RAND CAPITAL CORP
For the period ended Jun 30, 2026. Filed Aug 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 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-Q
Period ended 2026-03-31; filed 2026-05-06.
0001193125-26-207688
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-05.
0001193125-26-333983
Item 2. 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 112 previous paragraphs and 145 current paragraphs.
74 unchanged; 35 reworded; 23 added; 2 removed; 1 previous and 13 current paragraphs rearranged.
Tables are not compared: 10 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 (23)
Current report
n/m - Not meaningful
Current report
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Current report
The capital gains incentive fee expense during the three months ended June 30, 2026 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. At June 30, 2026, no fee would be due based on net portfolio depreciation, and accordingly no capital gains incentive fee expense was recognized during the three months ended June 30, 2026. For the three months ended June 30, 2025, the capital gains incentive fee benefit was ($1,490,000), which represented a reversal of a previously accrued capital gains incentive fee based on the calculation as required by GAAP.
Current report
The increase in interest expense resulted from higher average outstanding debt balances during the three months ended June 30, 2026 versus the same period in 2025 under the Credit Facility. Interest expense for the three months ended June 30, 2026 and 2025 was $72,476 and $25,417, respectively.
Current report
During the three months ended June 30, 2026, we sold our warrant investment in Applied Image and recognized a realized gain of $958,948.
Current report
During the three months ended June 30, 2026, the valuation of our investment in Swanson decreased as the company has ceased operations.
Current report
In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA, First Coast Mulch, and Mobile IV Nurses after a financial analysis of each of the portfolio companies indicating continued improved performance.
Current report
During the three months ended June 30, 2025, the valuation of our investments in Carolina Skiff, FSS, Lumious, and MRES were decreased after a review of their operations and financial condition.
Current report
The valuation of our investment in Tilson was reduced to zero after it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, District of Delaware.
Current report
Net Increase (Decrease) in Net Assets from Operations
Current report
Comparison of the six months ended June 30, 2026 to the six months ended June 30, 2025:
Current report
Investment Income
Current report
Expenses
Current report
The capital gains incentive fee expense during the six months ended June 30, 2026 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. At June 30, 2026, no fee would be due based on net portfolio depreciation, and accordingly no capital gains incentive fee expense was recognized during the six months ended June 30, 2026. For the six months ended June 30, 2025, the capital gains incentive fee benefit was ($1,565,000), which represented a reversal of a previously accrued capital gains incentive fee based on the calculation as required by GAAP.
Current report
Net Investment Income
Current report
Realized Gain on Investments
Current report
The change in net unrealized (depreciation) appreciation, before income taxes, for the six months ended June 30, 2026, was comprised of the following:
Current report
In accordance with the Corporation’s valuation policy, we increased the value of our investments in Verta, All About People, EFINEA, Open Exchange, Bauer, 4 Seasons, and Caitec after a financial analysis of each of the portfolio companies indicating continued improved performance.
Current report
The change in net unrealized appreciation (depreciation), before income taxes, for the six months ended June 30, 2025, was comprised of the following:
Current report
In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA, First Coast Mulch, Mobile IV Nurses, and Seybert’s after a financial analysis of each of the portfolio companies indicating continued improved performance.
Current report
During the six months ended June 30, 2025, the valuation of our investments in Carolina Skiff, FSS, ITA, Lumious, and MRES were decreased after a review of their operations and financial condition.
Current report
The valuation of our investment in Tilson was reduced to zero after it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, District of Delaware.
Current report
Net Increase (Decrease) in Net Assets from Operations
Removed paragraphs (2)
Previous report
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 report
Net (Decrease) Increase in Net Assets from Operations
Reworded paragraphs (35)
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 elsewhere in this report. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future periods.
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 elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”). Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future periods.
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 2026; and statements regarding our compliance with the RIC requirements as of March 31, 2026; 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 (including their negative counterparts or other various or comparable terminology) 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. All forward-looking statements are subject to risks and uncertainties described under the caption “Risk Factors” contained in Part II, Item 1A of this report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.
Current wording
Statements included in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q 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 2026; and statements regarding our compliance with the RIC requirements as of June 30, 2026; 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 (including their negative counterparts or other various or comparable terminology) 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. All forward-looking statements are subject to risks and uncertainties described under the caption “Risk Factors” contained in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of the 2025 10-K.
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. As of March 31, 2026, our asset coverage ratio for senior securities as of March 31, 2026 was substantially in excess of 150%. For a discussion of the risks associated with our adoption of a modified asset coverage requirement of 150%, please see the discussion of risks under the caption “Risk Factors – Risks related to our Indebtedness” contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. Notwithstanding the reduction of our asset coverage requirement under the 1940 Act from 200% to 150% effective January 24, 2025, under the terms of the Credit Agreement, we are required to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of the Corporation’s assets to the sum of all of the Corporation’s obligations for borrowed money plus all capital lease obligations) of not less than 300%.
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 June 30, 2026, our asset coverage ratio for senior securities was 1,109%. For a discussion of the risks associated with our adoption of a modified asset coverage requirement of 150%, please see the discussion of risks under the caption “Risk Factors – Risks related to our Indebtedness” contained in Part I, Item 1A of the 2025 10-K. Notwithstanding the reduction of our asset coverage requirement under the 1940 Act from 200% to 150% effective January 24, 2025, under the terms of the Credit Agreement, we are required to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of the Corporation’s assets to the sum of all of the Corporation’s obligations for borrowed money plus all capital lease obligations) of not less than 300%.
Previous wording
Our Board declared the following dividend during thethree months ended March 31, 2026:
Current wording
Our Board declared the following dividends during thesix months ended June 30, 2026:
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 are likely to 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 the disclosure under the caption “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
We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (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 2—Summary of Significant Accounting Policiesto the Consolidated Financial Statements in Item 1, Financial Statements and Supplementary Data, of this Quarterly Report.
Current wording
We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (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 2—Summary of Significant Accounting Policiesto the Consolidated Financial Statements in Item 1, Financial Statements, of this Form 10-Q.
Previous wording
Net asset value per share (NAV) was$17.16 at March 31, 2026 and$17.57 at December 31, 2025.
Current wording
Net asset value per share (NAV) was$17.33 at June 30, 2026 and$17.57 at December 31, 2025.
Previous wording
Cash and cash equivalents approximated 0.6% of net assets at March 31, 2026, as compared to 8.1% of net assets at December 31, 2025.
Current wording
Cash and cash equivalents approximated 0.8% of net assets at June 30, 2026, as compared to 8.1% of net assets at December 31, 2025.
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 March 31, 2026, there was $500,000 drawn on the Credit Facility and the applicable interest rate was 7.18%. 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%. At June 30, 2026, there was $5,100,000 drawn on the Credit Facility and the applicable interest rate was 7.18%. See Note 6—Senior Secured Revolving Credit Facility to the Consolidated Financial Statements in Item 1, Financial Statements, of this Form 10-Q 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 101% of net assets at March 31, 2026 as compared to approximately 93% of net assets at December 31, 2025.
Current wording
Our total investments at fair value, as determined by RCM and approved by our Board, approximated 110% of net assets at June 30, 2026 as compared to approximately 93% of net assets at December 31, 2025.
Previous wording
The change in investments during the three months ended March 31, 2026, at cost, is comprised of the following:
Current wording
The change in investments during the six months ended June 30, 2026, at cost, is comprised of the following:
Previous wording
The total investment income during the three months ended March 31, 2026 was received from 15 portfolio companies. For the three months ended March 31, 2025, total investment income was received from 18 portfolio companies.
Current wording
The total investment income during the three months ended June 30, 2026 was received from 16 portfolio companies. For the three months ended June 30, 2025, total investment income was received from 14 portfolio companies.
Previous wording
Interest from portfolio companies – Interest from portfolio companies was approximately 29% lower during the three months ended March 31, 2026 versus the same period in 2025 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 HDI Acquisition LLC (Hilton), Lumious, Mattison Avenue Holdings LLC (Mattison), Pressure Pro, Inc. (Pressure Pro), and Seybert’s. In addition, our debt investments in FSS, ITA Acquisition, LLC (ITA), and MRES were placed on non-accrual status during 2025.
Current wording
Interest from portfolio companies – Interest from portfolio companies was approximately 23% lower during the three months ended June 30, 2026 versus the same period in 2025 due to several interest-yielding investments being placed on non-accrual status during the last year. Debt instruments in Autotality, FSS, ITA Acquisition, LLC (ITA), MRES, and Swanson were placed on non-accrual status.
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. Interest can also be shifted from current cash payment to PIK as part of a loan modification. For the three months ended March 31, 2026 and 2025, 19.7% and 31.1%, respectively, of our total investment income was attributable to non-cash PIK interest income.
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. Interest can also be shifted from current cash payment to PIK as part of a loan modification. For the three months ended June 30, 2026 and 2025, 8.3% and 37.4%, respectively, of our total investment income was attributable to non-cash PIK interest income.
Previous 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, 2026 versus the same period in 2025.
Current wording
Interest from other investments - The decrease in interest from other investments is primarily due to lower average cash balances during the three months ended June 30, 2026 versus the same period in 2025.
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. No dividend income was recognized during the three months ended March 31, 2026. During the three months ended March 31, 2025, we recognized $13,125 in dividend income from Tilson Technology Management, Inc. (Tilson).
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 or dividends. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. During the three months ended June 30, 2026, we recognized $141,206 in dividend income from EFINEA and $11,307 in dividend income from Carolina Skiff LLC (Carolina Skiff). No dividend income was recognized during the three months ended June 30, 2025.
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 March 31, 2026 and 2025 was $545,027 and $1,218,115, 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 June 30, 2026 and 2025 was $709,661 and $2,478,234, respectively.
Previous wording
In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA and Seybert’s during the three months ended March 31, 2025 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 Verta, EFINEA, Open Exchange, BlackJet, 4 Seasons, and Caitec during the three months ended June 30, 2026 after a financial analysis of each of the portfolio companies indicated continued improved performance.
Previous wording
We account for our operations under GAAP for investment companies. The principal measure of our financial performance is “Net (decrease) increase in net assets from operations” on our consolidated statements of operations. The net (decrease) increase in net assets from operations for the three months ended March 31, 2026 and 2025 was ($367,469) and $841,447, respectively.
Current wording
We account for our operations under GAAP for investment companies. The principal measure of our financial performance is “Net increase (decrease) in net assets from operations” on our consolidated statements of operations. The net increase (decrease) in net assets from operations for the three months ended June 30, 2026 and 2025 was $1,366,278 and ($7,736,154), respectively.
Previous wording
The income associated with the amortization of financing fees was $43,289 and $87,777 for the three months ended March 31, 2026 and 2025, 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. No similar fees were received during the three months ended March 31, 2026.
Current wording
The income associated with the amortization of financing fees was $106,441 and $138,956 for the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, we recognized a loan modification fee of $5,000 from our debt investment in GoNoodle. During the six months ended June 30, 2025, we recognized a prepayment fee of $167,187 from our debt investment in Mattison Avenue Holdings LLC (Mattison), a loan monitoring fee of $20,000 from our debt investment in Pressure Pro, Inc. (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.
Previous wording
The decrease in total expenses during the three months ended March 31, 2026 versus the same period in 2025 was primarily due to a $119,673 decrease in the income based incentive fee expense and a $62,513 decrease in base management fee expense.
Current wording
The increase in total expenses during the six months ended June 30, 2026 versus the same period in 2025 was primarily due to a $1,565,000 increase in the capital gains incentive fee expense. The increase was partially offset by a $119,673 decrease in the income based incentive fee expense and a $75,009 decrease in base management fee expense.
Previous wording
The income based incentive fee is calculated quarterly in accordance with the Investment Management Agreement. There was no income based incentive fee accrual during the three months ended March 31, 2026. The income based incentive fee accrued during the three months ended March 31, 2025 was $119,673, and was a result of Pre-Incentive Fee Net Investment Income being above the applicable hurdle rate during the applicable quarter, 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.
Current wording
The income based incentive fee is calculated quarterly in accordance with the Investment Management Agreement. There was no income based incentive fee accrual during the six months ended June 30, 2026. The income based incentive fee accrued during the six months ended June 30, 2025 was $119,673, and was a result of Pre-Incentive Fee Net Investment Income being above the applicable hurdle rate during the applicable quarter, 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
Previous 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 or repaid or the fair value of our investments decline, the base management fee payable to RCM will decrease accordingly. The base management fee expense for the three months ended March 31, 2026 and 2025 was $189,695 and $252,208, 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 or repaid or the fair value of our investments decline, the base management fee payable to RCM will decrease accordingly. The base management fee expense for the six months ended June 30, 2026 and 2025 was $394,848 and $469,857, respectively.
Previous wording
During the three months ended March 31, 2026, we sold our equity and warrant investments in Seybert’s and recognized a realized gain of $1,072,459. In addition, during the three months ended March 31, 2026, we recognized a gain of $3,112 from additional proceeds received from the sale of our preferred equity investment in Carolina Skiff.
Current wording
During the six months ended June 30, 2026, we sold our equity and warrant investments in Seybert’s and recognized a realized gain of $1,072,459. In addition, during the six months ended June 30, 2026, we recognized a realized gain of $958,948 from the sale of our warrant investment in Applied Image. We also recognized a realized gain of $3,112 from additional proceeds received from the sale of our preferred equity investment in Carolina Skiff.
Previous 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 $55,357 from additional proceeds received from Microcision LLC (Microcision), an investment we exited in 2022. We also recognized a realized loss of ($25) with respect to our investment in GoNoodle when our Series C warrant expired without exercise.
Current wording
During the six months ended June 30, 2025, we sold our warrant investment in Pressure Pro and recognized a realized gain of $870,000. In addition, during the six months ended June 30, 2025, we recognized a gain of $55,357 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
We exited our investment in Seybert’s during the three months ended March 31, 2026.
Current wording
We exited our investment in Seybert’s during the six months ended June 30, 2026.
Previous wording
During the three months ended March 31, 2026, the valuation of our investments in BlackJet, MRES, and Autotality were each decreased after a review of their operations and financial condition.
Current wording
During the six months ended June 30, 2026, the valuation of our investments in MRES and Autotality were decreased after a review of their operations and financial condition. The valuation of our investment in Swanson decreased as the company has ceased operations.
Previous wording
We sold our warrant investment in Pressure Pro during the three months ended March 31, 2025.
Current wording
We sold our warrant investment in Pressure Pro during the six months ended June 30, 2025.
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 March 31, 2026, our total liquidity consisted of approximately $331,000 in cash and approximately $20,100,000 of unused 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 June 30, 2026, our total liquidity consisted of approximately $430,000 in cash and approximately $12,400,000 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 March 31, 2026 was $500,000. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was approximately $20,100,000 at March 31, 2026.
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. The outstanding balance drawn on the Credit Facility at June 30, 2026 was $5,100,000. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was approximately $12,400,000 at June 30, 2026.
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 were in compliance with these covenants at March 31, 2026. 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 June 30, 2026. See Note 6—Senior Secured Revolving Credit Facility to the Consolidated Financial Statements in Item 1, Financial Statements, of this Form 10-Q for additional information regarding the terms of our Credit Facility.
Previous wording
For the three months ended March 31, 2026, we experienced a net decrease in cash of approximately $3,878,000, which is a net effect of approximately $3,517,000 of net cash used in our operating activities and approximately $361,000 of net cash used in our financing activities.
Current wording
For the six months ended June 30, 2026, we experienced a net decrease in cash of approximately $3,779,000, which is a net effect of approximately $7,157,000 of net cash used in our operating activities and approximately $3,378,000 of net cash provided by our financing activities.
Previous wording
The $3,517,000 of net cash used in our operating activities during the three months ended March 31, 2026 resulted primarily from approximately $5,128,000 used to fund new or follow-on portfolio company investments, approximately $244,000 in non-cash interest income, and an approximately $141,000 net increase in operating assets. This was partially offset by net investment income of approximately $545,000, approximately $1,349,000 received from the sales of equity investments and repayments of debt investments, and an approximately $48,000 net increase in operating liabilities.
Current wording
The $7,157,000 of net cash used in our operating activities during the six months ended June 30, 2026 resulted primarily from approximately $12,028,000 used to fund new or follow-on portfolio company investments, approximately $360,000 in non-cash interest income, and an approximately $237,000 net increase in operating assets. This was partially offset by net investment income of approximately $1,255,000, approximately $4,029,000 received from the sales of equity investments and repayments of debt investments, and an approximately $89,000 net increase in operating liabilities.
Previous wording
Net cash used in financing activities during the three months ended March 31, 2026 was approximately $361,000. This is comprised of approximately $861,000 in cash dividends paid to shareholders and $500,000 borrowed on the Credit Facility.
Current wording
Net cash provided by financing activities during the six months ended June 30, 2026 was approximately $3,378,000. This is comprised of $5,100,000 borrowed on the Credit Facility and approximately $1,722,000 in cash dividends paid to shareholders.
Previous wording
We anticipate that we will continue to fund our investment activities through cash generated through our ongoing operating activities and through borrowings under the $25 million Credit Facility. We anticipate that we will continue to exit investments. However, the timing of liquidation events with respect to our privately held investments is difficult to project.
Current wording
We anticipate that we will continue to fund our investment activities through cash generated through our ongoing operating activities and through borrowings under the $25 million Credit Facility. The Credit Facility is scheduled to mature on June 27, 2027, and our liquidity could be adversely impacted if we are unable to extend the maturity of the Credit Facility, obtain alternate financing, or repay the Credit Facility using cash generated through our operating activities. We anticipate that we will continue to exit investments. However, the timing of liquidation events with respect to our privately held investments is difficult to project.
Rearranged current paragraphs (13)
Current report — wording carried from elsewhere
The income associated with the amortization of financing fees was $63,152 and $51,179 for the three months ended June 30, 2026 and 2025, respectively. During the three months ended June 30, 2026, we recognized a loan modification fee of $5,000 from our debt investment in GoNoodle. No similar fees were received during the three months ended June 30, 2025.
Current report — wording carried from elsewhere
The increase in total expenses during the three months ended June 30, 2026 versus the same period in 2025 was primarily due to a $1,490,000 increase in the capital gains incentive fee expense and a $47,059 increase in interest expense.
Current report — wording carried from elsewhere
The total investment income during the six months ended June 30, 2026 was received from 18 portfolio companies. For the six months ended June 30, 2025, total investment income was received from 17 portfolio companies.
Current report — wording carried from elsewhere
Interest from portfolio companies – Interest from portfolio companies was approximately 26% lower during the six months ended June 30, 2026 versus the same period in 2025 due to several interest-yielding investments being placed on non-accrual status during the last year. Debt instruments in Autotality, FSS, ITA, MRES, and Swanson were placed on non-accrual status.
Current report — wording carried from elsewhere
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. Interest can also be shifted from current cash payment to PIK as part of a loan modification. For the six months ended June 30, 2026 and 2025, 13.7% and 33.9%, respectively, of our total investment income was attributable to non-cash PIK interest income.
Current report — wording carried from elsewhere
Interest from other investments - The decrease in interest from other investments is primarily due to lower average cash balances during the six months ended June 30, 2026 versus the same period in 2025.
Current report — wording carried from elsewhere
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. During the six months ended June 30, 2026, we recognized $141,206 in dividend income from EFINEA and $11,307 in dividend income from Carolina Skiff. During the six months ended June 30, 2025, we recognized $13,125 in dividend income from Tilson.
Current report — wording carried from elsewhere
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 report — wording carried from elsewhere
Investment Income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation.
Current report — wording carried from elsewhere
The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the six months ended June 30, 2026 and 2025 was $1,254,688 and $3,696,349, respectively.
Current report — wording carried from elsewhere
Change in Unrealized (Depreciation) Appreciation of Investments
Current report — wording carried from elsewhere
All of the valuation adjustments resulted from a determination of fair value 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.
Current report — wording carried from elsewhere
We account for our operations under GAAP for investment companies. The principal measure of our financial performance is “Net increase (decrease) in net assets from operations” on our consolidated statements of operations. The net increase (decrease) in net assets from operations for the six months ended June 30, 2026 and 2025 was $998,809 and ($6,894,707), respectively.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In accordance with the Corporation’s valuation policy, we increased the value of our investments in All About People and Bauer during the three months ended March 31, 2026 after a financial analysis of each of the portfolio companies indicated continued improved performance.