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What changed in Oxford Square Capital Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Oxford Square Capital Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+312 added−299 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-19)

Top changes in Oxford Square Capital Corp.'s 2024 10-K

312 paragraphs added · 299 removed · 257 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+13 added−6 removed202 unchanged
Biggest changeRosenthal. • Our financial condition and results of operations will depend on our ability to manage our existing portfolio and future growth effectively. • Our business and operation could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price. • We operate in a highly competitive market for investment opportunities. • Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. • There will be uncertainty as to the value of our portfolio investments, which may impact our net asset value. • Further downgrades of the U.S. credit rating, impending automatic spending cuts or another government shutdown could negatively impact our liquidity, financial condition and earnings. 18 • Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and financial results. • The interest rates of our term loans to our portfolio companies that extend beyond 2023 might be subject to change based on recent regulatory changes. • A disruption in the capital markets and the credit markets could negatively affect our business. • We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. • Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage. • Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners. • Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited. • There are significant potential conflicts of interest between OXSQ and our management team. • Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
Biggest changeRosenthal. • Our financial condition and results of operations will depend on our ability to manage our existing portfolio and future growth effectively. • We operate in a highly competitive market for investment opportunities. • Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. • There will be uncertainty as to the value of our portfolio investments, which may impact our net asset value. • Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and financial results. 18 • A disruption in the capital markets and the credit markets could negatively affect our business. • We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. • Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage. • There are significant potential conflicts of interest between OXSQ and our management team. • Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
Rosenthal has served as President and a Director of Oxford Lane Capital Corp. (NasdaqGS: OXLC), a registered closed -end fund, and as President of Oxford Lane Management, since 2010. Mr. Rosenthal has also served as President of Oxford Gate Management, the investment adviser to the Oxford Gate Funds and 4 Oxford Bridge II, LLC, since 2015 and 2018, respectively.
Rosenthal has served as President and a Director of Oxford Lane Capital Corp. (NasdaqGS: OXLC), a registered closed -end fund, and as President of Oxford Lane Management, since 2010. Mr. Rosenthal has also 4 served as President of Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC, since 2015 and 2018, respectively.
Portfolio Overview We seek to create a portfolio that includes primarily CLO investments, senior secured loans, senior subordinated and junior subordinated debt investments, as well as warrants and other equity instruments we may receive in connection with such debt investments. We generally expect to invest between $5 million and $50 million in each of our portfolio companies.
Portfolio Overview We seek to create a portfolio that includes primarily senior secured loans, CLO investments, senior subordinated and junior subordinated debt investments, as well as warrants and other equity instruments we may receive in connection with such debt investments. We generally expect to invest between $5 million and $50 million in each of our portfolio companies.
The “Capital Gains Incentive Fee,” is determined as described above. For more information about the calculation of the advisory fee under the Investment Advisory Agreement prior to effectiveness of the 2016 Fee Waiver, refer to our Annual Report on Form 10 -K for the fiscal year ended December 31, 2016. 12 Calculation of Fees under the 2016 Fee Waiver.
The “Capital Gains Incentive Fee,” is determined as described above. 12 For more information about the calculation of the advisory fee under the Investment Advisory Agreement prior to effectiveness of the 2016 Fee Waiver, refer to our Annual Report on Form 10 -K for the fiscal year ended December 31, 2016. Calculation of Fees under the 2016 Fee Waiver.
Hypothetical Scenarios: • Year 1 = no realized capital gains or losses • Year 2 = 9% realized capital gains, 0% realized capital losses, 1% unrealized depreciation and 0% unrealized appreciation • Year 3 = 12% realized capital gains, 0% realized capital losses, 2% unrealized depreciation and 2% unrealized appreciation 15 Year 1 incentive fee • Total Incentive Fee Capital Gains = 0 • No Capital Gains Incentive Fee paid to Oxford Square Management in Year 1 Year 2 incentive fee • Total Incentive Fee Capital Gains = 8% (9% realized capital gains less 1% unrealized depreciation ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 2 = 20% × 8% = 1.6% Year 3 incentive fee • Total Incentive Fee Capital Gains = 10% (12% realized capital gains less 2% unrealized depreciation; unrealized appreciation has no effect ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 3 = 20% × 10% = 2% ____________ (*) The theoretical amounts of returns shown are based on a percentage of our total net assets and assume no leverage.
Hypothetical Scenarios: • Year 1 = no realized capital gains or losses 15 • Year 2 = 9% realized capital gains, 0% realized capital losses, 1% unrealized depreciation and 0% unrealized appreciation • Year 3 = 12% realized capital gains, 0% realized capital losses, 2% unrealized depreciation and 2% unrealized appreciation Year 1 incentive fee • Total Incentive Fee Capital Gains = 0 • No Capital Gains Incentive Fee paid to Oxford Square Management in Year 1 Year 2 incentive fee • Total Incentive Fee Capital Gains = 8% (9% realized capital gains less 1% unrealized depreciation ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 2 = 20% × 8% = 1.6% Year 3 incentive fee • Total Incentive Fee Capital Gains = 10% (12% realized capital gains less 2% unrealized depreciation; unrealized appreciation has no effect ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 3 = 20% × 10% = 2% ____________ (*) The theoretical amounts of returns shown are based on a percentage of our total net assets and assume no leverage.
We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to: • expenses of offering our debt and equity securities; • the investigation and monitoring of our investments, including expenses and travel fees incurred in connection with investment due diligence and on -site visits; • the cost of calculating our net asset value (“NAV”); • the cost of effecting sales and repurchases of shares of our common stock and other securities; • investment management and incentive fees payable pursuant to the Investment Advisory Agreement; • fees payable to third parties relating to, or associated with, making investments and valuing investments (including third -party valuation firms); • transfer agent, trustee and custodial fees; • interest payments and other costs related to our borrowings; • fees and expenses associated with our website, public relations and marketing efforts (including attendance at industry and investor conferences and similar events); • federal and state registration fees; • any exchange listing fees; • U.S. federal, state and local taxes; • independent directors’ fees and expenses, including travel expenses, and other costs of the Board’s meetings and other costs associated with the performance of independent directors’ responsibilities; • brokerage commissions; 16 • costs of preparing and mailing proxy statements, stockholders’ reports and notices, including annual proxy solicitations and stockholder meetings; • costs of preparing government filings, including periodic and current reports with the SEC; • fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums; and • direct costs such as printing, mailing, long distance telephone, staff, rent, independent audits and outside legal costs and all other expenses incurred by either Oxford Funds or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Oxford Funds on our behalf under the Administration Agreement, including a portion of the rent and the compensation and related expenses of our Chief Financial Officer, our accounting support staff and other administrative support personnel.
We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to: • expenses of offering our debt and equity securities; • the investigation and monitoring of our investments, including expenses and travel fees incurred in connection with investment due diligence and on -site visits; • the cost of calculating our net asset value (“NAV”); • the cost of effecting sales and repurchases of shares of our common stock and other securities; • investment management and incentive fees payable pursuant to the Investment Advisory Agreement; • fees payable to third parties relating to, or associated with, making investments and valuing investments (including third -party valuation firms); • transfer agent, trustee and custodial fees; • interest payments and other costs related to our borrowings; • fees and expenses associated with our website, public relations and marketing efforts (including attendance at industry and investor conferences and similar events); • federal and state registration fees; • any exchange listing fees; • U.S. federal, state and local taxes; 16 • independent directors’ fees and expenses, including travel expenses, and other costs of the Board’s meetings and other costs associated with the performance of independent directors’ responsibilities; • brokerage commissions; • costs of preparing and mailing proxy statements, stockholders’ reports and notices, including annual proxy solicitations and stockholder meetings; • costs of preparing government filings, including periodic and current reports with the SEC; • fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums; and • direct costs such as printing, mailing, long distance telephone, staff, rent, independent audits and outside legal costs and all other expenses incurred by either Oxford Funds or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Oxford Funds on our behalf under the Administration Agreement, including a portion of the rent and the compensation and related expenses of our Chief Financial Officer, our accounting support staff and other administrative support personnel.
The Net Investment Income Incentive Fee is then calculated as follows: (i) no Net Investment Income Incentive Fee is payable to Oxford Square Management in any calendar quarter in which the “Pre -Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”; 13 (ii) 100% of the “Pre -Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch -Up Amount” determined on a quarterly basis by multiplying 2.1875% by OXSQ’s net asset value at the end of such calendar quarter; and (iii) for any quarter in which the “Pre -Incentive Fee Net Investment Income” exceeds the “Catch -Up Amount,” the Net Investment Income Incentive Fee will be calculated at the rate of 20% of the amount of the “Pre -Incentive Fee Net Investment Income” for such quarter. c.
The Net Investment Income Incentive Fee is then calculated as follows: (i) no Net Investment Income Incentive Fee is payable to Oxford Square Management in any calendar quarter in which the “Pre -Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”; (ii) 100% of the “Pre -Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch -Up Amount” determined on a quarterly basis by multiplying 2.1875% by OXSQ’s net asset value at the end of such calendar quarter; and (iii) for any quarter in which the “Pre -Incentive Fee Net Investment Income” exceeds the “Catch -Up Amount,” the Net Investment Income Incentive Fee will be calculated at the rate of 20% of the amount of the “Pre -Incentive Fee Net Investment Income” for such quarter. c.
We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC. We are not generally able to sell our common stock at a price below net asset value per share.
We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC. 22 We are not generally able to sell our common stock at a price below net asset value per share.
Below investment grade securities, such as the CLO securities in which we primarily intend to invest, are often referred to as “junk.” In addition, the CLO equity and junior debt securities in which we invest are highly levered (with CLO equity securities typically being leveraged between nine and thirteen times), which significantly magnifies our risk of loss on such investments relative to senior debt tranches 1 of CLOs.
Below investment grade securities, such as the CLO securities in which we primarily intend to invest, are often referred to as “junk.” In addition, the CLO equity and junior debt securities in which we invest are highly levered (with CLO equity securities typically being leveraged between nine and thirteen times), which significantly magnifies our risk of loss on such investments relative to senior debt tranches of CLOs.
If we elect to treat a PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, we will be required to include in income each year our proportionate share of the ordinary earnings and net capital gain of the QEF, even if such income is 21 not distributed by the QEF.
If we elect to treat a PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, we will be required to include in income each year our proportionate share of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed by the QEF.
We prefer to invest in companies in which established private equity or venture capital funds or other financial or strategic sponsors have previously invested and are willing to make an ongoing contribution to the management of the business, including participation as board members or as business advisers. 5 • Strong competitive position in industry.
We prefer to invest in companies in which established private equity or venture capital funds or other financial or strategic sponsors have previously invested and are willing to make an ongoing contribution to the management of the business, including participation as board members or as business advisers. • Strong competitive position in industry.
Many of these entities may have greater financial and managerial resources than we have. For additional information concerning the competitive risks we face, refer to “Item 1A. Risk Factors — Risks Relating to Our Business and Structure — We operate in a highly competitive market for investment opportunities.” EMPLOYEES We have no employees.
Many of these entities may have greater financial and managerial resources than we have. For additional information concerning the competitive risks we face, refer to “Item 1A. Risk Factors — Risks Relating to Our Business and Structure — We operate in a highly competitive market for investment opportunities.” 19 EMPLOYEES We have no employees.
In the event that the second set of calculations produces a higher combined Base Fee and Net Investment Income Incentive Fee for any quarterly period, those combined fees are set to the original (lower) level, calculated pursuant to the Investment Advisory Agreement.
In the event that the second set 11 of calculations produces a higher combined Base Fee and Net Investment Income Incentive Fee for any quarterly period, those combined fees are set to the original (lower) level, calculated pursuant to the Investment Advisory Agreement.
A “Preferred Return Amount” is calculated on a quarterly basis by multiplying 1.75% by the Company’s net asset value at the end of the immediately preceding calendar quarter. b.
A “Preferred Return Amount” is calculated on a quarterly basis by multiplying 1.75% by the Company’s net asset value at the end of the immediately preceding calendar quarter. 13 b.
In the event that the second set of calculations produces lower combined Base Fee and Net Investment 11 Income Incentive Fee for that quarterly period, those lower combined fees are adopted for that quarterly period.
In the event that the second set of calculations produces lower combined Base Fee and Net Investment Income Incentive Fee for that quarterly period, those lower combined fees are adopted for that quarterly period.
A CLO itself is highly leveraged because it borrows significant amounts of money to acquire the underlying commercial loans in which it invests.
A CLO itself is highly leveraged because it borrows significant 1 amounts of money to acquire the underlying commercial loans in which it invests.
On April 25, 2023, the Board of Directors re -approved the Investment Advisory Agreement at an in -person meeting. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. Refer to “Item 1A.
On April 25, 2024, the Board of Directors re -approved the Investment Advisory Agreement at an in -person meeting. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. Refer to “Item 1A.
Typically, we would not expect to invest in start -up companies. • Clearly defined exit strategy.
Typically, we would not expect to invest in start -up companies. 5 • Clearly defined exit strategy.
We identify and source new prospective corporate debt investments through brokers, investment banks and direct company relationships. We have identified several criteria that we believe are important in seeking our investment objective.
INVESTMENT PROCESS Identification We identify and source new prospective corporate debt investments through brokers, investment banks and direct company relationships. We have identified several criteria that we believe are important in seeking our investment objective.
The operation of the incentive fee with respect to our Pre -Incentive Fee Net Investment Income for each quarter is as follows: i. no incentive fee was payable to Oxford Square Management in any calendar quarter in which our Pre -Incentive Fee Net Investment Income did not exceed one fourth of the annual hurdle rate (approximately 8.99% for the 2023 calendar year). ii. 20% of the amount of our Pre -Incentive Fee Net Investment Income, if any, that exceeds one -fourth of the annual hurdle rate (approximately 8.99% for the 2023 calendar year) in any calendar quarter was payable to Oxford Square Management (i.e., once the hurdle rate is reached, 20% of all Pre -Incentive Fee Net Investment Income thereafter was allocated to Oxford Square Management). 3) Capital Gains Incentive Fee .
The operation of the incentive fee with respect to our Pre -Incentive Fee Net Investment Income for each quarter is as follows: i. no incentive fee was payable to Oxford Square Management in any calendar quarter in which our Pre -Incentive Fee Net Investment Income did not exceed one fourth of the annual hurdle rate (approximately 8.84% for the 2024 calendar year). ii. 20% of the amount of our Pre -Incentive Fee Net Investment Income, if any, that exceeds one -fourth of the annual hurdle rate (approximately 8.84% for the 2024 calendar year) in any calendar quarter was payable to Oxford Square Management (i.e., once the hurdle rate is reached, 20% of all Pre -Incentive Fee Net Investment Income thereafter was allocated to Oxford Square Management). 3) Capital Gains Incentive Fee .
INVESTMENT PROCESS Identification We identify opportunities in the CLO market through our network of brokers, dealers, agent banks, collateral mangers and sponsors that we have worked with for several years.
We identify opportunities in the CLO market through our network of brokers, dealers, agent banks, collateral mangers and sponsors that we have worked with for several years.
We generally will endeavor in each taxable year to make sufficient distributions to our stockholders to satisfy the Excise Tax Avoidance Requirement. 20 In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • at all times during each taxable year, be registered under the 1940 Act as a management company or unit investment trust, or have in effect an election under the 1940 Act to be treated as a BDC; • derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”); and • diversify our holdings so that at the end of each quarter of the taxable year: • at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and • no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer (ii) the securities, other than securities of other RICs, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses; or (iii) the securities of certain “qualified publicly traded partnerships” (the “Diversification Tests”).
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • at all times during each taxable year, be registered under the 1940 Act as a management company or unit investment trust, or have in effect an election under the 1940 Act to be treated as a BDC; • derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”); and • diversify our holdings so that at the end of each quarter of the taxable year: • at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and • no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer (ii) the securities, other than securities of other RICs, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses; or (iii) the securities of certain “qualified publicly traded partnerships” (the “Diversification Tests”). 20 We may be required to recognize taxable income in circumstances in which we do not receive cash.
Information contained on our website or on the SEC’s website about us is not incorporated into this report and you should not consider information contained on our website or on the SEC’s website to be part of this report. 3 MARKET OVERVIEW AND OPPORTUNITY The broader corporate loan and CLO equity markets displayed strength throughout 2023.
Information contained on our website or on the SEC’s website about us is not incorporated into this report and you should not consider information contained on our website or on the SEC’s website to be part of this report. 3 MARKET OVERVIEW AND OPPORTUNITY The broader corporate loan and CLO equity markets displayed modest strength in 2024.
As of December 31, 2023, approximately $47.3 million remained outstanding on our investment. Carlyle Global Market Strategies CLO 2021-6, Ltd. Carlyle Global Market Strategies CLO 2021 -6 , Ltd. is a collateralized loan obligation investing primarily in U.S. -based senior secured loans. As of December 31, 2023, approximately $29.6 million remained outstanding on our investment.
As of December 31, 2024, approximately $47.3 million remained outstanding on our investment. Carlyle Global Market Strategies CLO 2021-6, Ltd. Carlyle Global Market Strategies CLO 2021 -6 , Ltd. is a collateralized loan obligation investing primarily in U.S. -based senior secured loans. As of December 31, 2024, approximately $29.6 million remained outstanding on our investment. Verifone Systems, Inc.
Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rates for the 2023, 2022 and 2021 calendar years, calculated as of December 31, were approximately 8.99%, 6.26%, and 5.36%, respectively, under the terms of the Investment Advisory Agreement.
Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rates for the 2024, 2023 and 2022 calendar years, calculated as of December 31, were approximately 8.84%, 8.99%, and 6.26%, respectively, under the terms of the Investment Advisory Agreement.
For example: • pursuant to Rule 13a -14 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the financial statements contained in our periodic reports; 24 • pursuant to Item 307 of Regulation S -K , our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; • pursuant to Rule 13a -15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal control over financial reporting; and • pursuant to Item 308 of Regulation S -K and Rule 13a -15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
For example: • pursuant to Rule 13a -14 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the financial statements contained in our periodic reports; • pursuant to Item 307 of Regulation S -K , our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; • pursuant to Rule 13a -15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal control over financial reporting; and • pursuant to Item 308 of Regulation S -K and Rule 13a -15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 24 The Sarbanes -Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes -Oxley Act and the regulations promulgated thereunder.
Verifone Systems, Inc. develops technology that enables electronic payment transactions and value -added services at the point of sale. As of December 31, 2023, approximately $13.9 million remained outstanding on our investment in the first lien notes. HealthChannels, Inc.
Verifone Systems, Inc. develops technology that enables electronic payment transactions and value -added services at the point of sale. As of December 31, 2024, approximately $14.8 million remained outstanding on our investment in the first lien senior secured notes. HealthChannels, Inc.
We sold a total of 2,695,388 shares of common stock pursuant to the ATM offering during the year ended December 31, 2023. The total amount of capital raised net of underwriting fees and offering costs was approximately $8.0 million during the year ended December 31, 2023. Organizational and Regulatory Structure Our investment activities are managed by Oxford Square Management.
We sold a total of 10,132,282 shares of common stock pursuant to the ATM offering during the year ended December 31, 2024. The total amount of capital raised net of underwriting fees and offering costs was approximately $29.2 million during the year ended December 31, 2024. Organizational and Regulatory Structure Our investment activities are managed by Oxford Square Management.
(f/k/a ScribeAmerica, LLC) HealthChannels, Inc. is a health -care company that offers clerical support services, including electronic medical record documentation, patient engagement, and medical coding to improve clinical outcomes. As of December 31, 2023, approximately $18.8 million remained outstanding on our investment in the first lien notes.
(f/k/a ScribeAmerica, LLC) HealthChannels, Inc. is a health -care company that offers clerical support services, including electronic medical record documentation, patient engagement, and medical coding to improve clinical outcomes. As of December 31, 2024, approximately $18.6 million remained outstanding on our investment in the first lien senior secured notes. 9 Octagon Investment Partners 49, Ltd.
Approximately 1.7 million shares of our common stock were purchased in the rights offering by affiliates of Oxford Square Management. 2 ATM Offering On August 22, 2023, we entered into Amendment No. 1 to the Equity Distribution Agreement dated August 1, 2019 with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an At -the-Market (“ATM”) offering.
ATM Offering On August 22, 2023, we entered into Amendment No. 1 to the Equity Distribution Agreement dated August 1, 2019 with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an At -the-Market (“ATM”) offering.
Hypothetical Scenario 2 Quarterly Investment income (including interest, dividends, fees, etc.) = 2.50% Quarterly Hurdle rate = 1.75% Base Fee (1) = 0.375% Quarterly Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2% Pre -Incentive Fee Net Investment Income (investment income – (Base Fee + other expenses)) = 1.925% The Total Return Requirement is met (no Net Investment Income Incentive Fee would be payable if the Total Return Requirement were not met). 14 Incentive fee = 100%* Pre -Incentive Fee Net Investment Income in excess of the hurdle rate but less than 2.1875% and 20% of any Pre -Incentive Fee Net Investment Income thereafter. = 100%* (1.925% – 1.75%) = 100%* 0.175% = 0.175% Pre -Incentive Fee Net Investment Income exceeds the hurdle rate but is less than 2.1875%.
Hypothetical Scenario 2 Quarterly Investment income (including interest, dividends, fees, etc.) = 2.50% Quarterly Hurdle rate = 1.75% Base Fee (1) = 0.375% Quarterly Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2% 14 Pre -Incentive Fee Net Investment Income (investment income – (Base Fee + other expenses)) = 1.925% The Total Return Requirement is met (no Net Investment Income Incentive Fee would be payable if the Total Return Requirement were not met).
Risks Relating to an Investment in Our Securities • Our common stock price may be volatile. • Our shares of common stock have traded at a discount from net asset value and may do so in the future. 19 • There is a risk that investors in our equity securities will not receive distributions or that our distributions will not grow over time and a portion of our distributions could be a return of capital. • We may choose to pay distributions in our own common stock, in which case, our stockholders may be required to pay U.S. federal income taxes in excess of the cash distributions they receive.
Risks Relating to an Investment in Our Securities • Our common stock price may be volatile. • Our shares of common stock have traded at a discount from net asset value and may do so in the future. • There is a risk that investors in our equity securities will not receive distributions or that our distributions will not grow over time and a portion of our distributions could be a return of capital.
Introduction As an investment adviser registered under the Advisers Act, Oxford Square Management has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, Oxford Square Management recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients.
As part of this duty, Oxford Square Management recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients.
The following is a representative list of the industries in which we have invested: • Structured Finance • IT Consulting • Business Services • Utilities • Software • Healthcare • Telecommunication Services • Diversified Insurance During the fiscal year ended December 31, 2023, we purchased approximately $11.7 million of investments, comprised of approximately $8.2 million in senior secured notes and $3.5 million in CLO equity.
The following is a representative list of the industries in which we have invested: • Aerospace and Defense • Business Services • Food and Beverage • Healthcare • Industrials • Materials • Software • Telecommunication Services • Structured Finance • IT Consulting During the fiscal year ended December 31, 2024, we purchased approximately $112.2 million of investments, comprised of approximately $76.3 million in senior secured notes, approximately $35.2 million in CLO equity and approximately $0.7 million in equity and other investments.
The principal address of Oxford Square Management and of Oxford Funds is 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut 06830. Oxford Funds is the managing member of Oxford Square Management. Charles M.
The principal address of Oxford Square Management and of Oxford Funds is 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut 06830. 17 Oxford Funds is the managing member of Oxford Square Management. Charles M. Royce, a member of our Board, has a minority, non -controlling interest in Oxford Square Management.
The S&P/LSTA Leveraged Loan Index increased from a price of 92.44% at the end of December 2022 to 96.21% at the end of December 2023. During 2023, lower credit quality loans outperformed higher credit quality loans. For the full year, BB rated loan prices increased 2.03%, B rated loan prices increased 5.82%, and CCC rated loan prices increased 7.71%.
The S&P/LSTA Leveraged Loan Index increased from a price of 96.21% at the end of December 2023 to 97.33% at the end of December 2024. During 2024, lower credit quality loans outperformed higher credit quality loans. For the full year, BB rated loan prices increased 0.53%, B rated loan prices increased 0.58%, and CCC rated loan prices increased 1.59%.
INVESTMENT ADVISORY AGREEMENT Management Services Oxford Square Management serves as our investment adviser. Oxford Square Management is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board, Oxford Square Management manages our day -to-day operations and provides investment advisory services to us.
Subject to the overall supervision of our Board, Oxford Square Management manages our day -to-day operations and provides investment advisory services to us.
You may obtain our annual reports on Form 10 -K , our quarterly reports on Form 10 -Q , and our current reports on Form 8 -K on our website at http://oxfordsquarecapital.com/ free of charge as soon as reasonably practicable after we file such reports electronically with the SEC.
You may obtain our annual reports on Form 10 -K , our quarterly reports on Form 10 -Q , and our current reports on Form 8 -K on our website at http://oxfordsquarecapital.com/ free of charge as soon as reasonably practicable after we file such reports electronically with the SEC. 25 NASDAQ Global Select Market Requirements We have adopted certain policies and procedures intended to comply with the NASDAQ Global Select Market’s corporate governance rules.
As a percentage of fair value of the total invested portfolio as of December 31, 2023, our portfolio was invested approximately 67.2% in senior secured notes, 30.8% in CLO equity, and 2.0% in equity and other investments. 8 TEN LARGEST PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 2023 Our ten largest portfolio company investments as of December 31, 2023, based on the combined fair value of the debt and equity securities (including CLO side letter related investments) we hold in each portfolio company, were as follows: Portfolio Company Industry December 31, 2023 ($ in millions) Cost (1) Fair Value Fair Value Percentage of Total Portfolio (1) Dryden 43 Senior Loan Fund Structured Finance $ 27.5 $ 21.7 8.1 % Carlyle Global Market Strategies CLO 2021-6, Ltd.
As a percentage of fair value of the total invested portfolio as of December 31, 2024, our portfolio was invested approximately 57.8% in senior secured notes, 40.1% in CLO equity, and 2.1% in equity and other investments. 8 TEN LARGEST PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 2024 Our ten largest portfolio company investments as of December 31, 2024, based on the combined fair value of the debt and equity securities (including CLO side letter related investments) we hold in each portfolio company, were as follows: Portfolio Company Industry December 31, 2024 ($ in millions) Cost (1) Fair Value (1) Fair Value Percentage of Total Portfolio (1) OCP CLO 2024-37, Ltd.
For a description of the factors relevant to the changes in the value of the above portfolio investments for the year ended December 31, 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Grading.” Set forth below are descriptions of the ten largest portfolio investments as of December 31, 2023: Dryden 43 Senior Loan Fund Dryden 43 Senior Loan Fund is a collateralized loan obligation investing primarily in U.S. -based senior secured loans.
For a description of the factors relevant to the changes in the value of the above portfolio investments for the year ended December 31, 2024, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Grading.” Set forth below are descriptions of the ten largest portfolio investments as of December 31, 2024: OCP CLO 2024-37, Ltd.
Royce, a member of our Board, has a minority, non -controlling interest in Oxford Square Management. 17 ADMINISTRATION AGREEMENT Pursuant to a separate Administration Agreement, Oxford Funds furnishes us with office facilities, together with equipment and clerical, bookkeeping and record keeping services at such facilities.
ADMINISTRATION AGREEMENT Pursuant to a separate Administration Agreement, Oxford Funds furnishes us with office facilities, together with equipment and clerical, bookkeeping and record keeping services at such facilities.
Income inclusions from a QEF or a CFC will be “good income” for purposes of the 90% Income Test provided that they are derived in connection with our business of investing in stocks and securities or the QEF or the CFC distribute such income to us in the same taxable year to which the income is included in our income.
If we are treated as receiving a deemed distribution from a CFC, we will be required to include such distribution in our investment company taxable income regardless of whether we receive any actual distributions from such CFC, and we must distribute such income to satisfy the Annual Distribution Requirement and the Excise Tax Avoidance Requirement. 21 Income inclusions from a QEF or a CFC will be “good income” for purposes of the 90% Income Test provided that they are derived in connection with our business of investing in stocks and securities or the QEF or the CFC distribute such income to us in the same taxable year to which the income is included in our income.
In accordance with the requirements of the Exchange Act, this annual report contains financial statements audited and reported on by our independent registered public accounting firm.
Periodic Reporting and Audited Financial Statements We have registered our common stock under the Exchange Act, and have reporting obligations thereunder, including the requirement that we file annual and quarterly reports with the SEC. In accordance with the requirements of the Exchange Act, this annual report contains financial statements audited and reported on by our independent registered public accounting firm.
NASDAQ Global Select Market Requirements We have adopted certain policies and procedures intended to comply with the NASDAQ Global Select Market’s corporate governance rules. We will continue to monitor our compliance with all future listing standards that are approved by the SEC and will take actions necessary to ensure that we are in compliance therewith.
We will continue to monitor our compliance with all future listing standards that are approved by the SEC and will take actions necessary to ensure that we are in compliance therewith.
We believe that the loan market’s performance during 2023 was driven by lower primary market issuance resulting in higher demand for existing loans in the secondary market somewhat offset by macroeconomic uncertainty, higher interest rates, investment outflows from the loan asset class, and moderately lower issuance in the CLO asset class.
We believe that the loan market’s performance during 2024 was driven by investment inflows into the loan asset class, higher issuance in the CLO asset class, and lower primary market issuance associated with leveraged buyout and acquisition transactions, resulting in higher demand for existing loans in the secondary market.
A BDC provides stockholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing in primarily privately owned companies. 22 We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by the vote of a majority of the outstanding voting securities, as required by the 1940 Act.
We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by the vote of a majority of the outstanding voting securities, as required by the 1940 Act.
The Sarbanes -Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes -Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes -Oxley Act and will take actions necessary to ensure that we are in compliance therewith.
We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes -Oxley Act and will take actions necessary to ensure that we are in compliance therewith. Proxy Voting Policies and Procedures We have delegated our proxy voting responsibility to our investment adviser, Oxford Square Management.
Proxy Voting Records You may obtain information about how Oxford Square Management voted proxies by making a written request for proxy voting information to: Chief Compliance Officer, Oxford Square Management, LLC, 8 Sound Shore Drive, Suite 255, Greenwich, CT 06830. 25 Periodic Reporting and Audited Financial Statements We have registered our common stock under the Exchange Act, and have reporting obligations thereunder, including the requirement that we file annual and quarterly reports with the SEC.
Proxy Voting Records You may obtain information about how Oxford Square Management voted proxies by making a written request for proxy voting information to: Chief Compliance Officer, Oxford Square Management, LLC, 8 Sound Shore Drive, Suite 255, Greenwich, CT 06830.
Convergint Technologies, LLC Convergint Technologies, LLC offers security, communications, installation, fire alarm safety, and building automation systems to commercial offices, residential, government, healthcare, and educational industries. As of December 31, 2023, approximately $2.5 million and $11.0 million remained outstanding on our investment in the first and second lien notes, respectively.
Octagon Investment Partners 49, Ltd. is a collateralized loan obligation investing primarily in U.S. -based senior secured loans. As of December 31, 2024, approximately $26.4 million remained outstanding on our investment. Convergint Technologies, LLC Convergint Technologies, LLC offers security, communications, installation, fire alarm safety, and building automation systems to commercial offices, residential, government, healthcare, and educational industries.
Proxy Voting Policies and Procedures We have delegated our proxy voting responsibility to our investment adviser, Oxford Square Management. The Proxy Voting Policies and Procedures of Oxford Square Management are set forth below. The guidelines are reviewed periodically by Oxford Square Management, and, accordingly, are subject to change.
The Proxy Voting Policies and Procedures of Oxford Square Management are set forth below. The guidelines are reviewed periodically by Oxford Square Management, and, accordingly, are subject to change. Introduction As an investment adviser registered under the Advisers Act, Oxford Square Management has a fiduciary duty to act solely in the best interests of its clients.
A BDC may use capital provided by public stockholders and from other sources to invest in long -term , private investments in businesses.
A BDC may use capital provided by public stockholders and from other sources to invest in long -term , private investments in businesses. A BDC provides stockholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing in primarily privately owned companies.
As of December 31, 2023, approximately $17.0 million remained outstanding on our investment in the second lien notes. 9 Viant Medical Holdings, Inc. Viant Medical Holdings, Inc. provides vertically integrated plastics processing solutions for medical devices. As of December 31, 2023, approximately $9.5 million and $5.0 million remained outstanding on our investment in the first and second lien notes, respectively.
As of December 31, 2024, approximately $2.2 million remained outstanding on our investment in the first lien first out senior secured notes, approximately $3.0 million remained outstanding on our investment in the first lien second out senior secured notes and $15.0 million remained outstanding on our investment in the second lien senior secured notes.
Moreover, loan market credit quality deteriorated during 2023 as exhibited by an increase in default rates to 1.53% at the end of 2023 versus 0.72% at the end of 2022.
Credit quality in the loan market deteriorated in 2024 as exhibited by an increase in the default rate to 4.70% at the end of 2024 versus 3.84% at the end of 2023 when including traditional defaults and out -of-court restructurings, exchanges, and sub -par buybacks.
Access CIG, LLC Access CIG, LLC is a records and documents storage firm. As of December 31, 2023, approximately $16.8 million remained outstanding on our investment in the second lien notes. Global Tel Link Corp Global Tel Link Corp. is a provider of telecom and technology products and services used by inmates, investigators and administrators in the corrections industry.
Access CIG, LLC Access CIG, LLC is a records and documents storage firm. As of December 31, 2024, approximately $10.1 million remained outstanding on our investment in the first lien senior secured notes. Nielsen Consumer, LLC Nielsen Consumer, LLC is a global measurement and data analytics company that helps businesses understand consumer behavior and market trends.
Business Services 13.5 13.5 5.1 % HealthChannels, Inc. (f/k/a ScribeAmerica, LLC) Healthcare 18.6 13.0 4.9 % Convergint Technologies, LLC Business Services 13.4 12.3 4.6 % $ 178.7 $ 152.0 57.0 % ____________ (1) Totals may not sum due to rounding.
Structured Finance 16.4 11.7 4.5 % Convergint Technologies, LLC Business Services 11.0 10.9 4.2 % Dodge Data & Analytics, LLC Software 10.9 10.6 4.1 % Access CIG, LLC Business Services 10.2 10.2 3.9 % Nielsen Consumer, LLC Business Services 10.0 10.0 3.9 % $ 158.1 $ 136.7 52.4 % ____________ (1) Totals may not sum due to rounding.
Structured Finance 20.7 17.6 6.6 % Access CIG, LLC Business Services 16.8 16.7 6.2 % Global Tel Link Corp. Telecommunication Services 16.9 15.0 5.6 % Viant Medical Holdings, Inc. Healthcare 14.5 14.2 5.3 % Quest Software, Inc. Software 22.7 14.1 5.3 % Affinion Insurance Solutions, Inc. (f/k/a AIS Intermediate, LLC) Diversified Insurance 14.3 13.9 5.2 % Verifone Systems, Inc.
Structured Finance $ 22.8 $ 22.7 8.7 % Dryden 43 Senior Loan Fund Structured Finance 24.9 17.0 6.5 % Carlyle Global Market Strategies CLO 2021-6, Ltd. Structured Finance 19.0 16.9 6.5 % Verifone Systems, Inc. Business Services 14.6 13.8 5.3 % HealthChannels, Inc. (f/k/a ScribeAmerica, LLC) Healthcare 18.5 12.8 4.9 % Octagon Investment Partners 49, Ltd.
Removed
Quest Software, Inc. Quest Software, Inc. is an infrastructure software provider. They have five main product/service offerings: platform management, information management, identity management, data protection, and endpoint management. As of December 31, 2023, approximately $3.0 million and $20.0 million remained outstanding on our investment in the first lien notes and second lien notes, respectively. Affinion Insurance Solutions, Inc.
Added
Approximately 1.7 million shares of our common stock were purchased in the rights offering by affiliates of Oxford Square Management.
Removed
(f/k/a AIS Intermediate, LLC) Affinion Insurance Solutions, Inc. is an insurance company that offers insurance, value -added checking programs, customer acquisition solutions, data analysis, multi -channel marketing, direct mail, and online marketing services. As of December 31, 2023, approximately $14.5 million remained outstanding on our investment in the first lien notes. Verifone Systems, Inc.
Added
On August 16, 2024, 2 we entered into an amended and restated equity distribution agreement (the “Amended and Restated Equity Distribution Agreement”) with Lucid Capital Markets, LLC and Ladenburg Thalmann & Co. Inc., as the sales agents, to add Lucid Capital Markets, LLC as an additional sales agent to the Amended and Restated Equity Distribution Agreement.
Removed
Risks Relating to the Economy • We are currently operating in a period of capital markets disruption and economic uncertainty. • Political, social and economic uncertainty creates and exacerbates risks.
Added
OCP CLO 2024 -37 , Ltd. is a collateralized loan obligation investing primarily in U.S. -based senior secured loans. As of December 31, 2024, approximately $27.0 million remained outstanding on our investment. Dryden 43 Senior Loan Fund Dryden 43 Senior Loan Fund is a collateralized loan obligation investing primarily in U.S. -based senior secured loans.
Removed
We may be required to recognize taxable income in circumstances in which we do not receive cash.
Added
As of December 31, 2024, approximately $11.0 million remained outstanding on our investment in the second lien senior secured notes. Dodge Data & Analytics, LLC Dodge Data & Analytics, LLC offers analytics and software -based workflow integration solutions for the construction industry.
Removed
If we are treated as receiving a deemed distribution from a CFC, we will be required to include such distribution in our investment company taxable income regardless of whether we receive any actual distributions from such CFC, and we must distribute such income to satisfy the Annual Distribution Requirement and the Excise Tax Avoidance Requirement.
Added
As of December 31, 2024, approximately $10.0 million remained outstanding on our investment in the first lien senior secured notes. INVESTMENT ADVISORY AGREEMENT Management Services Oxford Square Management serves as our investment adviser. Oxford Square Management is registered as an investment adviser under the Advisers Act.
Removed
The principal categories of qualifying assets relevant to our business are: • securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company; • securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and • cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment. 23 An eligible portfolio company is generally a domestic company that is not an investment company (other than a small business investment company wholly owned by a BDC) and that: • does not have a class of securities with respect to which a broker may extend margin credit at the time the acquisition is made; • is controlled by the BDC and has an affiliate of the BDC on its board of directors; • does not have any class of securities listed on a national securities exchange; • is a public company that lists its securities on a national securities exchange with a market capitalization of less than $250 million; or • meets such other criteria as may be established by the SEC.
Added
Incentive fee = 100%* Pre -Incentive Fee Net Investment Income in excess of the hurdle rate but less than 2.1875% and 20% of any Pre -Incentive Fee Net Investment Income thereafter. = 100%* (1.925% – 1.75%) = 100%* 0.175% = 0.175% Pre -Incentive Fee Net Investment Income exceeds the hurdle rate but is less than 2.1875%.
Added
We generally will endeavor in each taxable year to make sufficient distributions to our stockholders to satisfy the Excise Tax Avoidance Requirement.
Added
The principal categories of qualifying assets relevant to our business are: (1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company (as defined below), or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC.
Added
(2) Securities of any portfolio company which we control, as defined by the 1940 Act.
Added
(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
Added
(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
Added
(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. (6) Cash, cash equivalents, U.S. Government securities or high -quality debt securities maturing in one year or less from the time of investment.
Added
An eligible portfolio company is defined in the 1940 Act as any issuer which: (a) is organized under the laws of, and has its principal place of business in, the United States; (b) is not an investment company (other than a SBIC wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and (c) satisfies any of the following: i. does not have any class of securities that is traded on a national securities exchange or has a class of securities listed on a national securities exchange but has an aggregate market value of outstanding voting and non -voting common equity of less than $250 million; 23 ii. is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or iii. is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

85 edited+33 added−21 removed378 unchanged
Biggest changeThe Due Diligence Requirements further require that prior to holding a securitization position, an Institutional Investor, other than the originator, sponsor or original lender, carry out a due diligence assessment which enables it to assess the risks involved, including but not limited to (a) the risk characteristics of the individual securitization position and the underlying exposures; and (b) all the structural features of the securitization that can materially 43 impact the performance of the securitization position, including the contractual priorities of payment and priority of payment -related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction -specific definitions of default.
Biggest changeThe Due Diligence Requirements further require that prior to holding a securitization position, an Institutional Investor, other than the originator, sponsor or original lender, carry out a due diligence assessment which enables it to assess the risks involved, including but not limited to (a) the risk characteristics of the individual securitization position and the underlying exposures; and (b) all the structural features of the securitization that can materially impact the performance of the securitization position, including the contractual priorities of payment and priority of payment -related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction -specific definitions of default. 43 Any Institutional Investor that fails to comply with the applicable Due Diligence Requirements in respect of a securitization position which it holds may become subject to a range of regulatory sanctions including, in the case of a credit institution, investment firm, insurer or reinsurer, a punitive regulatory capital charge with respect to such securitization position, or, in certain other cases, a requirement to take corrective action.
Oxford Square Management, Oxford Lane Management, Oxford Gate Management, and Oxford Park Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Bridge II, LLC, the Oxford Gate Funds and Oxford Park Income Fund, Inc.
Oxford Square Management, Oxford Lane Management, Oxford Gate Management, and Oxford Park Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford Gate Funds.
If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline.
If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline.
The due diligence requirements of Article 5 of the EU Securitization Regulation (the “EU Due Diligence Requirements”) apply to each investor that is an “institutional investor” (as such term is defined in the EU Securitization Regulation), being an investor which is one of the following: (a) an insurance undertaking as defined in Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking -up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast) (“Solvency II”); (b) a reinsurance undertaking as defined in Solvency II; (c) subject to certain conditions and exceptions, an institution for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (the “IORP Directive”), or an investment manager or an authorized entity appointed by an institution for occupational retirement provision pursuant to the IORP Directive; (d) an alternative investment fund manager (“AIFM”) as defined in Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers that manages and/or markets alternative investment funds in the EU; (e) an undertaking for the collective investment in transferable securities (“UCITS”) management company, as defined in Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (the “UCITS Directive”); (f) an internally managed UCITS, which is an investment company authorized in accordance with the UCITS Directive and which has not designated a management company authorized under the UCITS Directive for its management; or (g) a credit institution as defined in Regulation (EU) 42 No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (the “CRR”) for the purposes of the CRR, or an investment firm as defined in the CRR, in each case, such investor an “EU Institutional Investor”.
The due diligence requirements of Article 5 of the EU Securitization Regulation (the “EU Due Diligence Requirements”) apply to each investor that is an “institutional investor” (as such term is defined in the EU Securitization Regulation), being an investor which is one of the following: (a) an insurance undertaking as defined in Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking -up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast) (“Solvency II”); (b) a reinsurance undertaking as defined in Solvency II; (c) subject to certain conditions and exceptions, an institution for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (the “IORP Directive”), or an investment manager or an authorized entity appointed by an institution for occupational retirement provision pursuant to the IORP Directive; (d) an alternative investment fund manager (“AIFM”) as defined in Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers that manages and/or markets alternative investment funds in the EU; (e) an undertaking for the collective investment in transferable securities (“UCITS”) management company, as defined in Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (the “UCITS Directive”); (f) an internally managed UCITS, which is an investment company authorized in accordance with the UCITS Directive and which has not designated a management company authorized under the UCITS Directive for its management; or (g) a credit institution as defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (the “CRR”) for the purposes of the CRR, or an investment firm as defined in the CRR, in each case, such investor an “EU Institutional Investor”.
The due diligence requirements of Article 5 of the UK Securitization Regulation (the “UK Due Diligence Requirements” and, together with the EU Due Diligence Requirements, the “Due Diligence Requirements”) apply to each investor that is an “institutional investor” (as such term is defined in the UK Securitization Regulation), being an investor which is one of the following: (a) an insurance undertaking as defined in the Financial Services and Markets Act 2000 (as amended, the “FSMA”); (b) a reinsurance undertaking as defined in the FSMA; (c) an occupational pension scheme as defined in the Pension Schemes Act 1993 that has its main administration in the UK, or a fund manager of such a scheme appointed under the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorized under the FSMA; (d) an AIFM (as defined in the Alternative Investment Fund Managers Regulations 2013 (the “AIFM Regulations”)) which markets or manages AIFs (as defined in the AIFM Regulations) in the UK; (e) a management company as defined in the FSMA; (f) a UCITS as defined by the FSMA, which is an authorized open ended investment company as defined in the FSMA; (g) a FCA investment firm as defined by the CRR as it forms part of UK domestic law by virtue of EUWA (the “UK CRR”); or (h) a CRR investment firm as defined in the UK CRR, in each case, such investor a “UK Institutional Investor” and, such investors together with EU Institutional Investors, “Institutional Investors”.
The due diligence requirements of Article 5 of the UK Securitization Regulation (the “UK Due Diligence Requirements” and, together with the EU Due Diligence Requirements, the “Due Diligence Requirements”) apply to each investor that is an “institutional investor” (as such term is defined in the UK Securitization Regulation), 42 being an investor which is one of the following: (a) an insurance undertaking as defined in the Financial Services and Markets Act 2000 (as amended, the “FSMA”); (b) a reinsurance undertaking as defined in the FSMA; (c) an occupational pension scheme as defined in the Pension Schemes Act 1993 that has its main administration in the UK, or a fund manager of such a scheme appointed under the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorized under the FSMA; (d) an AIFM (as defined in the Alternative Investment Fund Managers Regulations 2013 (the “AIFM Regulations”)) which markets or manages AIFs (as defined in the AIFM Regulations) in the UK; (e) a management company as defined in the FSMA; (f) a UCITS as defined by the FSMA, which is an authorized open ended investment company as defined in the FSMA; (g) a FCA investment firm as defined by the CRR as it forms part of UK domestic law by virtue of EUWA (the “UK CRR”); or (h) a CRR investment firm as defined in the UK CRR, in each case, such investor a “UK Institutional Investor” and, such investors together with EU Institutional Investors, “Institutional Investors”.
On June 14, 2017, the SEC issued an order permitting the Company and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions, or the “Order.” Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is Oxford Square’s investment adviser or an investment adviser controlling, controlled by, or under common control with Oxford Square Management, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, 35 providing the Company’s stockholders with access to a broader array of investment opportunities.
On June 14, 2017, the SEC issued an order permitting the Company and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions, or the “Order.” Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is Oxford Square’s investment adviser or an investment adviser controlling, controlled by, or under common control with Oxford Square Management, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing the Company’s stockholders with access to a broader array of investment opportunities.
Through comprehensive new global regulatory regimes impacting derivatives ( e.g. , the Dodd -Frank Act, European Market Infrastructure Regulation (“EMIR”), Markets in Financial Investments Regulation (“MIFIR”)/Markets in Financial Instruments Directive (“MIFID II”)), certain over -the-counter derivatives transactions in which we may engage are either now or will soon be subject to various requirements, such as mandatory central clearing of transactions which include additional margin requirements and in certain cases trading on electronic platforms, pre -and post -trade transparency reporting requirements and mandatory bi -lateral 33 exchange of initial margin for non -cleared swaps.
Through comprehensive new global regulatory regimes impacting derivatives ( e.g. , the Dodd -Frank Act, European Market Infrastructure Regulation (“EMIR”), Markets in Financial Investments Regulation (“MIFIR”)/Markets in Financial Instruments Directive (“MIFID II”)), certain over -the-counter derivatives transactions in which we may engage are either now or will soon be subject to various requirements, such as mandatory central clearing of transactions which include additional margin requirements and in certain cases trading on electronic platforms, pre -and post -trade transparency reporting requirements and mandatory bi -lateral exchange of initial margin for non -cleared swaps.
These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of securities of regulated investment companies, BDCs or other financial services companies; • exclusion of our common stock from certain indices could reduce the ability of certain investment funds to own our common stock and put short -term selling pressure on our common stock; 49 • changes in regulatory policies or tax guidelines with respect to regulated investment companies or BDCs; • actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts; • general economic conditions and trends; • loss of a major funding source; or • departures of key personnel.
These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of securities of regulated investment companies, BDCs or other financial services companies; • exclusion of our common stock from certain indices could reduce the ability of certain investment funds to own our common stock and put short -term selling pressure on our common stock; • changes in regulatory policies or tax guidelines with respect to regulated investment companies or BDCs; • actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts; • general economic conditions and trends; • loss of a major funding source; or • departures of key personnel.
Refer to “Risks relating to our business and structure — Our business and operation could be negatively affected if we become subject to any additional securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price.” Our shares of common stock have traded at a discount from net asset value and may do so in the future.
Refer to “Risks relating to our business and structure — Our business and operation could be negatively affected if we become subject to any additional securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price.” 49 Our shares of common stock have traded at a discount from net asset value and may do so in the future.
If we hold more than 10% of the shares in a foreign corporation that is treated as a controlled foreign corporation or CFC (including equity tranche investments in a CLO treated as CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporation in an amount equal to 38 our pro rata share of the corporation’s income for the tax year (including both ordinary earnings and capital gains).
If we hold more than 10% of the shares in a foreign corporation that is treated as a controlled foreign corporation or CFC (including equity tranche investments in a CLO treated as CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporation in an amount equal to our pro rata share of the corporation’s income for the tax year (including both ordinary earnings and capital gains).
These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
These 48 risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all. 32 Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all. Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
As a result of this arrangement, there may be times when the management team of Oxford Square Management has interests that differ from those of our stockholders, giving rise to a conflict. 34 Oxford Square Management receives a quarterly incentive fee based, in part, on our “Pre -Incentive Fee Net Investment Income,” if any, for the immediately preceding calendar quarter.
As a result of this arrangement, there may be times when the management team of Oxford Square Management has interests that differ from those of our stockholders, giving rise to a conflict. Oxford Square Management receives a quarterly incentive fee based, in part, on our “Pre -Incentive Fee Net Investment Income,” if any, for the immediately preceding calendar quarter.
We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board of Directors reviews these procedures on an annual basis.
We will not enter into any agreements unless and 35 until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board of Directors reviews these procedures on an annual basis.
In general, the tax treatment of these investments may result in higher distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows are reflected in a constant yield to maturity. 47 Some instruments issued by CLO vehicles may not be readily marketable and may be subject to restrictions on resale.
In general, the tax treatment of these investments may result in higher distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows are reflected in a constant yield to maturity. Some instruments issued by CLO vehicles may not be readily marketable and may be subject to restrictions on resale.
We and Oxford Square Management, through its managing member, Oxford Funds, will need to continue to hire, train, supervise and manage new employees. Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations. We operate in a highly competitive market for investment opportunities.
We and Oxford Square Management, through its managing member, Oxford Funds, will need to continue to hire, train, supervise and manage new employees. Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations. 26 We operate in a highly competitive market for investment opportunities.
Generally, covenant -lite loans permit borrowers more opportunity to negatively impact lenders because their covenants, if any, tend to be incurrence -based , which means they are only tested and can only be breached following certain actions of the borrower, rather than 44 by a deterioration in the borrower’s financial condition.
Generally, covenant -lite loans permit borrowers more opportunity to negatively impact lenders because their covenants, if any, tend to be incurrence -based , which means they are only tested and can only be breached following certain actions of the borrower, rather than by a deterioration in the borrower’s financial condition.
In order to create liquidity to pay the final principal payment, a portfolio company typically must raise additional capital. If it is unable to raise sufficient funds to repay us, the debt investment may go into default, which may compel us to foreclose on the borrower’s assets, even if the debt investment was otherwise performing prior to maturity.
In order to create liquidity to pay the final principal 41 payment, a portfolio company typically must raise additional capital. If it is unable to raise sufficient funds to repay us, the debt investment may go into default, which may compel us to foreclose on the borrower’s assets, even if the debt investment was otherwise performing prior to maturity.
A return of capital distribution could cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price. 50 Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.
A return of capital distribution could cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price. Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.
Even though such conditions have improved broadly and significantly over the short -term , adverse conditions in particular sectors of the financial markets could adversely impact our business over the long -term . Even in the event the value of your investment declines, the Base Fee and, in certain circumstances, the Net Investment Income Incentive Fee will still be payable.
Even though such conditions have improved broadly and significantly over the short -term , adverse conditions in particular sectors of the financial markets could adversely impact our business over the long -term . 28 Even in the event the value of your investment declines, the Base Fee and, in certain circumstances, the Net Investment Income Incentive Fee will still be payable.
If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act (in accordance with any applicable law, rules or regulations), the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increases the difficulty of consummating such a transaction.
If we amend our bylaws to repeal 36 the exemption from the Control Share Acquisition Act (in accordance with any applicable law, rules or regulations), the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increases the difficulty of consummating such a transaction.
Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the price we paid for those investments. 48 Investments in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk.
Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the price we paid for those investments. Investments in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk.
This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a 51 proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance.
This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance.
Oxford 56 Square Management’s employees may be the target of fraudulent calls, emails and other forms of activities. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to business relationships.
Oxford Square Management’s employees may be the target of fraudulent calls, emails and other forms of activities. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to business relationships.
In the event our Board of Directors opts to reclassify a portion of our unissued shares of common stock into a class of preferred stock, those preferred shares would have a preference over our common stock with respect to distributions and liquidation. The cost of any such reclassification would be borne by our existing common stockholders.
In the event our Board of Directors opts to reclassify a portion of our unissued shares of common stock into a class of preferred stock, those preferred 32 shares would have a preference over our common stock with respect to distributions and liquidation. The cost of any such reclassification would be borne by our existing common stockholders.
Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. Charles M. Royce, a member of our Board of Directors, holds a minority, non -controlling interest in our investment adviser. Messrs.
Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. Charles M. Royce, a member of our Board of Directors, holds a minority, non -controlling interest in our investment adviser. 34 Messrs.
If at any time our current Investment Advisory Agreement is terminated we may not be able to find a new investment adviser or hire internal 37 management with similar expertise and ability to provide the same or equivalent services on acceptable terms.
If at any time our current Investment Advisory Agreement is terminated we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms.
If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to U.S. federal income tax at corporate rates. If we do not receive timely distributions from our CLO investments, we may fail to qualify as a RIC.
If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to U.S. federal income tax at corporate rates. 38 If we do not receive timely distributions from our CLO investments, we may fail to qualify as a RIC.
Conversely, if interest rates decrease, we may earn less interest income from investments and our cost of funds will also decrease, which could result in lower net investment income. From time to time, we may also enter into certain hedging transactions to mitigate our exposure to changes in interest rates.
Conversely, if interest rates decrease, we may earn less interest income from investments and our cost of funds will also decrease, which could result in lower net investment income. From time to time, we may also enter into certain 40 hedging transactions to mitigate our exposure to changes in interest rates.
As a result, our exposure to losses may be increased, which could result in an adverse impact on our revenues, net income and net asset value. Our investments in the companies that we target may be extremely risky and we could lose all or part of our investments.
As a result, our exposure to losses may be increased, which could result in an adverse impact on our revenues, net income and net asset value. 44 Our investments in the companies that we target may be extremely risky and we could lose all or part of our investments.
In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness.
In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we 27 incur indebtedness.
Also, in the event of 46 insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment.
Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment.
If we need to dispose of such 36 investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.
If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.
If we 31 fail to obtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect on the value of our securities.
If we fail to obtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect on the value of our securities.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism. RISKS RELATED TO U.S.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism. 37 RISKS RELATED TO U.S.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment 56 processes.
The 5.50% Unsecured Notes are our general unsecured obligations, rank equally in right of payment with our future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future. Illustration.
The 5.50% Unsecured Notes are our general unsecured obligations, rank equally in right of payment with our future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future. 30 Illustration.
In the event that a CLO vehicle failed these certain tests, holders of debt senior to us may be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive.
In the event that a CLO vehicle failed these certain tests, holders of debt senior to us may be entitled to additional 47 payments that would, in turn, reduce the payments we would otherwise be entitled to receive.
The debt capital that will be available to us in the future, if any, may be at 52 a higher cost and on less favorable terms and conditions than would currently be available.
The debt capital that will be available to us in the future, if any, may be at a higher cost and on less favorable terms and conditions than would currently be available.
The full impact of any such risks is uncertain and difficult to predict. Capital markets volatility and instability have also occurred in the past and may occur in the future.
The full impact of any such risks is uncertain and difficult to predict. 51 Capital markets volatility and instability have also occurred in the past and may occur in the future.
It is not possible to predict the duration or extent of longer -term consequences of these conflicts, which could include further sanctions, retaliatory 54 and escalating measures, embargoes, regional instability, geopolitical shifts and adverse effects on or involving macroeconomic conditions, the energy sector, supply chains, inflation, security conditions, currency exchange rates and financial markets around the globe.
It is not possible to predict the duration or extent of longer -term consequences of these conflicts, which could include further sanctions, retaliatory and escalating measures, embargoes, regional instability, geopolitical shifts and adverse effects on or involving macroeconomic conditions, the energy sector, supply chains, inflation, security conditions, currency 53 exchange rates and financial markets around the globe.
Gerald Cummins, our Chief Compliance Officer, currently serves in similar capacities for Oxford Lane Management, Oxford Lane Capital Corp., Oxford Square Management, LLC, Oxford Gate Management, LLC, Oxford Park Income Fund, Inc. and Oxford Park Management.
Gerald Cummins, our Chief Compliance Officer, currently serves in similar capacities for Oxford Lane Management, Oxford Lane Capital Corp., Oxford Square Management, Oxford Gate Management, Oxford Park Income Fund, Inc. and Oxford Park Management.
Our portfolio must have an annual return of at least 2.83% in order to cover the annual interest payments on our current borrowings. If we are unable to comply with the covenants or restrictions in our borrowings, our business could be materially adversely affected.
Our portfolio must have an annual return of at least 2.62% in order to cover the annual interest payments on our current borrowings. If we are unable to comply with the covenants or restrictions in our borrowings, our business could be materially adversely affected.
Any decline in the net asset value of our investments would be borne entirely by the holders of common stock.
Any decline in the net asset value of our investments would be borne entirely by the holders of common 50 stock.
Uncertainty can result in or coincide with, among other things: increased volatility in the financial markets for securities, derivatives, loans, credit and currency; a decrease in the reliability of market prices and difficulty in valuing assets (including portfolio company assets); greater fluctuations in spreads on debt investments and currency exchange rates; increased risk of default (by both government and private obligors and issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; changes to governmental regulation and supervision of the loan, securities, derivatives and currency markets and market participants and decreased or revised monitoring of such markets by governments or self -regulatory organizations and reduced enforcement of regulations; limitations on the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; the significant loss of liquidity and the inability to purchase, sell and otherwise fund investments or settle transactions (including, but not limited to, a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.
These impacts can be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat. 52 Uncertainty can result in or coincide with, among other things: increased volatility in the financial markets for securities, derivatives, loans, credit and currency; a decrease in the reliability of market prices and difficulty in valuing assets (including portfolio company assets); greater fluctuations in spreads on debt investments and currency exchange rates; increased risk of default (by both government and private obligors and issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; changes to governmental regulation and supervision of the loan, securities, derivatives and currency markets and market participants and decreased or revised monitoring of such markets by governments or self -regulatory organizations and reduced enforcement of regulations; limitations on the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; the significant loss of liquidity and the inability to purchase, sell and otherwise fund investments or settle transactions (including, but not limited to, a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.
In addition, significant changes in the capital markets, including the recent period of extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments.
In addition, significant changes in the capital markets, including periods of extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments.
In this period of rising interest rates, our interest income will increase as the majority of our portfolio bears interest at variable rates while our cost of funds will also increase, which could result in an increase to our net investment income.
In periods of rising interest rates, our interest income will increase as the majority of our portfolio bears interest at variable rates while our cost of funds will also increase, which could result in an increase to our net investment income.
Assumed total return on our portfolio (net of expenses) (10.0 )% (5.0 )% 0.0 % 5.0 % 10.0 % Corresponding return to stockholder (1) (23.5 )% (14.4 )% (5.2 )% 4.0 % 13.2 % ____________ (1) Assumes $277.7 million in total assets and $125.3 million in total debt principal outstanding, which reflects our total assets and total debt outstanding as of December 31, 2023, and a cost of funds of approximately 6.26%.
Assumed total return on our portfolio (net of expenses) (10.0 )% (5.0 )% 0.0 % 5.0 % 10.0 % Corresponding return to stockholder (1) (23.5 )% (14.2 )% (4.9 )% 4.4 % 13.8 % ____________ (1) Assumes $299.7 million in total assets and $125.3 million in total debt principal outstanding, which reflects our total assets and total debt outstanding as of December 31, 2024, and a cost of funds of approximately 6.26%.
If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies. 40 Risks related to the transition away from LIBOR.
If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies.
The occurrence of a disaster such as a cyber -attack against us or against a third -party that has access to our data or networks, a natural catastrophe, an industrial accident, a terrorist attack or war, disease pandemics, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have 55 an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer -based data processing, transmission, storage, and retrieval systems or destroy data.
The occurrence of a disaster such as a cyber -attack against us or against a third -party that has access to our data or networks, a natural catastrophe, an industrial accident, a terrorist attack or war, disease pandemics, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer -based data processing, transmission, storage, and retrieval systems or destroy data. 54 We depend heavily upon computer systems to perform necessary business functions.
Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity.
The effect of global climate change may impact the operations of our portfolio companies. There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity.
In addition, if a portfolio company goes bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance” to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors. 45 Inflation may adversely affect our and our portfolio companies’ business, results of operations and financial condition.
In addition, if a portfolio company goes bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance” to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors.
Our common stock could trade at a discount to net asset value at any time in the future. The possibility that our shares of common stock may trade at a discount from net asset value over the long term is separate and distinct from the risk that our net asset value will decrease.
The possibility that our shares of common stock may trade at a discount from net asset value over the long term is separate and distinct from the risk that our net asset value will decrease.
In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in CLOs that may differ from the distributions received in respect of such investments.
In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in CLOs that may differ from the distributions received in respect of such investments. We also may be required to include in income certain other amounts that we will not receive in cash.
We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computers, networks, and data, like those of other companies, could be subject to cyber -attacks and unauthorized access, use, alteration, or destruction, such as from physical and electronic break -ins or unauthorized tampering.
Despite our implementation of a variety of security measures, our computers, networks, and data, like those of other companies, could be subject to cyber -attacks and unauthorized access, use, alteration, or destruction, such as from physical and electronic break -ins or unauthorized tampering.
In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. 46 In addition, we will not be in a position to control any portfolio company by investing in its debt securities.
RISKS RELATING TO OUR INVESTMENTS Our investment portfolio may be concentrated in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that we hold or if the sectors in which we invest experience a market downturn.
In addition, OID income for certain portfolio investments may or may not be included as a factor in the determination of the fair value of such investments. 39 RISKS RELATING TO OUR INVESTMENTS Our investment portfolio may be concentrated in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that we hold or if the sectors in which we invest experience a market downturn.
Our charter permits our Board of Directors to reclassify any authorized but unissued shares of stock into one or more classes of preferred stock. We are currently authorized to issue up to 100,000,000 shares of common stock, of which 59,672,337 shares are issued and outstanding as of March 14, 2024.
Our charter permits our Board of Directors to reclassify any authorized but unissued shares of stock into one or more classes of preferred stock. We are currently authorized to issue up to 100,000,000 shares of common stock, of which 69,789,527 shares are issued and outstanding as of February 27, 2025.
Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, at Oxford Park Management, the investment adviser to Oxford Park Income Fund, Inc., a non -diversified closed -end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC.Oxford Bridge II, LLC and Oxford Gate Funds are private funds that invest principally in CLO debt and equity.
Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, of Oxford Park Income Fund, Inc., a non -diversified closed -end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Park Management. Messrs.
As of December 31, 2023, the CLO vehicles in which we were invested had average leverage of 8.3 times and ranged from approximately 2.3 times to 11.7 times levered. In particular, investors in CLO vehicles indirectly bear risks of the underlying debt investments held by such CLO vehicles.
As of December 31, 2024, the CLO vehicles in which we were invested had average leverage of 6.49 times and ranged from approximately 0.41 times to 9.69 times levered. In particular, investors in CLO vehicles indirectly bear risks of the underlying debt investments held by such CLO vehicles.
If we are unable to raise additional equity capital or consummate new credit facilities on terms that are acceptable to us, we may not be able to initiate significant originations. 28 These situations may arise due to circumstances that we may be unable to control, such as access to the credit markets, a severe decline in the value of the U.S. dollar, another economic downturn or an operational problem that affects third parties or us, and could materially harm our business.
These situations may arise due to circumstances that we may be unable to control, such as access to the credit markets, a severe decline in the value of the U.S. dollar, another economic downturn or an operational problem that affects third parties or us, and could materially harm our business.
These events could limit our investment originations, limit our ability to grow and negatively impact our operating results. Further, inflation could make it difficult to extend the maturity of, or refinance existing indebtedness or obtain new indebtedness on favorable terms. Certain of our portfolio companies may be impacted by inflation.
Further, inflation could make it difficult to extend the maturity of, or refinance existing indebtedness or obtain new indebtedness on favorable terms. Certain of our portfolio companies may be impacted by inflation.
We also may be required to include in income certain other amounts that we will not receive in cash. 39 Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the Annual Distribution Requirement applicable to RICs.
Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the Annual Distribution Requirement applicable to RICs.
Substantial costs may be incurred in order to prevent any cyber incidents in the future. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.
The 5.50% Unsecured Notes will mature on July 31, 2028, 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 May 31, 2024.
On May 20, 2021, the Company completed an underwritten public offering of approximately $80.5 million in aggregate principal amount of 5.50% Unsecured Notes. The 5.50% Unsecured Notes will mature on July 31, 2028, 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 May 31, 2024.
In addition, the foreign and fiscal policies of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets. Increased geopolitical unrest, terrorist attacks, or acts of war may affect any market for our common stock, impact the businesses in which we invest, and harm our business, operating results, and financial conditions.
Increased geopolitical unrest, terrorist attacks, or acts of war may affect any market for our common stock, impact the businesses in which we invest, and harm our business, operating results, and financial conditions.
Legislative changes, any other significant changes in economic or tax policy and/or government programs, as well as any future such changes could have a material adverse impact on us and on our investments. The effect of global climate change may impact the operations of our portfolio companies. There may be evidence of global climate change.
Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment in us. Legislative changes, any other significant changes in economic or tax policy and/or government programs, as well as any future such changes could have a material adverse impact on us and on our investments.
If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage. We are subject to risks related to corporate social responsibility. Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities.
If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage.
Our investment adviser will 29 not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never receive as a result of a default by an entity on the obligation that resulted in the accrual of such income.
Our investment adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never receive as a result of a default by an entity on the obligation that resulted in the accrual of such income. 29 Our investment adviser can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus be subject to U.S. federal income tax at corporate rates. In addition, OID income for certain portfolio investments may or may not be included as a factor in the determination of the fair value of such investments.
If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus be subject to U.S. federal income tax at corporate rates.
Our business operations rely upon secure information technology systems for data processing, storage, and reporting. We depend on the effectiveness of the information and cybersecurity policies, procedures, and capabilities maintained by our affiliates and our and their respective third -party service providers to protect their computer and telecommunications systems and the data that reside on or are transmitted through them.
We depend on the effectiveness of the information and cybersecurity policies, procedures, and capabilities maintained by our affiliates and our and their respective third -party service providers to protect their computer and telecommunications systems and the data that reside on or are transmitted through them. Substantial costs may be incurred in order to prevent any cyber incidents in the future.
Inflation could negatively impact our business, including our ability to access the debt markets on favorable terms, or could negatively impact our portfolio companies. Sustained inflation could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
Sustained inflation could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit 45 our investment originations, limit our ability to grow and negatively impact our operating results.
Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage.
In addition, as a BDC, our ability to borrow or issue preferred stock may be restricted if our total assets are less than 150% of our total borrowings and preferred stock. 31 Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage.
Losses from terrorist attacks are generally uninsurable. The Israel -Hamas war and the conflict between Russia and Ukraine, and resulting market volatility, could also adversely affect the Company’s business, operating results, and financial condition. The extent and duration or escalation of such conflicts, resulting sanctions and resulting future market disruptions are impossible to predict, but could be significant.
Losses from terrorist attacks are generally uninsurable. The Israel -Hamas war and the conflict between Russia and Ukraine and in the Middle East, and resulting market volatility, could also adversely affect the Company’s business, operating results, and financial condition.
Also, an increase in interest rates available to investors could make an investment in our shares less attractive if we are not able to pay dividends at a level that provides a similar return, which could reduce the value of our shares. 41 Most of our debt investments will not fully amortize during their lifetime, which may subject us to the risk of loss of our principal in the event a portfolio company is unable to repay us prior to maturity.
Also, an increase in interest rates available to investors could make an investment in our shares less attractive if we are not able to pay dividends at a level that provides a similar return, which could reduce the value of our shares.
However, even if the Company itself is not located in a particular jurisdiction or directly subject to the jurisdiction’s derivatives regulations, we may still be impacted to the extent we enter into a derivatives transaction with a regulated market participant or counterparty that is organized in that jurisdiction or otherwise subject to that jurisdiction’s derivatives regulations.
However, even if the Company itself is not located in a particular jurisdiction or directly subject to the jurisdiction’s derivatives regulations, we may still be impacted to the extent we enter into a derivatives transaction with a regulated market participant or counterparty that is organized in that jurisdiction or otherwise subject to that jurisdiction’s derivatives regulations. 33 Based on information available as of the date of this annual report on Form 10 -K , the effect of such requirements will be likely to (directly or indirectly) increase our overall costs of entering into derivatives transactions.
The 6.25% Unsecured Notes are our general unsecured obligations, rank equally in right of payment with our future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future. 30 On May 20, 2021, the Company completed an underwritten public offering of approximately $80.5 million in aggregate principal amount of 5.50% Unsecured Notes.
The 6.25% Unsecured Notes are our general unsecured obligations, rank equally in right of payment with our future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future.
Any such new or changed laws or regulations could have a material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term. Changes to the laws and regulations governing our permitted investments may require a change to our investment strategy.
President and others in the executive branch, and new laws, regulations and interpretations could also come into effect. Any such new or changed laws or regulations could have a material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term.
Shares of BDCs have frequently traded at a market price that is less than the net asset value that is attributable to those shares. Our common stock traded below our net asset value per share during some periods from 2010 through March 2024.
Shares of BDCs have frequently traded at a market price that is less than the net asset value that is attributable to those shares. Our common stock has traded below our net asset value and could trade at a discount to net asset value at any time in the future.
Our ability to achieve our investment objective will depend on our ability to manage our existing investment portfolio and to grow, which will depend, in turn, on our investment adviser’s ability to identify, analyze, invest in and finance companies that meet our investment criteria, and our ability to raise and retain debt and equity capital. 26 Accomplishing this result on a cost -effective basis is largely a function of our investment adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms.
Accomplishing this result on a cost -effective basis is largely a function of our investment adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Board receives periodic updates from its Chief Compliance Officer (“CCO”), which incorporates updates provided by the Head of Information Technology of Oxford Funds, regarding the overall state of Oxford Funds’ cybersecurity program, information on the current threat landscape, and risks from cybersecurity threats and cybersecurity incidents impacting the Company.
Biggest changeThe Board receives periodic updates from its Chief Compliance Officer (“CCO”), which incorporates updates provided by the Head of Information Technology of Oxford Funds, regarding the overall state of Oxford Funds’ cybersecurity program, information on the current threat landscape, and risks from cybersecurity threats and cybersecurity incidents impacting the Company. 57 Management’s Role in Cybersecurity Risk Management The Company’s management, including the Company’s CCO and the Head of Information Technology of Oxford Funds, manages the Company’s cybersecurity program.
During the reporting period, the Company has not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that the Company believes have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, operational results, and financial condition. 58
During the reporting period, the Company has not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that the Company believes have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, operational results, and financial condition.
The CCO has been responsible for his oversight function as CCO to the Company for 8 years and has worked in the financial services industry for more than 35 years, during which time the CCO has gained expertise in assessing and managing risk applicable to the Company.
The CCO has been responsible for his oversight function as CCO to the Company for 9 years and has worked in the financial services industry for more than 35 years, during which time the CCO has gained expertise in assessing and managing risk applicable to the Company.
The Head of Information Technology has more than 8 years of experience in actively managing cybersecurity and information security programs for financial services companies with complex information systems.
The Head of Information Technology has more than 9 years of experience in actively managing cybersecurity and information security programs for financial services companies with complex information systems.
Oxford Funds manages the day -to-day operations of the Company and has implemented a cybersecurity program that applies to the Company and its operations. 57 Cybersecurity Program Overview Oxford Funds has instituted a cybersecurity program designed to identify, assess, and manage cyber risks applicable to the Company and assists with the oversight of other third party service providers and their cybersecurity programs.
Cybersecurity Program Overview Oxford Funds has instituted a cybersecurity program designed to identify, assess, and manage cyber risks applicable to the Company and assists with the oversight of other third party service providers and their cybersecurity programs.
Removed
Management’s Role in Cybersecurity Risk Management The Company’s management, including the Company’s CCO and the Head of Information Technology of Oxford Funds, manages the Company’s cybersecurity program.
Added
Oxford Funds manages the day -to-day operations of the Company and has implemented a cybersecurity program that applies to the Company and its operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile 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 4. Mine Safety Disclosures Not applicable. 59 PART II
Biggest changeWhile 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 4. Mine Safety Disclosures Not applicable. 58 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrice Range Premium or (Discount) of High Sales Price to NAV (2) Premium or (Discount) of Low Sales Price to NAV (2) Distributions Per Share (3) NAV (1) High Low Fiscal 2024 First Quarter (through March 14, 2024) * $ 3.22 $ 2.85 * * * Fiscal 2023 Fourth Quarter $ 2.55 $ 3.12 $ 2.82 22.4 % 10.6 % $ 0.105 Third Quarter $ 2.78 $ 3.29 $ 2.68 18.3 % (3.6 )% $ 0.225 Second Quarter $ 2.88 $ 3.20 $ 2.60 11.1 % (9.7 )% $ 0.105 First Quarter $ 2.80 $ 3.70 $ 3.00 32.1 % 7.1 % $ 0.105 Fiscal 2022 Fourth Quarter $ 2.78 $ 3.25 $ 2.82 16.9 % 1.4 % $ 0.105 Third Quarter $ 3.34 $ 4.05 $ 2.94 21.3 % (12.0 )% $ 0.105 Second Quarter $ 3.67 $ 4.29 $ 3.45 16.9 % (6.0 )% $ 0.105 First Quarter $ 4.65 $ 4.42 $ 3.68 (4.9 )% (20.9 )% $ 0.105 ____________ (1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices.
Biggest changePrice Range Premium or (Discount) of High Sales Price to NAV (2) Premium or (Discount) of Low Sales Price to NAV (2) Distributions Per Share (3) NAV (1) High Low Fiscal 2025 First Quarter (through February 27, 2025) * $ 2.87 $ 2.44 * * $ 0.105 Fiscal 2024 Fourth Quarter $ 2.30 $ 2.99 $ 2.40 30.0 % 4.3 % $ 0.105 Third Quarter $ 2.35 $ 3.10 $ 2.74 31.9 % 16.6 % $ 0.105 Second Quarter $ 2.43 $ 3.29 $ 2.91 35.4 % 19.8 % $ 0.105 First Quarter $ 2.42 $ 3.22 $ 2.85 33.1 % 17.8 % $ 0.105 Fiscal 2023 Fourth Quarter $ 2.55 $ 3.12 $ 2.82 22.4 % 10.6 % $ 0.105 Third Quarter $ 2.78 $ 3.29 $ 2.68 18.3 % (3.6 )% $ 0.225 Second Quarter $ 2.88 $ 3.20 $ 2.60 11.1 % (9.7 )% $ 0.105 First Quarter $ 2.80 $ 3.70 $ 3.00 32.1 % 7.1 % $ 0.105 ____________ * Net asset value has not yet been calculated for this period.
Because our investment strategy involves investments that generate primarily current income, we believe that a 5% annual return resulting entirely from net realized capital gains is unlikely. The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.
Because our investment strategy involves investments that generate primarily current income, we believe that a 5% annual return resulting entirely from net realized capital gains is unlikely. 62 The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.
It assumes that distributions paid are reinvested in like securities. 61 The graph and the information furnished under this Part II Item 5 of this Form 10 -K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
It assumes that distributions paid are reinvested in like securities. 60 The graph and the information furnished under this Part II Item 5 of this Form 10 -K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
For a detailed discussion of the calculation of the incentive fees, see Item 1 — Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K . (6) Assumes that we have $125.3 million of outstanding principal borrowings as of December 31, 2023.
For a detailed discussion of the calculation of the incentive fees, see Item 1 — Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K . (6) Assumes that we have $125.3 million of outstanding principal borrowings as of December 31, 2024.
The calculation also assumes an effective interest rate of 6.77% (including amortization of deferred issuance costs) on the approximately $44.8 million of 6.25% Unsecured Notes outstanding as of December 31, 2023, and an effective interest rate of 5.98% (including amortization of deferred issuance costs) on the approximately $80.5 million of 5.50% Unsecured Notes outstanding as of December 31, 2023.
The calculation also assumes an effective interest rate of 6.77% (including amortization of deferred issuance costs) on the approximately $44.8 million of 6.25% Unsecured Notes outstanding as of December 31, 2024, and an effective interest rate of 5.98% (including amortization of deferred issuance costs) on the approximately $80.5 million of 5.50% Unsecured Notes outstanding as of December 31, 2024.
The graph assumes that, on December 31, 2018, a person invested $100 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Financial 100, which includes the 100 largest domestic and international financial organizations listed on the NASDAQ Stock Market based on market capitalization.
The graph assumes that, on December 31, 2019, a person invested $100 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Financial 100, which includes the 100 largest domestic and international financial organizations listed on the NASDAQ Stock Market based on market capitalization.
(7) “Other expenses” are based on the actual expenses for the year ended December 31, 2023, and adjusted for any new and non -recurring expenses, such as an assumed issuance of an additional $50.0 million of common stock.
(7) “Other expenses” are based on the actual expenses for the year ended December 31, 2024, and adjusted for any new and non -recurring expenses, such as an assumed issuance of an additional $50.0 million of common stock.
The aggregate value for the shares of common stock issued under the distribution reinvestment plan was approximately $0.9 million. Issuer Purchases of Equity Securities During the year ended December 31, 2023, no common stock was repurchased.
The aggregate value for the shares of common stock issued under the distribution reinvestment plan was approximately $0.9 million. Issuer Purchases of Equity Securities During the year ended December 31, 2024, no common stock was repurchased.
For a more detailed discussion of the requirements under Subchapter M, please refer to the discussion in “Business — Certain U.S. Federal Income 60 Tax Considerations” set forth above.
For a more detailed discussion of the requirements under Subchapter M, please refer to the discussion in “Business — Certain U.S. Federal 59 Income Tax Considerations” set forth above.
Performance Graph The graph below compares the cumulative stockholder return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Financial 100, as we do not believe there is an appropriate index of companies with an investment strategy similar to our own with which to compare the return on our common stock, for the period from December 31, 2018 through December 31, 2023.
Performance Graph The graph below compares the cumulative stockholder return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Financial 100, as we do not believe there is an appropriate index of companies with an investment strategy similar to our own with which to compare the return on our common stock, for the period from December 31, 2019 through December 31, 2024.
Stockholder transaction expenses: Sales load (as a percentage of offering price) — % (1) Offering expenses borne by our common stockholders (as a percentage of offering price) — % (2) Distribution reinvestment plan expenses — ​ (3) Total stockholder transaction expenses (as a percentage of offering price) — % Annual expenses (as a percentage of net assets attributable to our common stock): Base management fee 2.44 % (4) Incentive fees payable under our investment advisory agreement — % (5) Interest payments on borrowed funds 3.90 % (6) Other expenses 2.73 % (3) (7) Total annual expenses 9.07 % (8) ____________ (1) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable sales load and the “Example” will be updated accordingly. 62 (2) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable offering expenses and total stockholder transaction expenses as a percentage of the offering price.
Stockholder transaction expenses: Sales load (as a percentage of offering price) — % (1) Offering expenses borne by our common stockholders (as a percentage of offering price) — % (2) Distribution reinvestment plan expenses — % (3) Total stockholder transaction expenses (as a percentage of offering price) — % Annual expenses (as a percentage of net assets attributable to our common stock): Base management fee 2.49 % (4) Incentive fees payable under our investment advisory agreement — % (5) Interest payments on borrowed funds 3.73 % (6) Other expenses 2.03 % (3) (7) Total annual expenses 8.24 % (8)(9) ____________ (1) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable sales load and the “Example” will be updated accordingly.
In the event of a debt restructuring or extinguishment, we may incur a loss comprised of deferred financing costs and note discount which may cause actual expenses to exceed those amounts projected in the table.
In the event of a debt restructuring or extinguishment, we may incur a loss comprised of deferred financing costs which may cause actual expenses to exceed those amounts projected in the table.
(4) Assumes gross assets (which equals the total assets on our Statements of Assets and Liabilities adjusted as described in this footnote) of $327.7 million and $125.3 million of leverage (including $44.8 million in aggregate principal of our 6.25% Unsecured Notes and $80.5 million in aggregate principal of our 5.50% Unsecured Notes in each case, as of December 31, 2023), and assumes net assets of $201.3 million (which has been adjusted to reflect the net issuance of an additional $50.0 million of common stock).
(4) Assumes gross assets (which equals the total assets on our Statements of Assets and Liabilities adjusted as described in this footnote) of $349.7 million and $125.3 million of leverage (including $44.8 million in aggregate principal of our 6.25% Unsecured Notes and $80.5 million in aggregate principal of our 5.50% Unsecured Notes in each case, as of December 31, 2024), and assumes net assets of $210.7 million (which has been adjusted to reflect the net issuance of an additional $50.0 million of common stock).
Recent Sales of Unregistered Securities We did not engage in unregistered sales of equity securities during the year ended December 31, 2023, however, we issued a total of 309,016 shares of common stock under our distribution reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended.
Recent Sales of Unregistered Securities We did not engage in unregistered sales of equity securities during the year ended December 31, 2024, however, we issued a total of 326,184 shares of common stock under our distribution reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended.
Our shares of common stock have traded both at a premium and a discount to the net assets attributable to those shares. As of March 14, 2024, our shares of common stock traded at a premium equal to approximately 21.2% of the net asset value per share as of December 31, 2023.
Our shares of common stock have traded both at a premium and a discount to the net assets attributable to those shares. As of February 27, 2025, our shares of common stock traded at a premium equal to approximately 21.7% of the net asset value per share as of December 31, 2024.
In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above. 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (1) $ 89 $ 256 $ 410 $ 742 You would pay the following expenses on a $1,000 investment, assuming a 5% annual return entirely from realized gains (2) $ 98 $ 280 $ 444 $ 785 ____________ (1) Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.
In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above. 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (1) $ 81 $ 235 $ 380 $ 702 You would pay the following expenses on a $1,000 investment, assuming a 5% annual return entirely from realized gains (2) $ 90 $ 260 $ 416 $ 750 ____________ (1) Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.
The above calculation presents our base management fee as a percentage of our net assets. Our base management fee under the Investment Advisory Agreement, however, is based on our gross assets, which is defined as all the assets of Oxford Square Capital Corp., including those acquired using borrowings for investment purposes.
For purposes of this table, the SEC requires our base management fee to be calculated as a percentage of our net assets. Our base management fee under the Investment Advisory Agreement, however, is based on our gross assets, which is defined as all the assets of Oxford Square Capital Corp., including those acquired using borrowings for investment purposes.
(3) The expenses of the distribution reinvestment plan are included in “other expenses.” The plan administrator’s fees will be paid by us. We will not charge any brokerage charges or other charges to stockholders who participate in the plan. However, your own broker may impose brokerage charges in connection with your participation in the plan.
We will not charge any brokerage charges or other charges to stockholders who participate in the plan. However, your own broker may impose brokerage charges in connection with your participation in the plan.
Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K , there is no expectation for Oxford Square Management to earn incentive fees for the year ending December 31, 2024.
Oxford Square Management did not earn incentive fees during the year ended December 31, 2024, due to the Total Return Requirement described under Item 1. Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K .
(3) Represents the cash distributions, including dividends, dividends reinvested and returns of capital, if any, per share that we have declared on our common stock in the specified quarter. On March 14, 2024, the last reported sales price of our common stock was $3.09 per share. As of March 14, 2024, we had 125 stockholders of record.
(2) Calculated as the respective high or low intraday sales price divided by NAV and subtracting 1. (3) Represents the cash distributions, including dividends, dividends reinvested and returns of capital, if any, per share that we have declared on our common stock in the specified quarter.
The indirect expenses associated with the Company’s CLO equity investments are not included in the fee table presentation, but if such expenses were included in the fee table presentation then OXSQ’s total annual expenses would have been 19.71%. 63 Example The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock.
Example The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock.
Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares.
On February 27, 2025, the last reported sales price of our common stock was $2.80 per share. As of February 27, 2025, we had 124 stockholders of record. Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares.
The net asset values shown are based on outstanding shares at the end of each period. (2) Calculated as the respective high or low intraday sales price divided by NAV and subtracting 1.
(1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period.
Removed
While Oxford Square Management did earn incentive fees during the year ended December 31, 2023, due to the Total Return Requirement described under Item 1.
Added
(2) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable offering expenses and total stockholder transaction expenses as a percentage of the offering price. 61 (3) The expenses of the distribution reinvestment plan are included in “other expenses.” The plan administrator’s fees will be paid by us.
Added
The indirect expenses associated with the Company’s CLO equity investments are not included in the fee table presentation, but if such expenses were included in the fee table presentation then OXSQ’s total annual expenses would have been 13.56%. (9) Totals may not sum due to rounding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+6 added−13 removed67 unchanged
Biggest changeWe have until October 15, 2024 to file our U.S. federal income tax return for the year ended December 31, 2023. 76 The following table reflects the cash distributions, including distributions reinvested, if any, per share that we have paid on our common stock since the beginning of the 2021 fiscal year through 2023: Date Declared Record Date Payment Date Total Distributions GAAP Net Investment Income Distributions in Excess of/ (Less than) GAAP Net Investment Income (1) Fiscal 2023 August 3, 2023 December 15, 2023 December 29, 2023 $ 0.035 $ N/A $ — August 3, 2023 November 16, 2023 November 30, 2023 0.035 N/A — August 3, 2023 October 17, 2023 October 31, 2023 0.035 N/A — Total (Fourth Quarter 2023) 0.105 0.13 (0.03 ) August 3, 2023 (5) September 15, 2023 September 29, 2023 $ 0.120 $ N/A $ — April 25, 2023 September 15, 2023 September 29, 2023 0.035 N/A — April 25, 2023 August 17, 2023 August 31, 2023 0.035 N/A — April 25, 2023 July 17, 2023 July 31, 2023 0.035 N/A — Total (Third Quarter 2023) 0.225 0.11 0.12 March 16, 2023 June 16, 2023 June 30, 2023 $ 0.035 $ N/A $ — March 16, 2023 May 17, 2023 May 31, 2023 0.035 N/A — March 16, 2023 April 14, 2023 April 28, 2023 0.035 N/A — Total (Second Quarter 2023) 0.105 0.13 (0.03 ) October 20, 2022 March 17, 2023 March 31, 2023 $ 0.035 $ N/A $ — October 20, 2022 February 14, 2023 February 28, 2023 0.035 N/A — October 20, 2022 January 17, 2023 January 31, 2023 0.035 N/A — Total (First Quarter 2023) 0.105 0.13 (0.03 ) Total (2023) $ 0.540 ​ (1) $ 0.51 ​ (4) $ 0.03 ​ (4) Fiscal 2022 July 21, 2022 December 16, 2022 December 30, 2022 $ 0.035 $ N/A $ — July 21, 2022 November 16, 2022 November 30, 2022 0.035 N/A — July 21, 2022 October 17, 2022 October 31, 2022 0.035 N/A — Total (Fourth Quarter 2022) 0.105 0.13 (0.03 ) April 21, 2022 September 16, 2022 September 30, 2022 $ 0.035 $ N/A $ — April 21, 2022 August 17, 2022 August 31, 2022 0.035 N/A — April 21, 2022 July 15, 2022 July 29, 2022 0.035 N/A — Total (Third Quarter 2022) 0.105 0.11 (0.01 ) March 1, 2022 June 16, 2022 June 30, 2022 $ 0.035 $ N/A $ — March 1, 2022 May 17, 2022 May 31, 2022 0.035 N/A — March 1, 2022 April 15, 2022 April 29, 2022 0.035 N/A — Total (Second Quarter 2022) 0.105 0.09 0.02 October 22, 2021 March 17, 2022 March 31, 2022 $ 0.035 $ N/A $ — October 22, 2021 February 14, 2022 February 28, 2022 0.035 N/A — October 22, 2021 January 17, 2022 January 31, 2022 0.035 N/A — Total (First Quarter 2022) 0.105 0.09 0.02 Total (2022) $ 0.420 ​ (2) $ 0.42 $ — Fiscal 2021 July 22, 2021 December 17, 2021 December 31, 2021 $ 0.035 $ N/A $ — July 22, 2021 November 16, 2021 November 30, 2021 0.035 N/A — July 22, 2021 October 15, 2021 October 29, 2021 0.035 N/A — Total (Fourth Quarter 2021) 0.105 0.09 0.02 April 22, 2021 September 16, 2021 September 30, 2021 $ 0.035 $ N/A $ — April 22, 2021 August 17, 2021 August 31, 2021 0.035 N/A — April 22, 2021 July 16, 2021 July 30, 2021 0.035 N/A — Total (Third Quarter 2021) 0.105 0.08 0.02 February 23, 2021 June 16, 2021 June 30, 2021 $ 0.035 $ N/A $ — February 23, 2021 May 14, 2021 May 28, 2021 0.035 N/A — February 23, 2021 April 16, 2021 April 30, 2021 0.035 N/A — Total (Second Quarter 2021) 0.105 0.06 0.05 October 22, 2020 March 17, 2021 March 31, 2021 $ 0.035 $ N/A $ — October 22, 2020 February 12, 2021 February 26, 2021 0.035 N/A — October 22, 2020 January 15, 2021 January 29, 2021 0.035 N/A — Total (First Quarter 2021) 0.105 0.10 — Total (2021) $ 0.420 ​ (3) $ 0.32 ​ (4) $ 0.10 ​ (4) 77 ____________ (1) The tax characterization of cash distributions for the year ended December 31, 2023 will not be known until the tax return for such year is finalized.
Biggest changeWe have until October 15, 2025 to file our U.S. federal income tax return for the year ended December 31, 2024. 75 The following table reflects the cash distributions, including distributions reinvested, if any, per share that we have paid on our common stock since the beginning of the 2022 fiscal year through 2024: Date Declared Record Date Payment Date Total Distributions GAAP net investment income Distributions in excess of/ (less than) GAAP net investment income (1) Fiscal 2024 (1) August 8, 2024 December 17, 2024 December 31, 2024 $ 0.035 $ N/A $ — August 8, 2024 November 15, 2024 November 29, 2024 0.035 N/A — August 8, 2024 October 17, 2024 October 31, 2024 0.035 N/A — Total (Fourth Quarter 2024) 0.105 0.09 0.02 April 25, 2024 September 16, 2024 September 30, 2024 0.035 N/A $ — April 25, 2024 August 16, 2024 August 30, 2024 0.035 N/A — April 25, 2024 July 17, 2024 July 31, 2024 0.035 N/A — Total (Third Quarter 2024) 0.105 0.10 0.01 March 14, 2024 June 14, 2024 June 28, 2024 0.035 N/A — March 14, 2024 May 17, 2024 May 31, 2024 0.035 N/A — March 14, 2024 April 16, 2024 April 30, 2024 0.035 N/A — Total (Second Quarter 2024) 0.105 0.13 (0.02 ) November 2, 2023 March 15, 2024 March 29, 2024 0.035 N/A — November 2, 2023 February 15, 2024 February 29, 2024 0.035 N/A — November 2, 2023 January 17, 2024 January 31, 2024 0.035 N/A — Total (First Quarter 2024) 0.105 0.11 (0.01 ) Total (2024) $ 0.420 ​ (1) $ 0.42 ​ (4) $ 0.00 ​ (4) Fiscal 2023 August 3, 2023 December 15, 2023 December 29, 2023 $ 0.035 $ N/A $ — August 3, 2023 November 16, 2023 November 30, 2023 0.035 N/A — August 3, 2023 October 17, 2023 October 31, 2023 0.035 N/A — Total (Fourth Quarter 2023) 0.105 0.13 (0.03 ) August 3, 2023 (5) September 15, 2023 September 29, 2023 $ 0.120 $ N/A $ — April 25, 2023 September 15, 2023 September 29, 2023 0.035 N/A — April 25, 2023 August 17, 2023 August 31, 2023 0.035 N/A — April 25, 2023 July 17, 2023 July 31, 2023 0.035 N/A — Total (Third Quarter 2023) 0.225 0.11 0.12 March 16, 2023 June 16, 2023 June 30, 2023 $ 0.035 $ N/A $ — March 16, 2023 May 17, 2023 May 31, 2023 0.035 N/A — March 16, 2023 April 14, 2023 April 28, 2023 0.035 N/A — Total (Second Quarter 2023) 0.105 0.13 (0.03 ) October 20, 2022 March 17, 2023 March 31, 2023 $ 0.035 $ N/A $ — October 20, 2022 February 14, 2023 February 28, 2023 0.035 N/A — October 20, 2022 January 17, 2023 January 31, 2023 0.035 N/A — Total (First Quarter 2023) 0.105 0.13 (0.03 ) Total (2023) $ 0.540 $ 0.51 ​ (2)(4) $ 0.03 ​ (2) Fiscal 2022 July 21, 2022 December 16, 2022 December 30, 2022 $ 0.035 $ N/A $ — July 21, 2022 November 16, 2022 November 30, 2022 0.035 N/A — July 21, 2022 October 17, 2022 October 31, 2022 0.035 N/A — Total (Fourth Quarter 2022) 0.105 0.13 (0.03 ) April 21, 2022 September 16, 2022 September 30, 2022 $ 0.035 $ N/A $ — April 21, 2022 August 17, 2022 August 31, 2022 0.035 N/A — April 21, 2022 July 15, 2022 July 29, 2022 0.035 N/A — Total (Third Quarter 2022) 0.105 0.11 (0.01 ) March 1, 2022 June 16, 2022 June 30, 2022 $ 0.035 $ N/A $ — March 1, 2022 May 17, 2022 May 31, 2022 0.035 N/A — March 1, 2022 April 15, 2022 April 29, 2022 0.035 N/A — Total (Second Quarter 2022) 0.105 0.09 0.02 76 Date Declared Record Date Payment Date Total Distributions GAAP net investment income Distributions in excess of/ (less than) GAAP net investment income (1) October 22, 2021 March 17, 2022 March 31, 2022 $ 0.035 $ N/A $ — October 22, 2021 February 14, 2022 February 28, 2022 0.035 N/A — October 22, 2021 January 17, 2022 January 31, 2022 0.035 N/A — Total (First Quarter 2022) 0.105 0.09 0.02 Total (2022) $ 0.420 ​ (3) $ 0.42 $ — ____________ (1) The tax characterization of cash distributions for the year ended December 31, 2024 will not be known until the tax return for such year is finalized.
The quantitative inputs and data points that determine which method to utilize to value any given investment include, but are not limited to: • Bid/offer prices; • Depth, which is defined as the number of securities firms that make a market in a respective corporate syndicated loan and contribute data on the corporate syndicated loan to market data providers; • Liquidity score, which is a metric to help market participants ascertain their ability to exit a position within a given time frame and near a prevailing indicative price, which provides a benchmark of liquidity risk; • Financial performance of the underlying portfolio company; • Recent business developments; • Covenant compliance; and • Recent transactions. 80 In instances where secondary market data is limited, we may engage a third -party valuation firm to independently determine an estimate of fair value.
The quantitative inputs and data points that determine which method to utilize to value any given investment include, but are not limited to: • Bid/offer prices; • Depth, which is defined as the number of securities firms that make a market in a respective corporate syndicated loan and contribute data on the corporate syndicated loan to market data providers; • Liquidity score, which is a metric to help market participants ascertain their ability to exit a position within a given time frame and near a prevailing indicative price, which provides a benchmark of liquidity risk; • Financial performance of the underlying portfolio company; • Recent business developments; • Covenant compliance; and • Recent transactions. 79 In instances where secondary market data is limited, we may engage a third -party valuation firm to independently determine an estimate of fair value.
That expense (or the reversal of such an expense) related to that hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to our investment adviser in the event of a complete liquidation of our portfolio as of period end and the termination of the Investment Advisory Agreement on such date.
That expense (or the reversal of such an expense) related to that hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to our investment adviser in the event of a complete liquidation of our portfolio 71 as of period end and the termination of the Investment Advisory Agreement on such date.
Under the Investment Advisory Agreement, we have agreed to pay Oxford Square Management an annual Base Fee calculated on gross assets, and an incentive fee based upon our performance. Under the Administration Agreement, we have agreed to pay or reimburse Oxford Funds, as administrator, for certain expenses incurred in operating the Company.
Under the Investment Advisory Agreement, we have agreed to pay Oxford Square Management an annual Base Fee calculated on gross assets, 64 and an incentive fee based upon our performance. Under the Administration Agreement, we have agreed to pay or reimburse Oxford Funds, as administrator, for certain expenses incurred in operating the Company.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10 -K . 65 OVERVIEW Our investment objective is to maximize our portfolio’s total return.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10 -K . OVERVIEW Our investment objective is to maximize our portfolio’s total return.
Our critical accounting estimates, including those relating to the valuation of our investment portfolio, are described below. Actual results could materially differ from those estimates. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 1A.
Our critical accounting 78 estimates, including those relating to the valuation of our investment portfolio, are described below. Actual results could materially differ from those estimates. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 1A.
Oxford Square Management, Oxford Lane Management, Oxford Park Management and Oxford Gate Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford 78 Gate Funds.
Oxford Square Management, Oxford Lane Management, Oxford Park Management and Oxford Gate Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford Gate Funds.
The fair value of the 6.50% Unsecured Notes, 6.25% Unsecured Notes and 5.50% Unsecured Notes are based upon the closing price on the last day of the period. The 6.50% Unsecured Notes, 6.25% Unsecured Notes and 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQL”,“OXSQZ” and “OXSQG”, respectively).
The fair value of the 6.25% Unsecured Notes and 5.50% Unsecured Notes are based upon the closing price on the last day of the period. The 6.25% Unsecured Notes and 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQZ” and “OXSQG”, respectively).
We consider the attributes of current market conditions on an on -going basis and have determined that due to the general illiquidity of the market for our investment portfolio, whereby little or no market data exists, substantially all of our fair valued investments are measured based upon Level 3 inputs as of December 31, 2023 and December 31, 2022.
We consider the attributes of current market conditions on an on -going basis and have determined that due to the general illiquidity of the market for our investment portfolio, whereby little or no market data exists, substantially all of our fair valued investments are measured based upon Level 3 inputs as of December 31, 2024 and December 31, 2023.
Oxford Square Management or the Valuation Committee may request an additional analysis by a third -party firm to assist in the valuation process of CLO investment vehicles. All information is presented to our Board for its determination of fair value of these investments. Recently Issued Accounting Standards See “Note 16.
Oxford Square Management or the Valuation Committee may request an additional analysis by a third -party firm to assist in the valuation process of CLO investment vehicles. All information is presented to our Board for its determination of fair value of these investments. Recently Issued Accounting Standards See “Note 17.
The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations. (2) Cash distributions for the year ended December 31, 2022 represented 100% net investment income and therefore there was no tax return of capital.
The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations. (2) Cash distributions for the year ended December 31, 2023 represented 100% net investment income and therefore there was no tax return of capital.
The weighted average annualized yield was computed using the effective interest rates as of December 31, 2023, including accretion of OID and excluding any debt investments on non -accrual status. There can be no assurance that the weighted average annualized yield will remain at its current level.
The weighted average annualized yield was computed using the effective interest rates as of December 31, 2024, including accretion of OID and excluding any debt investments on non -accrual status. There can be no assurance that the weighted average annualized yield will remain at its current level.
(2) Totals may not sum due to rounding. The following tables present the top ten industries (based upon Moody’s industry classifications) of the aggregate holdings of the CLOs included in our portfolio, based on par value, as of December 31, 2023 and December 31, 2022.
(2) Totals may not sum due to rounding. The following tables present the top ten industries (based upon Moody’s industry classifications) of the aggregate holdings of the CLOs included in our portfolio, based on par value, as of December 31, 2024 and December 31, 2023.
For the year ended December 31, 2023, the net increase in net assets resulting from net investment income per common share was $0.51 (basic and diluted), compared to $0.42 (basic and diluted) for the year ended December 31, 2022, based on the weighted average common shares outstanding for the respective periods.
For the year ended December 31, 2024, the net increase in net assets resulting from net investment income per common share was $0.42 (basic and diluted), compared to $0.51 (basic and diluted) for the year ended December 31, 2023, based on the weighted average common shares outstanding for the respective periods.
(3) Cash distributions for the year ended December 31, 2021 represented 100% net investment income and therefore there was no tax return of capital. (4) Totals may not sum due to rounding. (5) Special distribution.
(3) Cash distributions for the year ended December 31, 2022 represented 100% net investment income and therefore there was no tax return of capital. (4) Totals may not sum due to rounding. (5) Special distribution.
Risk Factors.” See Note 2 to our financial statements for the year ended December 31, 2023 for more information on our critical accounting policies. 79 Investment Valuation We fair value our investment portfolio in accordance with the provisions of ASC 820, Fair Value Measurement and Disclosure (“ASC 820”) and Rule 2a -5 under the 1940 Act.
Risk Factors.” See Note 2 to our financial statements for the year ended December 31, 2024 for more information on our critical accounting policies. Investment Valuation We fair value our investment portfolio in accordance with the provisions of ASC 820, Fair Value Measurement and Disclosure (“ASC 820”) and Rule 2a -5 under the 1940 Act.
Equity securities are not graded. As of December 31, 2023 and 2022 our portfolio had a weighted average grade of 2.3 and 2.2, respectively, based upon the fair value of the debt investments in the portfolio.
Equity securities are not graded. As of December 31, 2024 and 2023 our portfolio had a weighted average grade of 2.3 and 2.3, respectively, based upon the fair value of the debt investments in the portfolio.
For the years ended December 31, 2023 and 2022, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio.
For the years ended December 31, 2024 and 2023, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio.
The final determination of the source of all distributions in 2023 will be made after year -end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099 -DIV notice.
The final determination of the source of all distributions in 2024 will be made after year -end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099 -DIV notice.
Contractual obligations (in millions) Principal Amount Payments Due by Period Less than 1 year 1 – 3 years 3 – 5 years More than 5 years Long-term debt obligations: 6.25% Unsecured Notes $ 44.8 $ — $ 44.8 $ — $ — 5.50% Unsecured Notes 80.5 — — 80.5 — $ 125.3 $ — $ 44.8 $ 80.5 $ — Share Issuance and Repurchase Programs On August 22, 2023, we entered into Amendment No. 1 to that certain Equity Distribution Agreement dated August 1, 2019 with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an At -the-Market (“ATM”) offering.
Contractual obligations (in millions) Principal Amount Payments Due by Period Less than 1 year 1 – 3 years 3 – 5 years More than 5 years Long-term debt obligations: 6.25% Unsecured Notes $ 44.8 $ — $ 44.8 $ — $ — 5.50% Unsecured Notes 80.5 — — 80.5 — $ 125.3 $ — $ 44.8 $ 80.5 $ — Share Issuance and Repurchase Programs On August 22, 2023, we entered into Amendment No. 1 to the Equity Distribution Agreement dated August 1, 2019 with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an ATM offering.
For the year ended December 31, 2023, the amounts and sources of distributions reported are only estimates and are not being provided for U.S. tax reporting purposes.
For the year ended December 31, 2024, the amounts and sources of distributions reported are only estimates and are not being provided for U.S. tax reporting purposes.
The number and amount of investments included in Grade 3, 4 or 5 may fluctuate from year to year. 70 RESULTS OF OPERATIONS Set forth below is a comparison of our results of operations for the years ended December 31, 2023 and 2022.
The number and amount of investments included in Grade 3, 4 or 5 may fluctuate from year to year. RESULTS OF OPERATIONS Set forth below is a comparison of our results of operations for the years ended December 31, 2024 and 2023.
In addition, we receive principal repayments of some of our investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. For the years ended December 31, 2023 and December 31, 2022, we had loan principal repayments of approximately $15.8 million and approximately $50.0 million, respectively.
In addition, we receive principal repayments of some of our investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. For the years ended December 31, 2024 and December 31, 2023, we had loan principal repayments of approximately $75.0 million and approximately $15.8 million, respectively.
Borrowings In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 150% immediately after such borrowing. As of December 31, 2023, our asset coverage for borrowed amounts was approximately 219%.
Borrowings In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 150% immediately after such borrowing. As of December 31, 2024, our asset coverage for borrowed amounts was approximately 227%.
Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Park Income Fund, Inc. and Chief Financial Officer and Treasurer of Oxford Park Management, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Park Income Fund, Inc. and Oxford Park Management.
Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Park Income Fund, Inc. and Chief Financial Officer and Treasurer of Oxford Park Management, and Mr.
Our primary focus is to seek an attractive risk -adjusted total return by investing primarily in corporate debt securities and in CLOs, which are structured finance investments that own corporate debt securities.
Our primary focus is to seek an attractive risk -adjusted total return by investing primarily in corporate debt securities and, to a lesser extent, in CLOs, which are structured finance investments that own corporate debt securities.
For information regarding results of operations for the year ended December 31, 2021, refer to Part II Item 7 in our Form 10 -K for the year ended December 31, 2022, as filed with the SEC on March 23, 2023, which is incorporated by reference herein.
For information regarding results of operations for the year ended December 31, 2022, refer to Part II Item 7 in our Form 10 -K for the year ended December 31, 2023 , as filed with the SEC on March 19, 2024, which is incorporated by reference herein.
The aggregate accrued interest which remained payable as of December 31, 2023 and 2022, was approximately $1.2 million.
The aggregate accrued interest which remained payable as of December 31, 2024 and 2023, was approximately $1.2 million.
Compensation expense was approximately $825,000 for the year ended December 31, 2023, compared to approximately $916,000 for the year ended December 31, 2022, reflecting the allocation of compensation expenses for the services of our Chief Financial Officer, accounting personnel, and other administrative support staff. As of December 31, 2023, there was no compensation expense payable.
Compensation expense was approximately $747,000 for the year ended December 31, 2024, compared to approximately $825,000 for the year ended December 31, 2023, reflecting the allocation of compensation expenses for the services of our Chief Financial Officer, accounting personnel, and other administrative support staff. As of December 31, 2024 and 2023, there was no compensation expense payable.
This includes net unrealized appreciation of approximately $15.3 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $32.0 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $16.7 million.
This includes net unrealized appreciation of approximately $13.0 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $28.4 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $15.3 million.
Top Ten Industries December 31, 2023 High tech industries 11.3 % Healthcare & pharmaceuticals 10.1 % Banking, finance, insurance & real estate 9.9 % Business services 9.4 % Media: broadcasting & subscription 5.6 % Telecommunications 4.9 % Hotels, gaming & leisure 4.4 % Chemicals, plastics & rubber 3.9 % Beverage, food & tobacco 3.7 % Construction & building 3.5 % Total 66.7 % Top Ten Industries December 31, 2022 High tech industries 10.1 % Healthcare & pharmaceuticals 9.8 % Banking, finance, insurance & real estate 9.6 % Business services 8.8 % Media: broadcasting & subscription 5.0 % Telecommunications 4.8 % Hotels, gaming & leisure 4.7 % Chemicals, plastics & rubber 4.5 % Beverage, food & tobacco 3.7 % Construction & building 3.6 % Total 64.6 % 69 PORTFOLIO GRADING We have adopted a credit grading system to monitor the quality of our debt investment portfolio.
Top Ten Industries December 31, 2024 High tech industries 12.0 % Healthcare & pharmaceuticals 10.3 % Banking, finance, insurance & real estate 10.1 % Business services 9.7 % Hotels, gaming & leisure 4.9 % Media: broadcasting & subscription 4.2 % Construction & building 4.1 % Chemicals, plastics & rubber 4.0 % Telecommunications 3.9 % Consumer services 3.5 % Total 66.7 % Top Ten Industries December 31, 2023 High tech industries 11.3 % Healthcare & pharmaceuticals 10.1 % Banking, finance, insurance & real estate 9.9 % Business services 9.4 % Media: broadcasting & subscription 5.6 % Telecommunications 4.9 % Hotels, gaming & leisure 4.4 % Chemicals, plastics & rubber 3.9 % Beverage, food & tobacco 3.7 % Construction & building 3.5 % Total 66.7 % 68 PORTFOLIO GRADING We have adopted a credit grading system to monitor the quality of our debt investment portfolio.
For the year ended December 31, 2023, the net increase in net assets resulting from operations per common share was $0.32 (basic and diluted), compared to a net decrease in net assets per common share of $1.72 (basic and diluted) for the year ended December 31, 2022, based on the weighted average common shares outstanding for the respective periods.
For the year ended December 31, 2024, the net increase in net assets resulting from operations per common share was $0.09 (basic and diluted), compared to a net increase in net assets per common share of $0.32 (basic and diluted) for the year ended December 31, 2023, based on the weighted average common shares outstanding for the respective periods.
As of December 31, 2022, our asset coverage for borrowed amounts was approximately 171%. The following are our outstanding principal amounts, carrying values and fair values of our borrowings as of December 31, 2023 and December 31, 2022.
As of December 31, 2023, our asset coverage for borrowed amounts was approximately 219%. The following are our outstanding principal amounts, carrying values and fair values of our borrowings as of December 31, 2024 and December 31, 2023.
At December 31, 2023 and 2022, our debt investment portfolio was graded as follows: ($ in millions) December 31, 2023 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 175.5 60.4 % 134.5 74.9 % 3 Closer monitoring is required.
At December 31, 2024 and 2023, our debt investment portfolio was graded as follows: ($ in millions) December 31, 2024 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 117.5 58.2 % 112.2 74.5 % 3 Closer monitoring is required.
The Base Fee which remained payable to Oxford Square Management as of December 31, 2023 and 2022 was approximately $1.0 million and $1.3 million, respectively.
The Base Fee which remained payable to Oxford Square Management as of December 31, 2024 and 2023 was approximately $1.2 million and $1.0 million, respectively.
Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non -qualifying assets. As of December 31, 2023 and 2022, we held qualifying assets that represented 70.6% and 70.1%, respectively, of the total assets.
Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non -qualifying assets. As of December 31, 2024 and 2023, we held qualifying assets that represented 63.8% and 70.6%, respectively, of the total assets.
The aggregate accrued interest which remained payable as of December 31, 2023 and 2022 was approximately $1.2 million. The Base Fee decreased by approximately $1.3 million in 2023 compared to 2022 due to lower average adjusted gross assets in 2023.
The aggregate accrued interest on existing debt which remained payable as of December 31, 2024 and 2023 was approximately $1.2 million. The Base Fee decreased by approximately $0.3 million in 2024 compared to 2023 due to lower average adjusted gross assets in 2024.
The following table indicates the quarterly portfolio investment activity for the years ended December 31, 2023 and 2022: ($ in millions) Purchases of Investments Repayments of Principal Sales of Investments Reductions to CLO Equity Cost (1) Quarter ended December 31, 2023 $ 3.5 $ 0.8 $ 3.7 $ 2.8 September 30, 2023 — 14.2 1.9 5.1 June 30, 2023 — 0.4 13.9 4.4 March 31, 2023 8.2 0.3 — 3.0 Total (2) $ 11.7 $ 15.8 $ 19.6 $ 15.3 December 31, 2022 $ 6.1 $ 0.2 $ — $ 2.3 September 30, 2022 3.9 11.0 1.8 3.9 June 30, 2022 26.9 0.2 9.5 6.4 March 31, 2022 47.4 38.6 3.4 7.8 Total (2) $ 84.2 $ 50.0 $ 14.6 $ 20.4 ____________ (1) Represents reductions to CLO equity cost value (representing distributions received, or entitled to be received, in excess of effective yield interest income and amortized cost adjusted CLO fee note income).
The following table indicates the quarterly portfolio investment activity for the years ended December 31, 2024 and 2023: ($ in millions) Purchases of Investments Repayments of Principal Sales of Investments Reductions to CLO Equity Cost (1) Quarter ended December 31, 2024 $ 25.1 $ 15.0 $ 7.0 $ 3.3 September 30, 2024 47.7 27.9 — 2.5 June 30, 2024 27.3 14.3 3.4 6.3 March 31, 2024 12.1 17.9 1.4 0.8 Total (2) $ 112.2 $ 75.0 $ 11.8 $ 13.0 December 31, 2023 $ 3.5 $ 0.8 $ 3.7 $ 2.8 September 30, 2023 — 14.2 1.9 5.1 June 30, 2023 — 0.4 13.9 4.4 March 31, 2023 8.2 0.3 — 3.0 Total (2) $ 11.7 $ 15.8 $ 19.6 $ 15.3 ____________ (1) Represents reductions to CLO equity cost value (representing distributions received, or entitled to be received, in excess of effective yield interest income and amortized cost adjusted CLO fee note income).
(f/k/a Aspect Software, Inc.) (3.2 ) Dodge Data & Analytics, LLC (3.3 ) ConvergeOne Holdings, Inc. (3.5 ) Careismatic Brands, Inc.
(f/k/a Aspect Software, Inc.) (3.2 ) Dodge Data & Analytics, LLC (3.3 ) ConvergeOne Holdings, Inc.
As of ($ in millions) December 31, 2023 December 31, 2022 Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value 6.50% Unsecured Notes $ — $ — $ — $ 64.4 $ 64.0 $ 63.4 6.25% Unsecured Notes 44.8 44.2 42.9 44.8 44.0 42.6 5.50% Unsecured Notes 80.5 78.7 72.5 80.5 78.3 70.0 Total (1) $ 125.3 $ 123.0 $ 115.4 $ 189.7 $ 186.3 $ 176.0 ____________ (1) Totals may not sum due to rounding. 75 The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2023 were 5.77% and 3.8 years, respectively, and as of December 31, 2022 were 6.02% and 3.6 years, respectively.
($ in millions) As of December 31, 2024 December 31, 2023 Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value 6.25% Unsecured Notes $ 44.8 $ 44.5 $ 44.4 $ 44.8 $ 44.2 $ 42.9 5.50% Unsecured Notes 80.5 79.1 74.7 80.5 78.7 72.5 Total (1) $ 125.3 $ 123.6 $ 119.1 $ 125.3 $ 123.0 $ 115.4 ____________ (1) Totals may not sum due to rounding. 74 The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2024 were 5.77% and 2.8 years, respectively, and as of December 31, 2023 were 5.77% and 3.8 years, respectively.
RECENT DEVELOPMENTS The following distributions payable to stockholders are shown below: Date Declared Record Dates Payable Dates Per Share Distribution Amount Declared November 2, 2023 January 17, 2024 January 31, 2024 $ 0.035 November 2, 2023 February 15, 2024 February 29, 2024 $ 0.035 November 2, 2023 March 15, 2024 March 29, 2024 $ 0.035 March 14, 2024 April 16, 2024 April 30, 2024 $ 0.035 March 14, 2024 May 17, 2024 May 31, 2024 $ 0.035 March 14, 2024 June 14, 2024 June 28, 2024 $ 0.035
RECENT DEVELOPMENTS The following distributions payable to stockholders are shown below: Date Declared Record Dates Payable Dates Per Share Distribution Amount Declared October 31, 2024 January 17, 2025 January 31, 2025 $0.035 October 31, 2024 February 14, 2025 February 28, 2025 $0.035 October 31, 2024 March 17, 2025 March 31, 2025 $0.035 February 27, 2025 April 16, 2025 April 30, 2025 $0.035 February 27, 2025 May 16, 2025 May 30, 2025 $0.035 February 27, 2025 June 16, 2025 June 30, 2025 $0.035
The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 ($ in millions) Investments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio Senior Secured Notes $ 179.5 67.2 % $ 211.4 67.2 % CLO Equity 82.2 30.8 % 98.9 31.4 % Equity and Other Investments 5.3 2.0 % 4.3 1.4 % Total (1) $ 266.9 100.0 % $ 314.7 100.0 % ____________ (1) Totals may not sum due to rounding.
The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2024 and 2023: ($ in millions) December 31, 2024 December 31, 2023 Investments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio Senior Secured Notes $ 150.7 57.8 % $ 179.5 67.2 % CLO Equity 104.6 40.1 % 82.2 30.8 % Equity and Other Investments 5.6 2.1 % 5.3 2.0 % Total (1) $ 260.9 100.0 % $ 266.9 100.0 % ____________ (1) Totals may not sum due to rounding.
LIQUIDITY AND CAPITAL RESOURCES During the year ended December 31, 2023, cash and cash equivalents decreased from approximately $9.0 million at the beginning of the period to approximately $5.7 million at the end of the period.
LIQUIDITY AND CAPITAL RESOURCES During the year ended December 31, 2024, cash and cash equivalents increased from approximately $5.7 million at the beginning of the period to approximately $34.9 million at the end of the period.
Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. — — % — — % 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status 42.9 14.8 % 1.7 1.0 % Total $ 290.7 100.0 % $ 179.5 100.0 % ($ in millions) December 31, 2022 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 230.1 74.9 % 180.0 85.1 % 3 Closer monitoring is required.
Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. — — % — — % 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status 2.5 1.2 % 0.5 0.3 % Total $ 202.0 100.0 % $ 150.7 100.0 % ($ in millions) December 31, 2023 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 175.5 60.4 % 134.5 74.9 % 3 Closer monitoring is required.
Related Party Transactions” in the notes to our financial statements. 72 The expense attributable to the capital gains incentive fee, as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period.
The expense attributable to the capital gains incentive fee, as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period.
Net cash provided by operating activities for the year ended December 31, 2023, consisting primarily of the items described in “— Results of Operations,” was approximately $65.7 million, largely reflecting repayments of principal of approximately $15.8 million, proceeds from the sale of investments of approximately $19.6 million and reductions to CLO equity cost value of approximately $15.3 million, partially offset by purchases of new investments of approximately $11.7 million.
Net cash provided by operating activities for the year ended December 31, 2024, consisting primarily of the items described in “— Results of Operations,” was approximately $25.7 million, largely reflecting repayments of principal of approximately $75.0 million, proceeds from the sale of investments of approximately $11.8 million and reductions to CLO equity cost value of approximately $13.0 million, partially offset by purchases of new investments of approximately $100.2 million.
Net Increase/Decrease in Net Assets Resulting from Operations Net increase in net assets resulting from operations for the year ended December 31, 2023 was approximately $17.2 million, compared to a net decrease of $85.6 million for year ended December 31, 2022.
Net Increase in Net Assets Resulting from Operations Net increase in net assets resulting from operations for the year ended December 31, 2024 was approximately $5.9 million, compared to a net increase of $17.2 million for year ended December 31, 2023.
During the year ended December 31, 2022, we purchased approximately $84.2 million in portfolio investments, including additional investments of approximately $58.9 million in existing portfolio companies and approximately $25.3 million in new portfolio companies. In certain instances, we receive payments based on scheduled amortization of the outstanding balances.
During the year ended December 31, 2023, we purchased approximately $11.7 million in portfolio investments, including additional investments of approximately $3.5 million in existing portfolio companies and approximately $8.2 million in new portfolio companies. In certain instances, we receive payments based on scheduled amortization of the outstanding balances.
The decrease in the value of investments during the year ended December 31, 2023 was due primarily to repayments of principal of approximately $15.8 million and sales of securities totaling approximately $19.6 million, partially offset by a net change in unrealized appreciation on our investment portfolio of approximately $7.1 million (which incorporates reductions to CLO equity cost value of $15.3 million) and purchases of investments of approximately $11.7 million.
The decrease in the value of investments during the year ended December 31, 2024 was due primarily to repayments of principal of approximately $75.0 million, sales of securities totaling approximately $11.8 million, and realized losses of approximately $96.2 million, partially offset by a net change in unrealized appreciation on our investment portfolio of approximately $75.7 million (which incorporates reductions to CLO equity cost value of $13.0 million) and purchases of investments of approximately $112.2 million.
A reconciliation of the investment portfolio for the years ended December 31, 2023 and 2022 follows: ($ in millions) December 31, 2023 December 31, 2022 Beginning investment portfolio $ 314.7 $ 420.8 Portfolio investments acquired 11.7 84.2 Debt repayments (15.8 ) (50.0 ) Sales of securities (19.6 ) (14.6 ) Reductions to CLO equity cost value (1) (15.3 ) (20.4 ) Accretion of discounts on investments 1.1 0.9 Net change in unrealized appreciation/(depreciation) on investments 7.1 (105.9 ) Net realized losses on investments (17.1 ) (0.3 ) Ending investment portfolio (2) $ 266.9 $ 314.7 ____________ (1) For the year ended December 31, 2023, the reductions to CLO equity cost value of approximately $15.3 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $32.0 million, plus the amortization of cost on our CLO fee notes of approximately $123,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $16.8 million.
Refer to the table below, which reconciles the investment portfolio for the year ended December 31, 2024 and the year ended December 31, 2023. 65 A reconciliation of the investment portfolio for the years ended December 31, 2024 and 2023 follows: ($ in millions) December 31, 2024 December 31, 2023 Beginning investment portfolio $ 266.9 $ 314.7 Portfolio investments acquired 112.2 11.7 Debt repayments (75.0 ) (15.8 ) Sales of securities (11.8 ) (19.6 ) Reductions to CLO equity cost value (1) (13.0 ) (15.3 ) Accretion of discounts on investments 1.7 1.1 PIK income 0.5 — Net change in unrealized appreciation/(depreciation) on investments 75.7 7.1 Net realized losses on investments (96.2 ) (17.1 ) Ending investment portfolio (2) $ 260.9 $ 266.9 ____________ (1) For the year ended December 31, 2024, the reductions to CLO equity cost value of approximately $13.0 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $28.4 million, plus the amortization of cost on our CLO fee notes of approximately $71,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $15.4 million.
We sold a total of 2,695,388 shares of common stock pursuant to the ATM offering during the year ended December 31, 2023. The total amount of capital raised net of underwriting fees and offering costs was approximately $8.1 million during the year ended December 31, 2023.
We sold a total of 10,132,282 shares of common stock pursuant to the ATM offering during the year ended December 31, 2024. The total amount of capital raised net of underwriting fees and offering costs was approximately $29.2 million during the year ended December 31, 2024.
For the year ended December 31, 2022, the reductions to CLO equity cost value of approximately $20.4 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $37.3 million, plus the amortization of cost on our CLO fee notes of approximately $128,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $17.1 million.
For the year ended December 31, 2023, the reductions to CLO equity cost value of approximately $15.3 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $32.0 million, plus the amortization of cost on our CLO fee notes of approximately $123,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $16.8 million.
The change was primary the result of higher investment income, partially offset by an increase in operating expenses, as discussed above.
The change was primary the result of lower operating expenses, partially offset by a decrease in investment income, as discussed above.
No additional non -qualifying assets were acquired during the periods, if any, when qualifying assets were less than 70% of the total assets. 68 The following table shows our portfolio of investments by industry at fair value, in millions, as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Investments at Fair Value Percentage of Fair Value Investments at Fair Value Percentage of Fair Value ($ in millions) ($ in millions) Structured finance (1) $ 82.2 30.8 % $ 98.9 31.4 % Software 66.0 24.7 % 69.0 21.9 % Business services 43.0 16.1 % 53.4 17.0 % Healthcare 28.4 10.7 % 33.6 10.7 % Telecommunication services 20.9 7.8 % 22.2 7.0 % Diversified insurance 13.9 5.2 % 14.7 4.7 % Utilities 7.2 2.7 % 6.8 2.2 % IT consulting 5.3 2.0 % 4.3 1.4 % Plastics manufacturing — — % 11.7 3.7 % Total (2) $ 266.9 100.0 % $ 314.7 100.0 % ____________ (1) Reflects our equity investments in CLOs as of December 31, 2023 and December 31, 2022, respectively.
No additional non -qualifying assets were acquired during the periods, if any, when qualifying assets were less than 70% of the total assets. 67 The following table shows our portfolio of investments by industry at fair value, in millions, as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Investments at Fair Value Percentage of Fair Value Investments at Fair Value Percentage of Fair Value ($ in millions) ($ in millions) Structured finance (1) $ 104.6 40.2 % $ 82.2 30.8 % Business services 45.5 17.4 % 43.0 16.1 % Software 42.0 16.1 % 66.0 24.7 % Healthcare 18.9 7.2 % 28.4 10.7 % Industrials 16.0 6.1 % — — % Food and Beverage 10.0 3.8 % — — % Telecommunication Services 7.2 2.8 % 20.9 7.8 % Aerospace and Defense 6.0 2.3 % — — % Materials 6.0 2.3 % — — % IT Consulting 4.6 1.8 % 5.3 2.0 % Diversified Insurance — — % 13.9 5.2 % Utilities — — % 7.2 2.7 % Total (2) $ 260.9 100.0 % $ 266.9 100.0 % ____________ (1) Reflects our equity investments in CLOs as of December 31, 2024 and December 31, 2023, respectively.
(2) Totals may not sum due to rounding. During the year ended December 31, 2023, we purchased approximately $11.7 million in portfolio investments, including additional investments of approximately $3.5 million in existing portfolio companies and approximately $8.2 million in new portfolio companies.
(2) Totals may not sum due to rounding. During the year ended December 31, 2024, we purchased approximately $112.2 million in portfolio investments, including additional investments of approximately $31.0 million in existing portfolio companies and approximately $81.2 million in new portfolio companies.
There was no Net Investment Income Incentive Fee for the year ended December 31, 2022, primarily as a result of the Net Investment Income Incentive Fee being reduced as the result of the Total Return Requirement.
There was no Net Investment Income Incentive Fee for the year ended December 31, 2024, primarily as a result of the Net Investment Income Incentive Fee being reduced as the result of the Total Return Requirement. Net Investment Income Incentive Fees for the year ended December 31, 2023 were approximately $3.7 million.
The increase in 2023 is attributable primarily to higher Net Investment Income Incentive Fees and excise tax, partially offset by lower interest expense and Base Fee. Interest expense decreased by approximately $1.5 million in 2023 compared to 2022. The decrease in 2023 was due to the full paydown of the 6.50% Unsecured Notes.
The decrease in 2024 is attributable primarily to lower Net Investment Income Incentive Fees, excise tax, and interest expense. Interest expense decreased by approximately $3.0 million in 2024 compared to 2023. The decrease in 2024 was due to the full paydown of the 6.50% Unsecured Notes throughout 2023.
Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 48.9 15.9 % 31.3 14.8 % 4 A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status.
Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 82.0 40.6 % 38.0 25.2 % 4 A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status.
For the year ended December 31, 2022, our net change in unrealized depreciation was approximately $105.9 million, composed of approximately $3.8 million in gross unrealized appreciation, approximately $109.0 million in gross unrealized depreciation and approximately $0.7 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized.
For the year ended December 31, 2024, our net change in unrealized appreciation was approximately $75.7 million, comprised of approximately $7.1 million in gross unrealized appreciation, approximately $17.1 million in gross unrealized depreciation and approximately $85.7 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized.
We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of December 31, 2023, our debt investments had stated interest rates of between 9.22% and 16.00% and maturity dates of between 0 and 74 months.
We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of December 31, 2024, our debt investments (excluding debt investments on non -accrual status) had stated interest rates of between 7.61% and 13.13% and maturity dates of between 3 and 82 months.
(f/k/a AIS Intermediate, LLC) 0.7 Net all others 1.3 Total repayments $ 15.8 67 Portfolio activity also reflects sales of securities in the amounts of approximately $19.6 million and approximately $14.6 million for the years ended December 31, 2023 and 2022, respectively.
(f/k/a ScribeAmerica, LLC) 0.2 Net all others 0.5 Total repayments $ 75.0 66 Portfolio activity also reflects sales of securities in the amounts of approximately $11.8 million and approximately $19.6 million for the years ended December 31, 2024 and 2023 respectively.
In addition, our total portfolio had a weighted average annualized yield on debt investments of approximately 13.30%.
In addition, our total portfolio had a weighted average annualized yield on debt investments of approximately 15.76% as of December 31, 2024.
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward -looking statements, including without limitation: • an economic downturn could impair our portfolio companies’ and CLO investments’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies and CLO investments; • a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities; • interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; • the elevated levels of inflation and its impact on our investment activities and the industries in which we invest; • currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions and cybersecurity attacks; and • the risks, uncertainties and other factors we identify in Item 1A.
The forward -looking statements contained in this Annual Report on Form 10 -K involve risks and uncertainties, including statements as to: • our future operating results, including our ability to achieve objectives; • our business prospects and the prospects of our portfolio companies; • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • the ability of our portfolio companies and CLO investments to achieve their objectives; • the valuation of our investments in portfolio companies and CLOs, particularly those having no liquid trading market; • market conditions and our ability to access alternative debt markets and additional debt and equity capital; • our expected financings and investments; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies and CLO investments; and • the ability of our investment adviser to locate suitable investments for us and monitor and administer our investments. 63 These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward -looking statements, including without limitation: • an economic downturn could impair our portfolio companies’ and CLO investments’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies and CLO investments; • a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities; • interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; • inflation and its impact on our investment activities and the industries in which we invest; • currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions and cybersecurity attacks; and • the risks, uncertainties and other factors we identify in Item 1A.
As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs. Cohen and Rosenthal to manage Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford Gate Funds, respectively, on the other hand.
Cummins serves as the Chief Compliance Officer of Oxford Park Income Fund, Inc. and Oxford Park Management. 77 As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs.
As of December 31, 2022, we had investments in debt securities of, or loans to, 20 portfolio companies, with a fair value of approximately $211.4 million, and CLO equity investments of approximately $98.9 million.
As of December 31, 2023, we had investments in debt securities of, or loans to, 19 portfolio companies, with a fair value of approximately $179.5 million, CLO equity investments of approximately $82.2 million and equity and other investments of approximately $5.3 million.
In addition, our total portfolio had a weighted average yield on debt investments of approximately 13.30% as of December 31, 2023, compared to a weighted average yield on debt investments of 11.85% as of December 31, 2022. 71 Operating Expenses The following table sets forth the components of operating expenses for the years ended December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Interest expense $ 10,825,877 $ 12,354,392 Base Fee 4,613,664 5,903,986 Net Investment Income Incentive Fees 3,705,387 — Professional fees 1,426,098 1,393,116 Excise Tax 1,423,686 252,172 Compensation expense 825,226 915,583 General and administrative 638,350 583,740 Director’s fees 429,500 417,500 Insurance 329,892 378,804 Transfer agent and custodian fees 246,562 231,241 Total operating expenses $ 24,464,242 $ 22,430,534 Total operating expenses for the year ended December 31, 2023 increased by approximately $2.0 million compared to the year ended December 31, 2022.
In addition, our total portfolio had a weighted average yield on debt investments of approximately 15.76% as of December 31, 2024, compared to a weighted average yield on debt investments of 13.30% as of December 31, 2023. 70 Operating Expenses The following table sets forth the components of operating expenses for the years ended December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Interest expense $ 7,847,320 $ 10,825,877 Base Fee 4,310,484 4,613,664 Professional fees 1,537,434 1,426,098 Compensation expense 746,762 825,226 General and administrative 597,883 638,350 Director’s fees 417,500 429,500 Insurance 308,552 329,892 Transfer agent and custodian fees 260,330 246,562 Excise Tax 216,528 1,423,686 Net Investment Income Incentive Fees — 3,705,387 Total operating expenses $ 16,242,793 $ 24,464,242 Total operating expenses for the year ended December 31, 2024 decreased by approximately $8.2 million compared to the year ended December 31, 2023.
The total principal outstanding on income producing debt investments as of December 31, 2023 and December 31, 2022 was approximately $247.7 million and $279.0 million, respectively. As of December 31, 2023, our debt investments had stated interest rates of between 9.22% and 16.00% and maturity dates of between 0 and 74 months.
As of December 31, 2024, our income producing debt investments had stated interest rates of between 7.61% and 13.13% and maturity dates of between 3 and 82 months. As of December 31, 2023, our debt investments had stated interest rates of between 9.22% and 16.00% and maturity dates of between 0 and 74 months.
The change year over year was largely due to approximately $7.1 million of net change in unrealized appreciation recognized in the year ended December 31, 2023, compared to approximately $105.9 million of net change in unrealized depreciation recognized in the year ended December 31, 2022, as discussed above.
The change year over year was largely due to approximately $20.6 million of net realized and unrealized losses for the year ended December 31, 2024, compared to approximately $10.1 million of net realized and unrealized losses for the year ended December 31, 2023, as discussed above.
The components of the net change in unrealized appreciation/(depreciation) during the year ended December 31, 2023 were as follows ($ in millions): Portfolio Company Changes in Unrealized Appreciation/ (Depreciation) Nassau 2019-I Ltd. $ 9.4 Telos CLO 2013-4, Ltd. 4.9 THL Credit Wind River 2012-1 CLO, Ltd. 2.9 Carlyle Global Market Strategies CLO 2021-6, Ltd. 2.7 Global Tel Link Corp. 2.2 Alvaria, Inc.
This includes net unrealized appreciation of approximately $15.3 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $32.0 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $16.7 million. 72 The components of the net change in unrealized appreciation/(depreciation) during the year ended December 31, 2023 were as follows ($ in millions): Portfolio Company Changes in Unrealized Appreciation/ (Depreciation) Nassau 2019-I Ltd. $ 9.4 Telos CLO 2013-4, Ltd. 4.9 THL Credit Wind River 2012-1 CLO, Ltd. 2.9 Carlyle Global Market Strategies CLO 2021-6, Ltd. 2.7 Global Tel Link Corp. 2.2 Alvaria, Inc.
As of December 31, 2022, approximately $31,000 in compensation expenses remained payable. General and administrative expenses, which consist primarily of listing fees, office supplies, facilities costs and other miscellaneous expenses, increased by approximately $55,000 for the year ended December 31, 2023 compared to the year ended December 31, 2022.
General and administrative expenses, which consist primarily of listing fees, office supplies, facilities costs and other miscellaneous expenses were approximately $598,000 for the year ended December 31, 2024 and decreased by approximately $40,000 from the year ended December 31, 2023. Office supplies, facilities costs and other expenses are allocated to us under the terms of the Administration Agreement.
We expect that a portion of our investments will be in the Grades 3, 4 or 5 categories from time to time, and, as such, we will be required to work with troubled portfolio companies to improve their business and protect our investment.
Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. — — % — — % 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status. 42.9 14.8 % 1.7 1.0 % Total $ 290.7 100.0 % $ 179.5 100.0 % 69 We expect that a portion of our investments will be in the Grades 3, 4 or 5 categories from time to time, and, as such, we will be required to work with troubled portfolio companies to improve their business and protect our investment.
Related Party Transactions” in the notes to our financial statements. A summary of our significant contractual payment obligations is as follows as of December 31, 2023. Refer to “Note 5. Borrowings” in the notes to our financial statements.
Refer to “— Overview”. We incurred approximately $4.3 million for the Base Fee and approximately $1.7 million for administrative services for the year ended December 31, 2024. Refer to “Note 7. Related Party Transactions” in the notes to our financial statements. A summary of our significant contractual payment obligations is as follows as of December 31, 2024.
(3.7 ) Net all other (43.4 ) Total (1) $ (105.9 ) ____________ (1) Totals may not sum due to rounding. Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the year ended December 31, 2023 was approximately $27.4 million, compared to $20.7 million for the year ended December 31, 2022.
(3.5 ) Careismatic Brands, LLC (6.2 ) Magenta Buyer, LLC (f/k/a McAfee Enterprise) (6.3 ) Net all other 7.5 Total $ 7.1 Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the year ended December 31, 2024 was approximately $26.4 million, compared to $27.4 million for the year ended December 31, 2023.
The tables below summarize the components of interest expense for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 ($ in thousands) Stated Interest Expense Amortization of Deferred Debt Issuance Costs Loss on Extinguishment Total 6.50% Unsecured Notes $ 2,765.0 $ 215.3 $ 190.4 $ 3,170.6 6.25% Unsecured Notes 2,799.4 233.2 — 3,032.6 5.50% Unsecured Notes 4,427.5 385.5 — 4,813.0 Total $ 9,991.9 $ 834.0 $ 190.4 $ 11,016.2 Year Ended December 31, 2022 ($ in thousands) Stated Interest Expense Amortization of Deferred Debt Issuance Costs Total 6.50% Unsecured Notes $ 4,184.1 $ 324.7 $ 4,508.8 6.25% Unsecured Notes 2,799.4 233.2 3,032.6 5.50% Unsecured Notes 4,427.5 385.5 4,813.0 Total $ 11,411.0 $ 943.4 $ 12,354.4 ____________ (1) Totals may not sum due to rounding.
The tables below summarize the components of interest expense for the years ended December 31, 2024 and 2023: ($ in thousands) Year Ended December 31, 2024 Stated Interest Expense Amortization of Deferred Debt Issuance Costs Loss on Extinguishment Total 6.25% Unsecured Notes $ 2,799.4 $ 233.8 — 3,033.2 5.50% Unsecured Notes 4,427.5 386.6 — 4,814.1 Total $ 7,226.9 $ 620.4 $ — $ 7,847.3 ($ in thousands) Year Ended December 31, 2023 Stated Interest Expense Amortization of Deferred Debt Issuance Costs Loss on Extinguishment Total 6.50% Unsecured Notes $ 2,765.0 $ 215.3 $ 190.4 $ 3,170.6 6.25% Unsecured Notes 2,799.4 233.2 — 3,032.6 5.50% Unsecured Notes 4,427.5 385.5 — 4,813.0 Total $ 9,991.9 $ 834.0 $ 190.4 $ 11,016.2 Distributions In order to qualify for tax treatment as a RIC, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and realized net short -term capital gains in excess of realized net long -term capital losses to our stockholders on an annual basis.
Investment Income The following table sets forth the components of investment income for the years ended December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Interest Income Stated interest income $ 32,434,732 $ 23,954,078 Original issue discount and market discount income 1,094,874 880,671 Discount income derived from unscheduled remittances at par 62,560 399,566 Total interest income 33,592,166 25,234,315 Income from securitization vehicles and investments 16,796,699 17,093,203 Other income Fee letters 649,260 544,267 Money market fund income and all other fees 786,056 246,327 Total other income 1,435,316 790,594 Total investment income $ 51,824,181 $ 43,118,112 The increase in total investment income of approximately $8.7 million for the year ended December 31, 2023 over the year ended December 31, 2022 was largely due to an increase of stated interest income from our debt investments (approximately $8.5 million) resulting from higher weighted average yields in 2023 compared to 2022.
Investment Income The following table sets forth the components of investment income for the years ended December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Interest Income Stated interest income $ 22,453,772 $ 32,434,732 PIK interest income 462,883 — Original issue discount and market discount income 1,688,134 1,094,874 Discount income derived from unscheduled remittances at par 324,498 62,560 Total interest income 24,929,287 33,592,166 Income from securitization vehicles and investments 15,403,586 16,796,699 Other income Fee letters 661,281 649,260 Money market fund income and all other fees 1,689,051 786,056 Total other income 2,350,332 1,435,316 Total investment income $ 42,683,205 $ 51,824,181 The decrease in total investment income of approximately $9.1 million for the year ended December 31, 2024 from the year ended December 31, 2023 was largely due to a decrease of stated interest income from our debt investments (approximately $10.0 million) resulting from multiple restructurings and refinancings that occurred during the year ended December 31, 2024 and a decrease in floating interest rates.
The repayments during the year ended December 31, 2023 were as follows ($ in millions): Portfolio Company 2023 Repayments OMNIA Partners, Inc. $ 13.8 Affinion Insurance Solutions, Inc.
The repayments during the year ended December 31, 2024 were as follows ($ in millions): Portfolio Company 2024 Repayments Global Tel Link Corp. $ 16.9 Access CIG, LLC 16.9 Viant Medical Holdings, Inc. 14.5 Affinion Insurance Solutions, Inc.
(f/k/a KPEX Holdings, Inc.) $ 12.7 PPM CLO 4, Ltd. 3.7 Nassau 2019-I Ltd. 1.8 Babson CLO Ltd. 2015-I 1.2 Net all others 0.2 Total sales $ 19.6 As of December 31, 2023, we had investments in debt securities of, or loans to, 19 portfolio companies, with a fair value of approximately $179.5 million, and CLO equity investments of approximately $82.2 million.
The sales during the year ended December 31, 2024 were as follows ($ in millions): Portfolio Company 2024 Sales Quest Software, Inc. $ 7.0 Veritas USA, Inc. 3.4 Octagon Investment Partners 49, Ltd. 1.4 Total sales $ 11.8 As of December 31, 2024, we had investments in debt securities of, or loans to, 21 portfolio companies, with a fair value of approximately $150.7 million, CLO equity investments of approximately $104.6 million and equity and other investments of approximately $5.6 million.
Interest payments, if not deferred, are normally payable quarterly with most debt investments having scheduled principal payments on a monthly or quarterly basis.
Interest payments, if not deferred, are normally payable quarterly with most debt investments having scheduled principal payments on a monthly or quarterly basis. When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock.
During the year ended December 31, 2023, net cash used in by financing activities was approximately $69.0 million, reflecting the payment of distributions of approximately $28.6 million and full 74 principal repayment of the 6.50% Unsecured Notes of approximately $64.4 million, partially offset by proceeds from issuance of common stock from our ATM program and rights offering (net of underwriting fees and offering costs) of approximately $24.0 million.
During the year ended December 31, 2024, net cash provided by financing activities was approximately $3.5 million, reflecting the proceeds from issuance of common stock from our ATM program (net of underwriting fees and offering costs) of approximately $29.2 million, partially offset by the payment of distributions of approximately $25.8 million. 73 Contractual Obligations We have certain obligations with respect to the investment advisory and administration services we receive.
When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock. 66 PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY The total fair value of our investment portfolio was approximately $266.9 million and $314.7 million as of December 31, 2023 and December 31, 2022, respectively.
PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY The total fair value of our investment portfolio was approximately $260.9 million and $266.9 million as of December 31, 2024 and December 31, 2023, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHypothetical Change in Floating Interest Rates Estimated Percentage change in Investment Income Up 300 basis points 15.1 % Up 200 basis points 10.1 % Up 100 basis points 5.0 % Down 100 basis points (5.0 )% Down 200 basis points (10.1 )% Down 300 basis points (15.1 )% 82
Biggest changeHypothetical Change in Floating Interest Rates Estimated Percentage change in Investment Income Up 300 basis points 14.6 % Up 200 basis points 9.8 % Up 100 basis points 4.9 % Down 100 basis points (4.9 )% Down 200 basis points (9.6 )% Down 300 basis points (14.4 )% 81
Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio. 81 We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts.
Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio. 80 We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts.
Based on our Statements of Assets and Liabilities as of December 31, 2023, the following table shows the annualized impact on net investment income of hypothetical base rate changes in interest rates for our settled investments (considering interest rate floors for floating rate instruments), excluding CLO equity investments.
Based on our Statements of Assets and Liabilities as of December 31, 2024, the following table shows the annualized impact on net investment income of hypothetical base rate changes in interest rates for our settled investments (considering interest rate floors for floating rate instruments), excluding CLO equity investments.
The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of December 31, 2023. These hypothetical calculations are based on a model of the investments in our portfolio, held as of December 31, 2023, and are only adjusted for assumed changes in the underlying base interest rates.
The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of December 31, 2024. These hypothetical calculations are based on a model of the investments in our portfolio, held as of December 31, 2024, and are only adjusted for assumed changes in the underlying base interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in interest rates. As of December 31, 2023, all but four of our variable rate investments were income producing. The variable rates are generally based upon the five -year U.S.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in interest rates. As of December 31, 2024, all but one of our variable rate investments were income producing. The variable rates are generally based upon the five -year U.S.

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