Great Elm Capital Corp.

Previous wording

This section of this Form 10-K generally discusses 2024 and 2023 items and year to year comparisons between 2024 and 2023. For the discussion of 2023 compared to 2022, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, which specific discussion is incorporated herein by reference. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto in Part II, Item 8 of this Form 10-K, “Consolidated Financial Statements and Supplementary Data.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of this Form 10-K, “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K.

Current wording

This section of this Form 10-K generally discusses 2025 and 2024 items and year to year comparisons between 2025 and 2024. For the discussion of 2024 compared to 2023, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024, which specific discussion is incorporated herein by reference. The information contained in this section should be read in conjunction with the financial statements and notes thereto in Part II, Item 8 of this Form 10-K, “Financial Statements and Supplementary Data.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of this Form 10-K, “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K.

Previous wording

Our Board approves in good faith the valuation of our portfolio as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may impact the market quotations used to value some of our investments.

Current wording

GECM, as the Board's valuation designee, approves in good faith the valuation of our portfolio as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may impact the market quotations used to value some of our investments.

Previous wording

Investment income consists of interest income, including net amortization of premium and accretion of discount on loans and debt securities, dividend income and other income, which primarily consists of amendment fees, commitment fees and funding fees on loans. For the years ended December 31, 2024 and 2023, income includes non-cash PIK income of $3.0 million and $2.6 million, respectively.

Current wording

Investment income consists of interest income, including net amortization of premium and accretion of discount on loans and debt securities, dividend income and other income, which primarily consists of amendment fees, commitment fees and funding fees on loans. For the years ended December 31, 2025 and 2024, income includes non-cash PIK income of $3.3 million and $3.0 million, respectively. PIK income was 6.5% of total investment income for the year ended December 31, 2025 as compared to 7.7% for the year ended December 31, 2024. The aggregate amount of PIK income increased during the year ended December 31, 2025 as the number of investments with a PIK component increased during the year, however the PIK income share of total investment income declined.

Previous wording

Dividend income increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to the investment in CLO Formation JV, LLC, which was formed in the current year and pays periodic dividends to its equity holders.

Current wording

Dividend income increased for the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to the investment in CLO Formation JV, LLC, which was formed in the prior year and pays periodic dividends to its equity holders.

Previous wording

Overall expenses for the year ended December 31, 2024 increased as compared to the year ended December 31, 2023 primarily due to interest expense as a result of the issuance of $56.5 million in aggregate principal amount of 8.50% notes due 2029 (the “GECCI Notes”) in April and July 2024, and the issuance of $41.4 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes") in September and October 2024, partially offset by the redemption of $45.6 million in aggregate principal amount of 6.75% notes due 2025 ("GECCM Notes") during the year.

Current wording

Overall expenses for the year ended December 31, 2025 increased as compared to the year ended December 31, 2024 primarily due to interest expense as a result of the issuance of $57.5 million in aggregate principal amount of 7.75% notes due 2030 (the “GECCG Notes”) in September and October 2025, partially offset by the redemption of $18.5 million in aggregate principal amount of 5.875% notes due 2026 ("GECCO Notes") in December 2025.

Previous wording

Incentive fees decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to the annualized return on quarterly net income before incentive fee falling short of the hurdle rate for the three months ended December 31, 2024, offset with higher pre-incentive net investment income during the nine months ended September 30, 2024.

Current wording

Incentive fees increased for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to higher pre-incentive net investment income during the year ended December 31, 2025, primarily attributable to the increase in dividend income as compared to the year ended December 31, 2024.

Previous wording

The decrease in administration fees for the year ended December 31, 2024 as compared to the year ended December 31, 2023 is attributable to a decrease in overhead allocations under the administrative agreement with GECM.

Current wording

The increase in administration fees for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is attributable to an increase in underlying costs allocated under the administrative agreement with GECM.

Previous wording

Professional services costs increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to increased legal expenses associated with specific transaction matters, as well as general rate increases for professional services including custody, valuation, and accounting costs.

Current wording

Professional services costs increased for the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to increased legal expenses associated with specific transaction matters, as well as general rate increases for professional services including valuation and accounting costs.

Previous wording

For the year ended December 31, 2024, unrealized appreciation was primarily driven by an increase in fair value of our investment in Nice-Pak Products warrants of approximately $2.0 million and in our investment in CW Opportunity 2 LP of approximately $1.2 million.

Current wording

For the year ended December 31, 2024 , unrealized appreciation was primarily driven by an increase in the fair value of our investment in Nice-Pak Products warrants of approximately $2.0 million and in our investment in CW Opportunity 2 LP of approximately $1.2 million.

Previous wording

As of December 31, 2024, we had approximately $8.4 million of money market fund investments at fair value. As of December 31, 2024, we had investments in 53 debt instruments across 44 companies, totaling approximately $236.7 million at fair value and 18 equity investments in 14 companies, with an aggregate fair value of approximately $87.5 million.

Current wording

As of December 31, 2025, we had approximately $3.1 million of money market fund investments at fair value. As of December 31, 2025, we had investments in 68 debt instruments across 53 companies, totaling approximately $203.5 million at fair value and 21 equity investments in 18 companies, with an aggregate fair value of approximately $94.8 million.

Previous wording

In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of December 31, 2024, we had approximately $14.6 million in unfunded commitments to provide financing to certain of our portfolio companies. We had sufficient cash and other liquid assets on our December 31, 2024 balance sheet to satisfy the unfunded commitments.

Current wording

In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of December 31, 2025, we had no unfunded commitments to provide financing to certain of our portfolio companies.

Previous wording

For the year ended December 31, 2023, net cash provided by operating activities was approximately $25.7 million, reflecting the purchases and proceeds from sales of investments and principal repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash provided by purchases and proceeds from sales of investments was approximately $14.6 million, reflecting payments for additional investments of $220.5 million, offset by proceeds from principal repayments and sales of $235.1 million. Such amounts include draws and repayments on revolving credit facilities.

Current wording

For the year ended December 31, 2025, net cash used in operating activities was approximately $2.8 million, reflecting the purchases and proceeds from sales of investments and principal repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash used in purchases and proceeds from sales of investments was approximately $22.0 million, reflecting payments for additional investments of $182.1 million, offset by proceeds from principal repayments and sales of $160.1 million.

Previous wording

For the year ended December 31, 2024, net cash provided by operating activities was approximately $82.7 million, reflecting the purchases and proceeds from sales of investments and principal repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash provided by purchases and proceeds from sales of investments was approximately $$93.6 million, reflecting payments for additional investments of $335.0 million, offset by proceeds from principal repayments and sales of $241.4 million.

Current wording

For the year ended December 31, 2024, net cash used in operating activities was approximately $82.7 million, reflecting the purchases and proceeds from sales of investments and principal repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash used in purchases and proceeds from sales of investments was approximately $93.6 million, reflecting payments for additional investments of $335.0 million, offset by proceeds from principal repayments and sales of $241.4 million.

Previous wording

For the year ended December 31, 2023, cash used for financing activities was $25.3 million, which consisted of $38.4 million in net proceeds from the issuance of the GECCZ Notes which was offset by $42.8 million in payments to retire the GECCN Notes, $10.0 in net repayments on the revolving credit facility and $10.6 million in distributions to stockholders.

Current wording

For the year ended December 31, 2025, cash provided by financing activities was $4.6 million, which consisted of $57.5 million in net proceeds from the issuance of the GECCG Notes and $27.3 million in issuances of common stock, which was partially offset by $58.7 million in net payments on the redemption of the GECCZ and GECCO Notes and $19.2 million in distributions to stockholders.

Previous wording

On May 5, 2021, we entered into the Loan Agreement with CNB. The Loan Agreement provides for a senior secured revolving line of credit of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). We may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the sole discretion of CNB. In November 2023, the Company entered into an amendment to the Loan Agreement extending the maturity date of the revolving line to May 5, 2027. Borrowings under the revolving line currently bear interest at a rate equal to (i) the Secured Overnight Financing Rate ("SOFR") plus 3.00% (reduced from SOFR plus 3.50% prior to the November 2023 amendment), (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by us. Additionally, we are required to pay a commitment fee of 0.50% per annum on any unused portion of the revolving line of credit. As of December 31, 2024, there were no borrowings outstanding under the revolving line.

Current wording

On May 5, 2021, we entered into the Loan Agreement with CNB. The Loan Agreement provides for a senior secured revolving line of credit of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). In November 2023, the Company entered into an amendment to the Loan Agreement extending the maturity date of the revolving line to May 5, 2027. On August 13, 2025, the Company amended the Loan Agreement to increase the commitment of the revolving line of credit to up to $50 million (subject to a borrowing base as defined in the Loan Agreement). The amendment also allows the Company to request an increase of the Revolving Facility in an aggregate amount not to exceed $40 million (up to a revolving line of $90 million), which increase is subject to the sole discretion of CNB and updates the maturity date of the revolving line to the earlier of (i) May 5, 2027 and (ii) May 31, 2026 if the Company’s 5.875% notes due 2026 have not been refinanced prior to such date. In addition, the amendment provides that borrowings under the Revolving Facility shall bear interest at a rate equal to (i) at all times when a minimum deposit test is met (a) SOFR plus 2.50% or (b) a base rate plus 1.50% and (ii) at all times when a minimum deposit test is not met (a) SOFR plus 3.50% or (b) a base rate plus 2.50%. The amendment also amended the financial covenant of minimum net assets requirement to be of not less than $80 million. As of December 31, 2025, there were no borrowings outstanding under the revolving line.

Previous wording

Borrowings under the revolving line are secured by a first priority security interest in substantially all of our assets, subject to certain specified exceptions. We have made customary representations and warranties and are required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar loan agreements. In addition, the Loan Agreement contains financial covenants requiring (i) net assets of not less than $65 million, (ii) asset coverage equal to or greater than 150% and (iii) bank asset coverage equal to or greater than 300%, in each case tested as of the last day of each fiscal quarter of the Company. Borrowings are also subject to the leverage restrictions contained in the Investment Company Act.

Current wording

Borrowings under the revolving line are secured by a first priority security interest in substantially all of our assets, subject to certain specified exceptions. We have made customary representations and warranties and are required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar loan agreements. In addition, the Loan Agreement contains financial covenants requiring (i) net assets of not less than $80 million, (ii) asset coverage equal to or greater than 150% and (iii) bank asset coverage equal to or greater than 300%, in each case tested as of the last day of each fiscal quarter of the Company. Borrowings are also subject to the leverage restrictions contained in the Investment Company Act.

Previous wording

On June 23, 2021, we issued $50.0 million in aggregate principal amount of 5.875% notes due 2026 (the “GECCO Notes”). On July 9, 2021, we issued an additional $7.5 million of the GECCO Notes upon full exercise of the underwriters’ over-allotment option. The aggregate principal balance of the GECCO Notes outstanding as of December 31, 2024 is$57.5 million.

Current wording

On June 23, 2021, we issued $50.0 million in aggregate principal amount of 5.875% notes due 2026 (the “GECCO Notes”). On July 9, 2021, we issued an additional $7.5 million of the GECCO Notes upon full exercise of the underwriters’ over-allotment option. In December 2025, we repurchased $18.5 million of the outstanding principal on the GECCO Notes. The aggregate principal balance of the GECCO Notes outstanding as of December 31, 2025 is$39.0 million.

Previous wording

On August 16, 2023, we issued $40.0 million in aggregate principal amount of 8.75% notes due 2028 (the “GECCZ Notes” ). The aggregate principal balance of the GECCZ Notes outstanding as of December 31, 2024 is$40.0 million.

Current wording

On August 16, 2023, we issued $40.0 million in aggregate principal amount of 8.75% notes due 2028 (the “GECCZ Notes” ). We redeemed all of the issued and outstanding GECCZ Notes on September 30, 2025 at 100% of the principal amount plus accrued and unpaid interest from June 30, 2025 through, but excluding, the redemption date of September 30, 2025.

Previous wording

On September 19, 2024, the Company issued $36.0 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes" and, together with the GECCO Notes, GECCZ Notes and GECCI Notes, the "Notes"). On October 3, 2024, the Company issued an additional $5.4 million of the GECCH Notes upon full exercise of the underwriters' over-allotment option. The aggregate principal balance of the GECCH Notes outstanding as of December 31, 2024 is$41.4 million.

Current wording

On September 19, 2024, the Company issued $36.0 million in aggregate principal amount of 8.125% notes due 2029 (the "GECCH Notes"). On October 3, 2024, the Company issued an additional $5.4 million of the GECCH Notes upon full exercise of the underwriters' over-allotment option. The aggregate principal balance of the GECCH Notes outstanding as of December 31, 2025 is$41.4 million.

Previous wording

The Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated to indebtedness under our Loan Agreement and any other future secured indebtedness that we may incur to the extent of the value of the assets securing such indebtedness and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the Notes on March 31, June 30, September 30 and December 31 of each year. The GECCO Notes, GECCZ Notes, GECCI Notes and GECCH Notes will mature on June 30, 2026, September 30, 2028, April 30, 2029, and December 31, 2029 respectively. The GECCO Notes are currently callable at the Company’s option and the GECCZ Notes, GECCI Notes and GECCH Notes can be called on, or after, September 30, 2025, April 30, 2026, and December 31, 2026, respectively. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

Current wording

The Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated to indebtedness under our Loan Agreement and any other future secured indebtedness that we may incur to the extent of the value of the assets securing such indebtedness and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the Notes on March 31, June 30, September 30 and December 31 of each year. The GECCO Notes, GECCI Notes, GECCH Notes and GECCG Notes will mature on June 30, 2026, April 30, 2029, December 31, 2029, and December 31, 2030, respectively. The GECCO Notes are currently callable at the Company's option and the GECCI Notes, GECCH Notes, and GECCG Notes can be called on, or after, April 30, 2026, December 31, 2026, and December 31, 2027, respectively. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

Previous wording

We may repurchase the Notes in accordance with the Investment Company Act and the rules promulgated thereunder. During the year ended December 31, 2024, the Company redeemed the GECCM Notes in full on October 12, 2024.

Current wording

We may repurchase the Notes in accordance with the Investment Company Act and the rules promulgated thereunder. During the year ended December 31, 2025, the Company redeemed the GECCZ Notes in full on September 30, 2025.

Previous wording

As of December 31, 2024, our asset coverage ratio was approximately 169.7%. Under the Investment Company Act, we are subject to a minimum asset coverage ratio of 150%.

Current wording

As of December 31, 2025, our asset coverage ratio was approximately 158.1%. Under the Investment Company Act, we are subject to a minimum asset coverage ratio of 150%.

Previous wording

We are also subject to financial risks, including changes in market interest rates. As of December 31, 2024, approximately $179.8 million in principal amount of our debt investments bore interest at variable rates, which are generally based on SOFR or US prime rate, and many of which are subject to certain floors. Recently, interest rates have risen and a prolonged increase in interest rates will increase our gross investment income and could result in an increase in our net investment income if such increases in interest rates are not offset by a corresponding decrease in the spread over variable rates that we earn on any portfolio investments or an increase in our operating expenses. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

Current wording

We are also subject to financial risks, including changes in market interest rates. As of December 31, 2025, approximately $159.8 million in principal amount of our debt investments bore interest at variable rates, which are generally based on SOFR or US prime rate, and many of which are subject to certain floors. Recently, interest rates have fallen. A prolonged decrease in interest rates would decrease our gross investment income and could result in a decrease in our net investment income if such decreases in interest rates are not offset by a corresponding increase in the spread over variable rates that we earn on any portfolio investments or a decrease in our operating expenses. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

Previous wording

Our Board set a distribution for the quarter ending March 31, 2025 at a rate of $0.37 per share. The full amount of the distribution will be from distributable earnings. The schedule of the distribution payment will be established by GECC pursuant to authority granted by our Board. The distribution will be paid in cash.

Current wording

Our Board set a distribution for the quarter ending March 31, 2026 at a rate of $0.30 per share. The full amount of the distribution will be from distributable earnings. The distribution will be payable on March 31, 2026 to stockholders of record as of March 16, 2026. The distribution will be paid in cash.