RAND CAPITAL CORP

Previous wording

In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in the form of cash and contributed portfolio assets, in exchange for approximately 8.3 million shares of Rand common stock. East owns approximately 64% of Rand Capital’s outstanding common stock at September 30, 2024. Concurrent with the Closing, Rand Capital Management, LLC (“RCM”), a registered investment adviser, was retained by Rand as its external investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively referred to herein as the “Transaction”). The term of the new investment advisory and management agreement (the “Investment Management Agreement”) with RCM was extended after its renewal was approved by our Board of Directors (the “Board”) in October 2024 and will expire on December 31, 2025. In addition, the term of the administration agreement (the “Administration Agreement”) with RCM was extended after its renewal was approved by the Board in October 2024 and will expire on December 31, 2025. The Investment Management Agreement and Administration Agreement can continue for successive annual periods after December 31, 2025 provided that such continuance is specifically approved at least annually by (i)(A) the affirmative vote of a majority of the Board or (B) the affirmative vote of a majority of our outstanding voting securities, and (ii) the affirmative vote of a majority of our directors who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act"), of us, RCM or our respective affiliates.

Current wording

In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in the form of cash and contributed portfolio assets, in exchange for approximately 8.3 million shares of Rand common stock. Concurrent with the Closing, RCM, a registered investment advisor, was retained by Rand as its external investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively referred to herein as the “Transaction”). The term of the new investment advisory and management agreement (the “Investment Management Agreement”) with RCM was extended after approval of its renewal by our Board of Directors (the “Board”) in October 2024 and is currently scheduled to expire on December 31, 2025. In addition, the term of the administration agreement (the “Administration Agreement”) with RCM was extended after approval of its renewal by the Board in October 2024 and is currently scheduled to expire on December 31, 2025. The Investment Management Agreement and Administration Agreement can continue for successive annual periods after December 31, 2025 provided that such continuance is specifically approved at least annually by (i)(A) the affirmative vote of a majority of the Board or (B) the affirmative vote of a majority of our outstanding voting securities, and (ii) the affirmative vote of a majority of our directors who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act"), of us, RCM or our respective affiliates.

Previous wording

We elected U.S federal tax treatment as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended. To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. As of September 30, 2024, we believe we were in compliance with the RIC requirements. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends. In addition, as a RIC, we must distribute annually to our shareholders at least 90% of our ordinary net income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Accordingly, our Board has regularly declared a quarterly cash dividend since our RIC election.

Current wording

We elected U.S. federal tax treatment as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. As of March 31, 2025, we believe we were in compliance with the RIC requirements. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends. In addition, as a RIC, we must distribute annually to our shareholders at least 90% of our ordinary net income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Accordingly, our Board has regularly declared a quarterly cash dividend since our RIC election.

Previous wording

Our Board declared the following quarterly cash dividends during thenine months ended September 30, 2024:

Current wording

Our Board declared the following quarterly cash dividend during thethree months ended March 31, 2025:

Previous wording

We may co-invest, subject to the conditions included in the exemptive relief order we received from the SEC, with certain of our affiliates. See “SEC Exemptive Order” below. We believe these types of co-investments may afford us additional investment opportunities and provide an ability to achieve greater diversification in our investment portfolio.

Current wording

We may co-invest, subject to the conditions included in the exemptive relief order we received from the SEC, with certain of our affiliates. See “SEC Exemptive Order” below. We believe these types of co-investments are likely to afford us additional investment opportunities and provide an ability to achieve greater diversification in our investment portfolio.

Previous wording

On October 7, 2020, Rand, RCM and certain of their affiliates received an exemptive order from the SEC to permit the Corporation to co-invest in portfolio companies with certain affiliates, including other BDCs and registered investment companies managed by RCM and certain of its affiliates, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). On March 29, 2021, the SEC granted Rand, RCM, Callodine, which holds a controlling interest in RCM, and certain of their affiliates a new exemptive order (the “New Order”) that superseded the Order and permits Rand to co-invest with affiliates managed by RCM and Callodine. Pursuant to the New Order, we are generally permitted to co-invest with affiliates covered by the New Order if a “required majority” (as defined in Section 57(o) of the 1940 Act) of Rand’s independent directors makes certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to Rand and its shareholders and do not involve overreaching in respect of Rand or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of the Rand’s shareholders and is consistent with Rand’s investment objective and strategies and (3) the investment by Rand’s affiliates would not disadvantage Rand, and Rand’s participation would not be on a basis different from or less advantageous than that on which Rand’s affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit us to participate in follow-on investments in our existing portfolio companies with certain Affiliated Funds (as defined in the New Order) that do not hold any investments in such existing portfolio companies.

Current wording

On October 7, 2020, Rand, RCM and certain of their affiliates received an exemptive order from the SEC to permit the Corporation to co-invest in portfolio companies with certain affiliates, including other BDCs and registered investment companies managed by RCM and certain of its affiliates, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). On March 29, 2021, the SEC granted Rand, RCM, Callodine, which holds a controlling interest in RCM, and certain of their affiliates a new exemptive order (the “New Order”) that superseded the Order and permits Rand to co-invest with affiliates managed by RCM and Callodine. Pursuant to the New Order, we are generally permitted to co-invest with affiliates covered by the New Order if a “required majority” (as defined in Section 57(o) of the 1940 Act) of Rand’s independent directors makes certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to Rand and its shareholders and do not involve overreaching in respect of Rand or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of Rand’s shareholders and is consistent with Rand’s investment objective and strategies and (3) the investment by Rand’s affiliates would not disadvantage Rand, and Rand’s participation would not be on a basis different from or less advantageous than that on which Rand’s affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit us to participate in follow-on investments in our existing portfolio companies with certain Affiliated Funds (as defined in the New Order) that do not hold any investments in such existing portfolio companies.

Previous wording

Net asset value per share (NAV) was$27.29 at September 30, 2024 and$23.56 at December 31, 2023.

Current wording

Net asset value per share (NAV) was$21.99 at March 31, 2025 and$25.31 at December 31, 2024.

Previous wording

Cash approximated 4.8% of net assets at September 30, 2024, as compared to 5.4% of net assets at December 31, 2023.

Current wording

Cash approximated 7.6% of net assets at March 31, 2025, as compared to 1.3% of net assets at December 31, 2024.

Previous wording

During 2022, we entered into a $25 million senior secured revolving credit facility (the “Credit Facility”) with M&T Bank, as lender (the “Lender”), with the amount that we can borrow thereunder, at any given time, determined based upon a borrowing base formula. The Credit Facility has a 5-year term with a maturity date of June 27, 2027. Our borrowings under the Credit Facility bear interest at a variable rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. At September 30, 2024, there was $3,900,000 drawn on the Credit Facility and the applicable interest rate was 8.46%. See “Note 6. Senior Secured Revolving Credit Facility” in the Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

Current wording

During 2022, we entered into a $25 million senior secured revolving credit facility (the “Credit Facility”) with M&T Bank, as lender (the “Lender”), with the amount that we can borrow thereunder, at any given time, determined based upon a borrowing base formula. The Credit Facility has a 5-year term with a maturity date of June 27, 2027. Our borrowings under the Credit Facility bear interest at a variable rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. There was no outstanding balance drawn on the Credit Facility at March 31, 2025. See “Note 6. Senior Secured Revolving Credit Facility” in the Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

Previous wording

Our total investments at fair value, as determined by RCM and approved by our Board, approximated 107% of net assets at September 30, 2024 as compared to approximately 127% of net assets at December 31, 2023.

Current wording

Our total investments at fair value, as determined by RCM and approved by our Board, approximated 95% of net assets at March 31, 2025 as compared to approximately 108% of net assets at December 31, 2024.

Previous wording

Our investment objective is to generate current income and when possible, capital appreciation, by targeting investment opportunities with favorable risk-adjusted returns. As a result, we are focused on investing in higher yielding debt instruments and related equity investments in privately held, lower middle market companies with a committed and experienced management team in a broad variety of industries. In the past, we have also invested in publicly traded shares of other business development companies that provide income through dividends and have more liquidity than our private company equity investments.

Current wording

Our investment objective is to generate current income and when possible, complement this current income with capital appreciation. As a result, we are focused on investing in higher yielding debt instruments and related equity investments in privately held, lower middle market companies with a committed and experienced management team in a broad variety of industries. In the past, we have also invested in publicly traded shares of other business development companies that provided income through dividends and had more liquidity than our private company equity investments, but did not own any such shares of other business development companies as of March 31, 2025.

Previous wording

The change in investments during the nine months ended September 30, 2024, at cost, is comprised of the following:

Current wording

The change in investments during the three months ended March 31, 2025, at cost, is comprised of the following:

Previous wording

The total investment income during the three months ended September 30, 2024 was received from 21 portfolio companies. For the three months ended September 30, 2023, total investment income was received from 23 portfolio companies.

Current wording

The total investment income during the three months ended March 31, 2025 was received from 18 portfolio companies. For the three months ended March 31, 2024, total investment income was received from 24 portfolio companies.

Previous wording

Interest from portfolio companies – Interest from portfolio companies was approximately 27% higher during the three months ended September 30, 2024 versus the same period in 2023 due to the fact that we originated additional interest yielding investments during the last year. The new debt instruments were originated from FSS, ITA, Mattison, MRES, and Seybert's.

Current wording

Interest from portfolio companies – Interest from portfolio companies was approximately 8% lower during the three months ended March 31, 2025 versus the same period in 2024 due to the fact that several interest yielding investments were repaid during the last year and new debt instruments were not originated in replacement, rather such proceeds were used to repay outstanding borrowed amounts under the Credit Facility. Debt instruments were repaid by Hilton, Mattison, Nailbiter, Inc. (Nailbiter), Pressure Pro, and SciAps, Inc. (SciAps).

Previous wording

Interest from other investments - The increase in interest from other investments is primarily due to higher average idle cash balances during the nine months ended September 30, 2024 versus the same period in 2023.

Current wording

Interest from other investments - The increase in interest from other investments is primarily due to higher average cash balances during the three months ended March 31, 2025 versus the same period in 2024.

Previous wording

Fee income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income from portfolio company board attendance fees, income associated with portfolio company monitoring fees, and other miscellaneous fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees are carried on the balance sheet under the line item “Deferred revenue.”

Current wording

Fee income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income associated with portfolio company monitoring fees, income associated with early repayment fees and income associated with portfolio company loan modification fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees are carried on the balance sheet under the line item “Deferred revenue.”

Previous wording

The income associated with the amortization of financing fees was $154,637 and $164,212 for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, we recognized a prepayment fee of $146,300 from our debt investment in SciAps, a loan modification fee of $4,929 from our debt investment in SciAps, prepayment fees totaling $25,782 from our investment in Pressure Pro, a loan monitoring fee of $20,000 from our investment in Pressure Pro, a loan monitoring fee of $11,589 from our investment in First Coast Mulch, a loan monitoring fee of $8,814 from our investment in Mattison, a loan monitoring fee of $5,995 from our investment in Filterworks, and a loan modification fee of $5,000 from our investment in Lumious.

Current wording

The income associated with the amortization of financing fees was $87,777 and $49,031 for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025, we recognized a prepayment fee of $167,187 from our debt investment in Mattison, a loan monitoring fee of $20,000 from our debt investment in Pressure Pro, a prepayment fee of $17,266 from our debt investment in Pressure Pro, and a loan modification fee of $15,000 from our investment in MRES. During the three months ended March 31, 2024, we recognized a loan monitoring fee of $20,000 from our investment in Pressure Pro, a prepayment fee of $10,982 from our investment in Pressure Pro, a loan monitoring fee of $8,814 from our investment in Mattison, a loan monitoring fee of $5,995 from our investment in Filterworks, and a loan modification fee of $5,000 from our investment in Lumious.

Previous wording

The increase in total expenses during the nine months ended September 30, 2024 versus the same period in 2023 was primarily due to a $1,325,600 increase in the capital gains incentive fee expense, a $320,364 increase in interest expense, a $178,218 increase in income based incentive fee expense, a $164,663 increase in base management fees payable to RCM under the Investment Management Agreement, and a $44,825 increase in professional fees.

Current wording

The decrease in total expenses during the three months ended March 31, 2025 versus the same period in 2024 was primarily due to a $353,534 decrease in interest expense, a $187,300 decrease in the capital gains incentive fee expense, and a $50,387 decrease in base management fees payable to RCM. The decrease was partially offset by a $119,673 increase in the income based incentive fee expense.

Previous wording

The increase in interest expense resulted from higher average outstanding debt balances during the nine months ended September 30, 2024 versus the same period in 2023 under the Credit Facility. Interest expense for the nine months ended September 30, 2024 and 2023 was $1,028,198 and $707,834, respectively.

Current wording

The decrease in interest expense resulted from lower average outstanding debt balances during the three months ended March 31, 2025 versus the same period in 2024 under the Credit Facility. Interest expense for the three months ended March 31, 2025 and 2024 was $36,486 and $390,020, respectively.

Previous wording

The capital gains incentive fee accrual expense during the three months ended September 30, 2024 is due to the calculation of the capital gains fee as required by GAAP. We are required under GAAP to accrue capital gains incentive fees on the basis of net realized capital gains and losses and net unrealized gains and losses. Our capital gains incentive fee accrual reflects the capital gains incentive fees that would be payable to RCM if our entire investment portfolio was liquidated at its fair value as of the balance sheet date, even though RCM is not entitled to this capital gains incentive fee under the Investment Management Agreement with respect to unrealized gains unless and until such gains are realized. The increase in expense during the three months ended September 30, 2024 can be attributed to realized capital gains during the quarter.

Current wording

The capital gains incentive fee accrual (benefit) expense during the three months ended March 31, 2025 is due to the calculation of the capital gains fee as required by GAAP. We are required under GAAP to accrue capital gains incentive fees on the basis of net realized capital gains and losses and net unrealized gains and losses. Our capital gains incentive fee accrual reflects the capital gains incentive fees that would be payable to RCM if our entire investment portfolio was liquidated at its fair value as of the balance sheet date, even though RCM is not entitled to this capital gains incentive fee under the Investment Management Agreement with respect to unrealized gains unless and until such gains are realized. The decrease in expense during the three months ended March 31, 2025 is attributable to a net increase in net unrealized depreciation in excess of realized capital gains during the quarter.

Previous wording

The base management fee payable to RCM is calculated based upon total assets less cash, and, as we deploy more capital into investments, the base management fee payable to RCM will increase accordingly. The base management fee for the nine months ended September 30, 2024 and 2023 was $934,532 and $769,869, respectively.

Current wording

The base management fee payable to RCM under the Investment Management Agreement is calculated based upon total assets less cash, and, as investments are exited, the base management fee payable to RCM will decrease accordingly. The base management fee for the three months ended March 31, 2025 and 2024 was $252,208 and $302,595, respectively.

Previous wording

Pre-Incentive Fee Net Investment Income above the hurdle rate as set forth and described in the Investment Management Agreement. “Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during such calendar quarter, minus our operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of the Incentive Fee). Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that we have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation. The income based incentive fee with respect to Accrued Unpaid Income shall be deferred, on a security by security basis, and shall become payable only if, as, when and to the extent cash is received. The Accrued Unpaid Income for the three months ended September 30, 2024 exceeded the income based incentive fee for the third quarter of 2024, and therefore, no income based incentive fee is currently payable to RCM at September 30, 2024.

Current wording

The income based incentive fee is calculated quarterly in accordance with the Investment Management Agreement. The income based incentive fee accrued during the three months ended March 31, 2025 was $119,673, and results from an increase in Pre-Incentive Fee Net Investment Income above the applicable hurdle rate during the three months ended March 31, 2025, as set forth and described in the Investment Management Agreement. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during such calendar quarter, minus our operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of the Incentive Fee). Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that we have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation.

Previous wording

The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the three months ended September 30, 2024 and 2023 was $887,035 and $798,583, respectively.

Current wording

The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the three months ended March 31, 2025 and 2024 was $1,218,115 and $839,585, respectively.

Previous wording

During the nine months ended September 30, 2023, we recognized a gain of $58,329 from additional proceeds received from Microcision LLC (Microcision), an investment we exited in 2022. We also recognized a realized gain of $10,432 from additional proceeds received from ClearView Social, Inc. (Clearview Social), an investment we exited during 2021. In addition, we recognized a realized loss of ($4,941) on our escrow receivable from SocialFlow, Inc. (Social Flow), an investment we exited in 2022.

Current wording

During the three months ended March 31, 2025, we sold our warrant investment in Pressure Pro and recognized a realized gain of $870,000. In addition, during the three months ended March 31, 2025, we recognized a gain of $58,329 from additional proceeds received from Microcision LLC (Microcision), an investment we exited in 2022. We also recognized a realized loss of ($25) on GoNoodle when the Series C warrant expired without exercise.

Previous wording

During the nine months ended September 30, 2024, we recognized a net realized gain of $3,450,092 on the sale of 194,934 shares of ACV, a net realized gain of $598,371 on the sale of 86,000 shares of Carlyle, a net realized gain of $484,834 on the sale of 195,000 shares of Pennantpark, a net realized gain of $190,072 on the sale of 48,000 shares of FS KKR, a net realized gain of $176,794 on the sale of 21,000 shares of Ares, and a net realized gain of $59,282 on the sale of 40,000 shares of Barings. In addition, we recognized a realized gain of $397,264 from proceeds received from Tilson following a partial sale of certain SQF assets. We also recognized a realized gain of $23,699 from additional proceeds received from DSD, an investment we exited during 2023.

Current wording

During the three months ended March 31, 2024, we recognized a net realized gain of $3,450,092 on the sale of 194,934 shares of Class A common stock of ACV Auctions, Inc. (ACV).

Previous wording

In accordance with the Corporation’s valuation policy, we increased the value of our investments in Pressure Pro and Swanson after a financial analysis of each of the portfolio companies indicating continued improved performance.

Current wording

In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA and Seybert's after a financial analysis of each of the portfolio companies indicating continued improved performance.

Previous wording

During the three months ended September 30, 2024, the valuation of our investments in Filterworks, MRES, and FSS were decreased after a review of their operations and financial condition.

Current wording

During the three months ended March 31, 2025, the valuation of our investments in FSS and ITA were decreased after a review of their operations and financial condition.

Previous wording

ACV, Ares, Barings, Carlyle, FS KKR, and Pennantpark are all publicly traded stocks, and as such, were marked to market at the end of the quarter, using the closing price on the last trading day of the quarter.

Current wording

Ares, Barings, Carlyle, FS KKR, and Pennantpark are all publicly traded stocks, and as such, were marked to market at the end of the quarter, using the closing price on the last trading day of the quarter.

Previous wording

The valuation of our investment in Open Exchange, during the nine months ended September 30, 2023, was decreased after a review of their operations and financial condition.

Current wording

The valuation of our investment in Knoa, during the three months ended March 31, 2024, was decreased after a review of their commercial and financial operations.

Previous wording

All of the valuation adjustments resulted from a review by RCM management, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.

Current wording

All of the valuation adjustments resulted from a determination in good faith by RCM, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.

Previous wording

We account for our operations under GAAP for investment companies. The principal measure of our financial performance is "Net increase in net assets from operations" on our consolidated statements of operations. The net increase in net assets from operations for the three months ended September 30, 2024 and 2023 was $2,636,516 and $595,504, respectively.

Current wording

We account for our operations under GAAP for investment companies. The principal measure of our financial performance is "Net increase in net assets from operations" on our consolidated statements of operations. The net increase in net assets from operations for the three months ended March 31, 2025 and 2024 was $841,447 and $1,399,381, respectively.

Previous wording

Liquidity is a measure of our ability to meet anticipated cash requirements, fund new and follow-on portfolio investments, pay distributions to our shareholders and respond to other general business demands. As of September 30, 2024, our total liquidity consisted of approximately $3,353,000 in cash and $21,100,000 of remaining availability on our Credit Facility.

Current wording

Liquidity is a measure of our ability to meet anticipated cash requirements, fund new and follow-on portfolio investments, pay distributions to our shareholders and respond to other general business demands. As of March 31, 2025, our total liquidity consisted of approximately $4,933,000 in cash and $22,437,163 of unused availability on our Credit Facility.

Previous wording

During 2022, we entered into a $25 million Credit Facility. The amount we can borrow, at any given time, under the Credit Facility is tied to a borrowing base, which is measured as (i) 75% of the aggregate sum of the fair market values of the publicly traded equity securities we hold (other than shares of ACV Auctions, if any) plus (ii) the least of (a) 75% of the fair market value of the shares of ACV Auctions we hold, if any, (b) $6.25 million and (c) 25% of the aggregate borrowing base availability for the Credit Facility at any date of determination plus (iii) 50% of the aggregate sum of the fair market values of eligible private loans we hold that meet specified criteria plus (iv) the lesser of (a) 50% of the aggregate sum of the fair market values of unsecured private loans we hold that meet specified criteria and (b) $1.25 million minus (v) such reserves as the Lender may establish from time to time in its sole discretion. The Credit Facility has a maturity date of June 27, 2027. The outstanding balance drawn on the Credit Facility at September 30, 2024 was $3,900,000. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was $21,100,000 at September 30, 2024.

Current wording

During 2022, we entered into a $25 million Credit Facility. The amount we can borrow, at any given time, under the Credit Facility is tied to a borrowing base, which is measured as (i) 75% of the aggregate sum of the fair market values of the publicly traded equity securities we hold (other than shares of ACV Auctions, if any) plus (ii) the least of (a) 75% of the fair market value of the shares of ACV Auctions we hold, if any, (b) $6.25 million and (c) 25% of the aggregate borrowing base availability for the Credit Facility at any date of determination plus (iii) 50% of the aggregate sum of the fair market values of eligible private loans we hold that meet specified criteria plus (iv) the lesser of (a) 50% of the aggregate sum of the fair market values of unsecured private loans we hold that meet specified criteria and (b) $1.25 million minus (v) such reserves as the Lender may establish from time to time in its sole discretion. The Credit Facility has a maturity date of June 27, 2027. There was no outstanding balance drawn on the Credit Facility at March 31, 2025. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was $22,437,163 at March 31, 2025.

Previous wording

Our borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. At September 30, 2024, our applicable interest rate was 8.46%.

Current wording

Our borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. At March 31, 2025, our applicable interest rate was 7.91%.

Previous wording

The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others covenants that prohibit, subject to certain specified exceptions, our ability to merge or consolidate with other companies, sell any material part of our assets, incur other indebtedness, incur liens on our assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires us to maintain a Tangible Net Worth (defined in the Credit Agreement as our aggregate assets, excluding intangible assets, less all of our liabilities) of not less than $50.0 million, which is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires us to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of our assets to the sum of all of our obligations for borrowed money plus all capital lease obligations) of not less than 3:1, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires us to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2.5:1, which is measured quarterly on a trailing twelve-months basis. We believe we were in compliance with these covenants at September 30, 2024. See “Note 6. Senior Secured Revolving Credit Facility” on our Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

Current wording

The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others covenants that prohibit, subject to certain specified exceptions, our ability to merge or consolidate with other companies, sell any material part of our assets, incur other indebtedness, incur liens on our assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires us to maintain a Tangible Net Worth (defined in the Credit Agreement as our aggregate assets, excluding intangible assets, less all of our liabilities) of not less than $50.0 million, which is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires us to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of our assets to the sum of all of our obligations for borrowed money plus all capital lease obligations) of not less than 3:1, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires us to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2.5:1, which is measured quarterly on a trailing twelve-months basis. We were in compliance with these covenants at March 31, 2025. See “Note 6. Senior Secured Revolving Credit Facility” on our Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

Previous wording

For the nine months ended September 30, 2024, we experienced a net increase in cash of approximately $57,000, which is a net effect of approximately $14,550,000 of net cash provided by our operating activities and approximately $14,492,000 of net cash used in our financing activities.

Current wording

For the three months ended March 31, 2025, we experienced a net increase in cash of approximately $4,098,000, which is a net effect of approximately $7,729,000 of net cash provided by our operating activities and approximately $3,631,000 of net cash used in our financing activities.

Previous wording

The $14,550,000 of net cash provided by our operating activities during the nine months ended September 30, 2024 resulted primarily from net investment income of approximately $1,208,000, approximately $24,852,000 from the sales of equity investments and repayments of debt investments, and an approximately $1,495,000 net increase in operating liabilities. This was partially offset by approximately $11,070,000 used to fund new or follow-on portfolio company investments, approximately $1,339,000 in non-cash interest income, and an approximately $499,000 net increase in operating assets.

Current wording

The $7,729,000 of net cash provided by our operating activities during the three months ended March 31, 2025 resulted primarily from net investment income of approximately $1,218,000, approximately $9,325,000 from the sales of equity investments and repayments of debt investments, and an approximately $45,000 net decrease in operating assets. This was partially offset by approximately $375,000 used to fund new or follow-on portfolio company investments, approximately $624,000 in non-cash interest income, and an approximately $1,846,000 net decrease in operating liabilities.

Previous wording

Net cash used in financing activities during the nine months ended September 30, 2024 was approximately $14,492,000. This is comprised of $12,350,000 repaid on the Credit Facility and approximately $2,142,000 in dividends paid to shareholders.

Current wording

Net cash used in financing activities during the three months ended March 31, 2025 was approximately $3,631,000. This is comprised of $600,000 repaid on the Credit Facility and approximately $3,031,000 in cash dividends paid to shareholders.