OFS Capital Corp

Previous wording

Our NAV per common share decreased to $11.29 at September 30, 2024 from $11.51 at June 30, 2024, due to a net loss on investments of $0.15 per common share and our quarterly distribution of $0.34 per common share exceeding our quarterly net investment income of $0.27 per common share.

Current wording

Our NAV per common share decreased to $11.97 at March 31, 2025 from $12.85 at December 31, 2024, due to a net loss on investments of $0.80 per common share and our quarterly distribution of $0.34 per common share exceeding our quarterly net investment income of $0.26 per common share.

Previous wording

For the quarter ended September 30, 2024, total investment income decreased to $10.9 million from $11.2 million in the prior quarter, primarily due to a decrease of $0.2 million in interest income. For the quarter ended September 30, 2024, interest income decreased to $10.6 million from $10.9 million in the prior quarter, primarily due to a smaller average investment portfolio at cost. See “—Results of Operations” for additional information.

Current wording

For the quarter ended March 31, 2025, total investment income decreased to $10.3 million from $11.6 million in the prior quarter, primarily due to decreases in interest income of $0.5 million, dividend income of $0.5 million and fee income of $0.3 million. See “—Results of Operations” for additional information.

Previous wording

As of September 30, 2024, our total outstanding debt was $249.1 million and remained unchanged compared to our total outstanding debt at June 30, 2024. For the quarter ended September 30, 2024, our weighted-average debt interest costs remained stable at 6.46% compared to 6.45% for the quarter ended June 30, 2024. As of September 30, 2024, approximately 50% of our outstanding debt matures in 2027 and beyond, and 72% of our outstanding debt carries fixed interest rates and is unsecured.

Current wording

Our total outstanding debt decreased from $248.4 million at December 31, 2024 to $248.1 million at March 31, 2025. For the quarter ended March 31, 2025, our weighted-average debt interest costs remained stable at 6.29% compared to 6.30% for the quarter ended December 31, 2024. As of March 31, 2025, we had outstanding debt of $128.5 million contractually maturing in February 2026, which comprised 52% of our total outstanding debt. See “—Liquidity and Capital Resources” for additional details.

Previous wording

For the quarter ended September 30, 2024, we recognized a net loss on investments of $1.9 million, primarily due to net realized losses of $11.1 million, partially offset by net unrealized appreciation of $9.2 million. For the quarter ended September 30, 2024, our net realized loss of $11.1 million was primarily due to a $7.8 million loss upon the write-off of our debt and equity investments in Master Cutlery, LLC, which had no impact on our NAV during the quarter as the loss had been substantially recognized in prior fiscal periods. For the quarter ended September 30, 2024, our net unrealized appreciation of $9.2 million was primarily due to net unrealized appreciation of $2.8 million on our common equity in Pfanstiehl Holdings, Inc., as well as the reversal of previously recognized unrealized depreciation on exited investments. As of September 30, 2024, our loan portfolio had non-accrual loans with an aggregate fair value of $21.1 million, or 5.4% of our total investments at fair value. See “—Portfolio Composition and Investment Activity” for additional information.

Current wording

For the quarter ended March 31, 2025, we recognized a net loss on investments of $10.8 million due to net unrealized depreciation, net of taxes, of $8.2 million and a net realized loss of $2.6 million. For the quarter ended March 31, 2025, our net unrealized depreciation, net of taxes, of $8.2 million was primarily due to net unrealized depreciation of $7.3 million on our debt investments, of which $3.9 million related to non-accrual debt investments. For the quarter ended March 31, 2025, our net realized loss of $2.6 million was primarily due to a realized loss of $1.8 million recognized upon the sale of a non-performing Structured Finance Security. As of March 31, 2025, our loan portfolio had non-accrual loans with an aggregate fair value of $16.9 million, or 4.2% of our total investments at fair value. See “—Portfolio Composition and Investment Activity” for additional information.

Previous wording

As of September 30, 2024, our asset coverage ratio of 161% exceeded the minimum asset coverage requirement of 150% under the 1940 Act, and we remained in compliance with all applicable covenants under our outstanding debt facilities. As of September 30, 2024, we had unused commitments of $25.0 million under our Banc of California Credit Facility, as well as $80.9 million under our BNP Facility, each of which is subject to a borrowing base and other covenants. As of September 30, 2024, we had a payable for investments purchased of $14.7 million and unfunded commitments of $8.5 million to eight portfolio companies. See “—Liquidity and Capital Resources” for additional information.

Current wording

As of March 31, 2025, our asset coverage ratio of 165% exceeded the minimum asset coverage requirement of 150% under the 1940 Act, and we remained in compliance with all applicable covenants under our outstanding debt facilities. As of March 31, 2025, we had unused commitments of $21.5 million under our Banc of California Credit Facility, and $85.5 million under our BNP Facility, each of which is subject to a borrowing base and other covenants. As of March 31, 2025, we had unfunded commitments of $13.8 million to nine portfolio companies. See “—Liquidity and Capital Resources” for additional information.

Previous wording

On October 29, 2024, the Board declared a distribution of $0.34 per share for the fourth quarter of 2024, payable on December 31, 2024 to stockholders of record as of December 20, 2024.

Current wording

On April 29, 2025, the Board declared a distribution of $0.34 per share for the second quarter of 2025, payable on June 30, 2025 to stockholders of record as of June 20, 2025.

Previous wording

Our critical accounting policies and estimates are those relating to revenue recognition and fair value estimates. Management has discussed the development and selection of each critical accounting policy and estimate with the Audit Committee of the Board. For descriptions of our revenue recognition and fair value policies, see “Item 8. Financial Statements

Current wording

Our critical accounting policies and estimates are those relating to revenue recognition and fair value estimates. Management has discussed the development and selection of each critical accounting policy and estimate with the Audit Committee of the Board. For descriptions of our revenue recognition and fair value policies, see “Item 8. Financial Statements—Notes to Consolidated Financial Statements—Note 2” and “Item 7. Management's Discussion and Analysis of Financial

Previous wording

—Notes to Consolidated Financial Statements—Note 2” and “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Condition and Results of Operations—Critical Accounting Policies and Significant Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to us and OFS Advisor is free to furnish similar services to other entities, including other funds advised or sub-advised by OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to other funds, including HPCI and OCCI. Additionally, OFS Advisor provides sub-advisory services to various funds, including: (i) CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust; and (ii) CIM Real Assets & Credit Fund, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.

Current wording

OFS Advisor’s services under the Investment Advisory Agreement are not exclusive to us and OFS Advisor is free to furnish similar services to other entities, including other funds advised or sub-advised by OFS Advisor, so long as its services to us are not impaired. OFS Advisor also serves as the investment adviser to other funds, including HPCI and OCCI. Additionally, OFS Advisor provides sub-advisory services to: (i) CMFT Securities Investments, LLC, a wholly owned subsidiary of CIM Real Estate Finance Trust, Inc., a corporation that qualifies as a real estate investment trust; and (ii) CIM Real Assets & Credit Fund, an externally managed registered investment company that operates as an interval fund that invests primarily in a combination of real estate, credit and related investments.

Previous wording

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with certain affiliates absent an order from the SEC permitting the BDC to do so. On August 4, 2020, we received our existing Order, which superseded a previous order that we received on October 12, 2016, and provides us with greater flexibility to enter into co-investment transactions with certain Affiliated Funds in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions. We are generally permitted to co-invest with Affiliated Funds if, under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make 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 us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned; and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

Current wording

We are generally permitted to co-invest with Affiliated Funds if, under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make 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 us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned; (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies; (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing; and (4) the proposed investment by us would not benefit OFS Advisor, the other Affiliated Funds that are participating in the investment, or any affiliated person of any of them (other than parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.

Previous wording

In addition, we may file an application for an amendment to our existing Order to permit us to co-invest in our existing portfolio companies with certain affiliates that are private funds even if such other funds had not previously invested in such existing portfolio companies, subject to certain conditions. However, if filed, there is no guarantee that such application will be granted.

Current wording

In addition, we may file a new application for exemptive relief that, if granted, would supersede our existing Order and permit us to co-invest pursuant to a different set of conditions than those in our existing Order. However, if filed, there is no guarantee that such application will be granted.

Previous wording

Conflicts may arise when we make an investment in conjunction with an investment being made by an Affiliated Account, or in a transaction where an Affiliated Account has already made an investment. Investment opportunities are, from time to time, appropriate for more than one account in the same, different or overlapping securities of a portfolio company’s capital structure. Conflicts arise in determining the terms of investments, particularly where these accounts may invest in different types of securities in a single portfolio company. Potential conflicts arise when addressing, among other things, questions as to whether payment obligations and covenants should be enforced, modified or waived, or whether debt should be restructured, modified or refinanced. For a discussion of the risks associated with conflicts of interest, see “Item 1. Business—Regulation—Conflicts of Interest”, “Item 1A. Risk Factors—Risks Related to OFS Advisor and its Affiliates—We have potential conflicts of interest related to the purchases and sales that OFS Advisor makes on our behalf and/or on behalf of Affiliated Accounts” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Conflicts may arise when we make an investment in conjunction with an investment being made by an Affiliated Account, or in a transaction where an Affiliated Account has already made an investment. Investment opportunities are, from time to time, appropriate for more than one account in the same, different or overlapping securities of a portfolio company’s capital structure. Conflicts arise in determining the terms of investments, particularly where these accounts may invest in different types of securities in a single portfolio company. Potential conflicts arise when addressing, among other things, questions as to whether payment obligations and covenants should be enforced, modified or waived, or whether debt should be restructured, modified or refinanced. For a discussion of the risks associated with conflicts of interest, see “Item 1. Business—Regulation—Conflicts of Interest” and “Item 1A. Risk Factors—Risks Related to OFS Advisor and its Affiliates—We have potential conflicts of interest related to the purchases and sales that OFS Advisor makes on our behalf and/or on behalf of Affiliated Accounts” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

As of September 30, 2024, the fair value of our debt investment portfolio totaled $231.1 million in 42 portfolio companies, of which approximately 82% and 18% were first lien and second lien debt investments, respectively. We also had equity investments in 15 portfolio companies with a fair value of approximately $89.8 million and 17 investments in Structured Finance Securities with a fair value of $73.8 million. As of September 30, 2024, we had unfunded commitments of $8.5 million to eight portfolio companies. Set forth in the tables and charts below is selected information with respect to our portfolio as of September 30, 2024 and December 31, 2023.

Current wording

As of March 31, 2025, the fair value of our debt investment portfolio totaled $215.9 million in 35 portfolio companies, of which approximately 85% and 15% were first lien and second lien debt investments, respectively. We also had equity investments in 15 portfolio companies with a fair value of approximately $107.7 million and 18 investments in Structured Finance Securities with a fair value of $79.5 million. As of March 31, 2025, we had unfunded commitments of $13.8 million to nine portfolio companies. Set forth in the tables and charts below is selected information with respect to our portfolio as of March 31, 2025 and December 31, 2024.

Previous wording

The following table presents our ten largest investments by portfolio company based on fair value as of September 30, 2024 (dollar amounts in thousands):

Current wording

The following table presents our ten largest investments by issuer based on fair value as of March 31, 2025 (dollar amounts in thousands):

Previous wording

As of September 30, 2024, our common equity investment in Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounted for 18.7% and 48.7% of our total portfolio at fair value and our total net assets, respectively. The value of this investment is substantially comprised of unrealized appreciation of $73.4 million.

Current wording

As of March 31, 2025, our common equity investment in Pfanstiehl Holdings, Inc., a global manufacturer of high-purity pharmaceutical ingredients, accounted for 22.5% and 56.6% of our total portfolio at fair value and our total net assets, respectively. The value of this investment is substantially comprised of unrealized appreciation of $90.5 million.

Previous wording

As of September 30, 2024, approximately 5.1% and 13.3% of our total portfolio at fair value and net assets, respectively, were comprised of Structured Finance Securities managed by a single adviser.

Current wording

As of March 31, 2025, approximately 4.5% and 11.4% of our total portfolio at fair value and net assets, respectively, were comprised of Structured Finance Securities managed by a single adviser.

Previous wording

(2) Realized yield is calculated as (a) the actual amount earned on interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total interest-bearing investments at amortized cost, in each case, including debt investments on non-accrual status and non-income producing Structured Finance Securities.

Current wording

(2) Realized yield is calculated as (a) the actual amount earned on interest-bearing investments, including interest, prepayment fees and amortization of Net Loan Fees, divided by (b) the weighted-average of total interest-bearing investments at amortized cost, in each case, including debt investments on non-accrual status and non-performing Structured Finance Securities.

Previous wording

Weighted-average yields of our investments are not the same as a return on investment for our stockholders, but rather the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yields will remain at their current levels. As of September 30, 2024, 91% of our total loan portfolio, at fair value, consisted of variable rate investments, generally indexed to SOFR. See additional information under “Item 3. Quantitative and Qualitative Disclosures About Market Risk”.

Current wording

Weighted-average yields of our investments are not the same as a return on investment for our stockholders, but rather the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yields will remain at their current levels.

Previous wording

(1) As of September 30, 2024 and December 31, 2023, first lien debt investments include unitranche investments (which are loans that combine both senior and subordinated debt, in a first lien position) with an amortized cost and fair value of $119.7 million and $109.4 million, respectively, and $141.3 million and $131.3 million, respectively.

Current wording

(1) As of March 31, 2025 and December 31, 2024, first lien debt investments include unitranche investments (which are loans that combine both senior and subordinated debt, in a first lien position) with an amortized cost and fair value of $127.9 million and $118.9 million, respectively, and $128.1 million and $119.2 million, respectively.

Previous wording

As of September 30, 2024, 100% of our loan portfolio and 59% of our total portfolio consisted of first lien and second lien loans, based on fair value.

Current wording

As of March 31, 2025, 100% of our loan portfolio and 54% of our total portfolio consisted of first lien and second lien loans, based on fair value.

Previous wording

As of September 30, 2024, the three largest industries of our Portfolio Company Investments by fair value, were: (1) Manufacturing (33.4%); (2) Health Care and Social Assistance (20.5%); and (3) Professional, Scientific, and Technical Services (8.8%), totaling an aggregate of approximately 62.7% of our Portfolio Company Investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1—Financial Statements—Note 4.”

Current wording

As of March 31, 2025, the three largest industries of our Portfolio Company Investments by fair value, were: (1) Manufacturing (38.2%); (2) Health Care and Social Assistance (20.2%); and (3) Administrative and Support and Waste Management and Remediation Services (6.6%), totaling an aggregate of approximately 65.0% of our Portfolio Company Investment portfolio. For a full summary of our investment portfolio by industry, see “Item 1—Financial Statements—Note 4.”

Previous wording

As of September 30, 2024, the amortized cost and fair value ofnon-performing Structured Finance Securities were$5.7 million and $1.9 million, respectively. Non-performing Structured Finance Securities are securities that have not been optionally redeemed and have an effective yield of 0.0%, as remaining residual distributions are anticipated to be recognized as a return of capital.

Current wording

Non-performing Structured Finance Securities are securities that have not been optionally redeemed and have an effective yield of 0.0%, as remaining residual distributions are anticipated to be recognized as a return of capital. As of March 31, 2025, the amortized cost and fair value ofnon-performing Structured Finance Securities were$6.2 million and $1.6 million, respectively.

Previous wording

During the nine months ended September 30, 2024, we sold Structured Finance Securities for aggregate net proceeds of $19.2 million and recognized a net realized loss of $3.5 million.

Current wording

During the three months ended March 31, 2025, we sold a Structured Finance Security for net proceeds of $1.0 million and recognized a net realized loss of $1.8 million.

Previous wording

The following is a summary of our investment activity for the three and nine months ended September 30, 2024 (dollar amounts in thousands):

Current wording

The following is a summary of our investment activity for the three months ended March 31, 2025 and March 31, 2024 (dollar amounts in thousands):

Previous wording

Comparison of the three months ended September 30, 2024 and June 30, 2024 and comparison of the nine months ended September 30, 2024 and 2023

Current wording

Comparison of the three months ended March 31, 2025 and December 31, 2024 and comparison of the three months ended March 31, 2025 and 2024

Previous wording

Consolidated operating results for the three months ended September 30, 2024 and June 30, 2024, and the nine months ended September 30, 2024 and 2023 are as follows (in thousands):

Current wording

Consolidated operating results for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024 are as follows (in thousands):

Previous wording

For the three months ended September 30, 2024, total investment income decreased to $10.9 million from $11.2 million in the prior quarter, primarily due to a decrease in interest income of $0.2 million.

Current wording

For the three months ended March 31, 2025, total investment income decreased to $10.3 million from $11.6 million in the prior quarter, primarily due to decreases in interest income of $0.5 million, dividend income of $0.5 million and fee income of $0.3 million.

Previous wording

Fee income is primarily comprised of unused fees, prepayment fees and syndication fees that generally result from periodic transactions rather than from holding portfolio investments, and are considered non-recurring. We receive syndication fees on investments where OFS Advisor sources, structures, and arranges the lending group.

Current wording

Fee income is primarily comprised of unused fees, prepayment fees and syndication fees that generally result from periodic transactions rather than from holding portfolio investments, and are considered non-recurring. We receive syndication fees on investments where OFS Advisor sources, structures, and arranges the lending group. For the three months ended December 31, 2024, we received syndication and prepayments fees of $0.3 million, compared to no syndication or prepayment fees for the three months ended March 31, 2025.

Previous wording

Total investment income for the nine months ended September 30, 2024 decreased $7.1 million compared to the corresponding period in the prior year, primarily due to a decrease in total interest income of $8.9 million, partially offset by an increase in total dividend income of $1.8 million.

Current wording

Total investment income for the three months ended March 31, 2025 decreased $3.9 million compared to the corresponding period in the prior year, primarily due to decreases in total dividend income of $2.4 million and total interest income of $1.4 million.

Previous wording

Operating expenses for the three months ended September 30, 2024 and June 30, 2024, and the nine months ended September 30, 2024 and 2023 are presented below (in thousands):

Current wording

Operating expenses for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024 are presented below (in thousands):

Previous wording

Income Incentive Fees for the nine months ended September 30, 2024 decreased $0.7 million compared to the corresponding period in the prior year, primarily due to a decrease in our average interest-bearing investment portfolio, at cost, which reduced our net investment income during the current year.

Current wording

Income Incentive Fees for the three months ended March 31, 2025 decreased $0.7 million compared to the prior quarter, primarily due to a decrease in net investment income return on net assets in the current quarter.

Previous wording

Interest expense for the three months ended September 30, 2024 decreased $0.1 million compared to the prior quarter, primarily due to a decrease of $6.1 million in our average outstanding debt balances compared to the prior quarter.

Current wording

Other expenses for the three months ended March 31, 2025 decreased $0.1 million compared to the prior quarter, primarily due to non-recurring investment transaction expenses of $0.1 million recognized during the prior quarter.

Previous wording

Net gain (loss) on investments, inclusive of realized and unrealized gains (losses), by investment type for the three months ended September 30, 2024 and June 30, 2024, and the nine months ended September 30, 2024 and 2023 were as follows (in thousands):

Current wording

Net gain (loss) on investments, inclusive of realized and unrealized gains (losses), by investment type for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024 were as follows (in thousands):

Previous wording

For the three months ended September 30, 2024, we recognized a net loss on investments of $1.9 million, primarily comprised of aggregate net losses of $5.6 million on our loans and Structured Finance Securities, and partially offset by net gains of $3.7 million on our equity securities.

Current wording

For the three months ended March 31, 2025, we recognized a net loss on investments of $10.8 million, primarily comprised of aggregate net losses of $9.3 million on our debt and equity investments and $1.5 million on our Structured Finance Securities.

Previous wording

For the nine months ended September 30, 2024, we recognized a net loss on investments of $9.7 million, primarily due to a net loss on our debt investments of $8.7 million, of which $6.4 million related to net unrealized depreciation on our current non-accrual debt investments.

Current wording

For the three months ended March 31, 2025, our net loss on debt investments of $8.1 million was primarily due to net unrealized depreciation of $7.3 million, of which $3.9 million related to non-accrual debt investments.

Previous wording

During the nine months ended September 30, 2023, our portfolio experienced net losses of $11.6 million, primarily due to net unrealized depreciation of $6.7 million on our common equity, warrants and other investments and $3.4 million on our Structured Finance Securities, respectively.

Current wording

During the three months ended December 31, 2024, our portfolio experienced net gains of $21.4 million, primarily due to net unrealized appreciation of $15.6 million on our common equity investment in Pfanstiehl Holdings, Inc.

Previous wording

As of September 30, 2024, we held cash and cash equivalents of $20.3 million, which included $8.0 million held by OFSCC-FS. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. During the nine months ended September 30, 2024, the Parent received $8.8 million in cash distributions from OFSCC-FS.

Current wording

As of March 31, 2025, we held cash and cash equivalents of $4.1 million, which included $2.6 million held by OFSCC-FS. Distributions from OFSCC-FS to the Parent are restricted by the terms and conditions of the BNP Facility. During the three months ended March 31, 2025, the Parent received $2.5 million in cash distributions from OFSCC-FS.

Previous wording

As of September 30, 2024, we had an unused commitment of $25.0 million under our Banc of California Credit Facility, as well as an unused commitment of $80.9 million under our BNP Facility, both of which are subject to a borrowing base requirements and other covenants. As of September 30, 2024, we had a payable for investments purchased of $14.7 million and unfunded commitments of $8.5 million to eight portfolio companies.

Current wording

As of March 31, 2025, we had an unused commitment of $21.5 million under our Banc of California Credit Facility, as well as an unused commitment of $85.5 million under our BNP Facility, both of which are subject to borrowing base requirements and other covenants. The reinvestment period of the BNP Facility ends on June 20, 2025, upon which the ability to access the unused commitment of the facility terminates. The BNP Facility is scheduled to mature on June 20, 2027. If we are unable to amend the BNP Facility to extend the reinvestment period or enter into a new credit facility, our short-term liquidity will be significantly reduced.

Previous wording

As of September 30, 2024, the aggregate amount outstanding of the senior securities issued by us was $249.1 million, for which our asset coverage was 161%, exceeding our minimum asset coverage requirement of 150% under the 1940 Act. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.

Current wording

As of March 31, 2025, the aggregate amount outstanding of the senior securities issued by us was $248.1 million, for which our asset coverage was 165%, exceeding our minimum asset coverage requirement of 150% under the 1940 Act. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.

Previous wording

We generate operating cash flows from net investment income and the net proceeds from liquidation of portfolio investments, and use cash in our operations in the net purchase of portfolio investments and payment of expenses. Significant variations may exist between net investment income and cash from net investment income, primarily due to the recognition of non-cash investment income, including certain Net Loan Fee amortization, PIK interest and PIK dividends, which generally will not be fully realized in cash until we exit the investment, as well as accreted interest income on Structured Finance Securities, which may not coincide with cash distributions from these investments. As discussed in “Item 1.—Financial Statements—Note 3,” we pay OFS Advisor a quarterly incentive fee with respect to our pre-incentive fee net investment income, which may include investment income that we have not received in cash. In addition, we must distribute substantially all of our taxable income, which approximates, but will not always equal, the cash we generate from net investment income to maintain our RIC tax treatment. We also obtain cash to fund investments or general corporate activities from the issuance of securities and our revolving lines of credit. These principal sources and uses of cash and liquidity are presented below (in thousands):

Current wording

We generate operating cash flows from net investment income and the net proceeds from the liquidation of portfolio investments, and use cash in our operations in the net purchase of portfolio investments and payment of expenses. Significant variations may exist between net investment income and cash from net investment income, primarily due to the recognition of non-cash investment income, including certain Net Loan Fee amortization, PIK interest and PIK dividends, which generally will not be fully realized in cash until we exit the investment, as well as accreted interest income on Structured Finance Securities, which may not coincide with cash distributions from these investments. As discussed in “Item 1.—Financial Statements—Note 3,” we pay OFS Advisor a quarterly incentive fee with respect to our pre-incentive fee net investment income, which may include investment income that we have not received in cash. In addition, we must distribute substantially all of our taxable income, which approximates, but will not always equal, the cash we generate from net investment income to maintain our RIC tax treatment. We also obtain cash to fund investments or general corporate activities from the issuance of securities and our revolving lines of credit. These principal sources and uses of cash and liquidity are presented below (in thousands):