa, Canada
10/17/2025
10/17/2031
4,735,304
4,659,441
4,640,598
1.26
Fidus Investments Holdings, L.P. Common Units
268
267,728
240,152
4,927,169
4,880,750
1.33
FiscalNote Boards LLC
Toronto, Canada
8.89
3/11/2024
3/12/2029
2,899,540
2,863,921
FCP-Connect Holdings LLC Class A Common Shares
5/28/2024
284
FCP-Connect Holdings LLC Series A Preferred Shares
190,382
200,397
3,054,303
3,099,937
0.84
General LED OPCO, LLC
San Antonio, TX
Second Lien
9.00
5/1/2018
4/30/2027
4,500,000
1.23
GS HVAM Intermediate, LLC
Carlsbad, CA
10/18/2019
11/30/2028
11,433,148
11,430,772
11,261,652
3.07
1,484,848
1,462,575
HV GS Acquisition, LP Class A Interests
10/2/2019
2,144
563,209
1,494,762
13,478,829
14,218,989
3.88
GSF Buyer, LLC
North Andover, MA
8.41
4/30/2025
4/30/2031
4,227,998
4,174,099
4,164,578
1.13
GSF Group Holdings, L.P. Class A2 Units
241
240,595
181,917
4,414,694
4,346,495
Guidant Corp.
Erie, PA
9,803,561
9,590,923
9,754,544
2.65
1,045,150
1,039,924
Titan Meter Topco LP Class A Units
574,863
581,608
823,096
11,217,681
11,617,564
3.15
I2P Holdings, LLC
Series A Preferred Units
1/31/2018
1,613,828
Identity Theft Guard Solutions, Inc.
Portland, OR
2/28/2025
2/28/2030
8,613,851
8,479,235
8,527,712
2.32
IDX Parent, LLC Class A-2 Units
352,915
587,029
8,832,150
9,114,741
2.48
Impact Home Services LLC
4/28/2023
4/28/2028
5,775,412
5,712,264
5,688,781
1.55
10/11/2023
526,391
520,224
518,495
262,519
259,568
258,581
(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
39,094
6,987,674
6,586,214
1.79
Infolinks Media Buyco, LLC
Ridgewood, NJ
9.48
11/1/2021
5/1/2028
7,168,033
7,154,133
6,988,832
6/6/2024
2,440,641
2,433,788
2,379,625
1,440,450
1,438,378
1,404,439
Tower Arch Infolinks Media, LP LP Interests
(6)(15)
10/28/2021
514,846
261,030
111,285
11,287,329
10,884,181
10
Informativ, LLC
Fresno, CA
7/30/2021
7/30/2027
8,264,629
8,261,377
2.25
3/31/2022
6,231,010
6,228,224
1.70
Credit Connection Holdings, LLC Series A Units
804,384
300,783
1,597,017
14,790,384
16,092,656
Inoapps Bidco, LLC
Term Loan B
3M SONIA+
9.71
2/15/2022
8/15/2028
£
9,600,000
12,977,209
12,643,218
3.45
9.51
9.68
80,208
80,070
Inoapps Holdings, LLC Series A-1 Preferred Units
739,844
783,756
1,089,259
13,881,035
13,852,685
3.78
iNovex Information Systems Incorporated
Columbia, MD
12/17/2024
12/17/2030
7,409,351
7,320,131
7,298,211
1.99
International Cybernetics Acquisition, LLC
Largo, FL
6/3/2025
6/3/2030
4,700,523
4,632,479
4,630,015
International Cybernetics Holdings, LP Class B Units
6/2/2025
1,051
105,113
54,797
4,737,592
4,684,812
1.27
Invincible Boat Company LLC
Opa Locka, FL
7.50
11.29
3/31/2029
5,551,458
4,024,807
1.10
5,124,423
3,715,207
6/1/2021
1,140,251
826,682
957,447
694,149
Warbird Parent Holdco, LLC Class A Units
1,362,575
1,299,691
14,073,270
9,260,845
2.53
Ledge Lounger, Inc.
Katy, TX
11.38
11/9/2021
11/9/2027
8,116,889
8,102,526
7,345,785
91,508
82,815
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
8,618,370
7,428,600
2.02
Lightning Intermediate II, LLC
10.10
6/6/2022
10,333,433
10,285,372
Gauge Vimergy Coinvest, LLC Units
399
391,274
258,297
10,676,646
10,591,730
2.89
MacKenzie-Childs Acquisition, Inc.
Aurora, NY
9.38
9/2/2022
9/2/2027
86,331
85,953
9.24
MacKenzie-Childs Investment, LP Partnership Interests
208,383
205,953
314,714
Madison Logic Holdings, Inc.
New York, NY
7.00
12/30/2022
12/30/2028
4,562,678
4,514,444
4,106,410
1.12
BC Partners Glengarry Co-Investment LP Class 1 Interests
7/7/2023
404,964
66,310
4,919,408
4,172,720
1.14
MBH Management LLC
8.64
11/15/2024
11/15/2029
9,334,591
9,198,725
MBH Parent, LLC Common Units
646,944
606,032
1,092,746
9,804,757
10,427,337
2.84
MedLearning Group, LLC
3/26/2024
12/30/2027
4,241,530
4,202,693
4,220,322
1.15
2,485,853
2,463,091
2,473,424
0.67
2,030,160
2,011,625
2,020,009
8/5/2025
990,000
980,334
985,050
2,418,297
2,403,076
2,406,206
0.66
12,060,819
12,105,011
3.30
11
Michelli, LLC
New Orleans, LA
12/21/2023
12/21/2028
4,875,000
4,819,231
3,818,176
3,793,234
259,215
SP MWM Holdco LLC Class A Units
509,215
781,090
0.21
9,380,895
9,733,481
Microbe Formulas LLC
Meridian, ID
4/4/2022
4/3/2028
4,342,566
4,327,358
11/20/2024
4,190,443
4,178,265
8,505,623
8,533,009
Mobotrex Acquisition, LLC
Davenport, IA
6/7/2031
Wholesale
5,118,151
5,059,712
5,092,560
3,569,615
3,528,857
3,551,767
0.97
57,925
57,635
11/6/2025
255,523
254,095
254,245
8,900,589
8,956,207
2.45
MOM Enterprises, LLC
Richmond, CA
5/19/2021
5/19/2028
15,076,148
14,925,387
4.07
MBliss SPC Holdings, LLC Units
933,333
836,623
16,009,481
15,762,010
4.30
Monarch Behavioral Therapy, LLC
Addison, TX
6/6/2030
6,629,342
6,532,825
1.81
614,310
0.17
899,333
892,219
0.25
Convertible Promissory Note
(30)
6/29/2026
6/6/2031
29,835
BI Investors, LLC Class A Units
4,343
430,481
558,374
8,499,670
8,731,194
Monitorus Holding, LLC
(7)
London, UK
5/24/2022
5/30/2029
Media: Diversified & Production
106,590
106,376
104,458
(29)
€
108,113
117,537
115,186
73,066
73,747
72,272
Sapphire Aggregator S.a r.l. Class A Shares
9/1/2022
557,689
11,156
3,220
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
42,363
446,838
363,259
Morgan Electrical Group Intermediate Holdings, Inc.
Freemont, CA
9.89
8/3/2023
8/3/2029
4,043,318
3,987,785
4,002,885
1.09
1,598,673
1,587,173
1,582,686
0.43
Morgan Electrical Group Holdings, LLC Series A-2 Preferred Units
380
380,330
309,301
5,955,288
5,894,872
1.60
Naumann/Hobbs Material Handling Corporation II, Inc.
8/30/2019
7,959,086
7,919,291
2.16
5,019,029
4,993,934
1.36
1,789,578
1,780,630
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
782,715
Naumann Hobbs Holdings, L.P. Class W-1 Units
5/27/2025
57
Naumann Hobbs Holdings, L.P. Class W-2 Units
49
311,900
15,350,651
15,788,470
12
NINJIO, LLC
Westlake Village, CA
10/12/2022
10/12/2027
4,962,500
4,930,913
1.35
99,590
NINJIO Holdings, LLC Units
184
313,253
343,565
Gauge NINJIO Blocker LLC Preferred Units
9/22/2023
14
14,470
21,705
5,378,226
5,447,770
1.49
Norplex Micarta Acquisition, Inc.
Postville, IA
8.91
10/31/2024
10/31/2029
12,805,000
12,620,094
12,676,951
266,667
264,000
Norplex Micarta Parent, LP Preferred Units
739,804
720,740
0.20
13,626,565
13,661,691
3.72
NS412, LLC
8.25
12.08
5/6/2019
5/6/2027
7,615,000
NS Group Holding Company, LLC Class A Units
782
795,002
991,063
8,410,002
8,606,063
2.35
Onpoint Industrial Services, LLC
1.75
11/16/2022
11/16/2027
11,922,589
11,840,355
3.25
Spearhead TopCo, LLC Class A Units
606,742
1,041,786
12,447,097
12,964,375
3.53
OW RSG LLC
Hudson, WI
4/27/2026
4/27/2031
4,000,000
3,931,835
1.07
9,830
THRM Brands Holdings, LLC Class A Units
324
324,074
324,324
4,265,909
4,265,989
1.16
Pacific Shoring Holdings, LLC
Santa Rosa, CA
1/10/2025
1/10/2030
8,393,750
8,282,784
8,351,781
2.28
PSP Ultimate Holding, LP Class A Units
10,606
498,491
773,576
8,781,275
9,125,357
PCP MT Aggregator Holdings, L.P.
Oak Brook, IL
3/29/2019
Finance
825,020
5,436,063
1.48
PCS Software, Inc.
Shenandoah, TX
7/1/2019
6/30/2027
Transportation & Logistics
13,909,749
13,770,652
3.75
1,824,229
1,805,987
6,071
6,010
961,897
952,278
PCS Software Parent, LLC Class A Common Units
9/16/2022
471,211
9,995
227,439
16,711,941
16,762,366
4.56
Pearl Media Holdings, LLC
(24)
Montclair, NJ
8/31/2022
8/31/2027
8,574,711
8,526,947
8,488,964
2.31
Peltram Group Holdings LLC
Auburn, WA
12/30/2021
508,516
451,142
508,031
Pilot Power Group Acquisition, Inc.
San Diego, CA
(5)(10)(12)
9.97
12/18/2025
12/18/2030
12,000,000
11,806,452
11,880,000
3.24
BCM Pilot Opportunity Parent, LLC Class A Common Interests
(28)
4,423
366,868
505,478
12,173,320
12,385,478
Plus Delta Buyer LLC
1/16/2025
1/16/2031
7,307,500
7,188,433
7,197,888
Plus Delta Parent LLC Class A Units
325,765
325,764
329,141
7,514,197
7,527,029
2.05
Precision Strategies, LLC
3/3/2031
6,160,571
6,073,013
6,098,965
13
Premiere Digital Services, Inc.
Premiere Digital Holdings, Inc. Common Stock
10/18/2018
Media: Broadcasting & Subscription
5,000
2,622,485
0.71
Pure Upper Holdco LLC
Newtown Square, PA
12/3/2025
12/3/2031
9,950,000
9,857,925
9,900,251
2.70
Xanitos Topco, LLC Class A Units
246,667
298,039
10,104,592
10,198,290
2.78
Red's All Natural, LLC
Franklin, TN
8.95
1/31/2023
1/31/2029
8,815,327
8,723,391
Centeotl Co-Invest B, LP Common Units
710,600
439,595
9,433,991
9,254,922
2.52
RIA Advisory Borrower, LLC
5/1/2023
8/2/2027
5,725,291
5,688,416
1.56
58,596
RIA Advisory Aggregator, LLC Class A Units
104,425
160,982
284,315
RIA Products Aggregator, LLC Class A Units
81,251
69,342
39,195
5,977,336
6,107,397
1.67
Said Intermediate, LLC
Boston, MA
6/13/2024
6/13/2029
7,330,909
7,234,439
FCP-Said Holdings, LLC Class A Common Shares
804
FCP-Said Holdings, LLC Series A Preferred Shares
852
305,764
7,585,088
7,636,673
Silver Corporate Holdings LLC
Hendersonville, TN
1/9/2026
1/9/2031
7,094,650
6,980,057
6,917,284
1.89
25,000
24,375
Silver Parent LLC Class A Units
30,780
498,641
461,298
7,503,698
7,402,957
Solid Surface Holdco, LLC
6/6/2025
5,637,330
5,543,722
1.54
4,249,351
4,209,454
16,560
Carolina Topco Holdings, LP Class A-1 Units
6,881
688,137
832,517
10,457,873
10,735,758
2.93
Solomon Acquisition Co, LLC
8.92
4/13/2026
4/13/2032
4,196,557
4,125,391
Solomon HoldCo, LLC Common Units
187
186,807
4,312,198
1.17
Spectra Confectionery Limited
Vaughan, Canada
9.44
11/14/2024
5,244,030
5,186,771
5,165,370
1.41
SK Spectra Holdings LP Class A Units
298
297,765
201,135
5,484,536
5,366,505
Strategus, LLC
Englewood, CO
1/27/2025
1/27/2031
7,723,424
7,613,351
7,607,573
2.07
9,850
CIVC Strategus Blocker, LLC Class A Units
170
170,362
179,921
7,793,713
7,797,344
2.12
Synergy Health Partners MSO, LLC
Troy, MI
3/6/2026
3/6/2031
3,990,141
3,933,431
3,950,240
1.08
37,406
37,140
37,032
Synergy Health Partners Holdings, LLC Common Units
436,580
136,634
181,909
4,107,205
4,169,181
TAC LifePort Holdings, LLC
Woodland, WA
3/1/2021
546,543
189,094
1,182,374
Teckrez, LLC
10.49
5/24/2024
4,125,326
4,087,808
HH-Teckrez Parent, LP Preferred Units
90,139
223,492
4,177,947
4,348,818
The Hardenbergh Group, Inc.
Livonia, MI
8/7/2023
8/7/2028
10,213,096
10,084,570
789,960
780,330
10/1/2025
496,250
488,573
BV HGI Holdings, L.P. Class A Units
677,548
753,014
12,031,021
12,252,320
3.35
The Millennium Alliance LLC
8.39
7/31/2031
11,413,750
11,262,824
11,185,476
3.05
BV MA Blocker, Inc. Class A-2 Common Stock
52
515,556
585,925
11,778,380
11,771,401
3.21
Tiger 21, LLC
12/30/2024
12/30/2030
11,820,000
11,630,458
3.22
Tiger 21 Blocker, Inc. Class A-3 Common Stock
565
564,635
881,346
12,195,093
12,701,346
3.46
TradePending OpCo Aggregator, LLC
Carrboro, NC
3/2/2021
3/1/2028
9,379,293
2.56
8/4/2023
2,399,030
66,667
669,832
TradePending Holdings, LLC Series A Units
908,333
947,699
1,512,206
TradePending Holdings, LLC Series A-1 Units
132,783
260,254
311,072
13,722,775
14,338,100
3.90
TriplePoint Acquisition Holdings LLC
Columbus, OH
5/31/2024
5/31/2029
5,249,361
5,181,067
1.43
4/8/2025
1,751,637
1,725,620
0.48
TriplePoint Holdco LLC Class A Units
557,968
421,361
3,691,621
7,328,048
10,692,619
2.92
Unicat Catalyst Holdings, LLC
Alvin, TX
Unicat Catalyst, LLC Class A Units
4/27/2021
7,500
685,206
Unicat Catalyst, LLC Class A-1 Units
12/13/2023
974
58,446
62,497
808,446
747,703
U.S. Expediters, LLC
Stafford, TX
10.18
12/22/2021
12/22/2026
14,236,513
14,202,944
14,094,149
3.84
Cathay Hypnos LLC Units
1,737,087
1,353,155
439,833
15,556,099
14,533,982
3.96
USDTL AcquisitionCo, Inc.
Des Plaines, IL
12/9/2024
12/9/2030
5,910,000
5,815,969
5,762,250
39,000
USDTL Holdings, LLC Preferred Units
110
110,000
50,112
5,965,969
5,851,362
1.59
Valor Buyco, LLC
Leesburg, VA
12/23/2025
12/23/2031
6,000,000
5,943,902
5,970,000
1.63
99,502
99,500
Valor Holdco LLC Voting Common Units
4,306
430,556
727,000
6,473,960
6,796,500
1.86
VeloSource Purchaser, LLC
St. Louis, MO
4/3/2026
4/3/2031
200,000
196,636
Interlock VS Investco, LP Partnership Interests
18,605
215,241
15
Venbrook Buyer, LLC
(4)(25)
13.50
3/13/2020
5/27/2026
14,611,018
10,446,878
2.85
(25)
1,514,616
304,529
1,082,950
1,898,736
12/5/2025
556,930
479,326
398,205
2/25/2026
1,256,415
628,201
502,566
6/1/2026
337,697
327,566
6/26/2026
352,052
2,750,080
1,966,307
5,308,287
3,795,425
2,866,121
273,012
2,049,277
Venbrook Holdings, LLC Convertible Term Loan
(14)(25)
12/20/2028
234,966
117,483
Venbrook Holdings, LLC Common Units
822,758
819,262
30,884,948
25,971,124
7.09
WER Holdings, LLC
Sugar Hill, GA
9.35
4/11/2024
4/11/2030
2,650,081
2,612,632
2,623,580
5/30/2025
422,616
417,415
418,390
214,260
212,117
109,877
108,778
1,319,645
1,308,957
1,306,449
882,574
876,845
873,748
Blade Landscape Investments, LLC Class A Units
1,803
180,300
250,463
5,720,286
5,793,525
1.58
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
913,612,730
251.90
Total Investments
977,628,049
968,246,417
263.86
LIABILITIES IN EXCESS OF OTHER ASSETS
(601,288,471)
(163.86)
100.00
16
17
Unused
Unfunded
Commitment
Security
Fee
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 *
88,500
July 1, 2028
90,684
November 6, 2028
Axis Portable Air LLC
50,000
December 31, 2030
2,216,358
1.00%
December 20, 2030
91,000
September 1, 2026
September 19, 2030
15,207
February 7, 2027
61,667
August 2, 2028
November 22, 2027
June 30, 2028
60,855
December 31, 2028
September 22, 2030
333,333
August 22, 2031
1,987,500
0.75%
July 31, 2030
2,681,986
January 15, 2030
525,974
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
1,166,667
November 30, 2028
2,847,136
April 30, 2031
10,557
February 28, 2030
July 30, 2027
60,000
August 15, 2028
December 17, 2030
3,561,003
June 3, 2030
638,298
March 31, 2029
80,000
September 2, 2027
18
52,632
December 30, 2027
November 15, 2029
1,036,861
December 21, 2028
0.38%
April 3, 2028
1,292,891
June 7, 2031
115,851
May 19, 2028
173,452
June 6, 2030
108,408
August 3, 2029
October 12, 2027
233,333
October 31, 2029
April 27, 2031
January 10, 2030
1,318,143
June 30, 2027
3,753,955
January 16, 2031
March 3, 2031
1,000,000
December 3, 2031
41,404
August 2, 2027
1,168,831
June 13, 2029
January 9, 2031
March 21, 2030
121,440
Solomon AcquisitionCo, LLC
April 13, 2032
2,524,737
January 27, 2031
462,500
March 6, 2031
1,442,221
August 6, 2028
July 31, 2031
December 30, 2030
March 1, 2028
743,957
May 31, 2029
December 22, 2026
December 9, 2030
Valor Buyco LLC
December 23, 2031
April 3, 2031
524,998
July 2, 2029
1,408,896
April 11, 2030
WER Holdings, LLC**
499,940
Total Unfunded Debt Commitments
45,322,619
A
* Included in this investment is a Line of Credit in the amount of $4,861, with Line of Credit rate of 5.25% and a maturity of July 1, 2028.
** Included in this investment is Line of Credit in the amount of $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
(978,119)
(3,437,484)
(27,411)
(41,117)
(20,413)
(22,492)
(25,811)
(29,205)
(63,597)
3,399,302
(1,767,637)
1,631,665
3,174,226
138,000
Class A Preferred
Total control investments
4,054,852
(2,966,387)
(a) Gross additions include increases in the cost basis of investments resulting from new investments, follow-on investments, payment-in-kind interest or dividends, the amortization of any unearned income or discounts on debt investments, as applicable.
(b) Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales and return of capital.
(c) Represents the total amount of interest, fees or dividends credited to income for the portion of the year an investment was included in the control category.
4,031,455
298,445
1,815,868
189,475
6,317,213
3,441,373
2,901,994
8,984
204,006
45,298
3,324
53,668
3,844
2,868,074
147,254
147,295
50
Trade Education Holdings, L.L.C. Class A Units
882,600
(183,646)
963
Total non-controlled, affiliated investments
19,473,616
9,306,062
9,079
148,315
(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 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
5,734,549
1.19
18,419,200
8,379,604
2.26
10,082,316
2,520,579
3,514,892
878,723
1,587,113
0.86
15,184,321
6,573,528
1.78
33,603,521
4.04
4,806,660
8.67
5,376,454
5,299,849
1.45
1,415,799
1,394,300
3,813,089
3,771,087
62,500
1,220,397
10,704,651
11,888,239
9.93
16,778,592
16,730,161
16,778,593
4.52
0
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
10,399,150
10,318,340
13,101,406
13,071,113
11,856,773
3.19
15,698
31,396
14,019,767
11,888,169
22
16,781,420
2,331,934
0.63
2,563,750
1,465,000
0.39
20,714,369
6,360,684
1.71
9.17
10,566,027
10,406,341
10,354,707
2.79
8,048,097
7,942,571
2.17
98,250
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
9.27
93,519
9,511,775
9,377,401
311,230
88,922
9,530,194
10,006,565
2.69
3,162,656
482,200
809,392
4,148,482
40,530
10.34
9,458,170
12,164,536
3.28
9.67
8/8/2028
10,918,921
10,754,010
11/6/2024
1,283,750
1,264,755
0.35
399,965
396,842
271,401
202,628
365,976
12,618,235
12,968,612
3.50
2,342,141
8,848,087
2.38
11,190,228
3.01
23
9,310,000
9,230,695
1,855,738
1,836,176
98,000
97,548
2,882,638
0.78
11,608,055
14,146,376
3.82
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
3.48
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
3/15/2029
4,526,683
4,455,979
1.22
68,499
328,640
371,091
4,847,580
4,966,273
1.34
88,511
150,931
9.98
13,222,035
13,176,452
13,155,926
3.54
9.86
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
253,825
12,008,955
11,984,425
3.23
24
10.84
12,982,758
12,947,843
3.49
1,655,482
1,649,757
10.82
20,276
10.94
10.74
6,759
10.86
27,035
14,715,878
14,756,518
3.97
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
1.40
9.42
9,882,041
9,768,247
9.45
1,132,360
10,434,937
11,054,401
2.98
12,656,689
12,563,484
12,530,123
40,164
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
6,008,500
1.62
169,710
6,177,713
6,178,210
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
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
Equine Network, LLC
Boulder, CO
Term A Loan (SBIC)
10.33
5/22/2023
5/22/2028
Hotel, Gaming, & Leisure
6,949,183
6,845,973
1.87
Term A Loan
7/28/2025
2,117,063
2,070,832
0.57
166,667
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
9,211,059
473,485
498,613
9,684,544
9,833,927
10.57
12,104,445
11,956,146
12,043,924
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
2.33
328,204
8,972,119
8,959,575
10.42
7,481,998
7,360,162
7,444,588
2.01
103,720
101,905
514,030
511,460
2,641,131
2,617,056
2,627,925
2,985
304,909
421,889
10,898,062
11,109,063
4,759,099
4,677,532
4,945,260
26
8.97
3,503,162
3,453,695
3,468,130
176,211
3,644,077
3,644,341
0.98
12.77
4,496,653
4,410,000
10.32
12,123,673
12,121,297
3.27
1,944,444
10.51
176,768
10.50
88,384
4,468,228
15,336,022
19,243,417
5.18
8.84
4,191,024
233,513
4,431,619
4,482,864
10.17
9,853,707
9,608,518
422,283
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
HV Watterson Holdings, LLC
12.00
12/17/2021
12/17/2026
13,568,717
13,508,378
9,023,198
99,975
66,483
329,632
328,777
219,205
HV Watterson Parent, LLC Class A Units
1,632
1,631,591
15,568,721
9,308,886
1,587,652
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
27
11/1/2026
7,138,013
7,132,193
1.92
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
3.09
8,308,013
8,285,463
2.24
6,263,548
6,244,249
1.69
1,371,768
0.37
14,830,495
15,943,329
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
3.81
7,446,962
7,349,332
7,372,492
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
1.29
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
3.03
11.55
7,893,466
7,862,441
7,064,652
88,989
79,645
8,375,766
7,144,297
9.60
11,214,012
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
0.89
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
995,000
982,379
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
5,305,649
5,282,425
4,211,768
4,196,582
9,479,007
9,517,417
5,143,936
5,079,288
5,092,497
1.37
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
10.15
15,046,351
15,000,768
850,956
15,979,684
15,851,724
4.27
6,663,165
6,556,702
6,629,849
289,087
287,642
216,815
215,731
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
5/24/2027
105,248
104,923
103,669
6/27/2025
1,462,650
1,673,913
1,691,278
106,498
115,781
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
4,065,515
4,002,647
4,024,860
1,607,266
1,594,242
1,591,193
246,772
5,977,219
5,862,825
8,054,946
7,934,122
2.14
5,079,479
5,003,287
1,762,734
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
1.47
12,870,000
12,661,385
12,805,651
49,750
690,496
13,451,189
13,545,897
3.65
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
2.41
30
6,187,401
13,816,136
13,747,056
3.70
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
11/3/2021
11/3/2026
12,070,359
12,057,869
3,126,233
15,196,592
8.42
10,000,000
9,901,043
2.67
10,147,710
5,283,494
(9)(18)(26)
98,030
5,743,362
3,558,406
0.95
9.13
8,708,727
352,910
9,419,327
9,168,237
2.47
5,835,000
5,782,654
73,915
165,078
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
Sales Benchmark Index, LLC
9.87
1/7/2020
7/7/2026
12,004,716
443,820
SBI Holdings Investments LLC Class A Units
66,573
665,730
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
9.70
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
0.42
4,240,129
4,194,947
4,218,928
885,936
881,506
144,222
143,501
162,373
5,315,244
5,406,308
10.27
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
656,334
11,821,782
12,012,873
11,673,028
770,506
12,237,663
12,650,506
Tilley Distribution, Inc.
Baltimore, MD
9.82
4/1/2022
82,617
82,299
79,725
9,016
8,981
8,700
13,043
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
508,733
1,876,311
0.51
7,437,171
8,912,960
639,521
59,014
698,535
10.12
14,311,049
14,244,794
13,523,942
200,084
15,597,949
13,724,026
5,940,000
5,837,398
5,880,600
8.70
19,800
156,484
5,967,398
6,056,884
8.44
6,370,556
1.72
15,567,454
15,554,413
10,352,358
177,127
176,979
117,789
942,301
626,630
471,156
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
884,786
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
37,500
1,299,020
250,895
September 3, 2026
1,130,707
March 15, 2029
16,897
52,500
2,500,000
Delayed Draw Term Loan**
3,918,298
December 19, 2029
1,363,636
628,259
579,226
633,424
December 17, 2026
February 15, 2027
23,000
35
106,383
1,296,076
June 7, 2030
150,606
450,000
1,317,703
576,923
November 3, 2026
February 7, 2028
26,085
July 7, 2026
412,063
86,957
December 31, 2026
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
December 31, 2024
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)
2,855,414
543,888
236,250
462,113
2,475,863
1,132,576
10,744,100
3,227,622
(2,281,116)
4,395,102
37
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
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 June 30, 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”. As of June 30, 2026, the Company repurchased 274,343 shares of its common stock under the Repurchase Program (as defined below) for an aggregate purchase price of $2,447,682, including commissions, at a weighted average net repurchase price of $8.92 per share. 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.
On June 4, 2024, the Company formed Stellus Capital SBIC III, LP (the “SBIC III subsidiary”), a Delaware limited partnership. The SBIC III 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 III subsidiary are included in the consolidated financial statements.
The SBIC licenses allow the SBIC I subsidiary, SBIC II subsidiary and the SBIC III 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 the SBIC III subsidiary, SBA regulations limit the amounts that the SBIC III subsidiary may borrow to $250 million when it has at least $125 million in regulatory capital, as such term is defined by the SBA, subject to the increased family of funds limit of $475 million across all of the Company’s SBIC subsidiaries and applicable SBA regulations and policies.
As of June 30, 2026 and December 31, 2025, the SBIC I subsidiary had $64,065,000 and $75,000,000 in regulatory capital, respectively.
As of both June 30, 2026 and December 31, 2025, the SBIC II subsidiary had $87,500,000 in regulatory capital.
As of June 30, 2026, the SBIC III subsidiary had $20,000,000 in regulatory capital.
As of June 30, 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 June 30, 2026 and December 31, 2025, the SBIC II subsidiary had $175,000,000 of SBA-guaranteed debentures outstanding. As of June 30, 2026, the SBIC III subsidiary had $0 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 June 30, 2026, the Company’s asset coverage ratio was 206%.
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.
40
In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of the financial statements for the interim periods included herein. The results of operations for the three and six months ended June 30, 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.
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 June 30, 2026, cash balances totaling $318,170, including foreign currency of $154,511 (acquisition cost of $154,511), exceeded Federal Deposit Insurance Corporation ("FDIC") insurance protection levels of $250,000 by $68,170. In addition, as of June 30, 2026, the Company held $4,820,780 in money market mutual funds, a cash equivalent, 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.
41
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 June 30, 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 2030 Notes Payable (as defined below) as prepared for disclosure purposes was $231,686,598 (Level 3 classification) and $124,906,250 (Level 2 classification), respectively. See Note 6 to the Consolidated Financial Statements contained herein for further discussion regarding the fair value measurements and hierarchy.
Consolidation
As permitted under Regulation S-X under the Exchange Act and ASC Topic 946, the Company generally does not consolidate its investments in a portfolio company other than an investment company subsidiary. Accordingly, the Company consolidated the results of the SBIC subsidiaries and the Taxable Subsidiaries. All intercompany balances have been eliminated upon consolidation.
Use of Estimates
The preparation of the Consolidated Statements of Assets and Liabilities in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. Additionally, as explained in Note 1, the Consolidated Financial Statements include investments in the portfolio whose values have been determined in good faith by the Board, pursuant to procedures approved by the Board, in the absence of readily 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 June 30, 2026, there were no such costs.
42
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 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 and six months ended June 30, 2026 and 2025 is as follows:
Loan interest
18,899,098
22,127,706
38,364,227
44,478,212
PIK income
1,718,348
Fee amortization income(1)
705,823
790,544
1,470,270
1,551,927
Fee income acceleration(2)
260,155
216,550
609,199
255,298
Total Interest Income
21,583,424
24,654,205
43,836,431
48,781,321
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 June 30, 2026, the Company had loans to five portfolio companies that were on non-accrual status, which represented approximately 8.5% of the Company’s total investments at cost and 5.4% 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 June 30, 2026 and December 31, 2025, $14,926,872 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.
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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:
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 June 30, 2026 and 2025 of $29,685 and $428,951, respectively, was mostly related to excise and franchise taxes. Income tax expense for the six months ended June 30, 2026 and 2025 of $390,156 and $928,498, respectively, was mostly related to excise and franchise taxes.
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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 June 30, 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 such expenses for the three and six months ended June 30, 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 and six months ended June 30, 2026 and June 30, 2025, the Company did not record deferred income tax benefit or provision related to the Taxable Subsidiaries. In addition, as of both June 30, 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.
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Distributable (Loss) Earnings
The components that make up distributable (loss) earnings on the Consolidated Statements of Assets and Liabilities as of June 30, 2026 and December 31, 2025 are as follows:
Accumulated net realized loss from investments, net of cumulative dividends of $30,352,761 for both periods
(46,456,331)
(39,963,218)
(280,292)
(282,145)
Net unrealized depreciation on investments and cash equivalents, net of deferred tax liability of $0 for both periods
(9,068,139)
(18,419,231)
Net unrealized (depreciation) appreciation on foreign currency translations
(9,121)
17,854
Accumulated undistributed net investment income
27,360,771
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 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
On June 16, 2026, stockholders of the Company approved a new investment advisory agreement (the “Investment Advisory Agreement”) by and between the Company and Stellus Capital, pursuant to which the Advisor will continue to provide investment advisory services to the Company. On June 22, 2026, the Company entered into the Investment Advisory Agreement upon the closing of the acquisition of Stellus Capital by Ridgepost Capital, LLC, which resulted in a change in control of the Advisor. Ridgepost Capital’s parent company, Ridgepost Capital, Inc., is a reporting company listed on the New York Stock Exchange. The terms of the Investment Advisory Agreement are identical to the prior investment advisory agreement, dated October 26, 2012, by and between the Company and the Advisor (the “Prior Advisory Agreement”), including with respect to the advisory fees payable by the Company to the Advisor, other than the date and term thereof. The base management fee and incentive fees under the Investment Advisory Agreement are calculated in a manner identical to that of the Prior Advisory Agreement. The Investment Advisory Agreement will continue in effect for an initial two year period from June 22, 2026, its effective date, and thereafter from year-to-year, provided that such continuance is specifically approved at least annually by (A) the vote of the Board, or by the vote of a majority of the outstanding voting securities of the Company, and (B) the
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vote of a majority of the Company’s directors who are not parties to the Investment Advisory Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any such party, in accordance with the requirements of the 1940 Act.
Pursuant to the Investment Advisory Agreement, the Company has agreed to pay to Stellus Capital an annual base management fee of 1.75% of gross assets, including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents, and an incentive fee.
For the three and six months ended June 30, 2026, the Company recorded an expense for base management fees of $4,393,770 and $8,786,127, respectively. For the three and six months ended June 30, 2025, the Company recorded an expense for base management fees of $4,279,441 and $8,334,167, respectively. As of June 30, 2026 and December 31, 2025, $4,393,771 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 resulting from operations over the then-current and 11 preceding calendar quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding quarters. In other words, any Income Incentive Fee that is payable in a calendar quarter is limited to the lesser of (i) 20% of the amount by which the Company’s pre-incentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the Catch-up, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then-current and 11 preceding quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of pre-incentive fee net investment income, realized gains and losses and unrealized appreciation and depreciation of the Company for the then current and 11 preceding calendar quarters. In addition, the Advisor is not paid the portion of such incentive fee that is attributable to deferred interest until the Company actually receives such interest in cash.
For the three and six months ended June 30, 2026, the Company incurred $150,863 and $257,572 of Income Incentive Fees, respectively. For the three and six months ended June 30, 2025, the Company incurred $2,158,075 and $4,294,566 of Income Incentive Fees, respectively. As of June 30, 2026 and December 31, 2025, $889,986 and $2,317,429, respectively, of such Income Incentive Fees were payable to the Advisor, of which $135,530 and $1,539,724, respectively, were currently payable (as explained below). As of June 30, 2026 and December 31, 2025, $754,456 and $777,705, respectively, of Income Incentive Fees incurred but not paid by the Company were
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generated from deferred interest (i.e. PIK, certain discount accretion and deferred interest) and are not payable until such amounts are received by the Company in cash. For the three and six months ended June 30, 2026, $38,583 and $49,644, respectively, of Income Incentive Fees accrued but not paid by the Company were permanently written off due to the Cumulative Pre-Incentive Fee Net Return limitation. For the three and six months ended June 30, 2025, $928,926 and $2,171,769, 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 and six months ended June 30, 2026 and 2025, the Company did not incur any Capital Gains Incentive Fee. As of both June 30, 2026 and December 31, 2025, no Capital Gains Incentive Fees were accrued.
The following tables summarize the components of the incentive fees discussed above:
Investment income incentive fees incurred
Income incentive fees waived
Incentive fees expense
112,280
1,229,149
207,928
2,122,797
Investment income incentive fee currently payable
135,530
1,539,724
Investment income incentive fee deferred
754,456
777,705
Incentive fee payable
Director Fees
For the three and six months ended June 30, 2026, the Company recorded an expense relating to independent director fees of $84,250 and $213,500, respectively. For the three and six months ended June 30, 2025, the Company recorded an expense relating to independent director fees of $93,250 and $204,500, respectively. As of both June 30, 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 June 30, 2026, there was $0 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 both June 30, 2026 and December 31, 2025, there was no cash due to related parties related to interest paid by a borrower to a 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 and six months ended June 30, 2026, the Company recorded expenses of $508,712 and $1,040,305, respectively, related to the Administration Agreement, which are included in “Administrative services expenses” on the Consolidated Statements of Operations.
For the three and six months ended June 30, 2025, the Company recorded expenses of $398,129 and $769,103, respectively, related to the Administration Agreement, which are included in “Administrative services expenses” on the Consolidated Statements of Operations. As of June 30, 2026 and December 31, 2025, $508,712 and $530,739, respectively, remained payable to Stellus Capital related to the Administration Agreement and were 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 and six months ended June 30, 2026, the Company declared aggregate distributions of $0.34 and $0.68 per share on its common stock, respectively. For the three and six months ended June 30, 2025, the Company declared aggregate distributions of $0.40 and $0.80 per share on its common stock, respectively. The distributions declared for the three and six months ended June 30, 2025 differ from the amounts disclosed in the Consolidated Statements of Operations as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of the period-end. The Company has declared aggregate distributions of $18.83 per share on its common stock since Inception as described below:
Date Declared
Record Date
Payment Date
Per Share(1)
Fiscal 2012
Fiscal 2013
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
March 31, 2026
April 15, 2026
April 14, 2026
April 30, 2026
May 15, 2026
May 29, 2026
June 15, 2026
July 15, 2026
18.83
The Company has adopted an “opt-out” dividend reinvestment plan (“DRIP”), pursuant to which a stockholder whose shares are held in his own name will receive distributions in shares of the Company’s common stock under the Company’s DRIP unless he elects to receive distributions in cash. Stockholders whose shares are held in the name of a broker or the nominee of a broker may have distributions 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 and six months ended June 30, 2026 or 2025.
NOTE 4 — EQUITY OFFERINGS AND REPURCHASES AND RELATED EXPENSES
The table below illustrates the number of common stock shares the Company issued (repurchased) since Inception through various equity offerings and pursuant to the Company’s DRIP.
Average
Number of
Gross
Underwriting
Offering
Fees Covered
Offering/
Issuance/(Repurchase) of Common Stock
Shares
Proceeds(1)(2)
Fees
Expenses
by Advisor
Proceeds/(Payments)(3)
(Repurchase) 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
Quarter ended March 31, 2026
Quarter ended June 30, 2026
10,974
(8.92)
416,668,625
9,414,113
3,690,386
672,917
404,237,043
ATM Program
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
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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 and six months ended June 30, 2026, respectively, under the ATM Program.
Share Repurchase Program
On March 3, 2026, the Company announced that its Board authorized a program for the purpose of repurchasing up to $20,000,000 of its shares of common stock (the "Repurchase Program"). Under the Repurchase Program, the Company may, but is not obligated to, repurchase its outstanding common stock in the open market from time to time, provided that the Company complies with the requirements under its Code of Ethics and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. Unless amended or extended by the Board, the Repurchase Program will expire on the earlier of March 2, 2027 or when $20,000,000 of the Company's outstanding shares of common stock have been repurchased.
During the three and six months ended June 30, 2026, the Company repurchased 274,343 shares of its common stock under the Repurchase Program for an aggregate purchase price of $2,447,682, including commissions, at a weighted average net repurchase price of $8.92 per share.
NOTE 5 — NET INCREASE IN NET ASSETS PER COMMON SHARE
The following information sets forth the computation of net increase in net assets resulting from operations per common share for the three and six months ended June 30, 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
54
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.
At June 30, 2026, the Company had investments in 116 portfolio companies. The composition of the Company’s investments as of June 30, 2026 was as follows:
Fair Value
Senior Secured – First Lien(1)
901,407,481
863,348,047
Senior Secured – Second Lien
12,115,000
Unsecured Debt
344,582
132,977
63,760,986
92,650,393
55
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
12,025,000
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 June 30, 2026 and December 31, 2025, the Company had 77 and 77 of such investments, respectively, with aggregate unfunded commitments of $45,657,572 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 June 30, 2026 and December 31, 2025 were as follows:
Aggregate cost of portfolio company securities
Gross unrealized appreciation of portfolio company securities
64,497,633
59,298,870
Gross unrealized depreciation of portfolio company securities
(73,565,772)
(77,718,103)
Gross unrealized appreciation on foreign currency translations of portfolio company securities
2,965
26,900
Gross unrealized depreciation on foreign currency translations of portfolio company securities
(316,458)
(123,958)
Aggregate fair value of portfolio company securities
The fair values of the Company’s investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of June 30, 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
56
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 change in aggregate values of Level 3 portfolio investments during the six months ended June 30, 2026 was as follows:
Senior Secured
Loans-First
Loans-Second
Lien
Debt
Fair value at beginning of period
44,017,283
29,822
4,538,509
48,585,614
PIK interest
3,386,096
6,639
Sales and redemptions
(93,718,076)
(10,304)
(1,780,795)
(95,509,175)
Realized losses
(5,273,144)
(1,091,275)
(6,364,419)
Change in unrealized depreciation included in earnings(1)
5,095,933
86,653
(15,901)
4,184,407
9,351,092
Change in unrealized depreciation on foreign currency included in earnings
(210,108)
(1,068)
(5,259)
(216,435)
1,380,263
3,347
1,383,610
Fair value at end of period
There were no Level 3 transfers during the six months ended June 30, 2026.
The change in aggregate values of Level 3 portfolio investments during the year ended December 31, 2025 was 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.
58
The following is a summary of geographical concentration of the Company’s investment portfolio as of June 30, 2026:
% of Total
Investments at
California
178,427,458
174,860,639
18.06
Texas
136,764,088
133,424,017
13.78
Florida
99,848,846
92,837,302
New York
59,724,419
60,236,700
6.22
Illinois
64,092,415
52,438,419
5.42
Pennsylvania
48,141,996
49,661,336
5.13
Arizona
39,046,821
43,069,884
4.45
Canada
34,656,965
34,628,895
3.58
North Carolina
31,297,354
32,061,028
3.31
Colorado
32,717,165
31,605,891
3.26
Ohio
25,865,195
29,370,213
Tennessee
28,690,957
26,777,126
Iowa
22,527,154
22,617,898
District of Columbia
16,647,591
20,906,791
Virginia
19,567,712
20,181,650
New Jersey
19,814,276
19,373,145
Georgia
17,029,281
1.76
Michigan
16,138,226
16,421,501
Wisconsin
25,887,018
16,198,621
Missouri
12,274,070
12,585,720
Minnesota
Massachusetts
11,999,782
11,983,168
1.24
Louisiana
Oregon
Idaho
0.88
Washington
1,273,384
2,026,618
South Carolina
United Kingdom
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The following is a summary of geographical concentration of 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
35,249,934
36,769,186
36,116,171
36,140,789
31,163,913
32,456,489
24,283,990
25,043,277
22,351,338
22,467,248
2.23
19,768,069
19,924,612
1.98
20,495,678
18,827,946
17,506,416
17,764,137
17,168,351
10,685,508
14,469,710
1.44
0.91
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 of the Company’s investment portfolio as of June 30, 2026:
267,146,512
279,023,494
28.81
92,789,334
93,248,553
83,799,028
87,870,512
9.08
66,024,758
70,816,608
7.31
66,686,918
65,378,889
53,586,210
54,209,390
5.60
60,023,531
49,964,505
5.16
42,711,724
40,914,720
4.23
36,574,917
38,007,732
3.93
35,293,483
29,585,372
29,523,481
27,078,323
20,775,702
26,355,158
2.72
18,987,958
18,855,490
1.73
12,407,569
5,825,064
5,811,029
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The following is a summary of industry concentration of 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
4.03
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
1.51
11,802,297
0.83
7,495,599
7,566,694
0.61
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The following provides quantitative information about Level 3 fair value measurements as of June 30, 2026. During the six months ended June 30, 2026, investments valued at $52,260,125 changed valuation techniques from transaction value to the income and market approaches, as applicable, due to the transaction price no longer being reflective of current market conditions.
Description:
Valuation Technique
Unobservable Inputs
Range (Weighted Average)
First lien debt
753,188,093
Income approach(1)(2)
HY credit spreads
-1.73% to 13.46% (0.32%)
Risk free rates
-1.49% to 2.32% (0.35%)
101,896,262
Market approach(1)
EBITDA multiple
5.0x to 11.3x (8.0x)(3)
8,263,692
Transaction value
Transaction price
N/A
Second lien debt
0.37% to 0.37% (0.37%)
0.54% to 0.54% (0.54%)
Unsecured debt
0.20% to 0.20% (0.20%)
-0.06% to -0.06% (-0.06%)
6.8x to 9.3x (8.4x)(3)
Equity investments
78,824,396
Market approach(4)
3.8x to 18.1x (10.1x)
Revenue multiple
6.4x to 9.1x (7.5x)
13,825,997
Total Long Term Level 3 Investments
63
The following provides quantitative information about Level 3 fair value measurements as of December 31, 2025. During the year ended December 31, 2025, investments valued at $81,810,288 changed valuation techniques from transaction value to the income and market approaches, as applicable, due to the transaction price no longer being reflective of current market conditions.
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 the Company’s knowledge, is any material legal proceeding threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with the Company’s portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon the Company’s business, financial condition or results of operations.
As of June 30, 2026, the Company had $45,322,619 in unfunded debt commitments and $334,953 in unfunded equity commitments to 77 existing portfolio companies. As of December 31, 2025, the Company had $52,991,159 in unfunded debt commitments and $388,856
64
in unfunded equity commitments to 77 existing portfolio companies. As of June 30, 2026, the Company had sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded 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 appreciation on investments
Net realized loss
(0.22)
(0.24)
Total from operations
Stockholder distributions from:
(0.68)
(0.80)
Accretive effect of stock offerings (issuing shares above net asset value per share)
Other(6)
(0.01)
Net asset value at end of period
13.21
Per share market value at end of period
13.94
Total return based on market value(2)
(28.85)
7.32
Weighted average shares outstanding for the period
Ratio/Supplemental Data:(1)
Net assets at end of period
Weighted average net assets
366,698,144
374,041,889
Annualized ratio of gross operating expenses to net assets(5)
16.84
18.04
Annualized ratio of net operating expenses to net assets(5)(7)
16.81
16.87
Annualized ratio of interest expense and other fees to net assets
9.59
Annualized ratio of net investment income before fee waiver to net assets(5)
8.24
9.26
Annualized ratio of net investment income to net assets(5)(7)
8.26
10.43
Portfolio turnover(3)
4.62
4.77
Notes payable
125,000,000
175,000,000
222,192,028
163,059,680
260,000,000
308,750,000
Asset coverage ratio(4)
x
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
65
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 June 30, 2026 and December 31, 2025, the Company was in compliance with these covenants.
As of June 30, 2026 and December 31, 2025, $222,192,028 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 June 30, 2026, 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 June 30, 2026 and December 31, 2025, $2,970,506 and $3,481,928, respectively, of such prepaid loan structure fees and administration fees had yet to be amortized. These prepaid loan fees are presented on the Company’s Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following is a summary of the Credit Facility, net of prepaid loan structure fees:
236,649,288
Prepaid loan structure fees
(2,970,506)
(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 and six months ended June 30, 2026 and 2025:
Interest expense
3,664,852
2,868,425
7,408,585
6,757,582
Loan fee amortization
257,124
319,127
Total interest and financing expenses
3,921,976
3,187,552
7,920,007
7,392,327
Weighted average interest rate
6.5
7.6
6.3
7.3
Effective interest rate (including fee amortization)
6.9
8.4
6.8
8.0
Average debt outstanding
227,037,944
152,222,442
235,506,881
186,115,274
Cash paid for interest and unused fees
3,663,793
2,901,866
7,561,870
6,712,888
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 June 30, 2026 and December 31, 2025, the SBIC I subsidiary had $64,065,000 and $75,000,000 in regulatory capital and $85,000,000 and $124,000,000 of SBA-guaranteed debentures outstanding, respectively. As of June 30, 2026, the SBIC III subsidiary had $20,000,000 in regulatory capital and $0 of SBA-guaranteed debentures outstanding. During the six months ended ended June 30, 2026, the SBIC I subsidiary repaid $39,000,000 of SBA-guaranteed debentures that matured during the period and returned $10,935,000 of capital to the Company. As of both June 30, 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 $475,000,000 more than it would otherwise be able to absent the receipt of this exemptive relief.
On a stand-alone basis, the SBIC subsidiaries held $458,924,914 and $492,710,365 in assets at June 30, 2026 and December 31, 2025, respectively, which accounted for approximately 46.7% 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 June 30, 2026:
Issuance Date
Licensee
Maturity Date
Debenture Amount
Interest Rate
SBA Annual Charge
November 28, 2017
SBIC I subsidiary
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
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 June 30, 2026 and December 31, 2025, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6 to the consolidated financial statements contained herein.
As of both June 30, 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 and are amortized over the life of the debentures. As of June 30, 2026 and December 31, 2025, $2,695,407 and $3,015,937 of prepaid financing costs had yet to be amortized,
68
respectively. These prepaid loan fees are presented on the Consolidated Statements of Assets and Liabilities as a deduction from the debt liability.
The following is a summary of the SBA-guaranteed debentures, net of prepaid loan fees:
SBA-guaranteed Debentures payable
299,000,000
Prepaid loan fees
(2,695,407)
(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 and six months ended June 30, 2026 and 2025:
2,105,273
2,492,308
4,388,165
5,032,668
Debenture fee amortization
153,544
182,276
2,258,817
2,674,584
4,708,695
5,403,928
3.2
3.5
272,281,768
312,700,276
Cash paid for interest
4,803,285
5,188,661
NOTE 11 — NOTES
On January 14, 2021, the Company issued $100,000,000 in aggregate principal amount of 4.875% fixed-rate notes due 2026 (the “2026 Notes Payable”). 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 were amortized over the term of the 2026 Notes Payable. As of both June 30, 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 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 June 30, 2026, the aggregate carrying amount of the 2030 Notes Payable was approximately $122,897,963. The 2030 Notes Payable are institutional, non-traded notes.
In connection with the issuance and maintenance of the 2030 Notes Payable, the Company incurred $2,746,803 of fees, which are being amortized over the term of the 2030 Notes Payable. As of June 30, 2026 and December 31, 2025, $2,102,036 and $2,328,591 of
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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 and six months ended June 30, 2026 and 2025:
1,218,750
2,437,500
Deferred financing costs
111,374
221,524
1,330,124
2,659,024
4.9
5.4
100,000,000
The following table summarizes the interest expense and deferred financing costs on the 2030 Notes Payable for the three and six months ended June 30, 2026:
2,265,625
1,374,375
4,531,250
136,182
81,944
Discount amortization
33,873
31,436
Premium amortization
(31,006)
(61,431)
2,404,674
1,487,755
4,807,806
7.4
%(1)
7.7
7.8
75,000,000
(1)
15,000
(1) Calculated for the period from April 1, 2025, the date of the 2030 Notes Payable offering, through June 30, 2025.
The following is a summary of the 2030 Notes Payable, net of deferred financing costs:
(2,051,714)
(2,272,580)
Premium on 2030 Notes Payable
556,713
618,145
Discount on 2030 Notes Payable
(607,036)
(674,156)
2030 Notes Payable, net of deferred financing costs and discount
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 June 30, 2026 and 2025, 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 June 30, 2026:
Activity Type
Company Name
Company Description
Investment Amount
Instrument Type
Add-On Investment
July 2, 2026
Blade Landscape Investments, LLC*
Regional provider of commercial landscaping services
5,250
New Investment
July 16, 2026
Emergent Software
Microsoft-centric data, AI, and cloud IT services partner
3,197,377
2,664,481
Delayed Draw Term Loan Commitment
Revolver Commitment
306,732
August 5, 2026
LJ Welding Automation Ltd.
Manufacturer of material handlingand welding automation systems
7,693,688
303,470
* Existing portfolio company
The Company realized the following portfolio company investment subsequent to June 30, 2026:
Proceeds Received
Full Repayment
July 1, 2026
Provider of LED lighting systems and modules
July 27, 2026
Lifestyle home décor brand
July 30, 2026
Reseller of CPAP machines and accessories
Credit Facility
The outstanding balance under the Credit Facility as of August 10, 2026 was $211,740,000.
SBA Licensing
On July 14, 2026, the Company received a license from the SBA for the SBIC III subsidiary, which allows the Company to contribute $125,000,000 of equity and draw up to $250,000,000 of SBA-guaranteed debentures, subject to the increased family of funds limit of $475,000,000 across all of the Company’s SBIC subsidiaries and applicable SBA regulations and policies.
Since June 30, 2026, we repurchased 192,974 shares of our common stock under the Repurchase Program at a weighted-average purchase price of $7.95 per share.
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Dividends Declared
On July 16, 2026, the Board declared a regular monthly dividend for each of July 2026, August 2026, and September 2026 as follows:
Record
Payment
Amount per
Declared
Share
July 31, 2026
August 14, 2026
0.0833
August 31, 2026
September 15, 2026
September 30, 2026
October 15, 2026
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 June 30, 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 June 30, 2026, our asset coverage ratio was 206%. 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.
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Portfolio Composition and Investment Activity
Portfolio Composition
We originate and invest primarily in privately held lower middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA) with a focus on investing through first lien (including unitranche) loans, often with a corresponding equity investment.
As of June 30, 2026, we had $968.2 million (at fair value) invested in 116 portfolio companies. As of June 30, 2026, our portfolio included approximately 89% of first lien debt (including unitranche investments), 1% of second lien debt, 0% of unsecured debt and 10% of equity investments at fair value. The composition of our investments at cost and fair value as of June 30, 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 June 30, 2026 and December 31, 2025, we had unfunded commitments of $45.7 million and $53.4 million, respectively, to provide financing to 77 and 77 portfolio companies, respectively. As of June 30, 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 of our investment portfolio as of June 30, 2026:
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The following is a summary of geographical concentration of our investment portfolio as of December 31, 2025:
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The following is a summary of industry concentration of our investment portfolio as of June 30, 2026:
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The following is a summary of industry concentration of our investment portfolio as of December 31, 2025:
At June 30, 2026, our average portfolio company investment at amortized cost and fair value was approximately $8.4 million and $8.4 million, respectively, and our largest portfolio company investment at amortized cost and fair value was approximately $30.9 million and $26.0 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 June 30, 2026 and December 31, 2025, 91.7% and 91.6% of our debt investments bore interest based on floating rates (subject to interest rate floors), respectively, and 8.3% and 8.4% bore interest at fixed rates, respectively.
The weighted average yield on all of our debt investments as of June 30, 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 June 30, 2026 and December 31, 2025 was approximately 8.4% 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 June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $5.1 million and $25.1 million, respectively.
Investment Activity
During the six months ended June 30, 2026, we made an aggregate of $45.7 million of investments in six new portfolio companies and 11 existing portfolio companies. During the six months ended June 30, 2026, we received an aggregate of $90.9 million in proceeds from repayments of our investments.
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During the six months ended June 30, 2025, we made an aggregate of $78.2 million of investments in nine new portfolio companies and 13 existing portfolio companies. During the six months ended June 30, 2025, we received an aggregate of $46.6 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, 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 June 30, 2026
As of December 31, 2025
(dollars in millions)
Portfolio
Investment Category
Companies(1)
214.5
227.3
502.7
590.2
198.8
148.4
42.7
35.1
9.5
6.6
968.2
100
119
1,007.6
117
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 June 30, 2026, we had loans to five portfolio companies that were on non-accrual status, which represented approximately 8.5% of our total investments at cost and 5.4% 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 June 30, 2026 and December 31, 2025, $14.9 million and $11.2 million of income from investments on non-accrual had not been accrued, respectively.
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Results of Operations
An important measure of our financial performance is net increase (decrease) in net assets resulting from operations, which includes net investment income (loss), net realized gain (loss) and net unrealized appreciation (depreciation). Net investment income (loss) is the difference between our income from interest, dividends, fees and other investment income and our operating expenses, including interest on borrowed funds. Net realized gain (loss) on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost. Net unrealized appreciation (depreciation) on investments is the net change in the fair value of our investment portfolio.
Comparison of the Three and Six Months Ended June 30, 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 and six months ended June 30, 2026 and 2025 (in millions).
Interest income(1)
19.6
22.9
39.8
46.0
1.7
1.5
3.4
2.5
Miscellaneous fees(1)
1.0
1.3
2.4
2.1
22.3
25.7
45.6
50.6
The decrease in investment income for the three and six months ended June 30, 2026 was due primarily to a decrease in prevailing market rates on our loans, typically in reference to the Secured Overnight Financing Rate (“SOFR”) and a decrease in our principal debt outstanding.
Our primary operating expenses include the payment of fees to Stellus Capital under the Investment Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, which may include:
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The following shows the breakdown of operating expenses for the three and six months ended June 30, 2026 and 2025 (in millions).
Operating Expenses
4.4
4.3
8.8
0.2
0.6
0.5
1.2
0.9
2.2
0.3
1.1
0.7
0.1
8.5
8.7
17.4
17.0
0.4
0.8
14.8
17.1
30.6
33.5
(1.0)
(2.2)
16.1
31.3
The decrease in gross operating expenses for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, was due to the decrease in income incentive fees, partially offset by higher management fees and increased professional fees.
For the three months ended June 30, 2026, net investment income was $7.5 million, or $0.26 per common share (based on 28,869,028 weighted average shares outstanding for the three months ended June 30, 2026).
For the three months ended June 30, 2025, net investment income was $9.6 million, or $0.34 per common share (based on 28,412,849 weighted average shares outstanding for the three months ended June 30, 2025).
For the six months ended June 30, 2026, net investment income was $15.0 million, or $0.52 per common share (based on 28,907,925 weighted average shares outstanding for the six months ended June 30, 2026).
For the six months ended June 30, 2025, net investment income was $19.4 million, or $0.69 per common share (based on 28,009,969 weighted average shares outstanding for the six months ended June 30, 2025).
The decrease in net investment income over the respective three and six months periods was due to decreased interest income as explained in the “Revenues” section above, partially offset by a decrease in 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 June 30, 2026 totaled $49.2 million and net realized losses totaled ($7.2) million.
Proceeds from repayments of investments and amortization of certain other investments for the three months ended June 30, 2025 totaled $31.6 million and net realized losses totaled ($0.9) million.
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Proceeds from repayments of investments and amortization of certain other investments for the six months ended June 30, 2026 totaled $90.9 million and net realized losses totaled ($6.5) million.
Proceeds from repayments of investments and amortization of certain other investments for the six months ended June 30, 2025 totaled $46.6 million and net realized losses totaled ($6.8) million.
Net Change in Unrealized Appreciation (Depreciation) of Investments
Net change in unrealized appreciation (depreciation) of investments primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded appreciation or depreciation when gains or losses are realized.
Net change in unrealized appreciation on investments and cash equivalents for the three months ended June 30, 2026 and 2025 totaled $15.9 million and $1.4 million, respectively.
The change in unrealized appreciation over the respective periods was due to reversals of previous write-downs that were realized and company-specific investment write-ups, offset by company-specific write-downs.
Net change in unrealized appreciation on investments and cash equivalents for the six months ended June 30, 2026 and 2025 totaled $9.4 million and $2.6 million, respectively.
The change in unrealized appreciation over the respective periods was due to reversals of previous write-ups that were realized and company-specific investment write-downs, partially offset by company-specific write-ups.
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 and six months ended June 30, 2026 and June 30, 2025, we did not record deferred income tax benefit or provision related to the Taxable Subsidiaries. As of both June 30, 2026 and December 31, 2025, there was $0.0 of deferred tax liabilities on the Consolidated Statements of Assets and Liabilities.
For the three months ended June 30, 2026, net increase in net assets resulting from operations totaled $16.2 million, or $0.56 per common share (based on 28,869,028 weighted average shares outstanding for the three months ended June 30, 2026).
For the three months ended June 30, 2025, net increase in net assets resulting from operations totaled $10.1 million, or $0.36 per common share (based on 28,412,849 weighted average shares outstanding for the three months ended June 30, 2025).
The net decrease in net assets between the respective periods was due to higher unrealized depreciation, offset by higher realized gains in the current year.
For the six months ended June 30, 2026, net increase in net assets resulting from operations totaled $17.9 million, or $0.62 per common share (based on 28,907,925 weighted average shares outstanding for the six months ended June 30, 2026).
For the six months ended June 30, 2025, net increase in net assets resulting from operations totaled $15.1 million, or $0.54 per common share (based on 28,009,969 weighted average shares outstanding for the six months ended June 30, 2025).
The net decrease in net assets between the respective periods was due to higher unrealized depreciation and lower net investment income, offset by decreased net realized losses in the current year.
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Financial Condition, Liquidity and Capital Resources
Cash Flows from Operating and Financing Activities
Our operating activities provided net cash of $56.2 million for the six months ended June 30, 2026, primarily in connection with the purchase of portfolio investments, offset by the net increase in net assets resulting from operations and sales and repayments of portfolio investments. Our financing activities for the six months ended June 30, 2026 used cash of $76.1 million, primarily from repayments of SBA-guaranteed debentures and shareholder distributions.
Our operating activities used net cash of $13.3 million for the six months ended June 30, 2025, primarily in connection with the purchase of portfolio investments, offset by the net increase in net assets resulting from operations and sales and repayments of portfolio investments. Our financing activities for the six months ended June 30, 2025 provided cash of $33.2 million, primarily from proceeds from the issuance of common stock, offset by net paydowns on our Credit Facility and shareholder distributions.
Liquidity and Capital Resources
Our liquidity and capital resources are derived from the Credit Facility, Notes Payable (as defined below), SBA-guaranteed debentures and cash flows from operations, including investment sales and repayments, the ATM Program (as defined below), and income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as the payment of dividends to the holders of our common stock. We used, and expect to continue to use, these capital resources as well as proceeds from turnover within our portfolio and from public and private offerings of securities to finance our investment activities.
Although we expect to fund the growth of our investment portfolio through the net proceeds from future public and private equity offerings and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act, our plans to raise capital may not be successful. In this regard, if our common stock trades at a price below our then-current net asset value per share, we may be limited in our ability to raise equity capital given that we cannot sell our common stock at a price below net asset value per share unless our stockholders approve such a sale and our Board makes certain determinations in connection therewith. A proposal, approved by our stockholders at our 2026 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 16, 2027, the one-year anniversary of our 2026 annual stockholders meeting, and (ii) the date of our 2027 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. This requirement limits the amount that we may borrow. We have received exemptive relief from the SEC to permit us to exclude the debt of the Stellus Capital SBIC, LP (the “SBIC I subsidiary”), Stellus Capital SBIC II, LP (the “SBIC II subsidiary”), and Stellus Capital SBIC III, LP (the “SBIC III subsidiary”) (collectively, the “SBIC subsidiaries”) guaranteed by the U.S. Small Business Administration (“SBA”) from the definition of senior securities in the asset coverage test under the 1940 Act. As of June 30, 2026 and December 31, 2025, our asset coverage ratio was 206% 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 June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $5.1 million and $25.1 million, respectively.
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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 22, 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 $335.0 million on a committed basis with an accordion feature that allows us to increase the aggregate commitments up to $365.0 million, subject to new or existing lenders agreeing to participate in the increase and other customary conditions.
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 June 30, 2026 and December 31, 2025, we were in compliance with these covenants.
As of June 30, 2026 and December 31, 2025, $222.2 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. 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 June 30, 2026 and December 31, 2025, $3.0 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 monthly or quarterly in arrears. The following table summarizes the interest expense and amortized loan fees on the Credit Facility for the three and six months ended June 30, 2026 and 2025 (dollars in millions):
3.6
2.9
3.9
7.9
227.0
152.2
235.5
186.1
3.7
6.7
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 June 30, 2026 and December 31, 2025, the SBIC I subsidiary had
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$64.1 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 six months ended June 30, 2026, the SBIC I subsidiary repaid $39.0 million of SBA-guaranteed debentures that matured during the period. As of both June 30, 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. As of June 30, 2026 and December 31, 2025, the SBIC III subsidiary had $20.0 million and $0.0 million in regulatory capital, respectively, and $0 of SBA-guaranteed debentures outstanding for both periods.
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 $475.0 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 $458.9 million and $492.7 million in assets at June 30, 2026 and December 31, 2025, respectively, which accounted for approximately 46.7% 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 June 30, 2026 and December 31, 2025, the carrying amount of the SBA-guaranteed debentures was $257.3 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 $231.7 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 June 30, 2026 and December 31, 2025, the SBA-guaranteed debentures would be deemed to be Level 3, as defined in Note 6 to the Consolidated Financial Statements.
As of June 30, 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 June 30, 2026 and December 31, 2025, $2.7 million 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 and six months ended June 30, 2026 and 2025 (dollars in millions):
5.0
2.3
2.7
4.7
260.0
308.8
272.3
312.7
4.8
5.2
Notes Offering
On January 14, 2021, we issued $100.0 million in aggregate principal amount of 4.875% fixed-rate notes due 2026 (the “ 2026 Notes Payable”). On September 30, 2025, we prepaid $50,000,000 in aggregate principal of the 2026 Notes Payable. On December 31, 2025, we 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, we incurred $2,327,835 of fees, which were amortized over the term of the 2026 Notes Payable. As of both June 30, 2026 and December 31, 2025, $0 of prepaid financing costs had yet to be amortized.
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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 our 5.75% fixed-rate notes due September 15, 2022 and repay a portion of the amount outstanding under the Credit Facility.
The following table summarizes the interest expense and deferred financing costs on the 2026 Notes Payable for the three and six months ended June 30, 2026 and 2025 (dollars in millions):
100.0
0.0
On April 1, 2025 and September 25, 2025, we issued $75.0 million and $50.0 million, respectively, in aggregate principal amount of 7.250% fixed-rate notes due 2030 (the “2030 Notes Payable” and together with the 2026 Notes Payable, the “Notes Payable”). The 2030 Notes Payable will mature on April 1, 2030 and may be redeemed in whole or in part at any time or from time to time at our option on or after October 1, 2029, at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest on the 2030 Notes Payable is payable semi-annually beginning October 1, 2025. As of June 30, 2026, the aggregate carrying amount of the 2030 Notes Payable was approximately $122.6 million. The Notes Payable are institutional, non-traded notes. We used the net proceeds from the 2030 Notes Payable offerings 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 $2.6 million of fees, which are being amortized over the term of the 2030 Notes Payable. As of June 30, 2026 and December 31, 2025, $2.1 million and $2.3 million 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 2030 Notes Payable for the three and six months ended June 30, 2026 and 2025 (dollars in millions):
1.4
4.5
125.0
75.0
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 $50,000,000 in aggregate offering price of shares of our common stock, par value $0.001 per share, with the intention to use the net
88
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 to issue and sell, from time to time, up to $100,000,000 in aggregate offering price of shares of our common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with 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 $100,000,000 in aggregate offering price of shares of our common stock, par value $0.001 per share, with the intention to use the net proceeds from this at-the-market sales program to repay certain outstanding indebtedness and make investments in portfolio companies in accordance with our 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 and six months ended June 30, 2026 under the ATM Program. We issued 278,945 and 935,030 shares during the three and six months ended June 30, 2025 under the ATM Program, respectively, for gross proceeds of $3.9 million and $13.2 million, respectively, and underwriting fees and other expenses of $0.1 million and $0.4 million, respectively. The average per share offering price of shares issued in the ATM Program during the three and six months ended June 30, 2025 was $13.97 and $14.07, respectively. The Advisor has agreed to reimburse us for underwriting fees and expenses to the extent the per share price of the shares to the public, less underwriting fees, was less than the then-current net asset value per share. For the three and six months ended June 30, 2026, the Advisor was not required to reimburse underwriting fees as all shares were issued at a premium to net asset value.
On March 3, 2026, we announced that our Board authorized a program for the purpose of repurchasing up to $20.0 million of shares of our common stock (the “Repurchase Program”). Under the Repurchase Program, we may, but are not obligated to, repurchase our outstanding common stock in the open market from time to time, provided that we comply with the requirements under our Code of Ethics and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including certain price, market volume and timing constraints. Unless amended or extended by the Board, the Repurchase Program will expire on the earlier of March 2, 2027 or when $20.0 million of our outstanding shares of common stock have been repurchased.
During the three and six months ended June 30, 2026, we repurchased 274,343 shares of our common stock under the Repurchase Program for an aggregate purchase price of $2,447,682, including commissions, at a weighted average net repurchase price of $8.92 per share. See Part II, Item 2 of this Quarterly Report on Form 10-Q for more information about repurchases effectuated during the quarter.
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 June 30, 2026, we had $45.3 million in unfunded debt commitments and $0.3 million in unfunded equity commitments to an aggregate of 77 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 an aggregate of 77 portfolio companies. As of June 30, 2026, we had sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded 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.
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.
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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 June 30, 2026:
We realized the following portfolio company investments subsequent to June 30, 2026:
The outstanding balance under the Credit Facility as of August 10, 2026 was $211.7 million.
On July 14, 2026, we received a license from the SBA for the SBIC III subsidiary, which allows us to contribute $125.0 million of equity and draw up to $250.0 million of SBA-guaranteed debentures, subject to the increased family of funds limit of $475.0 million across all of our SBIC subsidiaries and applicable SBA regulations and policies.
Dividend Declared
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. In March 2022, the Federal Reserve raised interest rates for the first time since December 2018, and subsequently raised interest rates several times, most recently in July 2023, bringing the target for the federal funds rate to 5.25% - 5.50%, the highest since January 2001. In September 2024, the Federal Reserve began easing its policy, lowering the federal funds rate to a target range of 4.25% - 4.50% in December 2024, 4.00% - 4.25% in September 2025, 3.75% - 4.00% in October 2025 and 3.50% - 3.75% in December 2025. Since December 2025, the Federal Reserve has kept the interest rate at 3.50% - 3.75%. As of June 30, 2026 and December 31, 2025, 91.7% and 91.6% of the loans in our portfolio bore interest at a floating rate, respectively. These floating rate loans typically bear interest in reference to SOFR, which is indexed to 30-day or 90-day SOFR rates, subject to an interest rate floor. As of both June 30, 2026 and December 31, 2025, the weighted average interest rate floor on our floating rate loans was 1.42%.
Assuming that the consolidated statement of assets and liabilities as of June 30, 2026 was to remain constant and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annual impact on net income of changes in interest rates:
($ in millions)
Interest
Net Interest
Change in Basis Points(2)
Income
Expense(3)
Income(1)
Up 200 basis points
16.3
(4.4)
11.9
Up 150 basis points
12.2
(3.3)
8.9
Up 100 basis points
8.1
5.9
Up 50 basis points
4.1
(1.1)
3.0
Down 50 basis points
(4.1)
(3.0)
Down 100 basis points
(8.1)
(5.9)
Down 150 basis points
(12.2)
3.3
(8.9)
Down 200 basis points
(16.3)
(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 and six months ended June 30, 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 Exchange Act, as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
The Company’s management did not identify any change in the Company’s internal control over financial reporting that occurred during the three and six months ended June 30, 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 and six months ended June 30, 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 June 30, 2026.
No shares were issued under the distribution reinvestment program during either of the three and six months ended June 30, 2026 and 2025.
Repurchases of our equity securities during the three months ended June 30, 2026 were as follows:
Period
Total number of shares purchased
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs(1)
Maximum number of shares (orapproximate dollar value) that may yet be purchased under the plans or programs
April 1, 2026 to April 30, 2026
20,000,000
May 1, 2026 to May 31, 2026
115,009
9.16
18,946,698
June 1, 2026 to June 30, 2026
159,334
8.68
274,343
17,618,036
Item 3.Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Item 5.Other Information
During the three and six months ended June 30, 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).
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).
10.1
Investment Advisory Agreement, dated June 22, 2026, by and between Stellus Capital Investment Corporation and Stellus Capital Management, LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 814-00971), filed on June 22, 2026).
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 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: August 10, 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