RAND CAPITAL CORP
For the period ended Dec 31, 2025. Filed Mar 5, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 5, 2026
RAND$9.78-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-10.
0000950170-25-035949
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-05.
0001193125-26-092669
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 185 current paragraphs.
80 unchanged; 59 reworded; 44 added; 13 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 16 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
our dependence upon RCM for our future success;
Current report
our dependence on RCM to manage and deploy capital effectively;
Current report
RCM’s ability to maintain and develop its referral relationships, or the failure of these relationships to generate investment opportunities for us;
Current report
the highly-regulated environment we operate in;
Current report
political and regulatory conditions contributing to uncertainty and market volatility, both for us and our portfolio companies;
Current report
the valuation of our portfolio investments;
Current report
the competitive market for investment opportunities in which RCM operates;
Current report
conflicts of interests held by members of the Investment Committee of RCM and members of our management;
Current report
our potential inability to enter into transactions with our affiliates;
Current report
our obligation to pay RCM incentive compensation, even if we incur a net loss;
Current report
RCM’s limited liability under the Investment Management Agreement and the Administration Agreement and our indemnification obligations to RCM thereunder;
Current report
RCM’s right to resign as our investment adviser and administrator on 60 days’ written notice and our potential inability to find a suitable replacement within 60 days or at all;
Current report
our failure to maintain our qualification as a BDC if we do not invest a sufficient portion of our assets in qualifying assets;
Current report
the fee structure under the Investment Management Agreement potentially inducing RCM to pursue investments and incur leverage that may not be in the best interests of our shareholders;
Current report
our ability to raise additional capital to grow;
Current report
our ability to defend our operations against cybersecurity attacks;
Current report
fluctuation in our annual and quarterly results;
Current report
risks related to corporate social responsibility;
Current report
the limited number of companies in our portfolio of investments and the corresponding heightened risk if any of those companies perform poorly, go out of business or default on their repayment obligations under any of their debt instruments;
Current report
the lack of liquidity in our investments;
Current report
the extent to which we take large economic positions in a small number of portfolio companies, as we are permitted to do as a non-diversified investment company within the meaning of the 1940 Act;
Current report
general negative economic factors, including economic downturns and recessions;
Current report
our investment in covenant-lite loans to our portfolio companies;
Current report
our portfolio primarily consisting of debt and equity investments in small companies that are not publicly traded;
Current report
our inability to exercise control over our portfolio companies, as we typically do not hold controlling interests in our portfolio companies;
Current report
the debt investments we hold in our portfolio companies being subordinate to other debt our portfolio companies incur;
Current report
our inability to make follow-on investments in our portfolio companies, due to lack of funds or otherwise;
Current report
the extent to which we borrow money, which magnifies the potential for loss on amounts we invest;
Current report
the SBCAA allowing us to incur additional leverage;
Current report
our Credit Facility, or any other future borrowing facility, limiting our discretion in operating our business;
Current report
East’s majority ownership of our outstanding common stock;
Current report
our shares often trading at a discount to our net asset value;
Current report
risks relating to U.S. federal income tax, including our ability to maintain our RIC election; and
Current report
the other risks and uncertainties described in Item 1A, Risk Factors, of this Annual Report.
Current report
While we believe that the forward-looking statements in this Annual Report are reasonable, we caution that it is very difficult to predict the effect of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations are disclosed under this Item 7 and under Item 1A, Risk Factors, of this Annual Report. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Annual Report in the context of these risks and uncertainties.
Current report
On November 14, 2025, Rand, RCM and certain of RCM’s affiliates were granted a new order for exemptive relief (the “Order”) by the SEC that superseded all prior co-investment exemptive relief orders issued to Rand and its affiliates by the SEC. The Order permits Rand to co-invest in portfolio companies with certain of RCM’s affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Order. The Order requires that a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Board make certain findings (1) in most instances when Rand co-invests with RCM’s affiliates in an issuer where RCM’s affiliates have an existing investment in the issuer, and (2) if Rand disposes of an investment acquired in a co-investment transaction unless the disposition is done on a pro rata basis. Pursuant to the Order, the Board oversees Rand’s participation in the co-investment program. As required by the Order, Rand has adopted policies and procedures reasonably designed to ensure compliance with the terms of the Order, and RCM’s and Rand’s Chief Compliance Officer will provide reporting to the Board regarding compliance with such policies and procedures.
Current report
Resilient Capital Demand: Well-managed lower middle-market businesses continue to require growth capital and transition capital, even amid tighter credit conditions. While origination activity remains measured, demand persists for flexible, non-bank capital solutions, particularly among companies seeking to navigate near-term market uncertainty or to position themselves for long-term growth.
Current report
n/m - Not meaningful
Current report
Interest from portfolio companies - Interest from portfolio companies was approximately 26% lower for the year ended December 31, 2025 versus 2024 due to repayment of several interest-yielding investments during the last year, without corresponding new debt instrument originations in replacement. Debt instruments were repaid by Hilton, Lumious, Mattison, Pressure Pro, and Seybert’s during the year ended December 31, 2025. In addition, our debt investments in FSS, ITA, and MRES were placed on non-accrual status during the year ended December 31, 2025.
Current report
Net Realized (Loss) Gain on Investments
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (13)
Previous report
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 report
Resilient Capital Demand: Well-managed lower middle-market businesses require capital for expansion and remain competitive regardless of broader macroeconomic conditions, particularly with increasing adoption of innovative technologies and service models.
Previous report
Interest from portfolio companies - Interest from portfolio companies was approximately 29% higher for the year ended December 31, 2024 versus 2023 due to the fact we originated more interest yielding investments during the last year. At December 31, 2024, 75% of our portfolio was comprised of interest yielding debt instruments compared with 64% at the end of 2023. New debt instruments were originated from ITA, Mattison, Mobile IV Nurses, MRES, and Seybert's during 2024.
Previous report
During the year ended December 31, 2023, we recognized a one-time early prepayment fee of $61,264 from our investment in DSD, a loan monitoring fee of $20,000 from our investment in FSS, a loan monitoring fee of $20,000 from our investment in Pressure Pro, a loan monitoring fee of $12,000 from our investment in First Coast Mulch, and a loan modification fee of $2,000 from our investment in Lumious.
Previous report
The income based incentive fee is calculated quarterly in accordance with the Investment Management Agreement. The income based incentive fee accrued during the year ended December 31, 2024 was $178,218, and results from an increase in Pre-Incentive Fee Net Investment Income above the applicable hurdle rate during the third quarter of 2024, 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. At December 31, 2024, the accrued income based incentive fee is not currently payable to RCM as the cash that forms the basis of the fee has not yet been received by the Corporation.
Previous report
Professional fees expense increased by approximately $53,000 during the year ended December 31, 2024, versus the same period in 2023, as we incurred increased fees associated with the complex regulatory environment in which we operate.
Previous report
Net Realized Gains and Losses on Investments
Previous report
During the year ended December 31, 2023, we sold our investment in DSD and recognized a realized gain of $2,459,819. In addition, during the year ended December 31, 2023, we sold our investment in Somerset Gas Transmission Company, LLC (Somerset) and recognized a realized loss of ($448,717). We also liquidated our investment in Rheonix, Inc. (Rheonix), which was previously valued at $0, and recognized a realized loss of ($2,802,731).
Previous report
During the year ended December 31, 2023, we recognized a gain of $115,010 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, and an $3,440 realized gain from additional proceeds received from Mercantile Adjustment Bureau, LLC (Mercantile), an investment we exited during 2021.
Previous report
In addition, during the year ended December 31, 2023, we recognized a realized gain of $1,718,767 on the sale of 125,000 shares of ACV.
Previous report
ACV, Ares, Barings, Carlyle, FS KKR, and Pennant Park are all publicly traded stocks, and as such, were marked to market at the end of each quarter using the closing price on the last trading day of the quarter.
Previous report
We sold our investments in Rheonix, Somerset, and DSD during the year ended December 31, 2023.
Previous report
During the year ended December 31, 2023, we decreased the valuation of our investments in Post Process, Carolina Skiff, Caitec, and Open Exchange after a review of recent financial performance, cash flows, recent financings, and interim financial conditions of each of the portfolio companies.
Reworded paragraphs (59)
Previous wording
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included within Item 8 of this Annual Report.
Current wording
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included within Item 8, Financial Statements and Supplementary Data, of this Annual Report.
Previous wording
Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report that do not relate to present or historical conditions are “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements may be included in documents that are filed with the SEC. Forward-looking statements involve risks and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions, including statements related to our investment strategies and our intention to co-invest with certain of our affiliates; the impact of our election as a RIC for U.S. federal tax purposes on the payment of corporate level U.S. federal income taxes by Rand; statements regarding our liquidity and financial resources; statements regarding any capital gains fee that may be due to RCM upon a hypothetical liquidation of our portfolio and the amount of the capital gains fee that may be payable to RCM for 2025; and statements regarding our compliance with the RIC requirements as of December 31, 2024; and statements regarding future dividend payments, and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions are intended to identify forward-looking statements. Among the important factors on which such statements are based are assumptions concerning the state of the United States economy and the local markets in which our portfolio companies operate, the state of the securities markets in which the securities of our portfolio companies could be traded, liquidity within the United States financial markets, and inflation. Forward-looking statements are also subject to the risks and uncertainties described under the caption “Risk Factors” contained in Part I, Item 1A of this Annual Report.
Current wording
Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Annual Report that do not relate to present or historical conditions are “forward-looking statements” within the meaning of Section 27A of the Securities Act and in Section 21E of the Exchange Act, and are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements may be included in documents that are filed with the SEC. Forward-looking statements involve risks and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions, including certain forward-looking statements included below in the “Outlook” section of this Item 7, and including statements related to our investment strategies and our intention to co-invest with certain of our affiliates; the impact of our election as a RIC for U.S. federal tax purposes on the payment of corporate level U.S. federal income taxes by Rand; statements regarding our liquidity and financial resources; statements regarding any Capital Gains Fee that may be due to RCM upon a hypothetical liquidation of our portfolio and the amount of the Capital Gains Fee that may be payable to RCM for 2026; statements regarding our compliance with the RIC requirements as of December 31, 2025; and statements regarding future dividend payments. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions (including their negative counterparts or other various or comparable terminology) are intended to identify forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we currently expect, including:
Previous wording
There may be other factors not identified that affect the accuracy of our forward-looking statements. Further, any forward-looking statement speaks only as of the date when it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect, and we cannot predict all of them.
Current wording
Any forward-looking statement speaks only as of the date when it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
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. 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 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. East owns approximately 64% of Rand’s outstanding common stock at December 31, 2025. Concurrent with the Closing, 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 approval of its renewal by our Board of Directors (the “Board”) in October 2025 and is currently scheduled to expire on December 31, 2026. 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 2025 and is currently scheduled to expire on December 31, 2026. The Investment Management Agreement and Administration Agreement can continue for successive annual periods after December 31, 2026 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
On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our asset coverage requirement under the 1940 Act for senior securities was changed from 200% to 150%, effective January 24, 2025. We monitor our compliance with this coverage ratio on a regular basis.
Current wording
On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our asset coverage requirement under the 1940 Act for senior securities was changed from 200% to 150%, effective January 24, 2025. We monitor our compliance with this coverage ratio on a regular basis. As of December 31, 2025, we had no senior securities outstanding and, as a result, our asset coverage ratio for senior securities as of December 31, 2025 is incalculable.
Previous wording
Our Board declared the following dividends during the year ended December 31,2024:
Current wording
Our Board declared the following dividends during the year ended December 31,2025:
Previous wording
On December 5, 2024, our Board declared a dividend of $4.20 per share. The dividend was paid in the aggregate combination of 20% in cash and 80% in newly issued shares of our common stock on or about January 24, 2025 to shareholders of record as of December 16, 2024. The stock dividend increased the number of issued and outstanding shares of our common stock from 2,648,916 shares and 2,581,021 shares, respectively, to 3,037,709 shares and 2,969,814 shares, respectively, as of January 24, 2025.
Current wording
On December 5, 2024, our Board declared a dividend of $4.20 per share. The dividend was paid in the aggregate combination of 20% in cash and 80% in newly issued shares of our common stock on or about January 24, 2025 to shareholders of record as of December 16, 2024. The stock dividend increased the number of issued and outstanding shares of our common stock from 2,648,916 shares and 2,581,021 shares, respectively, to 3,037,709 shares and 2,969,814 shares, respectively, on January 24, 2025.
Previous wording
Rand remains committed to expanding and scaling its business by focusing on debt and related equity investments in privately held, lower middle-market companies. This strategy is designed to drive investment income growth and enhance shareholder value through increased dividend distributions. In 2024, we paid total dividends of $5.03 per share, which included a $4.20 per share cash and stock dividend in the fourth quarter of 2024. The amount of our fourth quarter 2024 cash and stock dividend was inclusive of both our regular quarterly dividend and an additional component reflecting our strong performance in 2024, driven by the realized gain that we recognized from the sale of our investment in SciAps. . Our aggregate 2024 dividend represented a 278% increase over 2023. Reflecting our strong financial performance, we raised our regular quarterly cash dividend by 16%, or $0.04 per share, from $0.25 per share to $0.29 per share in the second quarter of 2024.
Current wording
Rand remains committed to expanding and scaling its business by focusing on debt and related equity investments in privately held, lower middle-market companies. We believe disciplined underwriting, selective portfolio construction, and active monitoring are critical in the current credit environment, and that attention to these core principles will drive long-term investment income growth and enhance shareholder value through regular dividend distributions. In 2025, we declared and paid total dividends of $1.72 per share.
Previous wording
During 2024, we monetized select equity investments, exited our remaining publicly traded securities, and received loan repayments that generated approximately $27 million in aggregate cash proceeds. We strategically allocated these funds, using approximately $15.7 million to reduce outstanding borrowings under our senior secured revolving credit facility (the "Credit Facility"). Additionally, we invested approximately $13.9 million into income-producing investments as a means to further increase investment income. At December 31, 2024, after capital deployment and distributing an aggregate of $4.3 million in cash dividends to shareholders, we had approximately $835,000 in cash on hand and $24.4 million in available capacity under our Credit Facility to support future investments. Entering 2025, we have a strong and flexible balance sheet supported by multiple sources of capital.
Current wording
During 2025, we monetized select equity investments and received loan repayments that generated approximately $18 million in aggregate cash proceeds. We strategically allocated these funds by reducing outstanding borrowings under our senior secured revolving credit facility (the “Credit Facility”) by approximately $0.6 million, and investing approximately $6.6 million into income-producing investments to support investment income. At December 31, 2025, after capital deployment and distributing an aggregate of $7.3 million in cash dividends to shareholders during 2025, we had approximately $4.2 million in cash on hand and $19.2 million in available capacity under our Credit Facility to support future investments. Entering 2026, we believe we have a strong and flexible balance sheet supported by multiple sources of capital.
Previous wording
Our portfolio composition continued shifting toward debt investments in 2024, a trend we anticipate continuing in 2025. As of December 31, 2024, 75% of our portfolio consisted of interest-yielding debt instruments, up from 64% at the end of 2023. This shift has contributed to an improved portfolio yield and increased net interest income, with our annualized weighted average portfolio yield increasing to 13.8% from 13.6% in the prior year.
Current wording
Our portfolio composition continued shifting toward debt investments in 2025, reflecting our focus on expanding our base of interest-yielding assets. As of December 31, 2025, 79% of our portfolio consisted of interest-yielding debt instruments, up from 75% at the end of 2024. Our weighted average portfolio yield in 2025 decreased to 11.3% from 13.8% in the prior year, primarily due to increased non-accrual rates on debt investments during 2025 and changes in portfolio mix following repayments and new investment activity.
Previous wording
Supported by our strong liquidity position, we believe we are well-positioned to continue executing our strategy of portfolio expansion, investment income growth, and sustainable dividend increases.
Current wording
Supported by our liquidity position and access to capital, we believe we are well-positioned to continue executing our strategy of portfolio expansion, investment income growth, and sustainable dividend distributions. Market conditions during 2025 contributed to slower industry-wide origination activity and an increased use of payment-in-kind (“PIK”) interest structures. We monitor these dynamics closely, remain disciplined in underwriting, and expect to deploy capital opportunistically as attractive risk-adjusted opportunities arise.
Previous wording
As a lender, we remain exposed to market risks, particularly in periods of rising interest rates. As of December 31, 2024, all of our debt investments carried fixed interest rates, whereas borrowings under our Credit Facility bear interest at a variable rate equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. In rising interest rate environments, our fixed-rate debt investments generate stable returns, but our cost of capital under the Credit Facility increases. This could impact net investment income and overall returns. See “Risk Factors—Risks Related to Our Indebtedness” for further discussion of interest rate risk.
Current wording
As a lender, we remain exposed to market risks, including interest rate and refinancing risks that can affect borrowers’ cost of capital, credit performance, and overall portfolio returns. As of December 31, 2025, all of our debt investments carried fixed interest rates, whereas borrowings under our Credit Facility bear interest at a variable rate equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. In rising interest rate environments, our fixed-rate debt investments generate stable returns, but our cost of capital under the Credit Facility increases, which could impact net investment income and overall returns. At the same time, further interest rate reductions could improve refinancing and transaction activity in the lower middle market, potentially supporting origination levels or result in prepayments from our portfolio companies, which could potentially adversely affect us. The timing and magnitude of any such changes remain uncertain. See Part I, Item 1A, Risk Factors—Risks Related to Our Indebtedness for further discussion of interest rate risk.
Previous wording
We believe our combination of cash on hand, Credit Facility availability, proceeds from portfolio exits, and anticipated investment income provides the liquidity necessary to capitalize on new investment opportunities and reinvest in high-performing portfolio companies. RCM continues to build a strong pipeline of potential investments on our behalf, which should allow us to remain well-positioned to deploy capital effectively. Key trends and strategic advantages that support our growth outlook include:
Current wording
We believe our combination of cash on hand, Credit Facility availability, proceeds from portfolio exits, and anticipated investment income provides the liquidity necessary to capitalize on new investment opportunities and reinvest in high-performing portfolio companies. RCM continues to build a pipeline of potential investments on our behalf, and we expect to remain selective and disciplined as we evaluate investment opportunities. Key trends and strategic advantages that support our outlook include:
Previous wording
We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles, or GAAP, which require the use of estimates and assumptions that affect the reported amounts of assets and liabilities. For a summary of all significant accounting policies, including critical accounting policies, see Note 1 to the consolidated financial statements in Item 8 of this Annual Report.
Current wording
We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles, or GAAP, which require the use of estimates and assumptions that affect the reported amounts of assets and liabilities. For a summary of all significant accounting policies, including critical accounting policies, see Note 1—Summary of Significant Accounting Policiesto the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report.
Previous wording
Our investments are carried at fair value in accordance with FASB Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.
Current wording
Our investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.
Previous wording
Loan investments are defined as traditional loan financings typically with no equity features or required equity co-investment. Debt investments are defined as debt financings that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. Equity investments will be direct investments into a portfolio company and may include preferred stock, common stock, warrants and limited liability company membership interests.
Current wording
Loan investments are defined as traditional loan financings typically with no equity features or required equity co-investment. Debt investments are defined as debt financings that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. Equity investments are direct investments into a portfolio company and may include preferred stock, common stock, warrants and limited liability company membership interests.
Previous wording
Loan and debt securities are generally valued using a cost approach and will be valued at cost when representative of the fair value of the investment or sufficient assets or liquidation proceeds are expected to exist from a sale of a portfolio company at its estimated fair value. The valuation may also consider the carrying interest rate versus the related inherent portfolio risk of the investment. A loan or debt instrument may be reduced in value if it is judged to be of poor quality, collection is in doubt or insufficient liquidation proceeds exist.
Current wording
Loan and debt securities are generally valued at cost when representative of the fair value of the investment or sufficient assets or liquidation proceeds are expected to exist from a sale of a portfolio company at its estimated fair value. The valuation may also consider the carrying interest rate versus the related inherent portfolio risk of the investment. A loan or debt instrument may be reduced in value if it is judged to be of poor quality, collection is in doubt or insufficient liquidation proceeds exist.
Previous wording
Cost approach - The cost approach uses estimates of the liquidation value of the portfolio companies’ assets in relation to the cost of the respective security. This approach values the equity at the value remaining after the portfolio company pays off its debt and loan balances and its outstanding liabilities.
Current wording
Cost approach - The cost approach uses estimates of the liquidation value of the portfolio company’s assets in relation to the cost of the respective security. This approach values the equity at the value remaining after the portfolio company pays off its debt and loan balances and its outstanding liabilities.
Previous wording
At December 31, 2024, all of our investments were Level 3 investments. At December 31, 2023, 9% of our investments were Level 1 investments and 91% were Level 3 investments. There were no Level 2 investments at December 31, 2024 or 2023.
Current wording
At December 31, 2025 and 2024, all of our investments were Level 3 investments. There were no Level 1 or Level 2 investments at December 31, 2025 or 2024.
Previous wording
In the valuation process, we value restricted securities, categorized as Level 3 investments, using information from these portfolio companies, which may include:
Current wording
In the valuation process, we value restricted securities, categorized as Level 3 investments, using information from these portfolio companies, and, when considered appropriate, third-party valuation inputs, which may include:
Previous wording
Current information regarding any offers to purchase the investment, or recent fundraising transactions;
Current wording
Current information regarding any offers to purchase the investment, or recent financing transactions;
Previous wording
The valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.
Current wording
The valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be adjusted accordingly.
Previous wording
The significant unobservable inputs used in the fair value measurement of our equity investments are earnings before interest, taxes and depreciation and amortization (EBITDA) and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard industry multiples may be used when available; however, our portfolio companies are typically privately-held, lower middle market companies and these industry standards may be adjusted to more closely match the specific financial and operational performance of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
Current wording
The significant unobservable inputs used in the fair value measurement of our equity investments are EBITDA and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard industry multiples may be used when available; however, our portfolio companies are typically privately-held, lower middle market companies, and these industry standards may be adjusted to more closely match the specific financial and operational characteristics of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
Previous wording
Another key factor used in valuing equity investments is a significant recent arms-length equity transaction with a sophisticated non-strategic unrelated new investor entered into by the portfolio company. The terms of these equity transactions may not be identical to the equity transactions between the portfolio company and us, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.
Current wording
Another key factor used in valuing equity investments is a significant recent arms-length equity transaction entered into by the portfolio company with a sophisticated, non-strategic and unrelated new investor. The terms of these equity transactions may not be identical to the equity transactions between the portfolio company and us, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.
Previous wording
For investments made within the last year, we generally rely on the cost basis, which is deemed to represent fair value, unless other fair market value inputs are identified causing us to depart from this basis.
Current wording
For investments made within the last year, we generally rely on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing us to depart from this basis.
Previous wording
Interest income is recognized on the accrual basis except where the investment is in default or otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate.
Current wording
Interest income is recognized on the accrual basis except where the investment is in default or where receipt of such interest is otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate.
Previous wording
We hold debt securities in our investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. We stop accruing PIK interest and write off any accrued and uncollected interest when we determine that such PIK interest is no longer collectible.
Current wording
We hold debt securities in our investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. For investments with PIK interest, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. Loans that are on non-accrual status remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current.
Previous wording
We may receive distributions from portfolio companies that are limited liability companies or corporations, and these distributions are classified as dividend income on the consolidated statement of operations. Dividend income is recognized on an accrual basis when it can be reasonably estimated for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
Current wording
We may receive cash distributions from portfolio companies that are limited liability companies or corporations, and these distributions are classified as dividend income on our consolidated statement of operations. Dividend income is recognized on an accrual basis when it can be reasonably estimated for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
Previous wording
We hold preferred equity securities that may contain cumulative dividend provisions. Cumulative dividends are recorded as dividend income when they are declared and deemed a contractual obligation. Any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred security is redeemed.
Current wording
We may hold preferred equity securities that contain cumulative dividend provisions. Cumulative dividends are recorded as dividend income, if declared and deemed collectible, and any dividends in arrears are recognized into income and added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred security is redeemed.
Previous wording
Net asset value (NAV) was$25.31 per share at December 31, 2024 versus$23.56 per share at December 31, 2023.
Current wording
Net asset value per share (NAV) was$17.57 per share at December 31, 2025 versus$25.31 per share at December 31, 2024.
Previous wording
Cash approximated 1.3% of net assets at December 31, 2024, as compared to 5.4% at December 31, 2023.
Current wording
Cash and cash equivalents approximated 8.1% of net assets at December 31, 2025, as compared to 1.3% 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 December 31, 2024, there was $600,000 drawn on the Credit Facility, and the applicable interest rate was 7.99%. See “Note 5. 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 December 31, 2025, as compared to a balance of $600,000 as of December 31, 2024. See Note 5—Senior Secured Revolving Credit Facility 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 108% of net assets at December 31, 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 93% of net assets at December 31, 2025 as compared to approximately 108% of net assets at December 31, 2024.
Previous wording
Investment income was received, on a current basis, from 25 portfolio companies during the year ended December 31, 2024 and from 26 portfolio companies during the year ended December 31, 2023.
Current wording
Investment income was received, on a current basis, from 19 portfolio companies during the year ended December 31, 2025 and from 25 portfolio companies during the year ended December 31, 2024.
Previous wording
Interest from other investments - The increase in interest from other investments is primarily due to higher average idle cash balances during the year ended December 31, 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 year ended December 31, 2025 versus the same period in 2024.
Previous wording
Dividend and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and corporations in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional discretionary distributions or dividends. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. The dividend distributions for the respective years ended were:
Current wording
Dividend and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and corporations in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional discretionary distributions and dividends. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. The dividend distributions for the respective years ended were:
Previous wording
The income associated with the amortization of financing fees was $209,316 and $205,480 for the years ended December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, we recognized loan monitoring fees of $92,393, consisting of $28,814 from our investment in Mattison, $20,000 from our investment in FSS, $20,000 from our investment in Pressure Pro, $11,990 from our investment in Filterworks, and $11,589 from our investment in First Coast Mulch. Additionally, we recognized $232,011 in non-recurring fees, consisting of a prepayment fee and loan modification fee totaling $151,229 from our debt investment in SciAps, a dividend consent fee and prepayment fees totaling $75,782 from our investment in Pressure Pro, and a loan modification fee of $5,000 from our investment in Lumious.
Current wording
During the year ended December 31, 2024, we recognized loan monitoring fees of $92,393, consisting of $28,814 from our investment in Mattison, $20,000 from our investment in FSS, $20,000 from our investment in Pressure Pro, $11,990 from our investment in Autotality, and $11,589 from our investment in First Coast Mulch. Additionally, we recognized $232,011 in non-recurring fees, consisting of a prepayment fee and loan modification fee totaling $151,229 from our debt investment in SciAps, Inc. (SciAps), a dividend consent fee and prepayment fees totaling $75,782 from our investment in Pressure Pro, and a loan modification fee of $5,000 from our investment in Lumious.
Previous wording
Total expenses increased by approximately $660,000 for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in expenses was primarily due to an approximately $208,000 increase in the capital gains incentive fee expense, an approximately $178,000 increase in income based incentive fee expense, an approximately $155,000 increase in base management fees payable to RCM, an approximately $53,000 increase in professional fees, and an approximately $45,000 increase in interest expense.
Current wording
Total expenses decreased by approximately $3,650,000 for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in expenses was primarily due to an approximately $2,577,000 decrease in the capital gains incentive fee expense, an approximately $977,000 decrease in interest expense, and an approximately $382,000 decrease in base management fees payable to RCM.
Previous wording
The capital gains incentive fee accrual expense during the year ended December 31, 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 year ended December 31, 2024 can be attributed to realized capital gains and increases in unrealized appreciation in excess of realized capital losses and increases in unrealized depreciation during the year.
Current wording
The capital gains incentive fee benefit was ($1,565,000) during the year ended December 31, 2025 and 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 both 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 year ended December 31, 2025 is attributable to a net increase in net unrealized depreciation in excess of realized capital gains during the period, which was primarily the result of the writedown in valuation and subsequent realized loss with respect to our investment in Tilson.
Previous wording
The increase in interest expense resulted from higher average outstanding debt balances during the year ended December 31, 2024 versus the same period in 2023 under the Credit Facility. Interest expense for the year ended December 31, 2024 and 2023 was $1,089,678 and $1,044,831, respectively.
Current wording
The decrease in interest expense resulted from lower average outstanding debt balances under the Credit Facility during the year ended December 31, 2025 versus the same period in 2024. Interest expense for the year ended December 31, 2025 and 2024 was $112,528 and $1,089,678, respectively.
Showing the first 40 of 59 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The income associated with the amortization of financing fees was $248,844 and $209,316 for the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2025, we recognized loan monitoring fees of $37,584, consisting of $20,000 from our investment in Pressure Pro, $11,589 from our investment in First Coast Mulch, and $5,995 from our investment in Autotality. Additionally, we recognized $199,453 in non-recurring fees, consisting of a prepayment fee of $167,187 from our debt investment in Mattison, 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.
Current report — wording carried from elsewhere
During the year ended December 31, 2025, the valuation of our investments in FSS, ITA, MRES, and Carolina Skiff were each decreased after a review of their operations and financial condition.