x~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~


	x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

¨~~Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~quarterly period ended March 31, 2022

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares of ~~Capitala~~Logan Ridge Finance ~~Corp.’s~~Corporation’s common stock, $0.01 par value, outstanding as of ~~November 3, 2017 was 15,936,507.~~May 12, 2022 was 2,711,068.

Logan Ridge Finance Corporation

Consolidated Schedule of Investments - Continued

(in thousands, excepts for units/shares)

March 31, 2022

(unaudited)

^ As defined in the Investment Company Act, the investment is deemed to be an "affiliated person" of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company's outstanding voting securities.

^^ As defined in the Investment Company Act, the investment is deemed to be a "controlled affiliated person" of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

(+) Represents the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by the larger of the floor of the reference to either LIBOR ("L"), SOFR or alternate base rate (commonly known as the U.S. Prime Rate ("P"), unless otherwise noted) at the borrower's option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, or 1 month L rates. As of March 31, 2022, rates for the 12 month, 6 month, 3 month and 1 month L are 2.10%, 1.47%, 0.96% and 0.45%, respectively. As of March 31, 2022, rates for the 3 month and 1 month SOFR are 0.68% and 0.30%, respectively. As of March 31, 2022, P was 3.50%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at March 31, 2022.

(++) Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments.

~~(1)~~ All investments valued using ~~significant~~ unobservable inputs (Level 3).

Logan Ridge Finance Corporation

Consolidated Schedule of Investments - Continued

(in thousands, excepts for units/shares)

December 31, 2021

~~(1) The maturity date~~^ As defined in the Investment Company Act, the investment is deemed to be an"affiliated person" of the ~~original investment has been extended.~~

~~(3) The cash rate equals~~Company because the ~~approximate current yield on our last-out portion~~Company owns, either directly or indirectly, 5% or more of the ~~unitranche facility.~~portfolio company's outstanding voting securities.

~~(4)~~ ^^ As defined in the Investment Company Act, the investment is deemed to be a "controlled affiliated person" of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

(+) Represents the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by the larger of the floor of the reference to either LIBOR ("L") or alternate base rate (commonly known as the U.S. Prime Rate ("P"), unless otherwise noted) at the borrower's option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, or 1 month L rates. As of December 31, 2021, rates for the 12 month, 6 month, 3 month, 2 month and 1 month L are 0.58%, 0.34%, 0.21%, 0.15% and 0.10%, respectively. As of December 31, 2021, P was 3.25%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2021.

(++) Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments.

~~Capitala~~Logan Ridge Finance ~~Corp.~~Corporation (the “Company”, “we”, “us”, and “our”) is an externally managed non-diversified closed-end management investment company incorporated in Maryland that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company ~~is an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act of 2012, and as such, is subject to reduced public company reporting requirements. The Company~~ commenced operations on May 24, 2013 and completed its initial public offering (“IPO”) on September 30, 2013. The Company is managed by ~~Capitala Investment Advisors,~~Mount Logan Management LLC (the “Investment Advisor”), an investment adviser that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and ~~Capitala Advisors Corp.~~BC Partners Management LLC (the “Administrator”) provides the administrative services necessary for the Company to operate. For United States (“U.S.”) federal income tax purposes, the Company has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a regulated investment company (“RIC”) under ~~Subchapter~~subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company offers customized financing to business owners, management teams, and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion, and other growth initiatives. The Company invests in first lien loans, and, to a lesser extent, second lien loans and equity securities issued by lower middle-market and traditional middle-market companies.

The Company was formed for the purpose of: (i) acquiring, through a series of transactions, an investment portfolio from the following entities: CapitalSouth Partners Fund I Limited Partnership (“Fund I”); CapitalSouth Partners Fund II Limited Partnership (“Fund II”); CapitalSouth Partners Fund III, L.P. (“Fund III Parent”); CapitalSouth Fund III, L.P. (f/k/a CapitalSouth Partners SBIC Fund III, L.P.) (“Fund III”); and CapitalSouth Partners Florida Sidecar Fund I, L.P. (“Florida Sidecar” and, collectively with Fund I, Fund II, Fund III, and Fund III Parent, the “Legacy Funds”); (ii) raising capital in the IPO and (iii) continuing and expanding the business of the Legacy Funds by making additional debt and equity investments in lower middle-market ~~and traditional middle-market companies.~~

The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. Both directly and through our subsidiaries that are licensed by the U.S. Small Business Administration (“SBA”) under the Small Business Investment Company (“SBIC”) Act, the Company offers customized financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company invests in first lien, second lien, subordinated loans, and, to a lesser extent, equity securities issued by lower middle-market companies and traditional middle-market companies.

On September 24, 2013, the Company acquired 100% of the limited partnership interests in Fund II, Fund III, and Florida Sidecar and each of their respective general partners, as well as certain assets from Fund I and Fund III Parent, in exchange for an aggregate of 8,974,420 shares of the Company’s common stock (the “Formation Transactions”). Fund II, Fund III, and Florida Sidecar became the Company’s wholly owned subsidiaries. Fund II and Fund III retained their ~~SBIC~~small business investment company ("SBIC") licenses, continued to hold their existing investments at the time of the IPO and have continued to make new investments. The IPO consisted of the sale of 4,000,000 shares of the Company’s common stock at a price of $20.00 per share, resulting in net proceeds to the Company of $74.25 million, after deducting underwriting fees and commissions totaling $4.0 million and offering expenses totaling $1.75 million. The other costs of the IPO were borne by the limited partners of the Legacy Funds. During the fourth quarter of 2017, Florida Sidecar transferred all of its assets to the Company and was legally dissolved as a standalone partnership. On March 1, 2019, Fund II repaid its outstanding debentures guaranteed by the SBA (the “SBA-guaranteed debentures”) and relinquished its SBIC license. On June 10, 2021, Fund III repaid its SBA-guaranteed debentures and relinquished its SBIC license. As of March 31, 2022, there were no SBA-guaranteed debentures outstanding.

The Company has formed, and expects to continue to form, certain consolidated taxable subsidiaries (the “Taxable Subsidiaries”), which are taxed as corporations for U.S. federal income tax purposes. ~~These~~The Taxable Subsidiaries allow the Company to make equity investments in companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code.

Capitala Business Lending, LLC (“CBL”), a wholly-owned subsidiary of the Company, was established on October 30, 2020, for the sole purpose of holding certain investments pledged as collateral under the Company's line of credit with KeyBank National Association (the “KeyBank Credit Facility”). See Note 8 for more details about the KeyBank Credit Facility. The financial statements of CBL are consolidated with those of Logan Ridge Finance Corporation.

On April 20, 2021, Capitala Investment Advisors, LLC (“Capitala”), the Company’s former investment adviser, entered into a definitive agreement (the “Definitive Agreement”) with the Investment Advisor and Mount Logan Capital Inc. (“MLC”), both affiliates of BC Partners Advisors L.P. (“BC Partners”) for U.S. regulatory purposes, whereby Mount Logan acquired certain assets related to Capitala’s business of providing investment management services to the Company (the “Transaction”), through which the Investment Advisor became the Company’s investment adviser pursuant to an investment advisory agreement (the “Investment Advisory Agreement”) with the Company. At a special meeting of the Company’s stockholders (the “Special Meeting”) held on May 27, 2021, the Company’s stockholders approved the Investment Advisory Agreement. The transactions contemplated by the Definitive Agreement closed on July 1, 2021 (the “Closing”).

As part of the Transaction, the Investment Advisor entered into a two-year contractual fee waiver (the “Fee Waiver”) with the Company to waive, to the extent necessary, any capital gains fee under the Investment Advisory Agreement that exceeds what would have been paid to Capitala in the aggregate over such two-year period under the prior advisory agreement.

On the date of the Closing, the Company changed its name from Capitala Finance Corp. to Logan Ridge Finance Corporation and on July 2, 2021, the Company’s common stock began trading on the NASDAQ Global Select Market under the symbol “LRFC.” The Company’s 5.75% Convertible Notes due 2022 and 6.00% Notes due 2022 continue to trade under the symbols “CPTAG” and “CPTAL,” respectively.

On July 1, 2021, in connection with the Closing, the Company’s then-current interested directors and the Company’s then-current independent directors resigned as members of the Board and Ted Goldthorpe, the Chairman and Chief Executive Officer of the Company, along with Alexander Duka, George Grunebaum, and Robert Warshauer, were appointed as members of the Board (the “Directors”). The Directors were appointed by the Board to fill the vacancies created by the resignations described above and the Directors were appointed to the class of directors as determined by the Board in accordance with the Company’s organizational documents. The Company’s stockholders will have the opportunity to vote for each of the Directors when his class of directors is up for reelection.

All of the Company’s then-current officers resigned at the Closing and the Board appointed Ted Goldthorpe as the Company’s Chief Executive Officer and President, Jason Roos as the Company’s Chief Financial Officer, Treasurer and Secretary, Patrick Schafer as the Company’s Chief Investment Officer and David Held as the Company’s Chief Compliance Officer. On November 9, 2021, Jason Roos was replaced as Secretary and Treasurer of the Company by Brandon Satoren, who was also appointed as Chief Accounting Officer. Mr. Roos continues to serve as Chief Financial Officer of the Company.

The Company is considered an investment company as defined in Accounting Standards Codification (“ASC”) Topic 946 –— Financial Services –— Investment Companies (“ASC 946”). The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 6 and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying our annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, including Fund II, Fund III, ~~Florida Sidecar,~~CBL, and the Taxable Subsidiaries.

The Company’s financial statements as of ~~September 30, 2017~~March 31, 2022 and December 31, 2021 and for the periods ended March 31, 2022 and 2021 are presented on a consolidated basis. The effects of all intercompany transactions between the Company and its subsidiaries (Fund II, Fund III, ~~Florida Sidecar,~~CBL, and the Taxable Subsidiaries) have been eliminated in consolidation. All financial data and information included in these consolidated financial statements have been presented on the basis described above. In the opinion of management, the consolidated financial statements reflect all adjustments that are necessary for the fair presentation of financial results as of and for the periods presented.

The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Additionally, the unaudited consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~7, 2017.~~14, 2022.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates under different assumptions and conditions. The most significant estimates in the preparation of the consolidated financial statements are investment valuation, revenue recognition, and income taxes.

As provided under ~~Regulation S-X and~~ ASC 946, the Company will generally not consolidate its investment in a company other than a substantially wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly owned investment company subsidiaries (Fund II, Fund III, CBL, and the Taxable Subsidiaries) in its consolidated financial statements. The Company did not consolidate its interest in Capitala Senior Liquid Loan Fund I, LLC (“CSLLF”) during the periods it was in existence because the investment was not considered a substantially wholly owned investment company subsidiary. Further, CSLLF was a joint venture for which shared power existed relating to the decisions that most significantly impacted the economic performance of the entity. See Note 4 to the consolidated financial statements for a description of the Company’s investment in CSLLF.

In accordance with ASC Topic 280 —Segment Reporting (“ASC 280”), the Company has determined that it has a single reporting segment and operating unit structure. While the Company invests in several industries and geographic locations, all investments share similar business and economic risks. As such, all investment activities have been aggregated into a single segment.

The Company considers cash equivalents to be highly liquid investments with original maturities of three months or less at the date of purchase. The Company deposits its cash in financial institutions, and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits.

In accordance with the provisions of the 1940 Act, the Company classifies its investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those investments that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25% of the voting securities of such company and/or has greater than 50% representation on its board or has the power to exercise control over management or policies of such portfolio company. The Company is deemed to be an affiliate of a company in which the Company has invested if it owns ~~between~~ 5% ~~and 25%~~or more of the voting securities of such company.

The Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 —Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements. In accordance with ASC 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy, as discussed in Note 4.

In determining fair value, the ~~Company’s board of directors (the “Board”)~~Board uses various valuation approaches, and engages a third-party valuation firm, which provides an independent valuation of certain ~~investments.~~investments it reviews. In accordance with U.S. GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board. Unobservable inputs reflect the Board’s assumptions about the inputs market participants would use in pricing the asset or liability developed based upon the best information available in the circumstances.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a market for the securities existed. Accordingly, the degree of judgment exercised by the Board in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

In estimating the fair value of portfolio investments, the Company starts with the cost basis of the investment, which includes original issue discount ~~or premium~~ and payment-in-kind (“PIK”) income, if any. The transaction price is typically the best estimate of fair value at inception. When evidence supports a subsequent change to the carrying value from the original transaction price, adjustments are made to reflect the expected fair values.

As a practical expedient, the Company used the net asset value (“NAV”) as the basis for the fair value of its investment in CSLLF for the periods held. CSLLF recorded its underlying investments at fair value on a daily basis utilizing pricing information from third-party sources.

The valuation methodologies summarized below are utilized by the Company in estimating fair value.

The enterprise value waterfall approach determines an enterprise value based on earnings before interest, tax, depreciation, and amortization (“EBITDA”) multiples of publicly traded companies that are considered similar to the subject portfolio company. The Company considers a variety of items in determining a reasonable pricing multiple, including, but not limited to, operating results, budgeted projections, growth, size, risk, profitability, leverage, management depth, diversification, market position, supplier or customer dependence, asset utilization, liquidity metrics, and access to capital markets. EBITDA of the portfolio company is adjusted for non-recurring items in order to reflect a normalized level of earnings that is representative of future earnings. In certain instances, the Company may also utilize revenue multiples to determine enterprise value. When available, the Company may assign a pricing multiple or value its ~~equity~~ investments based on the value of recent investment transactions in the subject portfolio company or offers to purchase the portfolio company. The enterprise value is adjusted for financial instruments with seniority to the Company’s ownership and for the effect of any instrument which may dilute the Company’s investment in the portfolio company. The adjusted enterprise value is then apportioned based on the seniority and privileges of the Company’s investments within the portfolio company.

The enterprise value waterfall approach is primarily utilized to value the Company’s equity securities, including warrants. However, the Company may utilize the enterprise value waterfall approach to value certain debt securities.Income Approach

The income approach utilizes a discounted cash flow methodology in which the Company estimates fair value based on the present value of expected cash flows discounted at a market rate of interest. The determination of a discount rate, or required rate of return, takes into account the portfolio company’s fundamentals and perceived credit risk. Because the majority of the Company’s portfolio companies do not have a public credit rating, determining a discount rate often involves assigning an implied credit rating based on the portfolio company’s operating metrics compared to average metrics of similar publicly rated debt. Operating metrics include, but are not limited to, EBITDA, interest coverage, leverage ratios, return on capital, and debt to equity ratios. The implied credit rating is used to assign a base discount rate range based on publicly available yields on similarly rated debt securities. The Company may apply a premium to the discount rate utilized in determining fair value when performance metrics and other qualitative information indicate that there is an additional level of uncertainty about collectability of cash flows.

The asset approach values an investment based on the value of the underlying collateral securing the investment. ~~This approach is used when the Company has reason to believe that it will not collect all principal and interest in accordance with the contractual terms of the debt agreement.~~

Interest income and paid-in-kind interest income:Interest income is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company has loans in the portfolio that contain a ~~payment-in-kind~~PIK interest ~~(“PIK interest”)~~ provision. ~~The~~ PIK interest, which represents contractually deferred interest added to the loan balance that is generally due at maturity, is recorded on an accrual basis to the extent that such amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when due.

Non-accrual investments: ~~Generally, when interest and/or principal payments on a loan~~Management reviews all loans that become 90 days or more past due, or when there is reasonable doubt that principal or interest will be collected, for possible placement on non-accrual status. When the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income and PIK interest on that loan for financial reporting purposes. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. The Company may elect to cease accruing PIK interest and continue accruing interest income in cases where a loan is currently paying its interest income but, in management’s judgment, there is a reasonable likelihood of principal loss on the loan. Non-accrual loans are returned to accrual status when the borrower’s financial condition improves such that management believes current interest and principal payments are expected to be collected.

Gains and losses on investment ~~sales and paydowns:~~sales: Realized gains and losses on investments are recognized using the specific identification method.

Dividend income and paid-in-kind dividends:Dividend income is recognized on the date dividends are declared. The Company holds preferred equity investments in the portfolio that contain a ~~payment-in-kind~~PIK dividend ~~(“PIK dividends”)~~ provision. PIK dividends, which represent contractually deferred dividends added to the equity balance, are recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company will typically cease accrual of PIK dividends when the fair value of the equity investment is less than the cost basis of the investment or when it is otherwise determined by management that PIK dividends are unlikely to be collected.

If management determines that a decline in fair value is temporary in nature and ~~the~~ PIK dividends are more likely than not to be collected, management may elect to continue accruing PIK dividends.

Original issue discount:Discounts received to par on loans purchased are capitalized and accreted into income over the life of the loan. Any remaining discount is accreted into income upon prepayment of the loan.

Other income:Origination fees (to the extent services are performed to earn such income), amendment fees, consent fees, and other fees associated with investments in portfolio companies are recognized as income when ~~the investment transaction closes (to the extent services~~they are ~~performed to earn such income).~~earned. Prepayment penalties received by the Company for debt instruments repaid prior to maturity date are recorded as income upon receipt.

~~The Company follows the guidance in ASC Topic 860 —~~ ~~Transfers and Servicing~~ (“ASC 860”) when accounting for loan participations and partial loan sales as it relates to concluding on sales accounting treatment for such transactions. Based on the Company’s analysis of all loan participations and partial sales completed, the Company believes that all such transactions meet the criterion required by ASC 860 to qualify for sales accounting treatment.

General and administrative expenses are ~~paid~~accrued as incurred. The Company’s administrative expenses include personnel and overhead expenses allocable to the Company paid by and reimbursed to the Administrator under an administration agreement between the Company and the Administrator (the “Administration Agreement”). Other operating expenses such as legal and audit fees, director fees, and director and officer insurance are generally paid directly by the Company.

Costs incurred to issue the Company’s debt obligations are capitalized and are amortized over the term of the debt agreements under the effective interest method. Deferred financing fees are presented as a direct deduction from the carrying amount of the corresponding debt liability in the Statement of Assets and Liabilities.

The Company’s earnings per share (“EPS”) amounts have been computed based on the weighted-average number of shares of the Company’s common stock outstanding for the period. Basic EPS is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted average number of shares of the Company’s common stock outstanding during the period of computation. Diluted EPS is computed by dividing net increase (decrease) in net assets resulting from operations, adjusted for the change in net assets resulting from the exercise of the dilutive shares, by the weighted average number of shares of the Company’s common stock assuming all potentially dilutive shares had been issued. Diluted EPS reflects the potential dilution, using the as-if-converted method for convertible debt, which could occur if all potentially dilutive securities were exercised.

As of ~~September 30, 2017,~~ March 31, 2022, the Company had outstanding unfunded commitments related to debt investments in existing portfolio companies of ~~$4.0~~$0.4 million ~~(CIS Secure Computing,~~to American Academy Holdings, LLC, $4.7 million to Accordion Partners LLC, $0.9 million to Bradshaw International, Inc.), ~~$2.0~~$3.1 million ~~(Portrait Innovations, Inc.),~~to Critical Nurse Staffing, LLC, $0.9 million to Keg Logistics LLC, $1.5 million ~~(Kelle’s Transport Service, LLC),~~to Premiere Imaging, LLC, and ~~$1.0~~$3.0 million ~~(US Well Services, LLC).~~ to Wealth Enhancement Group, LLC. As of December 31, ~~2016,~~2021, the Company had outstanding unfunded commitments related to debt investments in an existing portfolio ~~company~~companies of ~~$1.2~~$9.0 million ~~(On-Site Fuel Services,~~to Accordion Partners LLC, $0.7 million to Bradshaw International, Inc.).

~~In addition~~, $3.1 million to ~~unfunded commitments related~~Critical Nursing Staffing, LLC, $3.5 million to ~~debt investments, the Company also has extended a guaranty on behalf of one of our portfolio companies, whereby we have guaranteed $1.5~~J5 Infrastructure Partners, LLC, $0.9 million ~~of obligations of Kelle’s Transport Service,~~to Keg Logistics LLC, $2.5 million to Marble Point Credit Management LLC, $1.9 million to Premiere Imaging, LLC, and $3.5 million to Wealth Enhancement Group, LLC. As of September 30, 2017 we have not been required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the fair value of this guaranty to be immaterial.

In the ordinary course of business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that could lead to the execution of these provisions against the Company. Based on its history and experience, management believes that the likelihood of such an event is remote.

In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency, or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company or result in direct losses to the Company. The nature of litigation can make it difficult to predict the impact a particular lawsuit will have on the Company. There are many reasons that the Company cannot make these assessments, including, among others, one or more of the following: the proceeding is in its early stages; the damages sought are unspecified, unsupportable, unexplained or uncertain; discovery has not started or is not complete; there are significant facts in dispute; and there are other parties who may share in any ultimate liability.

In management’s ~~opinion,~~opinion, no direct losses with respect to litigation contingencies were probable as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~2021. Management is of the opinion that the ultimate resolution of such claims, if any, will not materially affect the Company’s business, financial position, results of operations, or liquidity. Furthermore, in management’s opinion, it is not possible to estimate a range of reasonably possible losses with respect to ~~other~~ litigation contingencies.

The Company has elected to be treated for U.S. federal income tax purposes and intends to comply with the requirements to qualify annually ~~thereafter,~~ as a RIC under ~~Subchapter~~subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from U.S. federal income taxes. ~~Therefore, no provision has been recorded for U.S. federal income taxes.~~

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.

Depending on the level of taxable income earned in an excise tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next excise tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for U.S. federal excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. Since the Company’s IPO, the Company has not accrued or paid excise tax.

The tax years ended December 31, 2020, 2019, and 2018 remain subject to examination by U.S. federal, state, and local tax authorities. No interest expense or penalties have been assessed for the three months ended March 31, 2022 and 2021. If the Company was required to recognize interest and penalties, if any, related to unrecognized tax benefits this would be recognized as income tax expense in the consolidated statements of operations.

For U.S. federal income tax purposes, as of March 31, 2022, the aggregate net unrealized appreciation for all securities was $2.5 million. As of March 31, 2022, gross unrealized appreciation was $39.8 million and gross unrealized depreciation was $37.3 million. The aggregate cost of securities for U.S. federal income tax purposes was $204.4 million as of March 31, 2022. For U.S. federal income tax purposes, as of December 31, 2021, the aggregate net unrealized appreciation for all securities was $3.6 million. As of December 31, 2021, gross unrealized appreciation was $38.6 million and gross unrealized depreciation was $35.0 million. The aggregate cost of securities for U.S. federal income tax purposes was $194.6 million as of December 31, 2021.

The Company’s Taxable Subsidiaries ~~accrue income taxes payable based~~record deferred tax assets or liabilities related to temporary book versus tax differences on the ~~applicable statutory rates on~~income or loss generated by the ~~unrealized appreciation of the~~ underlying equity investments held by the Taxable Subsidiaries. As of ~~September 30, 2017,~~March 31, 2022 and December 31, ~~2016,~~2021, the Company recorded a net deferred tax ~~liability~~asset of ~~$2.7 million and $0.0 million, respectively.~~zero. For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 and 2021, the Company recorded a ~~change in~~tax provision ~~for~~of zero. As of March 31, 2022 and December 31, 2021, the valuation allowance on the Company’s deferred ~~taxes on unrealized appreciation on investments of $2.7 million. For~~tax asset was $2.5 million and $2.5 million, respectively. During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2022, there was no change in ~~provision for deferred taxes on unrealized appreciation on investments was recorded.~~the valuation allowance recognized by the Company. During the three months ended March 31, 2021, the Company recognized an decrease in the valuation allowance of $(1.0) million.

In accordance with certain applicable U.S. Treasury regulations and ~~private letter rulings~~guidance issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive its entire distribution in either cash or stock of the RIC, subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, ~~each stockholder~~the cash available for distribution must be allocated among the stockholders electing to receive ~~cash will receive a pro rata amount of~~ cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive ~~less than 20.0%~~the lesser of ~~its~~(a) the portion of the distribution such stockholder has elected to receive in cash or (b) an amount equal to his or her entire distribution ~~in cash.~~times the percentage limitation on cash available for distribution. If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

ASC Topic 740 — Income Taxes (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. As of ~~September 30, 2017~~March 31, 2022 and December ~~31, 2016,~~31, 2021, there were no uncertain tax positions.

The Company is required to determine whether a tax position of the Company is ~~more likely-than-not~~more-likely-than-not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that could negatively impact the Company’s net assets.

U.S. GAAP provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities.

The Company’s activities since commencement of operations remain subject to examination by U.S. federal, state, and local tax authorities. No interest expense or penalties have been assessed for the three and nine months ended September 30, 2017 and September 30, 2016. If the Company was required to recognize interest and penalties, if any, related to unrecognized tax benefits this would be recognized as income tax expense in the consolidated statements of operations.

Distributions to the Company’s common stockholders are recorded ~~as payable~~ on the ~~declaration~~record date. The amount to be paid out as a dividend is determined by the Board. Net capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.

The Company has adopted an “opt out” dividend reinvestment plan (“DRIP”) for the Company’s common stockholders. As a result, if the Company declares a distribution, then stockholders’ cash ~~dividend or other distribution, each stockholder that has not “opted out” of the DRIP~~distributions will ~~have its dividends~~be automatically reinvested in additional shares of the Company’s common stock ~~rather than receiving~~unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash ~~dividends. Stockholders who receive~~distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to ~~the same~~U.S. federal, state, and local ~~tax consequences~~taxes in the same manner as ~~if they received~~ cash ~~distributions.~~distributions, stockholders participating in the Company’s DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes.

The Investment Advisor has broad discretion in making investments for the Company. Investments will generally consist of debt and equity instruments that may be affected by business, financial market, or legal uncertainties. Prices of investments may be volatile, and a variety of factors that are inherently difficult to predict, such as domestic or international economic and political developments, may significantly affect the results of the Company’s activities and the value of its investments. In addition, the value of the Company’s portfolio may fluctuate as the general level of interest rates fluctuate.

The value of the Company’s investments may be detrimentally affected to the extent, among other things, that a borrower defaults on its obligations, there is insufficient collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted ~~loan,~~loan. The value of the Company’s investments may also be detrimentally affected to the extent observable ~~secondary~~primary or ~~primary~~secondary market yields for similar instruments issued by comparable companies increase materially or risk premiums ~~required~~ in the market between smaller companies, such as our borrowers, and those for which market yields are observable increase materially.

The Investment Advisor may attempt to minimize this risk by maintaining low debt-to-liquidation values with each debt investment and the collateral underlying the debt investment.

The Company’s assets may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly traded, making purchase or sale of such securities and financial instruments at desired prices or in desired quantities difficult. Furthermore, the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately.

In ~~January 2016, FASB~~March 2020, the Financial Accounting Standards Board issued ~~ASU 2016-01,~~Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial ~~Instruments — Overall~~ ~~(Subtopic 825-10):~~~~Recognition and Measurement of Financial Assets and Financial Liabilities~~Reporting (“ASU ~~2016-01”~~2020-04”). The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance2020-04 is effective for ~~annual and interim periods beginning after~~all entities as of March 12, 2020 through December ~~15, 2017, and early adoption is not permitted for public business entities.~~31, 2022. Management ~~is currently evaluating~~continues to assess the impact ~~these changes~~that the adoption of this guidance will have on the Company’s ~~consolidated~~ financial position, or results of ~~operations.~~

~~In October 2016, the SEC adopted new rules~~operations and amended existing rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management has adopted the amendments to Regulation S-X and included required disclosures in the Company’s consolidated financial statements and related disclosures.cash flows.

The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. ~~Both directly and through the Company’s subsidiaries that are licensed by the SBA under the SBIC Act, the~~The Company offers customized financing to business owners, management teams, and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion, and other growth initiatives. The Company invests in first lien loans, and, to a lesser extent, second lien loans and ~~subordinated loans. Most of the Company’s debt investments are coupled with~~ equity ~~interests, whether in the form of detachable “penny” warrants or equity co-investments made pari-passu with our borrowers’ financial sponsors.~~securities issued by lower middle-market and traditional middle-market companies. As of ~~September 30, 2017,~~March 31, 2022, our portfolio consisted of investments in ~~46 portfolio~~42 portfolio companies with a fair value of approximately ~~$471.1 million.~~ $206.9 million.

Most of the Company’s debt investments are structured as first lien loans. First lien loans may contain some minimum amount of principal amortization, excess cash flow sweep feature, prepayment penalties, or any combination of the foregoing. First lien loans are secured by a first priority lien in existing and future assets of the borrower and may take the form of term loans, or delayed draw facilities, or revolving credit facilities. Unitranche debt, a form of first lien loan, typically involves issuing one debt security that blends the risk and return profiles of both senior secured and subordinated debt, bifurcating the loan into a first-out tranche and last-out tranche. As of March 31, 2022, 8.2% of the fair value of our first lien loans consisted of last-out loans. As of December 31, 2021, 8.5% of the fair value of our first lien loans consisted of last-out loans. In some cases, first lien loans may be subordinated, solely with respect to the payment of cash interest, to an asset based revolving credit facility.

The Company also invests in debt instruments structured as second lien loans. Second lien loans are loans which have a second priority security interest in all or substantially all of the borrower’s assets, and ~~which are not subject to the blockage of cash interest payments to the Company at the first lien lender’s discretion.~~

~~In addition to first and second lien loans, the Company may also invest~~ in ~~subordinated loans. Subordinated loans typically have a second lien on all or substantially all of the borrower’s assets, and unlike second lien loans,~~some cases, may be subject to the interruption of cash interest payments upon certain events of default, at the discretion of the first lien lender.

~~During~~During the three months ended ~~September 30, 2017, the Company~~March 31, 2022, we made approximately ~~$11.4~~$16.4 million of investments and had approximately ~~$22.4~~$8.4 million in repayments and sales, resulting in net deployment of approximately $8.0 million for the period. During the three months ended March 31, 2021, the Company made no investments and had approximately $29.9 million in repayments and sales, resulting in net repayments and sales of approximately ~~$11.0~~$29.9 million for the period. During the three months ended September 30, 2016, the Company made approximately $26.0 million of investments and had approximately $111.9 million in repayments and sales of investments resulting in net repayments and sales of approximately $85.9 million for the period.

~~During the nine months ended September 30, 2017, the Company made approximately $39.7 million~~As of investments and had approximately $104.7 million in repayments and sales resulting in net repayments and sales of approximately $65.0 million for the period. During the nine months ended September 30, 2016, the Company made approximately $53.9 million of investments and had approximately $128.6 million in repayments and sales of investments resulting in net repayments and sales of approximately $74.7 million for the period.

During the three and nine months ended September 30, 2017, the Company funded $0.4 million and $0.7 million, respectively, of previously committed capital to existing portfolio companies. During the three and nine months ended September 30, 2017, the Company funded $11.0 million and $21.7 million, respectively, of investments in portfolio companies for which it was not previously committed to fund. During the three and nine months ended September 30, 2016, the Company funded $0.0 million and $2.8 million, respectively, of previously committed capital to existing portfolio companies. During the three and nine months ended September 30, 2016, the Company funded $26.0 million and $51.1 million, respectively, of investments in portfolio companies for which it was not previously committed to fund. In addition to investing directly in portfolio companies, the Company may assist portfolio companies in securing financing from other sources by introducing portfolio companies to sponsors or by leading a syndicate of investors to provide the portfolio companies with financing. During the three and nine months ended September 30, 2017 and September 30, 2016, the Company did not lead any syndicates and did not assist any portfolio companies in obtaining indirect financing.

~~On August~~March 31, 2016, the Company sold a portion of 14 securities across 10 portfolio companies to CapitalSouth Partners Florida Sidecar Fund II, L.P. (“FSC II”), including granting an option to acquire a portion of2022, the Company’s equity investment in Eastport Holdings, LLC (the “Written Call Option”), in exchange for 100% of the partnership interests in FSC II. Concurrent with the sale of these assets to FSC II, the Company received cash consideration of $47.6 million from an affiliated third-party purchaser in exchange for 100% of the partnership interests of FSC II. These assets were sold to FSC II at their June 30, 2016 fair market values, resulting in a net realized gain of $0.1 million. The Company’s Board ~~pre-approved this transaction pursuant to Section 57(f) of the 1940 Act.~~

The Company collected and will periodically collect principal and interest payments related to certain of the securities purchased by FSC II. Such principal and interest payments will be remitted timely to FSC II based on its proportionate share of the security. FSC II does not have any recourse to the Company related to the non-payment of principal or interest by the underlying issuers of the securities.

The Written Call Option granted FSC II the right to purchase up to 31.25% of the Company’s equity investment in Eastport Holdings, LLC. The Written Call Option has a strike price of $1.5 million and a termination date of August 31, 2018. The fair value of the Written Call Option, which has been treated as a derivative liability and is recorded in the financial statement line item Written Call Option at fair value in the Company’s consolidated statements of assets and liabilities, was approximately $5.6 million as of September 30, 2017. For purposes of determiningapproved the fair value of the ~~Written Call Option,~~Company’s investment portfolio of approximately $206.9 million in good faith in accordance with the ~~Company calculated the difference in~~Company’s valuation procedures. The Company’s Board approved the fair value of the ~~underlying equity~~Company’s investment ~~in Eastport Holdings, LLC~~portfolio as of March 31, 2022 with input from a third-party valuation firm and the ~~strike price~~Investment Advisor based on information known or knowable as of the Written Call Option, or intrinsic value. The time value of the Written Call Option as of September 30, 2017 was determined to be insignificant. The Written Call Option is classified as a Level 3 financial instrument.valuation date, including trailing and forward looking data.

The composition of our investments as of ~~September 30, 2017,~~March 31, 2022, at amortized cost and fair value was as follows (dollars in thousands):

The composition of our investments as of December 31, ~~2016,~~2021, at amortized cost and fair value was as follows (dollars in thousands):

As noted above, the Company values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

~~In addition to using the above inputs in investment valuations, the~~The Company ~~continues to employ~~employs the valuation policy approved by the Board that is consistent with ASC 820 (see Note 2). Consistent with the Company’s valuation policy, the Company evaluates the source of inputs, including any markets in which its investments are trading, in determining fair value.

In estimating fair value of portfolio investments, the Company starts with the cost basis of the investment, which includes amortized original issue discount and PIK income, if any. The transaction price is typically the best estimate of fair value at inception. When evidence supports a subsequent change to the carrying value from the original transaction price, adjustments are made to reflect the expected fair values.

The following table presents the fair value measurements of investments, by major class, as of ~~September 30, 2017 (dollars in thousands),~~March 31, 2022, according to the fair value ~~hierarchy:~~

~~The following table presents fair value measurements of the Written Call Option as of September 30, 2017~~hierarchy (dollars in thousands)~~, according to the fair value hierarchy:~~:

The following table presents fair value measurements of investments, by major class, as of December 31, ~~2016 (dollars in thousands),~~2021, according to the fair value ~~hierarchy:~~

~~The following table presents fair value measurements of the Written Call Option as of December 31, 2016~~hierarchy (dollars in thousands)~~, according to the fair value hierarchy:~~:

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 (dollars in thousands):

The following table provides a reconciliation of the beginning and ending balances for the Written Call Option that use Level 3 inputs for the nine months ended September 30, 2017 (dollars in thousands):LOGAN RIDGE FINANCE CORPORATION

The following table provides a reconciliation of the beginning and ending balances for the Written Call Option that use Level 3 inputs for the nine months ended September 30, 2016 (dollars in thousands):

The net change in unrealized ~~depreciation~~appreciation on investments held ~~as of September 30, 2017 and September 30, 2016,~~ was ~~$(14.0)~~$0.2 million and ~~$(1.7)~~$12.7 million for the three months ended March 31, 2022 and 2021, respectively, and is included in net change in unrealized appreciation ~~(depreciation)~~ on investments inon the consolidated statements of operations.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of March 31, 2022 were as follows:

(1)

$0.8 million of first lien debt, less than $0.1 million of second lien debt and $0.8 million of equity and warrants were valued using the asset approach.

(2)

The weighted averages disclosed in the table above were weighted by their relative fair value.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets ~~and (liabilities)~~ as of ~~September 30, 2017~~December 31, 2021 were as follows:

Fair Value
(in millions)

Valuation

Approach

Unobservable Input

Range (Weighted Average)

Fair Value
(in millions)

Valuation
Technique

Unobservable
Input

Range (Weighted
Average) (2)

First lien debt

2.5

Market

Broker/Dealer Quote

N/A

First lien debt

184.8

Income

Required Rate of Return
Leverage Ratio
Adjusted EBITDA

10.7% - 23.0% (13.8%)
1.3x – 7.0x (3.4x)
$1.7 million - $128.1 million ($23.2 million)

88.1

Income

Required Rate of Return

6.2% – 14.6% (7.4%)

First lien debt

36.4

Enterprise Value Waterfall and Asset⁽¹⁾

EBITDA Multiple
Adjusted EBITDA
Revenue Multiple
Revenue

5.8x – 5.8x (5.8x)
$2.5 million - $4.0 million ($3.0 million)
0.2x – 0.2x (0.2x)
$56.2 million -$56.2 million ($56.2 million)

7.6

Enterprise Market Value and Asset(1)

Revenue Multiple

0.3x

Second lien debt

15.4

Income

Required Rate of Return
Leverage Ratio
Adjusted EBITDA

11.3% - 17.5% (15.5%)
4.8x – 4.9x (4.9x)
$72.0 million - $79.5 million ($77.1 million)

29.8

Income and Asset(1)

Required Rate of Return

1.2% – 11.5% (9.7%)

Second lien debt

15.4

Enterprise Value Waterfall

EBITDA Multiple
Adjusted EBITDA

6.5x – 6.5x (6.5x)
$7.7 million - $7.7 million ($7.7 million)

0.4

Enterprise Market Value

Revenue Multiple

4.7x

Subordinated debt

62.0

Income

Required Rate of Return
Leverage Ratio
Adjusted EBITDA

11.5% – 20.3% (14.4%)
3.2x – 7.1x (5.1x)
3.2 million - $15.1 million ($10.1 million)

5.1

Income

Required Rate of Return

5.0%

Subordinated debt

44.0

Enterprise Value Waterfall and Asset⁽¹⁾

EBITDA Multiple
Adjusted EBITDA
Revenue Multiple
Revenue

6.0x – 7.3x (6.7x)
$1.7 million - $26.1 million ($17.7 million)
0.2x – 0.2x (0.2x)
$140.5 million -$140.5 million ($140.5 million)

Equity and warrants

113.1

Enterprise Value Waterfall

EBITDA Multiple
Adjusted EBITDA

5.0x – 14.2x (7.8x)
$0.9 million - $78.7 million ($21.8 million)

Written Call Option

(5.6

)

Enterprise Value Waterfall

EBITDA Multiple
Adjusted EBITDA

7.3x – 7.3x (7.3x)
$26.1 million - $26.1 million ($26.1 million)

Equity

53.2

Enterprise Market Value and Asset(1)

EBITDA Multiple

1.9x – 10.0x (6.4x)

Equity

3.7

Enterprise Market Value and Asset(1)

Revenue Multiple

0.4x – 0.7x (0.4x)

Equity

7.7

Income

Required Rate of Return

17.4x – 20.4x (19.1x)

198.2

~~(1)~~

~~$1.0 million in subordinated debt and $6.7 million in first lien debt were valued using the asset approach.~~

(1)

$0.6 million in first lien debt, $0.1 million in second lien debt, and $0.6 million in equity and warrants were valued using the asset approach.

(2)

The ~~valuation techniques and significant unobservable inputs used~~weighted averages disclosed in ~~recurring Level 3~~the table above were weighted by their relative fair ~~value measurements of assets and (liabilities) as of December 31, 2016 were as follows:~~

Fair Value
(in millions)
Valuation
Approach
Unobservable Input Range (Weighted Average)
First lien debt $ 173.3 Income Required Rate of Return
Leverage Ratio
Adjusted EBITDA 9.5% - 18.0% (14.2%)
2.0x – 6.4x (4.1x)
$1.8 million - $166.0 million ($24.1 million)
First lien debt $ 53.3 Enterprise Value Waterfall and Asset⁽¹⁾ EBITDA Multiple
Adjusted EBITDA
Revenue Multiple
Revenue 4.5x – 9.0x (6.3x)
$2.5 million - $34.3 million ($13.1 million)
0.3x – 0.3x (0.3x)
$88.1 million - $88.1 million ($88.1 million)
Second lien debt $ 71.5 Income Required Rate of Return
Leverage Ratio
Adjusted EBITDA 10.0% - 17.3% (13.3%)
0.0x – 7.5x (5.0x)
$8.1 million - $166.0 million ($76.5 million)
Subordinated debt $ 114.6 Income Required Rate of Return
Leverage Ratio
Adjusted EBITDA 11.5% – 20.0% (13.6%)
1.5x – 6.7x (4.1x)
2.0 million - $63.7 million ($21.4 million)
Subordinated debt $ 35.6 Enterprise Value Waterfall and Asset⁽¹⁾ EBITDA Multiple
Adjusted EBITDA 5.0x – 8.7x (6.3x)
$1.8 million – $27.6 million ($15.7 million)
Equity and warrants $ 93.3 Enterprise Value Waterfall EBITDA Multiple
Adjusted EBITDA 4.5x – 12.2x (7.6%)
$1.8 million - $63.7 million ($17.5 million)
Written Call Option $ (2.7 ) Enterprise Value Waterfall EBITDA Multiple
Adjusted EBITDA 6.25x – 6.25x (6.25x)
$27.6 million - $27.6 million ($27.6 million)

~~(1)~~

~~$2.5 million in subordinated debt and $2.6 million in first lien debt were valued using the asset approach~~

value.

The significant unobservable inputs used in the valuation of the Company’s investments are required rate of return, ~~adjusted EBITDA,~~ EBITDA multiples, and revenue ~~revenue multiples, and leverage ratios.~~multiples. Changes in any of these unobservable inputs could have a significant impact on the Company’s estimate of fair value. An increase (decrease) in the required rate of return ~~or leverage~~ will result in a lower (higher) estimate of fair value while an increase (decrease) in ~~adjusted~~ EBITDA ~~EBITDA multiples, revenue,~~ or revenue multiples will result in a higher (lower) estimate of fair value.

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Capitala Senior Liquid Loan Fund I, LLC~~March 31, 2022

(Unaudited)

OnNote 5. Transactions With Affiliated Companies

During the three months ended March ~~24, 2015,~~31, 2022, the Company and Trinity Universal Insurance Company (“Trinity”), a subsidiary of Kemper Corporation, entered into a limited liability company agreement to co-manage CSLLF. The purpose and design of the joint venture was to invest primarilyhad investments in ~~broadly syndicated senior secured loans to middle-market~~portfolio companies which were purchased on the secondary market. Capitala and Trinity committed to provide $25.0 million of equity to CSLLF, with Capitala providing $20.0 million and Trinity providing $5.0 million, resulting in an 80%/20% economic ownership between the two parties. The board of directors and investment committee of CSLLF were split 50/50 between Trinity and Capitala, resulting in equal voting power between the two entities. In September 2016, the Company and Trinity elected to wind-down operations of CSLLF. During the fourth quarter of 2016, CSLLF sold all referenced assets underlying the total return swap (“TRS”) and declared final distributions, inclusive of dividends and return of capital.

Because the TRS was wound down in a prior period, only comparative period disclosures are included herein. For the three and nine months ended September 30, 2016, the Company received $0.5 million and $1.6 million, respectively, in dividend income from its equity interest in CSLLF.

On March 27, 2015, CSLLF entered into a TRS with Bank of America, N.A. (“Bank of America”) that was indexed to a basket of senior secured loans purchased by CSLLF. CSLLF obtained the economic benefit of the loans underlying the TRS, including the net interest spread between the interest income generated by the underlying loans and the interest expense type paymentdesignated as affiliates under the ~~TRS, the realized gain (loss) on liquidated loans, and the unrealized appreciation (depreciation) on the underlying loans.~~

~~The terms of the TRS~~1940 Act. Transactions with affiliates were governed by an ISDA 2002 Master Agreement, the Schedule thereto, and Credit Support Annex to such Schedule, and the confirmation exchanged thereunder, between CSLLF and Bank of America, which collectively established the TRS, and are collectively referred to herein as the “TRS Agreement.” Pursuant to the terms of the TRS Agreement, CSLLF selected a portfolio of loans with a maximum market value (determined at the time each such loan becomes subject to the TRS) of $100.0 million, which was also referred to as the maximum notional amount of the TRS. Each individual loan, and the portfolio of loans taken as a whole, had to meet criteria described in the TRS Agreement. CSLLF received from Bank of America a periodic payment on set dates that was based upon any coupons, both earned and accrued, generated by the loans underlying the TRS, subject to limitations described in the TRS Agreement as well as any fees associated with the loans included in the portfolio. CSLLF paid to Bank of America interest at a rate equal to the London Interbank Offered Rate (“LIBOR”) plus 1.25% per annum; the LIBOR option paid by CSLLF was determined on an asset by asset basis such that the tenor of the LIBOR option (1 month, 3 month, etc.) matched the tenor of the underlying reference asset. In addition, upon the termination of any loan subject to the TRS or any repayment of the underlying reference asset, CSLLF either received from Bank of America the appreciation in the value of such loan, or paid to Bank of America any depreciation in the value of such loan.

CSLLF was required to pay an unused facility fee of 1.25% on any amount of unused facility under the minimum facility amount of $70.0 million as outlined in the TRS Agreement. Such unused facility fees were not applied during the first 4 months and last 60 days of the term of the TRS. CSLLF also agreed to pay Bank of America customary fees and expenses in connection with the establishment and maintenance of the TRS.

CSLLF was required to initially cash collateralize a specified percentage of each loan (generally 20% to 35% of the market value of senior secured loans) included under the TRS in accordance with margin requirements described in the TRS Agreement. As of December 31, 2016, CSLLF had posted $0.0 million in collateral to Bank of America in relation to the TRS, which was recorded on CSLLF’s statements of assets and liabilities as cash held as collateral on total return swap. The cash collateral represented CSLLF’s maximum credit exposure as of December 31, 2016.

In connection with the TRS, CSLLF made customary representations and warranties and was required to comply with various covenants, reporting requirements and other customary requirements for similar transactions governed by an ISDA 2002 Master Agreement.

CSLLF’s receivable due on the TRS represents realized amounts from payments on underlying loans in the total return swap portfolio. At December 31, 2016, the receivable due on TRS was $0.1 million and is recorded on CSLLF’s statement of assets and liabilities below. CSLLF does not offset collateral posted in relation to the TRS with any unrealized appreciation or depreciation outstanding in the statement of assets and liabilities as of December 31, 2016.

Transactions in TRS contracts during the three and nine months ended September 30, 2016 resulted in $1.4 million and $2.8 million, respectively, in realized gains and $0.8 million and $2.4 million, respectively, in unrealized appreciation, which was recorded on CSLLF’s statements of operations below.

~~The following represents the volume of the CSLLF’s derivative transactions during the three and nine months ended September 30, 2016~~follows (dollars in thousands):

For the
Three Months
Ended
September 30, 2016 For the
Nine Months
Ended
September 30, 2016
Average notional par amount of contract $ 68,935 $ 74,674


Company (4)	Type of Investment	Principal Amount		Amount of Interest, Fees or Dividends Credited to Income (1)		December 31, 2021 Fair Value		Gross Additions (2)		Gross Reductions (3)			Realized Gain/(Loss)		Unrealized Appreciation (Depreciation)			March 31, 2022 Fair Value
Affiliate investments
Burgaflex Holdings, LLC	Common Stock Class B (1,085,073 shares)	$	—	$	—	$	1,528	$	—	$	(335	)	$	—	$	1,061		$	2,254
Burgaflex Holdings, LLC	Common Stock Class A (1,253,198 shares)		—		—		1,193		336		—			—		619			2,148
					—		2,721		336		(335	)		—		1,680			4,402
Eastport Holdings, LLC	Second Lien Debt (13.5% Cash (3 month LIBOR + 13.0%, 0.5% Floor), Due 6/01/22)		16,500		559		16,500		—		(6	)		—		6			16,500
Eastport Holdings, LLC	Membership Units (22.9% ownership)		—		—		16,319		—		—			—		(363	)		15,956
					559		32,819		—		(6	)		—		(357	)		32,456
GA Communications, Inc.	Series A-1 Preferred Stock (1,998 shares)		—		—		4,394		—		—			—		(4	)		4,390
GA Communications, Inc.	Series B-1 Common Stock (200,000 shares)		—		—		185		—		—			—		(185	)		—
					—		4,579		—		—			—		(189	)		4,390
LJS Partners, LLC	Preferred Units (202,336 units)		—		—		843		—		—			—		28			871
LJS Partners, LLC	Common Membership Units (2,593,234 units)		—		—		7,164		—		—			—		143			7,307
					—		8,007		—		—			—		171			8,178
MMI Holdings, LLC	First Lien Debt (12.0% Cash, Due 1/31/22)		2,600		79		2,600		—		—			—		—			2,600
MMI Holdings, LLC	Second Lien Debt (6.0% Cash, Due 1/31/22)		400		6		400		—		—			—		—			400
MMI Holdings, LLC (5)	Preferred Units (1,000 units, 6.0% PIK Dividend)		—		30		1,898		30		—			—		(30	)		1,898
MMI Holdings, LLC	Common Membership Units (45 units)		—		—		63		—		—			—		1			64
					115		4,961		30		—			—		(29	)		4,962
Nth Degree Investment Group, LLC	Membership Units (6,088,000 Units)		—		—		—		—		—			—		—			—
					—		—		—		—			—		—			—
RAM Payment, LLC	First Lien Debt (6.5% Cash (1 month LIBOR + 5.0%), 1.5% Floor), Due 1/4/24)		998		16		998		—		(15	)		—		—			983
RAM Payment, LLC	First Lien Debt (9.8% Cash, Due 1/4/24)		2,706		67		2,706		—		(40	)		—		—			2,666
RAM Payment, LLC (5)	Preferred Units (86,000 units, 8.0% PIK Dividend)		—		17		3,726		17		—			—		106			3,849
					100		7,430		17		(55	)		—		106			7,498
Sierra Hamilton Holdings Corporation	Second Lien Debt (15.0%, Due 9/12/23)		3		—		3		—		—			—		—			3
Sierra Hamilton Holdings Corporation	Common Stock (15,068,000 shares)		—		—		330		—		—			—		(79	)		251
					—		333		—		—			—		(79	)		254
V12 Holdings, Inc.	Second Lien Debt		—		—		509		—		—			—		—			509
					—		509		—		—			—		—			509
Total Affiliate investments				$	774	$	61,359	$	383	$	(396	)	$	—	$	1,303		$	62,649
Control investments
Vology, Inc.	First Lien Debt (10.5% Cash (1 month LIBOR + 8.5%, 2.0% Floor), Due 3/31/22)	$	3,586	$	95	$	3,635	$	—	$	—		$	—	$	(7	)		3,628
Vology, Inc.	Class A Preferred Units (9,041,810 Units)		—		—		3,204		—		—			—		83			3,287
Vology, Inc.	Membership Units (5,363,982 Units)		—		—		—		—		—			—		—			—
Total Control investments				$	95	$	6,839	$	—	$	—		$	—	$	76		$	6,915


(1)	Represents the total amount of interest, original issue discount, fees and dividends credited to income for the portion of the year an investment was included in Affiliate or Control categories, respectively.
(2)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK and accretion of original issue discount. Gross additions also include transfers into Affiliate or Control classification.
(3)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales. Gross reductions also include transfers out of Affiliate or Control classification.
(4)	All debt investments are income producing. Equity and warrant investments are non-income producing, unless otherwise noted.
(5)	The equity investment is income producing, based on rate disclosed.

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

~~Below is certain summarized financial information for CSLLF as of~~During the year ended December 31, ~~2016 and for~~2021, the ~~three and nine months ended September 30, 2016~~Company had investments in portfolio companies designated as affiliates under the 1940 Act. Transactions with affiliates were as follows (dollars in thousands):

~~Selected Statements of Assets and Liabilities:~~


Company (4)	Type of Investment	Principal Amount		Amount of Interest, Fees or Dividends Credited to Income (1)		December 31, 2020 Fair Value		Gross Additions (2)		Gross Reductions (3)			Realized Gain/(Loss)		Unrealized Appreciation (Depreciation)			December 31, 2021 Fair Value
Affiliate investments
Burgaflex Holdings, LLC	First Lien Debt (12.0% Cash, 3.0% PIK, Due 3/23/21)	$	—	$	152	$	13,597	$	—	$	(13,597	)	$	—	$	—		$	—
Burgaflex Holdings, LLC	Common Stock Class B (1,085,073 shares)		—		—		1,338		—		—			—		190			1,528
Burgaflex Holdings, LLC	Common Stock Class A (1,253,198 shares)		—		—		—		—		—			—		1,193			1,193
					152		14,935		—		(13,597	)		—		1,383			2,721
City Gear, LLC	Membership Unit Warrants				—		2,011		—		(2,215	)		2,215		(2,011	)		—
					—		2,011		—		(2,215	)		2,215		(2,011	)		—
Eastport Holdings, LLC	Second Lien Debt (13.5% Cash (3 month LIBOR + 13.0%, 0.5% Floor), Due 4/30/22)		16,500		2,402		16,500		123		—			—		(123	)		16,500
Eastport Holdings, LLC	Membership Units (22.9% ownership)		—		—		20,294		—		—			—		(3,975	)		16,319
					2,402		36,794		123		—			—		(4,098	)		32,819
GA Communications, Inc.	Series A-1 Preferred Stock (1,998 shares)		—		—		4,066		—		—			—		328			4,394
GA Communications, Inc.	Series B-1 Common Stock (200,000 shares)		—		—		146		—		—			—		39			185
					—		4,212		—		—			—		367			4,579
LJS Partners, LLC	Preferred Units (202,336 units)		—		—		756		—		—			—		87			843
LJS Partners, LLC	Common Membership Units (2,593,234 units)		—		24		3,951		—		—			—		3,213			7,164
					24		4,707		—		—			—		3,300			8,007
MMI Holdings, LLC	First Lien Debt (12.0% Cash, Due 1/31/22)		2,600		316		2,600		—		—			—		—			2,600
MMI Holdings, LLC	Second Lien Debt (6.0% Cash, Due 1/31/22)		400		24		400		—		—			—		—			400
MMI Holdings, LLC (5)	Preferred Units (1,000 units, 6.0% PIK Dividend)		—		110		1,815		110		—			—		(27	)		1,898
MMI Holdings, LLC	Common Membership Units (45 units)		—		—		204		—		—			—		(141	)		63
					450		5,019		110		—			—		(168	)		4,961
Navis Holdings, Inc.	First Lien Debt (9.0% Cash, 2.0% PIK, Due 6/30/23)		—		993		10,882		181		(11,212	)		—		149			—
Navis Holdings, Inc.	Class A Preferred Stock (1,000 shares)		—		100		986		—		(1,000	)		—		14			—
Navis Holdings, Inc.	Common Stock (60,000 shares)		—		—		—		—		(260	)		260		—			—
					1,093		11,868		181		(12,472	)		260		163			—
Nth Degree Investment Group, LLC	Membership Units (6,088,000 Units)		—		—		—		—		—			—		—			—
					—		—		—		—			—		—			—
RAM Payment, LLC	First Lien Debt (6.5% Cash (1 month LIBOR + 5.0%), 1.5% Floor), Due 1/4/24)		983		126		2,451		—		(1,455	)		—		2			998
RAM Payment, LLC	First Lien Debt (9.8% Cash, Due 1/4/24)		2,666		517		6,646		—		(3,939	)		—		(1	)		2,706
RAM Payment, LLC (5)	Preferred Units (86,000 units, 8.0% PIK Dividend)		—		124		2,874		69		—			—		783			3,726
					767		11,971		69		(5,394	)		—		784			7,430
Sierra Hamilton Holdings Corporation	Second Lien Debt (15.0%, Due 9/12/23)		3		108		441		12		(450	)		—		—			3
Sierra Hamilton Holdings Corporation	Common Stock (15,068,000 shares)		—		—		977		—		—			—		(647	)		330
					108		1,418		12		(450	)		—		(647	)		333
V12 Holdings, Inc.	Second Lien Debt		—		—		490		—		—			—		19			509
					—		490		—		—			—		19			509
Total Affiliate investments				$	4,996	$	93,425	$	495	$	(34,128	)	$	2,475	$	(908	)	$	61,359
Control investments
Vology, Inc.	First Lien Debt (10.5% Cash (1 month LIBOR + 8.5%, 2.0% Floor), Due 3/31/22)	$	3,635	$	389	$	3,732	$	—	$	(97	)	$	—	$	-			3,635
Vology, Inc.	Class A Preferred Units (9,041,810 Units)		—		—		4,687		—		—			—		(1,483	)		3,204
Vology, Inc.	Membership Units (5,363,982 Units)		—		—		—		—		—			—		—			—
Total Control investments				$	389	$	8,419	$	—	$	(97	)	$	—	$	(1,483	)	$	6,839

As of
December 31,
2016
ASSETS
Receivable due on Total Return Swap $ 82
Total assets $ 82

LIABILITIES
Distribution payable $ 82
Total liabilities $ 82

NET ASSETS
Total net assets $ —
Total liabilities and net assets $ 82


(1)	Represents the total amount of interest, original issue discount, fees and dividends credited to income for the portion of the year an investment was included in Affiliate or Control categories, respectively.
(2)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK and accretion of original issue discount. Gross additions also include transfers into Affiliate or Control classification.
(3)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments and sales. Gross reductions also include transfers out of Affiliate or Control classification.
(4)	All debt investments are income producing. Equity and warrant investments are non-income producing, unless otherwise noted.
(5)	The equity investment is income producing, based on rate disclosed.

~~Selected Statements of Operations (unaudited):~~LOGAN RIDGE FINANCE CORPORATION

For the
Three Months For the
Nine Months
Ended Ended
September 30, 2016 September 30, 2016

Administrative and legal expenses $ (15 ) $ (131 )
Net operating loss $ (15 ) $ (131 )

Net realized gain on Total Return Swap $ 1,374 $ 2,810
Net unrealized appreciation on Total Return Swap 775 2,380
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,134 $ 5,059

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

Note 5.6. Agreements

On ~~September 24, 2013,~~July 1, 2021, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with ~~our~~the Investment Advisor, which was ~~initially~~ approved by the ~~Board~~Company’s stockholders on ~~June 10, 2013.~~May 27, 2021. Unless earlier terminated in accordance with its terms, the Investment Advisory Agreement will remain in effect until July 1, 2023, a period of two years from the date it first became effective and will remain in effect from year-to-year thereafter if approved annually by the Board or by a majority of our outstanding voting securities, including, in either case, by a majority of our ~~non-interested directors. The Investment Advisory Agreement was most recently re-approved by~~directors who are not "interested persons" as such term is defined in Section 2(a)(19) of the ~~Board, including by a majority of our non-interested directors, at an in-person meeting on August 3, 2017.~~1940 Act ("Independent Directors"). Subject to the overall supervision of the Board, the Investment Advisor manages our day-to-day operations and provides investment advisory and management services to us. Under the terms of the Investment Advisory Agreement, the Investment Advisor:

~~determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;~~

• determines the composition of our portfolio, the nature and timing of the changes to our portfolio, and the manner of implementing such changes;

~~identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies);~~

• identifies, evaluates, and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies);

~~closes and monitors the investments we make; and~~

• closes and monitors the investments we make; and

~~provides us with other investment advisory, research and related services as we may from time to time require.~~

• provides us with other investment advisory, research, and related services as we may from time to time require.

The Investment Advisor’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.

The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith, or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Investment Advisor and its officers, managers, partners, agents, employees, controlling persons, members, and any other person or entity affiliated with it are entitled to indemnification from the Company for any damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Investment Advisor’s services under the Investment Advisory Agreement or otherwise as Investment Advisor for the Company.

Pursuant to the Investment Advisory Agreement, the Company has agreed to pay the Investment Advisor a fee for investment advisory and management services consisting of two components — a base management fee and an incentive fee.

The base management fee is calculated at an annual rate of 1.75% of the gross assets, which are the total assets reflected on the consolidated statements of assets and liabilities and includes any borrowings for investment purposes. Although the Company does not anticipate making significant investments in derivative financial instruments, the fair value of any such investments, which will not necessarily equal their notional value, will be included in the calculation of gross assets. For services rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee ~~was initially~~is calculated ~~based on the value of the gross assets at the end of the first calendar quarter subsequent to the IPO, and thereafter~~ based on the average value of the gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.

The incentive fee consists of the following two parts:

The first part of the incentive fee is calculated and payable quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, 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 the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to our Administrator, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 2.0% per quarter (8.0% annualized). The ~~net investment income used to calculate this part of the incentive fee is also included in the amount of the gross assets used to calculate the 1.75% base management fee. The~~ Company pays the Investment Advisor an incentive fee with respect to the pre-incentive fee net investment income in each calendar quarter as follows:

~~no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle of 2.0%;~~

• no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle of 2.0%;

• 100% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.5% in any calendar quarter (10.0% annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.5%) as the “catch-up.” The “catch-up” is meant to provide the Investment Advisor with 20% of the pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 2.5% in any calendar quarter; and

100% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.5% in any calendar quarter (10.0% annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.5%) as the “catch-up.” The “catch-up” is meant to provide the Investment Advisor with 20% of the pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 2.5% in any calendar quarter; and

• 20% of the amount of the pre-incentive fee net investment income, if any, that exceeds 2.5% in any calendar quarter (10.0% annualized) is payable to the Investment Advisor (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to the Investment Advisor).

As announced on January 4, 2016, the Investment Advisor has voluntarily agreed to waive all or such portion of the quarterly incentive fees earned by the Investment Advisor that would otherwise cause the Company’s quarterly net investment income to be less than the distribution payments declared by the Board. Quarterly incentive fees are earned by the Investment Advisor pursuant to the Investment Advisory Agreement. Incentive fees subject to the waiver cannot exceed the amount of incentive fees earned during the period, as calculated on a quarterly basis. The Investment Advisor will not be entitled to recoup any amount of incentive fees that it waives. The waiver was effective in the fourth quarter of 2015 and will continue unless otherwise publicly disclosed by the Company.

The second part of the incentive fee iswill be determined and payable in arrears as of the end of each calendar year, ~~(or upon termination of the Investment Advisory Agreement, as of the termination date),~~commencing on December 31, 2021, and will equal ~~20%~~20.0% of ~~our~~the Company’s realized capital gains, if any, on a cumulative basis with respect to each of the investments in the Company’s portfolio from ~~inception~~the fiscal quarter ending on or immediately prior to July 1, 2021 through the end of each calendar year beginning with the calendar year ending December 31, 2021, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from September 30, 2021 through the end of each calendar year beginning with the calendar year ending December 31, 2021, less the aggregate amount of any previously paid capital gain ~~incentive~~ fees under the Investment Advisory Agreement. Any realized capital gains, realized capital losses and unrealized capital depreciation with respect to ~~each~~the Company’s portfolio as of the ~~investments in our portfolio.~~end of the fiscal quarter ending on or immediately prior to July 1, 2021 shall be excluded from the calculations of the capital gains fee. In the event that the Investment Advisory Agreement shall terminate as of a date that is not a calendar year end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying a capital gains fee.

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

The Company will defer cash payment of the portion of any incentive fee otherwise earned by the Investment Advisor that would, when taken together with all other incentive fees paid to the Investment Advisor during the most recent 12 full calendar month period ending on or prior to the date such payment is to be made, exceed 20% of the sum of (a) the pre-incentive fee net investment income during such period, (b) the net unrealized appreciation or depreciation during such period and (c) the net realized capital gains or losses during such period. Any deferred incentive fees will be carried over for payment in subsequent calculation periods to the extent such payment is payable under the Investment Advisory Agreement. As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, the Company had incentive fees payable to the Investment Advisor of ~~$2.2 million and $6.4 million, respectively.~~ zero and zero related to fees earned in prior years but deferred under the incentive fee deferral mechanism.

For the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, the Company incurred ~~$2.4~~$1.0 million and ~~$2.6~~$1.4 million in base management fees, respectively. The Company ~~incurred $0.0 million and $1.8 million in~~did not earn an incentive ~~fees~~fee related to pre-incentive fee net investment income or capital gains for the both three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively. For the three months ended September 30, 2017 and 2016, the Investment Advisor waived incentive fees of $0.0 million and $0.3 million, respectively.~~2021.

For the nine months ended September 30, 2017 and 2016, the Company incurred $7.4 million and $8.0 million in base management fees, respectively. The Company incurred $1.3 million and $5.2 million in incentive fees related to pre-incentive fee net investment income for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the Investment Advisor waived incentive fees of $1.0 million and $1.7 million, respectively.

On ~~September 24, 2013,~~July 1, 2021, the Company entered into the Administration Agreement, pursuant to which the Administrator has agreed to furnish the Company with office facilities, equipment and clerical, bookkeeping, and record keeping services at such facilities. The Administrator also performs or oversees the performance of the required administrative services, which include, among other things, being responsible for the financial records that the Company is required to maintain and preparing reports to our stockholders. In addition, the Administrator assists in determining and publishing the ~~NAV,~~net asset value, oversees the preparation and filing of the tax returns and the printing and dissemination of reports to the stockholders, and generally oversees the payment of the expenses and the performance of administrative and professional services rendered to the Company by others.

Payments under the Administration Agreement are equal to an amount based upon the allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the allocable portion of the compensation of the chief financial officer, ~~and~~ the chief compliance officer, and their respective administrative support staff. Under the Administration Agreement, the Administrator will also provide, on the Company’s behalf, managerial assistance to those portfolio companies that request such assistance. Unless terminated earlier in accordance with its terms, the Administration Agreement will remain in effect until July 1, 2021, a period of two years from the date it first became effective and will remain in effect from year-to-year thereafter if approved annually by the Board. ~~The Board most recently approved the renewal of the Administration Agreement on August 3, 2017.~~ To the extent that the Administrator outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis without any incremental profit to our Administrator. Stockholder approval is not required to amend the Administration Agreement.

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 and 2021, the Company ~~paid the Administrator $0.3~~accrued $0.1 million and ~~$0.8~~ $0.4 million, respectively, for the Company’s allocable portion of the Administrator’s overhead. For the three and nine months ended September 30, 2016, the Company paid the Administrator $0.3 million and $0.8 million, respectively, for the Company’s allocable portion of the Administrator’s overhead.

The Administration Agreement provides that, absent willful misfeasance, bad faith, or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our Administrator and its officers, managers, partners, agents, employees, controlling persons, members, and any other person or entity affiliated with it are entitled to indemnification from the Company for any damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Administrator’s services under the Administration Agreement or otherwise as Administrator for the Company.

Note 6.7. Related Party Transactions

~~At September 30, 2017~~As of March 31, 2022 and December 31, ~~2016,~~2021, the Company had ~~the following receivables from (payables to) related parties relating to certain~~$1.0 million and $1.1 million of management ~~fees,~~and incentive fees ~~reimbursable expenses, and other payments owed to related parties (dollars in thousands):~~

September 30,
2017 December 31,
2016
CapitalSouth Corporation $ 74 $ 182
CapitalSouth Partners Florida Sidecar Fund II, L.P. — (35 )
Capitala Investment Advisors, LLC (2,228 ) (6,426 )
Total $ (2,154 ) $ (6,279 )

payable. These amounts are reflected in the accompanying consolidated statements of assets and liabilities under the ~~captions, “Due from related parties”,~~caption “Management and incentive ~~fee payable” and “Due to related parties.~~fees payable.”

On August 31, 2016, the Company sold assets to FSC II in exchange for 100% of the partnership interests in FSC II. Concurrent with the sale of these assets to FSC II, the Company received cash consideration of $47.6 million from an affiliated third-party purchaser in exchange for 100% of the partnership interests of FSC II. The Company’s Board pre-approved this transaction pursuant to Section 57(f) of the 1940 Act. Capitala Advisors Corp., the Company’s administrator, also serves as the administrator to FSC II. See Note 4 for a further description of this transaction.

Note 7.8. Borrowings

~~SBA~~SBA-guaranteed Debentures

The Company, through its ~~two~~ wholly owned ~~subsidiaries, uses~~subsidiary Fund III, historically used debenture leverage provided through the SBA to fund a portion of its investment portfolio. As of ~~September 30, 2017 and~~ December 31, ~~2016,~~2021, the Company ~~has $170.7 million of~~had no SBA-guaranteed debentures outstanding. The Company has issued all SBA-guaranteed debentures that were permitted under each of the Legacy Funds’ respective SBIC licenses (as applicable), and there are no unused SBA debenture commitments remaining. SBA-guaranteed debentures are secured by a lien on all assets of Fund II and Fund III. As of September 30, 2017 and December 31, 2016, Fund II andOn June 10, 2021, Fund III ~~had total assets~~repaid all of ~~approximately $344.0 million and $349.4 million, respectively.~~its remaining SBA-guaranteed debentures. On June 10, 2014, the Company received an exemptive order from the SEC exempting the Company, Fund II, and Fund III from certain provisions of the 1940 Act (including an exemptive order granting relief from the asset coverage requirements for certain indebtedness issued by Fund II and Fund III as SBICs) and from certain reporting requirements mandated by the Securities Exchange Act of 1934, as amended, with respect to Fund II and Fund III. ~~The Company intends to comply with the conditions of the order.~~

~~The weighted average interest rate for all~~On March 1, 2019, Fund II repaid its outstanding SBA-guaranteed debentures asand relinquished its SBIC license. On June 10, 2021, Fund III repaid its SBA-guaranteed debentures and relinquished its SBIC license.

As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016 was 3.29%. In addition to the stated interest rate, the SBA also charges an annual fee on all~~2021, there were no SBA-guaranteed debentures ~~issued, which is included in the Company’s interest expense. The weighted average annual fee for all SBA-guaranteed debentures as of September 30, 2017 and December 31, 2016 was 0.43%.~~outstanding.

The following table summarizes the historical interest expense and annual charges, ~~and~~ deferred financing costs, average outstanding balance, and average stated interest and annual charge rate on the SBA-guaranteed debentures for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (dollars in thousands):

For the three months ended For the nine months ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Interest expense and annual charges $ 1,597 $ 1,724 $ 4,739 $ 5,276
Deferred financing costs 153 157 456 477
Total interest and financing expenses $ 1,750 $ 1,881 $ 5,195 $ 5,753

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)


	For the Three Months Ended March 31,
	2022		2021
Interest expense and annual charges	$	—	$	661
Deferred financing costs		—		139
Total interest and financing expenses	$	—	$	800
Average outstanding balance	$	—	$	84,111
Average stated interest and annual charge rate	N/A			3.17	%

~~As of September 30, 2017 and December 31, 2016, the Company’s issued and outstanding SBA-guaranteed debentures mature as follows (dollars in thousands):~~

Fixed Maturity Date Interest Rate SBA Annual
Charge September 30, 2017 December 31,
2016
March 1, 2019 4.620 % 0.941 % 5,000 5,000
September 1, 2020 3.215 % 0.285 % 19,000 19,000
March 1, 2021 4.084 % 0.515 % 15,700 15,700
March 1, 2021 4.084 % 0.285 % 46,000 46,000
March 1, 2022 2.766 % 0.285 % 10,000 10,000
March 1, 2022 2.766 % 0.515 % 50,000 50,000
March 1, 2023 2.351 % 0.515 % 25,000 25,000
$ 170,700 $ 170,700

~~2021~~2022 Notes

On June 16, 2014, the Company issued $113.4 million in aggregate principal amount of 7.125% fixed-rate notes due 2021 (the “2021 Notes”). On May 26, 2017, the Company caused notices to be issued to the holders of its 2021 Notes regarding the Company’s exercise of its option to redeem all of the issued and outstanding 2021 Notes, pursuant to Section 1104 of the Indenture dated as of June 16, 2014, between the Company and U.S. Bank National Association, as trustee, and Section 1.01(h) of the First Supplemental Indenture dated as of June 16, 2014. The Company redeemed all $113.4 million in aggregate principal amount of the 2021 Notes on June 25, 2017. The Notes were redeemed at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from June 16, 2017, through, but excluding, June 25, 2017. As a result of the redemption, the Company recognized a loss on the extinguishment of debt of $0.0 million and $2.7 million, respectively, for the three and nine months ended September 30, 2017, due to the amortization of the deferred financing costs remaining on the 2021 Notes.

The following table summarizes the interest expense and deferred financing costs, excluding debt extinguishment costs, on the 2021 Notes for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

For the three months ended For the nine months ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Interest expense $ — $ 2,021 $ 3,908 $ 6,062
Deferred financing costs — 141 293 414
Total interest and financing expenses $ — $ 2,162 $ 4,201 $ 6,476

~~2022 Notes~~

On May 16, 2017, the Company issued $70.0 million in aggregate principal amount of 6.0% fixed-rate notes due May 31, 2022 (the “2022 Notes”). On May 25, 2017, the Company issued an additional $5.0 million in aggregate principal amount of the 2022 Notes pursuant to a partial exercise of the underwriters’ overallotment option. The 2022 Notes will mature on May 31, 2022 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after May 31, 2019 at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest on the 2022 Notes is payable ~~quarterly beginning August~~quarterly. The Notes are listed on the NASDAQ Global Select Market under the trading symbol "CPTAL" with a par value of $25.00 per share.

As of March 31, ~~2017.~~2022 and December 31, 2021, the Company had $22.8 million, respectively, in aggregate principal amount of 2022 Notes outstanding.

The following table summarizes the interest expense, ~~and~~ deferred financing costs, average outstanding balance, and average stated interest rate on the 2022 Notes for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (dollars in thousands):



	For the three months ended				For the nine months ended				For the Three Months Ended March 31,
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		2022			2021
Interest expense	$	1,132	$	—	$	1,687	$	—	$	392		$	1,093
Deferred financing costs		121		—		181		—		27			144
Total interest and financing expenses	$	1,253	$	—	$	1,868	$	—	$	419		$	1,237
Average outstanding balance									$	22,833		$	72,833
Average stated interest rate										6.0	%		6.0	%

2022 Convertible Notes

On May 26, 2017, the Company issued $50.0 million in aggregate principal amount of 5.75% fixed-rate convertible notes due on May 31, 2022 (the “2022 Convertible Notes”). On June 26, 2017, the Company issued an additional $2.1 million in aggregate principal amount of the 2022 Convertible Notes pursuant to a partial exercise of the underwriters’ overallotment option. ~~Interest is payable quarterly beginning August 31, 2017.~~

The 2022 Convertible Notes are convertible, at the holder’s option, into shares of the Company’s common stock at any time on or prior to the close of business on the business day immediately preceding the maturity date. The conversion rate for the 2022 Convertible Notes iswas initially 1.5913 shares per $25.00 principal amount of 2022 Convertible Notes (equivalent to an initial conversion price of approximately $15.71 per share of common stock). The initial conversion premium is approximately 14.0%. As a result of the reverse stock split, the conversion rate for the 2022 Convertible Notes is 0.2652 shares per $25.00 principal amount of 2022 Convertible Notes (equivalent to a conversion price of approximately $94.26) effective August 21, 2020. Upon conversion, the Company will deliver shares of its common stock (and cash in lieu of fractional shares). The conversion rate is subject to adjustment if certain events occur as outlined in the supplemental indenture relating to the 2022 Convertible Notes. The Company has determined that the embedded conversion option in the 2022 Convertible Notes is not required to be separately accounted for as a derivative under U.S. GAAP.

In addition, pursuant to a “fundamental change”, as defined in the supplemental indenture relating to the 2022 Convertible Notes, holders of the 2022 Convertible Notes may require the Company to repurchase for cash all or part of their 2022 Convertible Notes at a repurchase price equal to 100.0% of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the repurchase date. The 2022 Convertible Notes are not redeemable prior to maturity and no “sinking fund” is provided for the 2022 Convertible Notes.

As of March 31, 2022 and December 31, 2021, the Company had $52.1 million, respectively in 2022 Convertible Notes outstanding.

The following table summarizes the interest expense, ~~and~~ deferred financing costs, average outstanding balance, and average stated interest rate on the 2022 Convertible Notes for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (dollars in thousands):



	For the three months ended				For the nine months ended				For the Three Months Ended March 31,
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		2022			2021
Interest expense	$	759	$	—	$	1,040	$	—	$	749		$	749
Deferred financing costs		77		—		102		—		100			94
Total interest and financing expenses	$	836	$	—	$	1,142	$	—	$	849		$	843
Average outstanding balance									$	52,088		$	52,088
Average stated interest rate										5.75	%		5.75	%

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

~~Credit Facility~~2026 Notes

On October ~~17, 2014,~~29, 2021, the Company issued $50.0 million in aggregate principal amount of 5.25% fixed-rate notes due October 30, 2026 (the "2026 Notes") at 98.00% pursuant to a supplemental indenture with U.S. Bank National Association (the "Trustee"), which supplements that certain base indenture, dated as of June 16, 2014. The 2026 Notes were issued in a private placement exempt from registration under the Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"). The net proceeds to the Company were approximately $48.8 million, after deducting estimated offering expenses. The Notes will mature on October 30, 2026 and may be redeemed in whole or in part at the Company's option at any time or from time to time at the redemption prices set forth in the Indenture. The Notes bear interest at a rate of 5.25% per year payable semi-annually on April 30 and October 30 of each year, commencing on April 30, 2022. The Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.

In connection with the offering, the Company entered into a Registration Rights Agreement, dated as of October 29, 2021 (the "Registration Rights Agreement"), with the purchasers of the 2026 Notes. Pursuant to the Registration Rights Agreement, the Company is obligated to file with the Securities and Exchange Commission a registration statement relating to an offer to exchange the 2026 Notes for new notes issued by the Company that are registered under the Securities Act and otherwise have terms substantially identical to those of the 2026 Notes, and to use its commercially reasonable efforts to cause such registration statement to be declared effective.

As of March 31, 2022 and December 31, 2021, the Company had $50.0 million, respectively in 2026 Notes outstanding.

The following table summarizes the interest expense, deferred financing costs, average outstanding balance, and average stated interest rate on the 2026 Notes for the three months ended March 31, 2022 and 2021 (dollars in thousands):



	For the Three Months Ended March 31,
	2022			2021
Interest expense	$	705		$	—
Deferred financing costs		29			—
Total interest and financing expenses	$	734		$	—
Average outstanding balance	$	50,000		$	—
Average stated interest rate		5.25	%	N/A

Bond Repurchase Program

On July 30, 2020, the Board approved a bond repurchase program which authorizes the Company to repurchase up to an aggregate of $10.0 million worth of the Company's outstanding 2022 Notes and/or 2022 Convertible Notes (the "Bond Repurchase Program"). The Bond Repurchase Program expired on July 30, 2021. The Company did not repurchase approximately any of the 2022 Notes or 2022 Convertible Notes during the three months ended March 31, 2021.

KeyBank Credit Facility

On October 30, 2020, Capitala Business Lending, LLC("CBL"), a direct, wholly owned, consolidated subsidiary of the Company, entered into a senior secured revolving credit agreement ~~(the “Credit Facility”~~("the KeyBank Credit Facility"), with ~~ING Capital, LLC,~~the Investment Advisor a the time, as collateral manager, the lenders from time to time parties thereto (each a “Lender”), KeyBank National Association, as administrative agent, ~~arranger,~~ and ~~bookrunner, and~~U.S. Bank National Association, as custodian. Under the ~~lenders party thereto. On June 16, 2017, the Company entered into an amendment to its~~KeyBank Credit Facility, the Lenders have agreed to extend credit to CBL in an aggregate principal amount of up to $25.0 million as of October 30, 2020. CBL may, on any business day prior to October 28, 2022, request an increase in the aggregate principal amount from $25.0 million to $100.0 million in accordance with ~~ING Capital, LLC (the “Amendment”). Pursuant~~the terms and in the manner described in the KeyBank Credit Facility. The period during which the Lenders may make loans to CBL under the ~~Amendment, the~~KeyBank Credit Facility ~~currently provides for borrowings up to $114.5 million~~commenced on October 30, 2020 and ~~may be increased up to $200.0 million pursuant to its “accordion” feature.~~will continue through October 28, 2022, unless there is an earlier termination or event of default. The KeyBank Credit Facility matures on ~~June 16, 2021.~~

October 28, 2023, unless there is an earlier termination or event of default. Borrowings under the KeyBank Credit Facility bear interest at the Company’s election, at a rate per annum equal to (i) the one, two, three or six month LIBOR, as applicable, plus 3.00% or (ii) 2.00% plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5% and (C) three monthone-month LIBOR plus ~~1.0%. The Company’s ability~~3.5%, subject to elect LIBOR indices with various tenors (e.g., one, two, three or six month LIBOR) on which the interest rates for borrowings under the Credit Facility are based, provides the company with increased flexibility to managea minimum interest rate risks as compared to a borrowing arrangement that does not provide for such optionality. Once a particular LIBOR rate has been selected, the interest rate on the applicable amount borrowed will reset after the applicable tenor period and be based on the then applicable selected LIBOR rate (e.g., borrowings for which the Company has elected the one month LIBOR rate will reset on the one month anniversary of ~~the period based on the then selected LIBOR rate)~~4.25%. For any given borrowing under the Credit Facility, the Company intends to elect what it believes to be an appropriate LIBOR rate taking into account the Company’s needs at the time as well as the Company’s view of future interest rate movements. The Amendment provides for the ability to step-down the pricing of the Credit Facility from LIBOR plus 3.00% to LIBOR plus 2.75% when certain conditions are met. The Company will also pay an unused commitment fee at a rate of ~~2.50%~~1.75% per annum on the ~~amount (if positive) by which 40%~~unutilized portion of the aggregate commitments under the KeyBank Credit Facility. As of March 31, 2022 and December 31, 2021, there were no outstanding draws on KeyBank Credit Facility. The KeyBank Credit Facility ~~exceeds~~is secured by the ~~outstanding amount of loans under~~investments and other assets held by CBL, the Company’s wholly owned subsidiary. The KeyBank Credit Facility includes customary affirmative and ~~0.50% per annum~~negative covenants, including certain limitations on ~~any remaining unused portion~~the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. As of March 31, 2022 and December 31, 2021, assets pledged to secure the KeyBank Credit ~~Facility.~~Facility had a fair value of $45.2 million and $57.7 million, respectively.

The following table summarizes the interest expense, deferred financing costs, ~~and~~ unused commitment fees, average outstanding balance, and average stated interest rate on the KeyBank Credit Facility for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (dollars in thousands):



	For the three months ended				For the nine months ended				For the Three Months Ended March 31,
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		2022		2021
Interest expense	$	59	$	581	$	874	$	1,845	$	28	$	—
Deferred financing costs		341		242		834		723		48		48
Unused commitment fees		346		72		612		193		110		109
Total interest and financing expenses	$	746	$	895	$	2,320	$	2,761	$	186	$	157
Average outstanding balance									$	—	$	—
Average stated interest rate									N/A		N/A

~~As of September 30, 2017 and December~~LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2016, the Company had $0.0 million and $44.0 million, respectively, outstanding under the Credit Facility. The Credit Facility is secured by investments and cash held by Capitala Finance Corp., exclusive of assets held at our two SBIC subsidiaries. Assets pledged to secure the Credit Facility had a fair value of $185.4 million at September 30, 2017. As part of the terms of the Credit Facility, the Company may not make cash distributions with respect to any taxable year that exceed 110% (125% if the Company is not in default and its covered debt does not exceed 85% of the borrowing base) of the amounts required to be distributed to maintain eligibility as a RIC and to reduce our tax liability to zero for taxes imposed on our investment company taxable income and net capital gains.2022

(Unaudited)

~~Note 8. Fair Value of Financial Instruments~~

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following table presents the ~~carrying value~~outstanding principal and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of ~~September 30, 2017,~~March 31, 2022, and the level of each financial liability within the fair value hierarchy (dollars in thousands):

Carrying
Value⁽¹⁾ Fair Value Level 1 Level 2 Level 3
SBA debentures $ 170,700 $ 173,577 $ — $ — $ 173,577
2022 Notes 75,000 75,900 75,900 — —
2022 Convertible Notes 52,088 51,983 51,983 — —
Credit Facility — — — — —
Total $ 297,788 $ 301,460 $ 127,883 $ — $ 173,577

~~(1)~~

~~Carrying value equals the gross principal outstanding at period end.~~


	Outstanding Principal		Fair Value		Level 1		Level 2		Level 3
2022 Notes	$	22,833	$	22,861	$	22,861	$	—	$	—
2022 Convertible Notes		52,088		52,213		52,213		—		—
2026 Notes		50,000		50,000		—		—		50,000
Total	$	124,921	$	125,074	$	75,074	$	—	$	50,000

The following table presents the ~~carrying value~~outstanding principal and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of December 31, ~~2016,~~2021, and the level of each financial liability within the fair value hierarchy (dollars in thousands):

Carrying
Value⁽¹⁾ Fair Value Level 1 Level 2 Level 3
SBA debentures $ 170,700 $ 175,581 $ — $ — $ 175,581
2021 Notes 113,438 115,888 115,888 — —
Credit Facility 44,000 43,927 — — 43,927
Total $ 328,138 $ 335,396 $ 115,888 $ — $ 219,508

~~(1)~~

~~Carrying value equals the gross principal outstanding at period end.~~

~~The estimated fair value of the Company’s SBA debentures was based on future contractual cash payments discounted at market interest rates to borrow from the SBA as of the measurement date.~~

~~The estimated fair value of the 2021 Notes was based on the closing price as of the measurement date as the 2021 Notes were traded on the New York Stock Exchange under the ticker “CLA.”~~


	Outstanding Principal		Fair Value		Level 1		Level 2		Level 3
2022 Notes	$	22,833	$	23,285	$	23,285	$	—	$	—
2022 Convertible Notes		52,088		52,983		52,983		—		—
2026 Notes		50,000		50,000		—		—		50,000
Total	$	124,921	$	126,268	$	76,268	$	—	$	50,000

The estimated fair value of the 2022 Notes and 2022 Convertible Notes was based on their respective closing prices as of the measurement date as they are traded on the NASDAQ Global Select Market under the ticker “CPTAL” (2022 Notes) and on the NASDAQ Capital Market under the ticker “CPTAG” (2022 Convertible Notes).

The estimated fair value of the ~~Company’s Credit Facility was based on future contractual cash payments discounted at estimated market interest rates for similar debt.~~2026 Notes approximates the par value.

Note 9. ~~Directors~~ Directors’Fees

Our ~~independent directors~~Independent Directors receive an annual fee of $50,000. They also receive $5,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each ~~board~~Board meeting and $5,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the audit committee receives an annual fee of $10,000 and each chairman of any other committee receives an annual fee of $5,000 for their additional services, if any, in these capacities. For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022, the Company recognized ~~directors~~directors’ fees expense of $0.1 million. For the three months ended March 31, 2021, the Company recognized directors’ fees expense of $0.1 ~~million and $0.3 million, respectively. For the three and nine months ended September 30, 2016, the Company recognized directors fees expense of $0.1 million and $0.3 million, respectively.~~million. No compensation is expected to be paid to directors who are “interested persons” of the Company, as such term is defined in Section 2(a)(19) of the 1940 ~~Act~~Act.

~~Note 10. Summarized Financial Information of Our Unconsolidated Subsidiaries~~

The Company holds a control interest, as defined by the 1940 Act, in six portfolio companies that are considered significant subsidiaries under the guidance in Regulation S-X, but are not consolidated in the Company’s consolidated financial statements. Below is a brief description of each such portfolio company, along with summarized financial information as of September 30, 2017 and December 31, 2016, and for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~CableOrganizer Acquisition, LLC~~

CableOrganizer Acquisition, LLC, a Delaware limited liability company that began operations on April 23, 2013, is a leading online provider of cable and wire management products. The income the Company generated from CableOrganizer Acquisition, LLC, which includes all interest, dividends, PIK interest and dividends, fees, and unrealized appreciation (depreciation), was $1.3 million and $1.4 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~Eastport Holdings, LLC~~

Eastport Holdings, LLC, an Ohio limited liability company organized on November 1, 2011, is a holding company consisting of marketing and advertising companies located across the U.S. The income the Company generated from Eastport Holdings, LLC, which includes all interest, dividends, PIK interest and dividends, fees, and unrealized appreciation (depreciation), was $7.9 million and $11.0 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~Kelle’s Transport Service, LLC~~

Kelle’s Transport Service, LLC, a Delaware limited liability company organized on March 28, 2014, provides temperature sensitive transportation services throughout North America. The loss the Company generated from Kelle’s Transport Service, LLC, which includes all interest, dividends, PIK interest and dividends, fees, and unrealized appreciation (depreciation), was $(3.7) million and $(1.2) million for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~Navis Holdings, Inc.~~

Navis Holdings, Inc., incorporated in Delaware on December 21, 2010, designs and manufactures leading machinery for the global knit and woven finishing textile industries. The income the Company generated from Navis Holdings, Inc., which includes all interest, dividends, PIK interest and dividends, fees, and unrealized appreciation (depreciation) was $0.8 million and $2.1 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~On-Site Fuel Services, Inc.~~

On-Site Fuel Services, Inc. is a 100% owned subsidiary of On-Site Fuel Holdings, Inc., which was incorporated in Delaware on December 19, 2011. On-Site Fuel Services, Inc. provides fueling services for commercial and government vehicle fleets throughout the southeast U.S. The income the Company generated from On-Site Fuel Service, Inc., which includes all interest, dividends, PIK interest and dividends, fees, and unrealized appreciation (depreciation), was $0.1 million and $1.9 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~Micro Precision, LLC~~

Micro Precision, LLC, formed on August 5, 2011 as a Delaware limited liability company, is a prime contractor supplying critical parts and mechanical assemblies to the United States Department of Defense as well as designer and manufacturer of locomotive air horns. The income (loss) the Company generated from Micro Precision, LLC, which includes all interest, dividends, PIK interest and dividends, fees, and unrealized appreciation (depreciation), was $(0.2) million and $0.7 million for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~The summarized unaudited financial information of our unconsolidated subsidiaries was as follows (dollars in thousands):~~

As of
Balance Sheet – CableOrganizer Acquisition, LLC September 30,
2017 December 31,
2016
Current assets $ 8,859 $ 5,589
Noncurrent assets 9,714 9,872
Total assets $ 18,573 $ 15,461

Current liabilities $ 8,365 $ 4,219
Noncurrent liabilities 12,247 11,882
Total liabilities $ 20,612 $ 16,101

Total deficit $ (2,039 ) $ (640 )

For the nine months ended
Statements of Operations – CableOrganizer Acquisition, LLC September 30,
2017 September 30,
2016
Net sales $ 21,926 $ 17,440
Cost of goods sold 15,558 11,703
Gross profit $ 6,368 $ 5,737

Other expenses $ 7,767 $ 6,877
Loss before income taxes (1,399 ) (1,140 )
Income tax benefit — —
Net loss $ (1,399 ) $ (1,140 )

As of
Balance Sheet – Eastport Holdings, LLC September 30,
2017 December 31,
2016
Current assets $ 93,749 $ 96,175
Noncurrent assets 150,772 145,802
Total assets $ 244,521 $ 241,977

Current liabilities $ 153,294 $ 157,622
Noncurrent liabilities 44,558 41,355
Total liabilities $ 197,852 $ 198,977

Total equity $ 46,669 $ 43,000

For the nine months ended
Statements of Operations – Eastport Holdings, LLC September 30,
2017 September 30,
2016
Net sales $ 415,289 $ 388,036
Cost of goods sold 308,434 305,926
Gross profit $ 106,855 $ 82,110

Other expenses $ 102,116 $ 76,195
Income before income taxes 4,739 5,915
Income tax provision 650 1,596
Net income $ 4,089 $ 4,319

As of
Balance Sheet – Kelle’s Transport Services, LLC September 30,
2017 December 31,
2016
Current assets $ 8,863 $ 8,415
Noncurrent assets 12,379 13,374
Total assets $ 21,242 $ 21,789

Current liabilities $ 12,073 $ 4,664
Noncurrent liabilities 17,487 14,962
Total liabilities $ 29,560 $ 19,626

Total equity(deficit) $ (8,318 ) $ 2,163

For the nine months ended
Statements of Operations – Kelle’s Transport Services, LLC September 30,
2017 September 30,
2016
Net sales $ 38,594 $ 49,095
Cost of goods sold 37,879 41,198
Gross profit $ 715 $ 7,897

Other expenses $ 10,906 $ 9,219
Loss before income taxes (10,191 ) (1,322 )
Income tax provision — 43
Net loss $ (10,191 ) $ (1,365 )

As of
September 30, December 31,
Balance Sheets - Navis Holdings, Inc. 2017 2016
Current assets $ 4,967 $ 4,655
Noncurrent assets 3,131 3,446
Total assets $ 8,098 $ 8,101

Current liabilities $ 2,473 $ 2,448
Noncurrent liabilities 7,006 6,719
Total liabilities $ 9,479 $ 9,167

Total deficit $ (1,381 ) $ (1,066 )

For the nine months ended
September 30, September 30,
Statement of Operations - Navis Holdings, Inc. 2017 2016
Net sales $ 9,990 $ 13,866
Cost of goods sold 6,251 8,585
Gross profit $ 3,739 $ 5,281

Other expenses $ 3,389 $ 3,666
Income before income taxes 350 1,615
Income tax provision 140 633
Net income $ 210 $ 982

As of
September 30, December 31,
Balance Sheets - On-Site Fuel Services, Inc. 2017 2016
Current assets $ 22,400 $ 13,079
Noncurrent assets 22,930 16,283
Total assets $ 45,330 $ 29,362

Current liabilities $ 21,157 $ 35,244
Noncurrent liabilities 34,215 1,127
Total liabilities $ 55,372 $ 36,371

Total deficit $ (10,042 ) $ (7,009 )

For the nine months ended
September 30, September 30,
Statement of Operations - On-Site Fuel Services, Inc. 2017 2016
Net sales $ 113,822 $ 78,408
Cost of goods sold 93,013 62,522
Gross profit $ 20,809 $ 15,886

Other expenses $ 23,843 $ 18,785
Loss before income taxes (3,034 ) (2,899 )
Income tax provision - -
Net loss $ (3,034 ) $ (2,899 )

As of
September 30, December 31,
Balance Sheets - Micro Precision, LLC 2017 2016
Current assets $ 6,312 $ 10,580
Noncurrent assets 19,808 15,562
Total assets $ 26,120 $ 26,142

Current liabilities $ 7,253 $ 8,680
Noncurrent liabilities 13,951 16,137
Total liabilities $ 21,204 $ 24,817

Total equity $ 4,916 $ 1,325

For the nine months ended
September 30, September 30,
Statement of Operations - Micro Precision, LLC 2017 2016
Net sales $ 12,289 $ 13,294
Cost of goods sold 7,522 8,659
Gross profit $ 4,767 $ 4,635

Other expenses $ 4,509 $ 5,101
Income/(loss) before income taxes 258 (466 )
Income tax provision - -
Net income/(loss) $ 258 $ (466 )

Note ~~11.~~10. Earnings Per Share

In accordance with the provisions of ASC Topic 260 - Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common ~~shareholders~~stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Other potentially dilutive shares of the Company’s common ~~shares,~~stock, and the related impact to earnings, are considered when calculating diluted earnings per ~~share on a diluted basis. As of September 30, 2017, all~~share. For the three months ended March 31, 2022 and 2021, 0.6 million in convertible shares related to the 2022 Convertible Notes were considered anti-dilutive. ~~As of September 30, 2016, there were no dilutive shares.~~

The following information sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets per share resulting from operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~2021 (dollars in thousands, except share and per share data):

For the three months ended For the nine months ended
Basic and diluted September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Net increase (decrease) in net assets from operations – basic and diluted $ (5,753 ) $ (2,013 ) $ (6,395 ) $ 1,055
Weighted average common shares outstanding – basic and diluted 15,911,160 15,829,878 15,891,636 15,807,801
Net increase (decrease) in net assets per share from operations – basic and diluted $ (0.36 ) $ (0.13 ) $ (0.40 ) $ 0.07


	For the Three Months Ended March 31,
	2022 (1)			2021
Net (decrease) increase in net assets resulting from operations - basic	$	(858	)	$	12,354
Weighted average common stock outstanding – basic		2,711,068			2,711,068
Net (decrease) increase in net assets per share resulting from operations - basic	$	(0.32	)	$	4.56
Net (decrease) increase in net assets resulting from operations - diluted		(858	)		12,354
Adjustment for interest on the 2022 Convertible Notes and incentive fees, net		—			843
Adjusted net (decrease) increase in net assets resulting from operations - diluted		(858	)		13,197
Weighted average common stock outstanding – diluted		2,711,068			2,711,068
Adjustment for dilutive effect of the 2022 Convertible Notes		—			552,579
Adjusted weighted average common stock outstanding - diluted		2,711,068			3,263,647
Net (decrease) increase in net assets per share resulting from operations - diluted	$	(0.32	)	$	4.04

(1)

In applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be anti-dilutive. For the three months ended March 31, 2022, conversion of the 0.6 million in convertible shares was not assumed as the effect on diluted earnings per share would be anti-dilutive.

Note 11. Distributions

LOGAN RIDGE FINANCE CORPORATION

~~Note 12. Distributions~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

The Company’s distributions are recorded ~~as payable~~ on the ~~declaration~~record date. ~~Shareholders~~Stockholders have the option to receive payment of ~~their~~the distribution in cash, shares of the Company’s common stock, or a combination of cash and shares of common stock.

Tax characteristics of all distributions paid are reported to stockholders on Form 1099 after the end of the calendar year. Accordingly, distributions may be subject to reclassification based on future dividends and operating results and will not be determined until the end of the year. The ~~following table summarizes the~~ Company’s Board determined not to declare a distribution ~~declarations~~ for the ~~nine months~~quarters ended ~~September 30, 2017 (dollars in thousands, except share~~March 31, 2022 and ~~per share data):~~2021.

Date Declared Record Date Payment Date Amount
Per Share Cash
Distribution DRIP
Shares
Issued DRIP
Share
Value
January 3, 2017 January 20, 2017 January 30, 2017 $ 0.13 $ 1,993 5,304 $ 70
January 3, 2017 February 20, 2017 February 27, 2017 0.13 1,993 5,195 70
January 3, 2017 March 23, 2017 March 30, 2017 0.13 1,998 4,948 67
April 3, 2017 April 19, 2017 April 27, 2017 0.13 1,996 5,164 69
April 3, 2017 May 23, 2017 May 29, 2017 0.13 1,990 5,880 76
April 3, 2017 June 21, 2017 June 29, 2017 0.13 1,969 7,959 97
July 3, 2017 July 21, 2017 July 28, 2017 0.13 1,995 5,889 73
July 3, 2017 August 23, 2017 August 30, 2017 0.13 1,957 13,162 111
July 3, 2017 September 20, 2017 September 28, 2017 0.13 1,989 9,085 80
Total Distributions Declared and Distributed $ 1.17 $ 17,880 62,586 $ 713

~~The following table summarizes the Company’s distribution declarations for the nine months ended September 30, 2016 (dollars in thousands, except share and per share data):~~

Date Declared Record Date Payment Date Amount
Per Share Cash
Distribution DRIP
Shares
Issued DRIP
Share
Value
January 4, 2016 January 22, 2016 January 28, 2016 $ 0.1567 $ 2,392 8,135 $ 80
January 4, 2016 February 19, 2016 February 26, 2016 0.1567 2,405 7,076 70
January 4, 2016 March 22, 2016 March 30, 2016 0.1567 2,397 7,079 77
April 1, 2016 April 22, 2016 April 28, 2016 0.1567 2,392 6,625 85
April 1, 2016 May 23, 2016 May 30, 2016 0.1567 2,372 8,147 104
April 1, 2016 June 21, 2016 June 29, 2016 0.1567 2,369 8,229 108
July 1, 2016 July 22, 2016 July 29, 2016 0.1567 2,382 7,025 98
July 1, 2016 August 22, 2016 August 30, 2016 0.1567 2,391 6,256 90
July 1, 2016 September 22, 2016 September 29, 2016 0.1567 2,380 8,242 101
Total Distributions Declared and Distributed $ 1.41 $ 21,480 66,814 $ 813

~~Note 13. Financial Highlights~~

Note 12. Financial Highlights

The following is a schedule of financial highlights for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (dollars in thousands, except share and per share data):

September 30, 2017 September 30, 2016
Per share data:
Net asset value at beginning of period $ 15.79 $ 17.04
Net investment income⁽¹⁾ 0.71 1.41
Net realized loss on investments⁽¹⁾ (0.05 ) (1.57 )
Net unrealized appreciation (depreciation) on investments⁽¹⁾ (0.72 ) 0.29
Net unrealized depreciation on Written Call Option⁽¹⁾ (0.18 ) (0.06 )
Change in provision for deferred taxes on unrealized appreciation on investments⁽¹⁾ (0.17 ) —
Distributions declared from net investment income (1.17 ) (1.41 )
Other⁽⁷⁾ — (0.02 )
Net asset value at end of period $ 14.21 $ 15.68
Net assets at end of period $ 226,307 $ 248,377
Shares outstanding at end of period 15,930,631 15,844,159
Per share market value at end of period $ 9.54 $ 13.11
Total return based on market value⁽²⁾ (18.50 )% 21.84 %
Ratio/Supplemental data:
Ratio of net investment income to average net assets⁽⁹⁾ 6.70 % 11.99 %
Ratio of incentive fee, net of incentive fee waiver, to average net assets^(6)(10) 0.15 % 1.35 %
Ratio of interest and financing expenses to average net assets⁽⁸⁾ 8.17 % 7.76 %
Ratio of loss on extinguishment of debt to average net assets⁽¹⁰⁾ 1.13 % —
Ratio of other operating expenses, to average net assets⁽⁸⁾ 5.75 % 5.71 %
Ratio of total expenses, net of fee waivers to average net assets⁽⁶⁾⁽⁹⁾ 15.20 % 14.82 %
Portfolio turnover rate⁽³⁾ 7.81 % 9.42 %
Average debt outstanding⁽⁴⁾ $ 333,572 $ 364,430
Average debt outstanding per common share $ 20.94 $ 23.00
Asset coverage ratio per unit⁽⁵⁾ $ 2,781 $ 2,640


	For the Three Months Ended March 31,
	2022			2021
Per share data:
Net asset value at beginning of year	$	39.48		$	40.19
Net investment loss(1)		(0.39	)		(0.29	)
Net realized loss on investments(1)		(0.01	)		(5.17	)
Net change in unrealized appreciation on investments(1)	$	0.08			10.02
Other(2)		—			(0.01	)
Net asset value at end of year	$	39.16		$	44.74
Net assets at end of period	$	106,171		$	121,301
Shares outstanding at end of period		2,711,068			2,711,068
Per share market value at end of period	$	22.57		$	15.44
Total return based on market value(3)		(1.83	)%		7.15	%
Ratio/Supplemental data:
Ratio of net investment (loss) income to average net assets(4)		(4.00	)%		(2.76	)%
Ratio of interest and financing expenses to average net assets(4)		8.32	%		10.70	%
Ratio of other operating expenses to average net assets(4)		8.37	%		9.41	%
Ratio of total expenses including tax provision, net of fee waivers, to average net assets(4)		16.69	%		20.11	%
Portfolio turnover rate(5)		4.15	%		—	%
Average debt outstanding(6)	$	124,921		$	209,032
Average debt outstanding per common share	$	46.08		$	77.10
Asset coverage ratio per unit(7)	$	1,843		$	1,971


(1)	Based on daily weighted average balance of shares of the Company’s common stock outstanding during the period.

(2)

~~(2)~~

Includes the impact of different share amounts used in calculating per share data based on weighted average shares of the Company’s common stock outstanding during the period and certain per share data based on shares of the Company’s common stock outstanding as of a period end or transaction date. Also includes the impact of shares of the Company’s common stock issued under the Company’s DRIP.

(3)

Total investment return is calculated assuming a purchase of shares of the Company’s common ~~shares~~stock at the current market value on the first day and a sale at the current market value on the last day of the period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions. Total investment returns covering less than a full period are not annualized.

(4)	~~(3)~~ Ratio is annualized.
(5)	Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value. Portfolio turnover rates that cover less than a full period are not annualized.

(6)

~~(4)~~

Based on the daily weighted average balance of debt outstanding during the period.

(7)	~~(5)~~	Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. We have excluded our SBA-guaranteed debentures from the asset coverage calculation as of ~~September 30, 2017 and September 30, 2016~~March 31, 2021 pursuant to the exemptive relief granted by the SEC in June 2014 that permits us to exclude such debentures from the definition of senior securities in the ~~200%~~150% asset coverage ratio we are required to maintain under the 1940 Act. There were no SBA-guaranteed debentures outstanding as of March 31, 2022. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.

~~(6)~~

~~The ratio of waived incentive fees to average net assets was 0.40% and 0.65% for the nine months ended September 30, 2017 and September 30, 2016.~~

~~(7)~~

Includes the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of a period end or transaction date.

~~(8)~~

~~Ratios are annualized.~~

~~(9)~~

~~Ratios are annualized. Incentive fees, net of incentive fee waiver, and loss on extinguishment of debt included within the ratio are not annualized.~~

~~(10)~~

~~Ratios are not annualized.~~

Note ~~14.~~13. Subsequent Events

Management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no other subsequent events that occurred during such period that would be required to be recognized in the consolidated financial statements as of ~~September 30, 2017.~~

~~Distributions~~

~~On October 2, 2017, the Company’s Board declared normal monthly distributions for October, November, and December of 2017~~March 31, 2022, other than as set forth ~~below:~~below.

Date Declared Record Date Payment Date Distributions per Share
October 2, 2017 October 23, 2017 October 30, 2017 $ 0.0833
October 2, 2017 November 21, 2017 November 29, 2017 $ 0.0833
October 2, 2017 December 20, 2017 December 28, 2017 $ 0.0833

~~Portfolio Activity~~

On ~~October 31, 2017,~~April 1, 2022, the Company ~~funded $2.0~~entered into a Note Purchase Agreement (the “Purchase Agreement”) governing the issuance of $15.0 million in aggregate principal amount of ~~its unfunded commitment~~5.25% Convertible Notes due 2032 (the “Convertible Notes”) in a transaction exempt from registration pursuant to ~~CIS Secure Computing, Inc.~~Section 4(a)(2) of the Securities Act. The Convertible Notes have not been registered under the Securities Act or any state securities laws and may not be reoffered or resold in the United States absent registration or an applicable exemption from such registration requirements. The Convertible Notes were delivered and paid for on April 1, 2022. The Convertible Notes will mature on April 1, 2032 (the “Maturity Date”). The net proceeds to the Company were $13,650,000, after deducting estimated offering expenses. Capitalized terms used but not defined herein have the meanings ascribed to them in the Purchase Agreement.

The Company obtained an Investment Grade rating from a Nationally Recognized Statistical Rating Organization (“NRSRO”) with respect to the Convertible Notes. The Convertible Notes have a fixed interest rate of 5.25% per annum payable semi-annually on March 31 and September 30 of each year, commencing on September 30, 2022, subject to a step up of 0.75% per annum to the extent that the Convertible Notes are downgraded below Investment Grade by an NRSRO or the

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

Convertible Notes no longer maintain a rating from an NRSRO. The Company will also be required to pay an additional interest rate of 2.0% per annum (x) on any overdue payment of interest and (y) during the continuance of an Event of Default. The Company intends to use the net proceeds from the offering of the Convertible Notes for general corporate purposes, which may include repaying outstanding indebtedness, making opportunistic investments and paying corporate expenses. In addition, on the occurrence of a Change in Control Repurchase Event or Delisting Event, the Company will generally be required to make an offer to purchase the outstanding Convertible Notes at a price equal to 100% of the principal amount of such Convertible Notes plus accrued and unpaid interest to the repurchase date.

On May 10, 2022, CBL, a direct, wholly owned, consolidated subsidiary of the Company, amended its existing senior secured revolving credit agreement (the “Amended KeyBank Credit Facility"), dated as of October 30, 2020 (and amended as of July 1, 2021) with the Investment Advisor as collateral manager, the lenders from time to time parties thereto (each a “Lender”), KeyBank National Association, as administrative agent, and U.S. Bank National Association, as custodian. Under the Amended KeyBank Credit Facility, the Lender agreed to extend credit to CBL in an initial commitment equal to an aggregate principal amount of $75.0 million. CBL may borrow up to an additional $125.0 million through an incremental uncommitted accordion feature in accordance with the terms and in the manner described in the Amended KeyBank Credit Facility.

The period during which the Lender may make loans to CBL under the Amended KeyBank Credit Facility and will continue through May 12, 2025, unless there is an earlier termination or event of default (the “Commitment Termination Date”). The Amended KeyBank Credit Facility will mature on May 10, 2027, unless there is an earlier termination or event of default. Borrowings under the Amended KeyBank Credit Facility will bear interest at a floating forward-looking term rate equal to term SOFR plus an applicable margin of 2.90% until the Commitment Termination Date and 3.25% thereafter. The Company will also pay an unused commitment fee, depending on the level of utilization, at a rate of 1.00%, 0.65%, or 0.35% per annum on the unutilized portion of the aggregate commitments under the Amended KeyBank Credit Facility.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.

Except as otherwise specified, references to “we,” “us,” ~~“our”~~“our,” “Logan Ridge,” or the “Company”, refer to ~~Capitala~~Logan Ridge Finance ~~Corp.~~Corporation.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the Company, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements.

Some of the statements in ~~the~~this Quarterly Report on Form 10-Q constitute forward-looking statements, which relate to future events or our performance or financial condition. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

•

our future operating ~~results;~~results and the impact of the COVID-19 pandemic thereon;

•

our business prospects and the prospects of our portfolio ~~companies;~~companies, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

•

the impact of investments that we expect to make;

•

our contractual arrangements and relationships with third parties;

•

the dependence of our future success on the general economy and its impact on the industries in which we invest;

~~the ability of our portfolio companies to achieve their objectives;~~

•

our expected financings and investments;

•

the adequacy of our cash resources and working capital; and

•

the timing of cash flows, if any, from the operations of our portfolio ~~companies.~~companies and the impact of the COVID-19 pandemic thereon.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

•

an economic downturn, due to the COVID-19 pandemic or otherwise, could impair our portfolio companies’ ability to continue to operate or repay their borrowings, which could lead to the loss of some or all of our investments in such portfolio companies;

•

a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment ~~activities;~~activities and the impact of the COVID-19 pandemic thereon;

•

interest rate volatility could adversely affect our results, particularly if we use leverage as part of our investment strategy; and

•

the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in ~~our Annual~~this Quarterly Report on Form ~~10-K.~~10-Q.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability, and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2021 and in this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law or U.S. Securities and Exchange Commission (“SEC”) rule or regulation.

~~OVERVIEW~~Overview

We are a Maryland corporation that has elected to be regulated as a business development company ~~(“BDC”~~(‘‘BDC’’) under the Investment Company Act of 1940, as amended (the ~~“1940 Act”~~‘‘1940 Act’’). ~~We are an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act of 2012, and as such, are subject to reduced public company reporting requirements.~~ Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We are managed by ~~Capitala Investment Advisors,~~Mount Logan Management LLC (the ~~“Investment Advisor”~~‘‘Investment Advisor’’), and ~~Capitala Advisors Corp.~~BC Partners Management LLC (the ~~“Administrator”~~‘‘Administrator’’) provides the administrative services necessary for us to operate.

We provide capital to lower and traditional middle-market companies in the United States (“(‘‘U.S.”’’), with a non-exclusive emphasis on the Southeast, Southwest, and Mid-Atlantic regions. We invest primarily in companies with a history of earnings growth and positive cash flow, proven management teams, products or services with competitive advantages, and industry-appropriate margins. We primarily invest in companies with between ~~$4.5~~$5.0 million and ~~$30~~$50.0 million in trailing ~~twelve month~~twelve-month earnings before interest, tax, depreciation, and amortization ~~(“EBITDA”~~(‘‘EBITDA’’).

We invest in first lien loans and, to a lesser extent, second lien loans and ~~subordinated loans. Most of our debt investments are coupled with~~ equity ~~interests, whether in the form of detachable “penny” warrants or equity co-investments made pari-passu with our borrowers’ financial sponsors.~~securities issued by lower middle-market and traditional middle-market companies.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally must invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, we are only allowed to borrow money such that our asset coverage, as defined in the 1940 Act, equals at least ~~200%~~150%, if certain requirements are met, after such borrowing, with certain limited exceptions. As of March 31, 2022, our asset coverage ratio was 184%. To maintain our regulated

investment company (“RIC”) status, we must meet specified source-of-income and asset diversification requirements. To maintain our RIC tax treatment under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes, we must distribute at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, for the taxable year.

Corporate History

We commenced operations on May 24, 2013 and completed our initial public offering (“IPO”) on September 30, 2013. The Company was formed for the purpose of (i) acquiring, through a series of transactions, an investment portfolio from the following entities: CapitalSouth Partners Fund I Limited Partnership (“Fund I”); CapitalSouth Partners Fund II Limited Partnership (“Fund II”); CapitalSouth Partners Fund III, L.P. (“Fund III Parent”); CapitalSouth Fund III, L.P. (f/k/a CapitalSouth Partners SBIC Fund III, L.P.) (“Fund III”) and CapitalSouth Partners Florida Sidecar Fund I, L.P. (“Florida Sidecar” and, collectively with Fund I, Fund II, Fund III and Fund III Parent, the “Legacy Funds”); (ii) raising capital in the IPO and (iii) continuing and expanding the business of the Legacy Funds by making additional debt and equity investments in lower middle-market and traditional middle-market companies.

On September 24, 2013, the Company acquired 100% of the limited partnership interests in Fund II, Fund III, and Florida Sidecar and each of their respective general partners, as well as certain assets from Fund I and Fund III Parent, in exchange for an aggregate of 8,974,420 shares of the Company’s common stock (the “Formation Transactions”). Fund II, Fund III, and Florida Sidecar became the Company’s wholly owned subsidiaries. Fund II and Fund III retained their ~~SBIC~~small business investment company (“SBIC”) licenses issued by the U.S. Small Business Administration (“SBA”), and continued to hold their existing investments at the time of IPO and have continued to make new investments after the IPO. The IPO consisted of the sale of 4,000,000 shares of the Company’s common stock at a price of $20.00 per share resulting in net proceeds to the Company of $74.25 million, after deducting underwriting fees and commissions totaling $4.0 million and offering expenses totaling $1.75 million. The other costs of the IPO were borne by the limited partners of the Legacy Funds. During the fourth quarter of 2017, Florida Sidecar transferred all of its assets to the Company and was legally dissolved as a standalone partnership. On March 1, 2019, Fund II repaid its outstanding debentures guaranteed by the SBA (“SBA-guaranteed debentures”) and relinquished its SBIC license. On June 10, 2021, Fund III repaid its SBA-guaranteed debentures and relinquished its SBIC license.

At the time of the Formation Transactions, our portfolio consisted of: (1) approximately $326.3 million in investments; (2) an aggregate of approximately $67.1 million in cash, interest receivable and other assets; and (3) liabilities of approximately $202.2 million of SBA-guaranteed ~~debt~~debentures payable. ~~We have two SBIC-licensed subsidiaries that have~~Fund III, our subsidiary, is licensed under the Small Business Investment Act, of 1958, as amended, and has elected to be regulated as ~~BDCs~~BDC under the 1940 Act.

~~Basis of Presentation~~

~~The Company is considered an investment company~~ Fund II, our subsidiary, was licensed under the SBIC Act until March 1, 2019 and has elected to be regulated as ~~defined in Accounting Standards Codification (“ASC”) Topic 946~~~~– Financial Services – Investment Companies~~ ~~(“ASC 946”).~~a BDC under the 1940 Act.

The Company has formed and expects to continue to form certain consolidated taxable subsidiaries (the ~~“Taxable Subsidiaries”~~‘‘Taxable Subsidiaries’’), which are taxed as corporations for U.S. federal income tax purposes. ~~These~~The Taxable Subsidiaries allow the Company to make equity investments in companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code.

Capitala Business Lending, LLC (“CBL”), a wholly-owned subsidiary of ours, was established on October 30, 2020, for the sole purpose of holding certain investments pledged as collateral under a senior secured revolving credit agreement with KeyBank National Association (the “KeyBank Credit Facility”). See “Financial Condition, Liquidity and Capital Resources” for more details. The financial statements of CBL are consolidated with those of Logan Ridge Finance Corporation.

Definitive Agreement

On the date of the Closing, the Company changed its name from Capitala Finance Corp. to Logan Ridge Finance Corporation and on July 2, 2021, the Company’s common stock began trading on the NASDAQ Global Select Market under the symbol “LRFC.”The Company’s 5.75% Convertible Notes due 2022 and 6.00% Notes due 2022 continue to trade under the symbols “CPTAG” and “CPTAL,” respectively.

All of the Company’s then-current officers resigned at the Closing and the Board appointed Ted Goldthorpe as the Company’s Chief Executive Officer and President, Jason Roos as the Company’s Chief Financial Officer, Treasurer and Secretary, Patrick Schafer as the Company’s Chief Investment Officer and David Held as the Company’s Chief Compliance Officer. On November 9, 2021, Jason T. Roos was replaced as Secretary and Treasurer of the Company by Brandon Satoren, who was also appointed as Chief Accounting Officer. Mr. Roos continues to serve as Chief Financial Officer of the Company.

Basis of Presentation

The Company is considered an investment company as defined in Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment Companies (“ASC 946”).The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 6 and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying our annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, including Fund II, Fund III, ~~Florida Sidecar,~~CBL, and the Taxable Subsidiaries.

Consolidation

As provided under ~~Regulation S-X and~~ ASC 946, the Company will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly owned investment company subsidiaries (Fund II, Fund III, CBL, and the Taxable Subsidiaries) in its consolidated financial statements. The Company did not consolidate its interest in Capitala Senior Liquid Loan Fund I, LLC (“CSLLF”) during the periods it was in existence because the investment was not considered a substantially wholly owned investment company subsidiary. Further, CSLLF was a joint venture for which shared power existed relating to the decisions that most significantly impacted the economic performance of the entity. See Note 4 to the consolidated financial statements for description of the Company’s investment in CSLLF.

Revenues

We generate revenue primarily from the periodic cash interest we collect on our debt investments. In addition, most of our debt investments offer the opportunity to participate in a borrower’s equity performance through warrant participation, direct equity ownership, or otherwise, which we expect to result in revenue in the form of dividends and/or capital gains. Further, we may generate revenue in the form of commitment fees, origination fees, amendment ~~structuring or~~fees, diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. These fees will be recognized as they are earned.

Expenses

Our primary operating expenses include the payment of investment advisory fees to our Investment Advisor, our allocable portion of overhead and other expenses incurred by our Administrator in performing its obligations under an administration agreement between us and the Administrator (the “Administration Agreement”) and other operating expenses as detailed below. Our investment advisory fee will compensate our Investment Advisor for its work in identifying, evaluating, negotiating, closing, monitoring, and servicing our investments. We will bear all other expenses of our operations and transactions, including (without limitation):

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the cost of our organization;

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the cost of calculating our net asset value, including the cost of any third-party valuation services;

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the cost of effecting sales and repurchases of our shares and other securities;

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interest payable on debt, if any, to finance our investments;

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fees payable to third parties relating to, or associated with, making investments (such as legal, accounting, and travel expenses incurred in connection with making investments), including fees and expenses associated with performing due diligence reviews of prospective investments and advisory fees;

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transfer agent and custodial fees;

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fees and expenses associated with marketing efforts;

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costs associated with our reporting and compliance obligations under the 1940 Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other applicable federal and state securities laws and ongoing stock exchange listing fees;

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federal, state and local taxes;

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independent directors’ fees and expenses;

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brokerage commissions;

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costs of proxy statements, stockholders’ reports and other communications with stockholders;

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fidelity bond, directors’ and officers’ liability insurance, errors and omissions liability insurance and other insurance premiums;

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direct costs and expenses of administration, including printing, mailing, telephone and staff;

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fees and expenses associated with independent audits and outside legal costs; and

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all other expenses incurred by either our Administrator or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by our Administrator in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of any costs of compensation and related expenses of our chief compliance officer, ~~and~~ our chief financial officer, and their respective administrative support staff.

Critical Accounting Policies and Use of Estimates

In the preparation of our consolidated financial statements and related disclosures, we have adopted various accounting policies that govern the application of U.S. GAAP. Our significant accounting policies are described in Note 2 to the consolidated financial statements. While all of these policies are important to understanding our consolidated financial statements, certain accounting policies and estimates are considered critical due to their impact on the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods covered by such consolidated financial statements. We have identified investment valuation, revenue recognition, and income taxes as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. Because of the nature of the judgments and assumptions we make, actual results could materially differ from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Valuation of Investments

~~Valuation of Investments~~

The Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 — Fair Value Measurements and Disclosures (“(“ASC 820”). ASC 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as discussed in Note 4 to our consolidated financial statements.

In determining fair value, ~~our board of directors (the “Board”)~~the Board uses various valuation approaches, and engages a third-party independent valuation firm, which provides positive assurance on the investments it reviews. In accordance with U.S. GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board. Unobservable inputs reflect the ~~Boards’~~Board’s assumptions about the inputs market participants would use in pricing the asset or liability developed based upon the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1— Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2— Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

~~As a practical expedient, the Company used net asset value (“NAV”) as the basis for~~In estimating the fair value of ~~its~~portfolio investments, the Company starts with the cost basis of the investment, ~~in CSLLF for~~which includes original issue discount and payment-in-kind (“PIK”) income, if any. The transaction price is typically the ~~periods held. CSLLF recorded its underlying investments at~~best estimate of fair value onat inception. When evidence supports a ~~daily basis utilizing pricing information~~subsequent change to the carrying value from ~~third-party sources.~~the original transaction price, adjustments are made to reflect the expected fair value.

Valuation Techniques

Enterprise Value Waterfall Approach

The enterprise value waterfall approach determines an enterprise value based on EBITDA multiples of publicly traded companies that are considered similar to the subject portfolio company. The Company considers a variety of items in determining a reasonable pricing multiple, including, but not limited to, operating results, budgeted projections, growth, size, risk, profitability, leverage, management depth, diversification, market position, supplier or customer dependence, asset utilization, liquidity metrics, and access to capital markets. EBITDA of the portfolio company is adjusted for non-recurring items in order to reflect a normalized level of earnings that is representative of future earnings. In certain instances, the Company may also utilize revenue multiples to determine enterprise value. When available, the Company may assign a pricing multiple or value its ~~equity~~ investments based on the value of recent investment transactions in the subject portfolio company or offers to purchase the portfolio company. The enterprise value is adjusted for financial instruments with seniority to the Company’s ownership and for the effect of any instrument which may dilute the Company’s investment in the portfolio company. The adjusted enterprise value is then apportioned based on the seniority and privileges of the ~~Company��s~~Company’s investments within the portfolio company.

Income Approach

The income approach utilizes a discounted cash flow methodology in which the Company estimates fair value based on the present value of expected cash flows discounted at a market rate of interest. The determination of a discount rate, or required rate of return, takes into account the portfolio company’s fundamentals and perceived credit risk. Because the majority of the Company’s portfolio companies do not have a public credit rating, determining a discount rate often involves assigning an implied credit rating based on the portfolio company’s operating metrics compared to average metrics of similar publicly rated debt. Operating metrics include, but are not limited to, EBITDA, interest coverage, leverage ratio, return on capital, and debt to equity ratios. The implied credit rating is used to assign a base discount rate range based on publicly available yields on similarly rated debt securities. The Company may apply a premium to the discount rate utilized in determining fair value when performance metrics and other qualitative information indicate that there is an additional level of uncertainty about collectability of cash flows.

Asset Approach

The asset approach values an investment based on the value orof the underlying collateral securing the investment. ~~This approach is used when the Company has reason to believe that it will not collect all principal and interest in accordance with the contractual terms of the debt agreement.~~

Revenue Recognition

The Company’s revenue recognition policies are as follows:

Interest income and paid-in-kind interest income:Interest income is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company has loans in the portfolio that contain a ~~payment-in-kind~~PIK interest ~~(“PIK interest”)~~ provision. ~~The~~ PIK interest, which represents contractually deferred interest added to the loan balance that is generally due at maturity, is recorded on the accrual basis to the extent that such amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when due.

Non-accrual investments: ~~Generally, when interest and/or principal payments on a loan~~Management reviews all loans that become 90 days or more past due, or when there is reasonable doubt that principal or interest will be collected, for possible placement on non-accrual status. When the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income and PIK interest on that loan for financial reporting purposes. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. The Company writes off any previously accrued and uncollected cash interest when it is determined that interest is no longer considered collectible. The Company may elect to cease accruing PIK interest and continue accruing interest income in cases where a loan is currently paying its interest income but, in management’s judgment, there is a reasonable likelihood of principal loss on the loan. Non-accrual loans are returned to accrual status when the borrower’s financial condition improves such that management believes current interest and principal payments are expected to be collected.

Gains and losses on investment sales and paydowns:Realized gains and losses on investments are recognized using the specific identification method.

Other income:Origination fees (to the extent services are performed to earn such income), amendment fees, consent fees and other fees associated with investments in portfolio companies are recognized as income when ~~the investment transaction closes.~~they are earned. Prepayment penalties received by the Company for debt instruments repaid prior to the maturity date are recorded as income upon receipt.

Income Taxes

Prior to the Formation Transactions, the Legacy Funds were treated as partnerships for U.S. federal, state and local income tax purposes and, therefore, no provision has been made in the accompanying consolidated financial statements for federal, state or local income taxes. In accordance with the partnership tax law requirements, each partner would include their respective components of the Legacy Funds’ taxable profits or losses, as shown on their Schedule K-1 in their respective tax or information returns. The Legacy Funds are disregarded entities for tax purposes prior to and post the Formation Transactions.

The Company has elected to be treated for U.S. federal income tax purposes and intends to comply with the requirement to qualify annually ~~thereafter,~~ as a RIC under ~~Subchapter~~subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from ~~U.S. federal income taxes. Therefore, no provision has been recorded for~~ U.S. federal income taxes.

The tax years ended December 31, 2021, 2020, 2019, and 2018 remain subject to examination by U.S. federal, state, and local tax authorities. No interest expense or penalties have been assessed for the periods ended March 31, 2022 and 2021. If the Company was required to recognize interest and penalties, if any, related to unrecognized tax benefits this would be recognized as income tax expense in the consolidated statements of operations.

The Company’s Taxable Subsidiaries ~~accrue income taxes payable based~~record deferred tax assets or liabilities related to temporary book versus tax differences on the ~~applicable statutory rates on~~income or loss generated by the ~~unrealized appreciation of the~~ underlying equity investments held by the Taxable Subsidiaries. As of ~~September 30, 2017,~~March 31, 2022, and December 31, ~~2016,~~2021, the Company recorded a net deferred tax asset of zero. For the three months ended March 31, 2022 and 2021, the Company recorded a deferred tax ~~liability~~provision of ~~$2.7~~zero. As of March 31, 2022 and December 31, 2021, the valuation allowance on the Company’s deferred tax asset was $2.5 million and ~~$0.0~~$2.5 million, respectively. ~~For~~During the three ~~and nine~~ months ended ~~September 30, 2017, the Company recorded a change in provision for deferred taxes on unrealized appreciation on investments of $2.7 million. For the three and nine months ended September 30, 2016,~~March 31, 2022, there was no change in ~~provision for deferred taxes on unrealized appreciation on investments was recorded.~~the valuation allowance recognized by the Company. During the three months ended March 31, 2021, the Company recognized a decrease in the valuation allowance of $1.0 million.

In accordance with certain applicable U.S. treasury regulations and private letter rulings issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive its entire distribution in either cash or stock of the RIC, subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of its entire distribution in cash. If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

ASC Topic 740 — Income Taxes (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s U.S. federal income tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, there were no uncertain tax positions.

The Company has concluded that it was not necessary to record a liability for any such tax positions as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~2021. However, the Company’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, ongoing analyses of, and changes to, tax laws, regulations and interpretations thereof.

The Company’s activities from commencement of operations remain subject to examination by U.S. federal, state, and local tax authorities. No interest expense or penalties have been assessed as of September 30, 2017 and December 31, 2016. If the Company were required to recognize interest and penalties, if any, related to unrecognized tax benefits this would be recognized as income tax expense in the consolidated statements of operations.

Portfolio and Investment Activity

The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. The Company offers customized financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company invests primarily in first lien loans, and, to a lesser extent, second lien loans and equity securities issued by lower middle-market companies and traditional middle-market companies. As of ~~September 30, 2017,~~March 31, 2022, our portfolio consisted of investments in 4642 portfolio companies with a fair value of approximately ~~$471.1 million.~~$206.9 million.

Most of the Company’s debt investments are structured as first lien loans. First lien loans may contain some minimum amount of principal amortization, excess cash flow sweep feature, prepayment penalties, or any combination of the foregoing. First lien loans are secured by a first priority lien in existing and future assets of the borrower and may take the form of term loans, delayed draw facilities, or revolving credit facilities. Unitranche debt, a form of first lien loan, typically involves issuing one debt security that blends the risk and return profiles of both senior secured and subordinated debt, bifurcating the loan into a first-out tranche and last-out tranche. As of March 31, 2022, 8.2% of the fair value of our first lien loans consisted of last-out loans. As of December 31, 2021, 8.5% of the fair value of our first lien loans consisted of last-out loans. In some cases, first lien loans may be subordinated, solely with respect to the payment of cash interest, to an asset based revolving credit facility.

The Company also invests in debt instruments structured as second lien loans. Second lien loans are loans which have a second priority security interest in all or substantially all of the borrower’s assets, and in some cases, may be subject to the interruption of cash interest payments upon certain events of default, at the discretion of the first lien lender.

During the three months ended ~~September 30, 2017,~~March 31, 2022, we made approximately ~~$11.4~~$16.4 million of investments and had approximately ~~$22.4~~$8.4 million in repayments and sales, resulting in net deployment of approximately $8.0 million for the period. During the three months ended March 31, 2021, we made no investments and had approximately $29.9 million in repayments and sales, resulting in net repayments and sales of approximately ~~$11.0~~$29.9 million for the period. During the three months ended September 30, 2016, we made approximately $26.0 million of investments and had approximately $111.9 million in repayments and sales resulting in net investments of approximately $85.9 million for the period.

During the nine months ended September 30, 2017, we made approximately $39.7 million of investments and had approximately $104.7 million in repayments and sales of investments resulting in net repayments and sales of approximately $65.0 million for the period. During the nine months ended September 30, 2016, we made approximately $53.9 million of investments and had approximately $128.6 million in repayments and sales resulting in net repayments and sales of approximately $74.7 million for the period.

On August 31, 2016, we sold a portion of 14 securities across 10 portfolio companies to CapitalSouth Partners Florida Sidecar Fund II, L.P. (“FSC II”), including granting an option to acquire a portion of our equity investment in Eastport Holdings, LLC (the “Written Call Option”), in exchange for 100% of the partnership interests in FSC II. Concurrent with the sale of these assets to FSC II, we received cash consideration of $47.6 million from an affiliated third-party purchaser in exchange for 100% of the partnership interests of FSC II. These assets were sold to FSC II at their June 30, 2016 fair market values, resulting in a net realized gain of $0.1 million. Our Board pre-approved this transaction pursuant to Section 57(f) of the 1940 Act.

The Written Call Option granted FSC II the right to purchase up to 31.25% of our equity investment in Eastport Holdings, LLC. The Written Call Option has a strike price of $1.5 million and a termination date of August 31, 2018. The fair value of the Written Call Option, which has been treated as a derivative liability and is recorded in the financial statement line item Written Call Option at fair value in our consolidated statements of assets and liabilities, was approximately $5.6 million as of September 30, 2017. For purposes of determining the fair value of the Written Call Option, we calculated the difference in the fair value of the underlying equity investment in Eastport Holdings, LLC and the strike price of the Written Call Option, or intrinsic value. The time value of the Written Call Option as of September 30, 2017 was determined to be insignificant. The Written Call Option is classified as a Level 3 financial instrument.

As of September 30, 2017, our average portfolio company investment and our largest portfolio company investment at amortized cost and fair value was approximately $9.9 million and $22.1 million, and $10.2 million and $38.9 million, respectively. As of September 30, 2017, the Company had approximately $52.3 million of cash and cash equivalents. As of DecemberMarch 31, 2016, our average portfolio company investment and our largest portfolio company investment at amortized cost and fair value was approximately $9.7 million and $10.2 million, and $22.1 million and $29.9 million, respectively. As of December 31, 2016, the Company had approximately $36.3 million of cash and cash equivalents.

~~As of September 30, 2017,~~2022, our debt investment portfolio, which represented ~~76.0%~~68.1% of the fair value of our total portfolio, had a weighted average annualized yield of approximately ~~12.9%, exclusive~~8.3% (excluding non-accruals and collateralized loan obligations). As of March 31, 2022, 24.3% of the ~~impact of our non-accrual debt investments. As of September 30, 2017, 58.2%~~fair value of our debt investment portfolio was bearing a fixed rate of interest. As of December 31, ~~2016,~~2021, our debt investment portfolio, which represented ~~82.8%~~67.4% of the fair value of our total portfolio, had a weighted average annualized yield of approximately ~~13.2%, exclusive of the impact of our non-accrual debt investments.~~8.1% (excluding non-accruals and collateralized loan obligations). As of December 31, ~~2016, 57.1%~~2021, 22.8% of the fair value of our debt investment portfolio was bearing a fixed rate of interest.

The weighted average annualized yield is calculated based on the effective interest rate as of period end, divided by the fair value of our debt investments. The weighted average annualized yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our fees and expenses. There can be no assurance that the weighted average annualized yield will remain at its current level.

As of March 31, 2022, the Board approved the fair value of our investment portfolio of approximately $206.9 million in good faith in accordance with our valuation procedures. The Board approved the fair value of our investment portfolio as of March 31, 2022 with input from a third-party valuation firm and the Investment Advisor based on information known or knowable as of the valuation date, including trailing and forward-looking data.

As of March 31, 2022, we had debt investments in two portfolio companies on non-accrual status with an aggregate amortized cost of $12.7 million and an aggregate fair value of $7.0 million, which represented 6.4% and 3.4% of the investment portfolio, respectively. As of December 31, 2021, we had debt investments in two portfolio companies on non-accrual status with aggregate amortized cost of $12.7 million and an aggregate fair value of $7.6 million, which represented 6.7% and 3.8% of the investment portfolio, respectively.

The following table summarizes the amortized cost and the fair value of investments as of March 31, 2022 (dollars in thousands):


	Investments at Amortized Cost		Amortized Cost Percentage of Total Portfolio			Investments at Fair Value		Fair Value Percentage of Total Portfolio
First Lien Debt	$	106,929		53.7	%	$	100,663		48.7	%
Second Lien Debt		33,168		16.7	%		33,220		16.1	%
Subordinated Debt		7,117		3.6	%		7,115		3.4	%
Collateralized Loan Obligations		8,106		4.1	%		7,199		3.5	%
Equity and Warrants		43,649		21.9	%		58,708		28.3	%
Total	$	198,969		100.0	%	$	206,905		100.0	%

The following table summarizes the amortized cost and the fair value of investments ~~and cash and cash equivalents~~ as of ~~September 30, 2017~~December 31, 2021 (dollars in thousands):


	Investments at Amortized Cost		Percentage of Total			Investments at Fair Value		Percentage of Total			Investments at Amortized Cost		Amortized Cost Percentage of Total Portfolio			Investments at Fair Value		Fair Value Percentage of Total Portfolio
First Lien Debt	$	246,188		48.5	%	$	221,205		42.2	%	$	103,667		54.4	%	$	98,251		49.6	%
Second Lien Debt		32,284		6.4			30,774		5.9			30,048		15.8	%		30,190		15.2	%
Subordinated Debt		120,161		23.7			106,019		20.3			5,050		2.6	%		5,050		2.6	%
Equity and Warrants		56,081		11.1			113,108		21.6			51,717		27.2	%		64,698		32.6	%
Cash and Cash Equivalents		52,307		10.3			52,307		10.0
Total	$	507,021		100.0	%	$	523,413		100.0	%	$	190,482		100.0	%	$	198,189		100.0	%

~~The following table summarizes the amortized cost and the fair value of investments and cash and cash equivalents as of December 31, 2016 (dollars in thousands):~~

Investments
at
Amortized Cost Percentage of
Total Investments
at
Fair Value Percentage of
Total
First Lien Debt $ 244,647 44.5 % $ 226,578 39.2 %
Second Lien Debt 74,559 13.5 71,483 12.3
Subordinated Debt 148,849 27.1 150,232 26.0
Equity and Warrants 45,721 8.3 93,346 16.2
Cash and Cash Equivalents 36,281 6.6 36,281 6.3
Total $ 550,057 100.0 % $ 577,920 100.0 %

The following table shows the portfolio composition by industry grouping at fair value as of March 31, 2022 and December 31, 2021 (dollars in thousands):

September 30, 2017 December 31, 2016
Investments at
Fair Value Percentage of
Total Portfolio Investments at
Fair Value Percentage of
Total Portfolio
Business Services $ 64,264 13.6 % $ 51,731 9.5 %
Consumer Products 30,135 6.4 30,209 5.6
Financial Services 29,232 6.2 25,553 4.7
Information Technology 24,490 5.2 24,232 4.5
Oil & Gas Services 23,033 4.9 15,083 2.8
Specialty Retail 21,288 4.5 22,067 4.1
Building Products 17,952 3.8 18,152 3.3
Footwear Retail 17,556 3.7 19,236 3.5
Food Product Manufacturer 16,774 3.6 16,599 3.1
Sales & Marketing Services 16,173 3.4 16,376 3.0
Industrial Equipment Rental 15,374 3.3 10,755 2.0
Retail 14,915 3.2 15,000 2.8
Bowling Products 13,330 2.8 12,503 2.3
Textile Equipment Manufacturer 12,830 2.7 13,134 2.4
Computer Supply Retail 12,411 2.6 12,183 2.2
Fuel Transportation Services 11,588 2.5 10,303 1.9
Transportation 10,913 2.3 16,856 3.1
Healthcare Management 9,892 2.1 10,851 2.0
Professional and Personal Digital Imaging 9,415 2.0 9,000 1.7
Automobile Part Manufacturer 9,320 2.0 10,076 1.9
Consumer Electronics 8,477 1.8 20,818 3.8
QSR Franchisor 8,404 1.8 8,497 1.6
Government Services 8,070 1.7 — —
Conglomerate 7,603 1.6 8,374 1.5
Healthcare 7,571 1.6 8,582 1.6
Oil & Gas Engineering and Consulting Services 6,958 1.5 4,500 0.8
Produce Distribution 6,035 1.3 6,182 1.1
Farming 5,724 1.2 11,779 2.2
Advertising & Marketing Services 5,069 1.1 3,910 0.7
Restaurant 4,874 1.0 4,857 0.9
Medical Device Distributor 4,684 1.0 25,768 4.8
Printing Services 3,999 0.8 12,761 2.4
Online Merchandise Retailer 3,840 0.8 4,169 0.8
Home Repair Parts Manufacturer 3,213 0.7 1,408 0.3
Replacement Window Manufacturer 2,706 0.6 2,571 0.5
Household Product Manufacturer 1,184 0.3 1,001 0.2
Data Processing & Digital Marketing 1,035 0.2 1,015 0.2
Retail Display & Security Services 439 0.2 537 0.1
In-Home Healthcare Services 142 0.0 446 0.1
Automotive Chemicals & Lubricants 101 0.0 2,230 0.4
Dental Practice Management 93 0.0 109 0.0
Home Décor Manufacturer — — 14,670 2.7
Bakery Supplies Distributor — — 10,776 2.0
Construction Services — — 9,500 1.7
Specialty Clothing — — 5,011 0.9
Satellite Communications — — 5,000 0.9
Industrial Specialty Services — — 4,750 0.9
Specialty Defense Contractor — — 1,532 0.3
Entertainment — — 987 0.2
Total $ 471,106 100.0 % $ 541,639 100.0

With the exception of the international investment holdings noted below, all investments made by the Company as of September 30, 2017 and December 31, 2016 were made in portfolio companies located in the U.S. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business. The following table shows the portfolio composition by geographic region at fair value as of September 30, 2017 and December 31, 2016 (dollars in thousands):

September 30, 2017 December 31, 2016
Investments at
Fair Value Percentage of
Total Portfolio Investments at
Fair Value Percentage of
Total Portfolio
South $ 231,305 49.1 % $ 257,162 47.5 %
West 97,503 20.7 85,642 15.8
Midwest 85,027 18.0 118,682 21.9
Northeast 46,039 9.8 68,613 12.7
International 11,232 2.4 11,540 2.1
Total $ 471,106 100.0 % $ 541,639 100.0 %

~~In addition to various risk management tools, our Investment Advisor also uses an investment rating system to characterize and monitor our expected level of return on each investment in our portfolio.~~

As part of our valuation procedures, we risk rate all of our investments. In general, our investment rating system uses a scale of 1 to 5, with 1 being the lowest probability of default and principal loss. Our internal rating is not an exact system, but it is used internally to estimate the probability of: (i) default on our debt securities and (ii) loss of our debt principal, in the event of a default. In general, our internal rating system may also assist our valuation team in its determination of the estimated fair value of equity securities or equity-like securities. Our internal risk rating system generally encompasses both qualitative and quantitative aspects of our portfolio companies.

~~Our internal investment rating system incorporates the following five categories:~~

~~Investment~~ ~~Rating~~		~~Definition~~
1		~~In general, the investment may be performing above our internal expectations. Full return of principal and interest is expected. Capital gain is expected.~~

2		In general, the investment may be performing within our internal expectations, and potential risks to the applicable investment are considered to be neutral or favorable compared to any potential risks at the time of the original investment. All new investments are initially given this rating.

3		In general, the investment may be performing below our internal expectations and therefore, investments in this category may require closer internal monitoring; however, the valuation team believes that no loss of investment return (interest and/or dividends) or principal is expected. The investment also may be out of compliance with certain financial covenants.

4		In general, the investment may be performing below internal expectations and quantitative or qualitative risks may have increased substantially since the original investment. Loss of some or all principal is expected.

5		In general, the investment may be performing substantially below our internal expectations and a number of quantitative or qualitative risks may have increased substantially since the original investment. Loss of some or all principal is expected.

Our Investment Advisor will monitor and, when appropriate, change the investment ratings assigned to each investment in our portfolio. In connection with our valuation process, our Investment Advisor will review these investment ratings on a quarterly basis. The investment rating of a particular investment should not, however, be deemed to be a guarantee of the investment’s future performance.

~~The following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value as of September 30, 2017 and December 31, 2016 (dollars in thousands):~~

As of September 30, 2017 As of December 31, 2016
Investment Performance Rating Investments
at
Fair Value Percentage of
Total
Investments Investments
at
Fair Value Percentage of
Total
Investments
1 $ 188,611 40.0 % $ 183,826 33.9 %
2 149,196 31.7 215,058 39.7
3 106,529 22.6 125,381 23.2
4 26,770 5.7 17,374 3.2
5 — — — —
Total $ 471,106 100.0 % $ 541,639 100.0 %

As of September 30, 2017, we had debt investments in 4 portfolio companies on non-accrual status with an amortized cost of $57.2 million and a fair value of $26.8 million, which represented 12.6% and 5.7% of the investment portfolio, respectively. As of December 31, 2016, we had debt investments in 3 portfolio companies on non-accrual status with amortized cost of $29.5 million and a fair value of $17.4 million, which represented 5.7% and 3.2% of the investment portfolio, respectively.

~~Capitala Senior Liquid Loan Fund I, LLC~~

On March 24, 2015, the Company and Trinity Universal Insurance Company (“Trinity”), a subsidiary of Kemper Corporation, entered into a limited liability company agreement to co-manage CSLLF. The purpose and design of the joint venture was to invest primarily in broadly syndicated senior secured loans to middle-market companies, which were purchased on the secondary market. Capitala and Trinity committed to provide $25.0 million of equity to CSLLF, with Capitala providing $20.0 million and Trinity providing $5.0 million, resulting in an 80%/20% economic ownership between the two parties. The board of directors and investment committee of CSLLF were split 50/50 between Trinity and Capitala, resulting in equal voting power between the two entities. In September 2016, the Company and Trinity elected to wind-down operations of CSLLF. During the fourth quarter of 2016, CSLLF sold all referenced assets underlying the total return swap (“TRS”) and declared final distributions, inclusive of dividends and return of capital, in December 2016.

On March 27, 2015, CSLLF entered into a TRS with Bank of America, N.A. (“Bank of America”) that was indexed to a basket of senior secured loans purchased by CSLLF. CSLLF obtained the economic benefit of the loans underlying the TRS, including the net interest spread between the interest income generated by the underlying loans and the interest expense type payment under the TRS, the realized gain (loss) on liquidated loans, and the unrealized appreciation (depreciation) on the underlying loans.

The terms of the TRS were governed by an ISDA 2002 Master Agreement, the Schedule thereto, and Credit Support Annex to such Schedule, and the confirmation exchanged thereunder, between CSLLF and Bank of America, which collectively established the TRS, and are collectively referred to herein as the “TRS Agreement.” Pursuant to the terms of the TRS Agreement, CSLLF selected a portfolio of loans with a maximum market value (determined at the time each such loan becomes subject to the TRS) of $100.0 million, which was also referred to as the maximum notional amount of the TRS. Each individual loan, and the portfolio of loans taken as a whole, had to meet criteria described in the TRS Agreement. CSLLF received from Bank of America a periodic payment on set dates that was based upon any coupons, both earned and accrued, generated by the loans underlying the TRS, subject to limitations described in the TRS Agreement as well as any fees associated with the loans included in the portfolio. CSLLF paid to Bank of America interest at a rate equal to the London Interbank Offered Rate (“LIBOR”) plus 1.25% per annum; the LIBOR option paid by CSLLF was determined on an asset by asset basis such that the tenor of the LIBOR option (1 month, 3 month, etc.) matched the tenor of the underlying reference asset. In addition, upon the termination of any loan subject to the TRS or any repayment of the underlying reference asset, CSLLF either received from Bank of America the appreciation in the value of such loan, or paid to Bank of America any depreciation in the value of such loan.

CSLLF was required to initially cash collateralize a specified percentage of each loan (generally 20% to 35% of the market value of senior secured loans) included under the TRS in accordance with margin requirements described in the TRS Agreement. As of December 31, 2016, CSLLF had posted $0.0 million in collateral to Bank of America in relation to the TRS which was recorded on CSLLF’s statements of assets and liabilities as cash held as collateral on total return swap. The cash collateral represented CSLLF’s maximum credit exposure as of December 31, 2016.

CSLLF’s receivable due on the TRS represents realized amounts from payments on underlying loans in the total return swap portfolio. At December 31, 2016, the receivable due on TRS was $0.1 million, respectively, and is recorded on CSLLF’s statement of assets and liabilities below. CSLLF does not offset collateral posted in relation to the TRS with any unrealized appreciation or depreciation outstanding in the statement of assets and liabilities as of December 31, 2016.

~~The following represents the volume of the CSLLF’s derivative transactions during the three and nine months ended September 30, 2016 (dollars in thousands):~~

For the
Three Months
Ended
September 30, 2016 For the
Nine Months
Ended
September 30, 2016
Average notional par amount of contract $ 68,935 $ 74,674

~~Below is certain summarized financial information for CSLLF as of December 31, 2016 and for the three and nine months ended September 30, 2016 (dollars in thousands):~~

~~Selected Statements of Assets and Liabilities:~~

~~Selected Statements of Operation (unaudited):~~

For the
Three Months For the
Nine Months
Ended Ended
September 30, 2016 September 30, 2016

Administrative and legal expenses $ (15 ) $ (131 )
Net operating loss $ (15 ) $ (131 )
Net realized gain on Total Return Swap $ 1,374 $ 2,810
Net unrealized appreciation on Total Return Swap 775 2,380
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,134 $ 5,059


	March 31, 2022					December 31, 2021
	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
Healthcare	$	35,509		17.2	%	$	28,852		14.6	%
Business Services		32,456		15.7	%		32,819		16.6	%
Information Technology		25,605		12.4	%		24,066		12.1	%
Financials		19,679		9.5	%		17,162		8.7	%
Consumer Discretionary		12,809		6.2	%		11,017		5.6	%
Industrials		10,062		4.9	%		14,640		7.4	%
Entertainment		8,643		4.2	%		8,894		4.5	%
Electronic Machine Repair		8,395		4.1	%		8,465		4.3	%
QSR Franchisor		8,178		4.0	%		8,007		4.0	%
Financial Services		7,498		3.6	%		7,430		3.7	%
Healthcare Management		6,247		3.0	%		7,002		3.5	%
Online Merchandise Retailer		5,954		2.9	%		5,951		3.0	%
Textile Equipment Manufacturer		5,107		2.5	%		5,050		2.5	%
Medical Device Distributor		4,961		2.4	%		4,961		2.5	%
Automobile Part Manufacturer		4,402		2.1	%		2,722		1.4	%
Advertising & Marketing Services		4,390		2.1	%		4,579		2.3	%
Home Repair Parts Manufacturer		3,055		1.5	%		3,062		1.5	%
Testing Laboratories		986		0.5	%		1,113		0.6	%
Consumer Products		803		0.4	%		623		0.3	%
Household Product Manufacturer		758		0.4	%		287		0.1	%
General Industrial		645		0.3	%		645		0.3	%
Data Processing & Digital Marketing		509		0.3	%		509		0.3	%
Oil & Gas Engineering and Consulting Services		254		0.1	%		333		0.2	%
Total	$	206,905		100.0	%	$	198,189		100.0	%

Results of Operations

Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were as follows (dollars in thousands):

For the three months ended For the nine months ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Total investment income $ 12,312 $ 17,357 $ 39,489 $ 51,798
Total expenses, net of incentive fee waivers 7,902 9,916 28,185 29,505
Net investment income 4,410 7,441 11,304 22,293
Net realized gain (loss) from investments (10,283 ) (17,030 ) (749 ) (24,897 )
Net unrealized appreciation (depreciation) on investments 3,187 8,474 (11,471 ) 4,557
Net unrealized depreciation on written call option (407 ) (898 ) (2,819 ) (898 )
Change in provision for deferred taxes on unrealized appreciation on investments (2,660 ) — (2,660 ) —
Net increase (decrease) in net assets resulting from operations $ (5,753 ) $ (2,013 ) $ (6,395 ) $ 1,055


	For the Three Months Ended March 31,
	2022			2021
Total investment income	$	3,337		$	4,926
Total expenses, net of incentive fee waiver		4,388			5,709
Net investment loss		(1,051	)		(783	)
Net realized loss on investments		(36	)		(14,023	)
Net change in unrealized appreciation on investments		229			27,160
Net (decrease) increase in net assets resulting from operations	$	(858	)	$	12,354

Investment income

The composition of our investment income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was as follows (dollars in thousands):


	For the three months ended				For the nine months ended				For the Three Months Ended March 31,
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		2022		2021
Interest income	$	9,514	$	14,654	$	31,288	$	43,002	$	3,197	$	4,592
Fee income		247		561		1,243		2,303
Other income										8		9
Payment-in-kind interest and dividend income		1,880		1,518		5,638		3,966		132		170
Dividend income		580		574		1,110		2,427		—		155
Other income		48		42		125		85
Interest from cash and cash equivalents		43		8		85		15
Total investment income	$	12,312	$	17,357	$	39,489	$	51,798	$	3,337	$	4,926

The income reported as interest income, ~~and~~ PIK interest, and PIK dividend income is generally based on the stated rates as disclosed in our consolidated ~~schedule~~schedules of investments. Accretion of discounts ~~paid~~received for purchased loans are included in interest income as an adjustment to yield. As a general rule, our interest income, ~~and~~ PIK interest, and PIK dividend income are recurring in nature.

We also generate fee income primarily through origination fees charged for new investments, and secondarily via amendment fees, consent fees, prepayment penalties, and other fees. While ~~the~~ fee income is typically non-recurring for each investment, most of our new investments include an origination fee; as such, fee income is dependent upon our volume of directly originated investments and the fee structure associated with those investments.

We earn dividends on certain equity investments within our investment portfolio. As noted in our consolidated ~~schedule~~schedules of investments, some investments are scheduled to pay a periodic dividend, though these recurring dividends do not make up a significant portion of our total investment income. We may receive, and have received, more substantial one-time dividends from our equity investments.

For the three months ended ~~September 30, 2017,~~March 31, 2022, total investment income decreased by ~~$5.0~~$1.6 million, or ~~29.1%~~32.3%, compared to the three months ended ~~September 30, 2016.~~March 31, 2021. The decrease from the prior period ~~over period decline~~ was driven ~~primarily~~ by a ~~$5.1~~decrease in interest income from $4.6 million for the three months ended March 31, 2021 to $3.2 million for the three months ended March 31, 2022. The decline in interest income is primarily due to ~~less~~lower average outstanding debt investments ~~outstanding and an increase in non-accrual investments. For~~for the three months ended ~~September 30, 2017, PIK income increased by $0.4 million~~March 31, 2022 compared to the three months ended ~~September 30, 2016, primarily due to investment restructurings that provided for an increase in the~~March 31, 2021. PIK ~~rate being charged. For the three months ended September 30, 2017, we generated~~income declined from $0.2 million ~~in origination fees from new deployments and $45 thousand in non-origination fees. Comparatively,~~ for the three months ended ~~September 30, 2016, we generated no origination fees from new deployments and $0.6~~March 31, 2021 to $0.1 million ~~in non-origination fees.~~

~~For~~for the ~~nine~~three months ended ~~September 30, 2017, total investment~~March 31, 2022. The decrease in PIK income was due to a decline in investments with a contractual PIK rate. Dividend income decreased ~~by $12.3~~from $0.2 million ~~or 23.8%, compared to~~for the ~~nine~~three months ended ~~September 30, 2016. The period over period decline was driven primarily by a $11.7 million decline in interest income due~~March 31, 2021 to ~~less average debt investments outstanding and an increase in non-accrual investments. For~~zero for the ~~nine~~three months ended ~~September 30, 2017, PIK income increased by $1.7 million compared to the nine months ended September 30, 2016,~~March 31, 2022, primarily due to ~~investment restructurings that provided for an increase to~~non-recurring dividends received from portfolio companies during the ~~PIK rate being charged. For the nine~~three months ended September 30, 2017, we generated $0.6 million in origination fees from new deployments and $0.6 million in non-origination fees. Comparatively, for the nine months ended September 30, 2016, we generated $0.7 million in origination fees from new deployments and $1.6 million in non-origination fees. Dividend income decreased from $2.4 million for the nine months ended September 30, 2016, to $1.1 million for the nine months ended September 30, 2017. The decrease in dividend income was driven primarily by the wind-down of CSLLF, which did not pay a dividend for the nine months ended September 30, 2017, but paid a dividend of $1.6 million for the nine months ended September 30, 2016.March 31, 2021

Operating expenses

The composition of our expenses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~2021 was as follows (dollars in thousands):


	For the three months ended				For the nine months ended				For the Three Months Ended March 31,
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016		2022		2021
Interest and financing expenses	$	4,585	$	4,938	$	14,726	$	14,990	$	2,188	$	3,037
Loss on extinguishment of debt		—		—		2,732		—
Base management fee		2,417		2,619		7,436		8,049		1,027		1,398
Incentive fees, net of incentive fee waiver		—		1,470		350		3,482
Directors' fees										103		103
Administrative service fees										120		350
General and administrative expenses		900		889		2,941		2,984		950		821
Total expenses, net of incentive fee waiver	$	7,902	$	9,916	$	28,185	$	29,505
Total expenses									$	4,388	$	5,709

For the three months ended ~~September 30, 2017,~~March 31, 2022, operating expenses decreased ~~$2.0~~by $1.3 million, or ~~20.3%~~23.2%, compared to the three months ended ~~September 30, 2016. For~~March 31, 2021. Interest and financing expenses decreased from $3.0 million for the three months ended ~~September 30, 2017, interest and financing expenses decreased $0.4~~ March 31, 2021 to $2.2 million for the three months ended March 31, 2022 due primarily to lower average outstanding debt during the three months ended March 31, 2022 compared to the three months ended ~~September 30, 2016, due primarily to lower Credit Facility utilization during the period. Management~~March 31, 2021. Base management fees declined ~~by $0.2 million,~~ from ~~$2.6~~$1.4 million for the three months ended ~~September 30, 2016~~March 31, 2021 to ~~$2.4~~$1.0 million for the three months ended ~~September 30, 2017,~~March 31, 2022, due to lower average assets under management. ~~Incentive~~Administrative services fees ~~net of incentive fee waiver,~~ declined ~~by $1.5 million,~~ from ~~$1.5~~$0.4 million for the three months ended ~~September 30, 2016~~March 31, 2021 to ~~$0.0~~$0.1 million for the three months ended ~~September 30, 2017,~~March 31, 2022, due to ~~lower pre-incentive fee net investment income.~~

~~For~~efficiencies generated by the nine months ended September 30, 2017, operating expenses decreased $1.3 million, or 4.5%, compared to the nine months ended September 30, 2016. For the nine months ended September 30, 2017, we recognized a $2.7 million loss on extinguishment of debt related to repaymentsize and scale of the ~~2021 Notes. The increase in~~Investment Advisor's platform. General and administrative expenses ~~related to the loss on extinguishment of debt was offset by (i) a decline in management fees,~~increased from ~~$8.0~~$0.8 million for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2021 to ~~$7.4~~$1.0 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, primarily due to ~~lower average assets under management and (ii) a decline in net incentive fees, net of incentive fee waiver from $3.5 million for~~accelerated one-time prepaid financing costs during the ~~nine~~three months ended September 30, 2016 to $0.4 million for the nine months ended September 30, 2017, due to lower pre-incentive fee net investment income, and (iii) a decline in interest and financing expense, from $15.0 million for the nine months ended September 30, 2016 to $14.7 million for the nine months ended September 30, 2017, due to a lower average debt balance outstanding during the period.March 31, 2022 as well as higher professional fees.

Net realized ~~gains (losses)~~loss on sales of investments

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022, we recognized ~~$(10.3) million and $(0.7) million, respectively,~~$36 thousand of net realized losses on our portfolio investments. During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2021 we recognized ~~$(17.0)~~$14.0 million ~~and $(24.9) million, respectively,~~ of net realized losses on our portfolio investments.

Net unrealized appreciation (depreciation) on investments

Net change in unrealized (depreciation) appreciation ~~(depreciation)~~ on investments reflects the net change in the fair value of our investment portfolio. For the three months ended ~~September 30, 2017~~March 31, 2022 and 2021, we ~~had $3.2~~recognized $0.2 million ~~of net unrealized appreciation on investments. For the nine months ended September 30, 2017 we had $(11.5)~~and $27.2 million of net unrealized depreciation on investments. For the three months ended September 30, 2016 we had $8.5 million of net unrealized appreciation on investments. For the nine months ended September 30, 2016 we had $4.6 million of net unrealized appreciation on investments.

~~Change in provision for deferred taxes on unrealized appreciation on investments~~

~~Change in provision for deferred taxes on unrealized appreciation on investments reflects the deferred tax effect of the~~ net change in unrealized ~~appreciation of investments held in our Taxable Subsidiaries. For the three and nine months ended September 30, 2017, we had a change in provision for deferred taxes on unrealized appreciation~~ appreciation investments, ~~of $(2.7) million. For the three and nine months ended September 30, 2016, we had no change in provision for deferred taxes on unrealized appreciation on investments.~~respectively.

~~Net unrealized appreciation (depreciation) on Written Call Option~~

For the three and nine months ended September 30, 2017, we had net unrealized depreciation on the Written Call Option of $(0.4) million and $(2.8) million, respectively. For the three and nine months ended September 30, 2016 we had net unrealized depreciation on the Written Call Option of $(0.9) million. As previously noted, unrealized appreciation (depreciation) on the Written Call Option is based on the change in fair value of the underlying equity investment in Eastport Holdings, LLC, less the strike price of the Written Call Option.

Changes in net assets resulting from operations

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022, we recorded a net decrease in net assets resulting from operations of ~~$(5.8) million and $(6.4) million, respectively.~~$0.9 million. Based on the weighted average shares of common stock outstanding for the three ~~and nine~~ months ~~ended September 30, 2017,~~March 31, 2022, our per share net decrease in net assets resulting from operations was ~~$(0.36) and $(0.40), respectively.~~ $0.32.

For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2021, we recorded a net increase ~~(decrease)~~ in net assets resulting from operations of ~~$(2.0) million and $1.1 million, respectively.~~$12.4 million. Based on the weighted average shares of common stock outstanding for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2021, our per share net increase in net assets resulting from operations was ~~$(0.13) and $0.07, respectively.~~$4.56.

~~Summarized Financial Information of Our Unconsolidated Subsidiaries~~

~~CableOrganizer Acquisition, LLC~~

~~Eastport Holdings, LLC~~

~~Kelle’s Transport Service, LLC~~

~~Navis Holdings, Inc.~~

~~On-Site Fuel Services, Inc.~~

~~Micro Precision, LLC~~

~~The summarized unaudited financial information of our unconsolidated subsidiaries was as follows (dollars in thousands):~~

As of
�� September 30, December 31,
Balance Sheets - Navis Holdings, Inc. 2017 2016
Current assets $ 4,967 $ 4,655
Noncurrent assets 3,131 3,446
Total assets $ 8,098 $ 8,101

Current liabilities $ 2,473 $ 2,448
Noncurrent liabilities 7,006 6,719
Total liabilities $ 9,479 $ 9,167

Total deficit $ (1,381 ) $ (1,066 )

Financial Condition, Liquidity and Capital Resources

We use and intend to use existing cash primarily to originate investments in new and existing portfolio companies, pay distributions to our ~~shareholders,~~stockholders, and repay indebtedness.

~~On September 30, 2013, we issued 4,000,000 shares at $20.00 per share in~~Since our IPO, ~~yielding~~we have raised approximately $136.0 million in net proceeds ~~of $74.25 million.~~from equity offerings through March 31, 2022.

KeyBank Credit Facility

On October ~~17, 2014, we~~30, 2020, Capitala Business Lending, LLC ("CBL"), a direct, wholly owned, consolidated subsidiary of the Company, entered into a senior secured revolving credit agreement (the ~~“Credit Facility”~~“KeyBank Credit Facility") with ~~ING Capital, LLC, as administrative agent, arranger, and bookrunner, and~~the Company’s investment adviser at the time (as collateral manager), the lenders ~~party thereto. On June 16, 2017, we entered into an amendment~~from time to ~~our~~time parties thereto (each, a “Lender”), KeyBank National Association (as administrative agent), and U.S. Bank National Association (as custodian). Under the KeyBank Credit Facility, ~~with ING Capital, LLC (the “Amendment”). Pursuant~~the Lenders have agreed to extend credit to CBL in an aggregate principal amount of up to $25.0 million. On January 1, 2021, the ~~Amendment, the~~KeyBank Credit Facility ~~currently provides for borrowings up~~was amended to ~~$114.5~~replace the collateral manager with the Company’s Investment Advisor. CBL may, on any business day prior to October 28, 2022, request an increase in the aggregate principal amount from $25.0 million to $100.0 million in accordance with the terms and in the manner described in the KeyBank Credit Facility. The period during which the Lenders may ~~be increased up~~make loans to ~~$200.0 million pursuant to its “accordion” feature.~~CBL under the KeyBank Credit Facility commenced on October 30, 2020 and will continue through October 28, 2022, unless there is an earlier termination or event of default. The KeyBank Credit Facility matures on ~~June 16, 2021.~~October 28, 2023, unless there is an earlier termination or event of

default. Borrowings under the KeyBank Credit Facility bear interest at one- month LIBOR plus 3.5%. The KeyBank Credit Facility includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. As of ~~September 30, 2017, we had $0.0~~March 31, 2022, there were no outstanding ~~and $114.5 million available under~~draws on the KeyBank Credit Facility.

2026 Notes

On ~~April 13, 2015,~~October 29, 2021, we ~~completed an underwritten~~issued $50.0 million in aggregate principal amount of 5.25% fixed rate notes due October 30, 2026 (the "2026 Notes") at 98.00% pursuant to a supplemental indenture with U.S. Bank National Association (the "Trustee"), which supplements that certain base indenture, dated as of June 16, 2014. The 2026 Notes were issued in a private placement exempt from registration under the Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"). The net proceeds to the Company were approximately $48.8 million, after deducting estimated offering ~~of 3,500,000 shares of our common stock~~expenses. The Notes will mature on October 30, 2026 and may be redeemed in whole or in part at the Company's option at any time or from time to time at the redemption prices set forth in the Indenture. The Notes bear interest at a ~~public offering price~~rate of ~~$18.32~~5.25% per ~~share.~~year payable semi-annually on April 30 and October 30 of each year, commencing on April 30, 2022. The ~~total proceeds received~~Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.

In connection with the offering, ~~net~~the Company entered into a Registration Rights Agreement, dated as of ~~underwriting discounts~~October 29, 2021 (the "Registration Rights Agreement"), with the purchasers of the 2026 Notes. Pursuant to the Registration Rights Agreement, the Company is obligated to file with the Securities and ~~offering costs were approximately $61.7 million.~~Exchange Commission a registration statement relating to an offer to exchange the 2026 Notes for new notes issued by the Company that are registered under the Securities Act and otherwise have terms substantially identical to those of the 2026 Notes, and to use its commercially reasonable efforts to cause such registration statement to be declared effective.

As of March 31, 2022, the Company had approximately $50.0 million in aggregate principal amount of 2026 Notes outstanding.

2022 Notes

On May 16, 2017, we issued $70.0 million in aggregate principal amount of 6.0% fixed-rate notes due May 31, 2022 (the “2022 Notes”). On May 25, 2017, we issued an additional $5.0 million in aggregate principal amount of the 2022 Notes pursuant to a partial exercise of the underwriters’ overallotment option. The 2022 Notes will mature on May 31, 2022 and may be redeemed in whole or in part at any time or from time to time at our option on or after May 31, 2019 at a redemption price equal to 100% of the outstanding principal, plus accrued and unpaid interest. Interest on the 2022 Notes is payable ~~quarterly beginning August 31, 2017.~~quarterly. The 2022 Notes are listed on the NASDAQ Global Select Market under the trading symbol “CPTAL” with a par value of $25.00 per share.

On November 1, 2021, the Company notified the Trustee for the Company's 2022 Notes, of the Company's election to redeem $50.0 million aggregate principal amount of the 2022 Notes outstanding. The redemption was completed on December 6, 2021. As of March 31, 2022, the Company had approximately $22.8 million in aggregate principal amount of 2022 Notes outstanding.

2022 Convertible Notes

On May 26, 2017, we issued $50.0 million in aggregate principal amount of 5.75% fixed-rate convertible notes due on May 31, 2022 (the “2022 Convertible Notes”). On June 26, 2017, we issued an additional $2.1 million in aggregate principal amount of the 2022 Convertible Notes pursuant to a partial exercise of the underwriters’ overallotment option. Interest on the 2022 Convertible Notes is payable ~~quarterly beginning August 31, 2017.~~quarterly. The 2022 Convertible Notes are listed on the NASDAQ Capital Market under the trading symbol “CPTAG” with a par value of $25.00 per share.As of March 31, 2022, the Company had approximately $52.1 million in aggregate principal amount of 2022 Convertible Notes outstanding.

AsBond Repurchase Program

On July 30, 2020, the Board approved a bond repurchase program which authorizes the Company to repurchase up to an aggregate of ~~September~~$10.0 million worth of the Company's outstanding 2022 Notes and/or 2022 Convertible Notes (the "Bond Repurchase Program"). The Bond Repurchase Program expired on July 30, ~~2017, Fund II had $26.2 million~~2021. During the three months ended March 31, 2021, the Company did not purchase any of the 2022 Notes or the 2022 Convertible Notes.

Asset Coverage Ratio

We are only allowed to borrow money such that our asset coverage, as defined in regulatory capital and $20.7 million in SBA-guaranteed debentures outstanding and Fund III had $75.0 million in regulatory capital and $150.0 million in SBA-guaranteed debentures outstanding. In addition to our existing SBA-guaranteed debentures, we may, if permitted by regulation, seek to issue additional SBA-guaranteed debentures as well as other forms of leverage and borrow funds to make investments. On June 10, 2014, we received an exemptive order from the SEC exempting us, Fund II and Fund III from certain provisions of the 1940 Act, ~~(including an exemptive order granting relief from the~~equals at least 150% if certain requirements are met, after such borrowing, with certain limited exceptions. As of March 31, 2022, our asset coverage ~~requirements for certain indebtedness issued by Fund II and Fund III as SBICs) and from certain reporting requirements mandated by~~ratio was 184%. If our asset coverage ratio falls below 150% due a decline in the ~~Securities Exchange Act~~fair market of ~~1934, as amended, with respect~~our portfolio, we may be limited in our ability to ~~Fund II and Fund III. We intend to comply with the conditions of the order.~~raise additional debt.

Cash and Cash Equivalents

As of ~~September 30, 2017,~~ March 31, 2022, we had ~~$52.3~~$15.8 million in cash and cash ~~equivalents, and our net assets totaled $226.3 million.~~equivalents.

Contractual Obligations

We have entered into two contracts under which we have material future commitments: the Investment Advisory Agreement, pursuant to which the Investment Advisor serves as our investment adviser, and the Administration Agreement, pursuant to which our Administrator agrees to furnish us with certain administrative services necessary to conduct our day-to-day operations. Payments under the Investment Advisory Agreement in future periods will be equal to: (1) a percentage of the value of our gross assets; and (2) an incentive fee based on our performance. Payments under the Administration Agreement will occur on an ongoing basis as expenses are incurred on our behalf by our Administrator.

The Investment Advisory Agreement and the Administration Agreement are each terminable by either party without penalty upon 60 days’ written notice to the other. If either of these agreements is terminated, the costs we incur under new agreements may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under both our Investment Advisory Agreement and our Administration Agreement. Any new investment advisory agreement would also be subject to approval by our stockholders.

A summary of our significant contractual payment obligations as of ~~September 30, 2017~~March 31, 2022 are as follows (dollars in ~~thousands)~~millions):

	Contractual Obligations Payments Due by Period
	Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years		Total		Contractual Obligations Payments Due by Period
SBA Debentures	$	—	$	24,000	$	121,700	$	25,000	$	170,700
											Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years		Total
2022 Notes		—		—		75,000		—		75,000	$	22.8	$	—	$	—	$	—	$	22.8
2022 Convertible Notes		—		—		52,088		—		52,088		52.1		—		—		—		52.1
Credit Facility		—		—		—		—		—
2026 Notes												—		—		50.0		—		50.0
Total Contractual Obligations	$	—	$	24,000	$	248,788	$	25,000	$	297,788	$	74.9	$	—	$	50.0	$	—	$	124.9

Distributions

In order to qualify as a RIC and to avoid corporate-level U.S. federal income tax on the income we timely distribute to our stockholders, we are required to distribute at least 90% of our net ordinary income and our net short-term capital gains in excess of net long-term capital losses, if any, to our stockholders on an annual basis. Additionally, we must distribute an amount at least equal to the sum of 98% of our net ordinary income (during the calendar year) plus 98.2% of our net capital gain income (during each 12-month period ending on October 31) plus any net ordinary income and capital gain net income that we recognized for preceding years, ~~that~~but were not distributed during such years, and on which we paid no U.S. federal income tax to avoid a U.S. federal excise tax. We made quarterly distributions to our stockholders for the first four full quarters subsequent to our IPO. To the extent we ~~have~~had income available, we ~~have~~ made ~~and intend to make~~ monthly distributions ~~thereafter.~~to our stockholders from October 30, 2014 until March 30, 2020. As announced on April 1, 2020, distributions, if any, will be made on a quarterly basis effective for the second quarter of 2020. Our ~~monthly~~ stockholder distributions, if any, will be determined by our Board on a quarterly basis. Any ~~distribution~~distributions to our stockholders will be declared out of assets legally available for ~~distribution.~~distribution. The Company’s Board determined not to declare a distribution for the first quarter of 2022 and 2021.

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of our distributions from time to time, and from time to time we may decrease the amount of our distributions. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a BDC under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including the possible loss of our qualification as a RIC. We cannot assure stockholders that they will receive any distributions.

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying any stockholder distribution carefully and should not assume that the source of any distribution is our ordinary income or capital gains.

We have adopted an “opt out” dividend reinvestment plan (“DRIP”) for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state, and local taxes in the same manner as cash distributions, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes.

The ~~following tables summarize our distributions declared from January 2, 2015~~Company's Board determined not to ~~September 30, 2017:~~declare a distribution for any quarter of 2021 and through March 31, 2022.

Date Declared Record Date Payment Date Amount
Per Share
January 3, 2017 January 20, 2017 January 30, 2017 $ 0.13
January 3, 2017 February 20, 2017 February 27, 2017 0.13
January 3, 2017 March 23, 2017 March 30, 2017 0.13
April 3, 2017 April 19, 2017 April 27, 2017 0.13
April 3, 2017 May 23, 2017 May 29, 2017 0.13
April 3, 2017 June 24, 2017 June 29, 2017 0.13
July 3, 2017 July 21, 2017 July 28, 2017 0.13
July 3, 2017 August 23, 2017 August 30, 2017 0.13
July 3, 2017 September 20, 2017 September 28, 2017 0.13
Total Distributions Declared and Distributed $ 1.17

Tax characteristics of all distributions paid are reported to stockholders on Form 1099 after the end of the calendar year. There were no distributions for the year ended December 31, 2021. Distributions may be subject to reclassification based on future dividends and operating results and will not be determined until the end of the year.

Date Declared Record Date Payment Date Amount
Per Share
January 4, 2016 January 22, 2016 January 28, 2016 $ 0.1567
January 4, 2016 February 19, 2016 February 26, 2016 0.1567
January 4, 2016 March 22, 2016 March 30, 2016 0.1567
April 1, 2016 April 22, 2016 April 28, 2016 0.1567
April 1, 2016 May 23, 2016 May 30, 2016 0.1567
April 1, 2016 June 21, 2016 June 29, 2016 0.1567
July 1, 2016 July 22, 2016 July 29, 2016 0.1567
July 1, 2016 August 22, 2016 August 30, 2016 0.1567
July 1, 2016 September 22, 2016 September 29, 2016 0.1567
September 22, 2016 October 21, 2016 October 28, 2016 0.1300
September 22, 2016 November 21, 2016 November 29, 2016 0.1300
September 22, 2016 December 21, 2016 December 29, 2016 0.1300
Total Distributions Declared and Distributed $ 1.80

Date Declared Record Date Payment Date Amount
Per Share
January 2, 2015 January 22, 2015 January 29, 2015 $ 0.1567
January 2, 2015 February 20, 2015 February 26, 2015 0.1567
January 2, 2015 March 23, 2015 March 30, 2015 0.1567
February 26, 2015 March 23, 2015⁽¹⁾ March 30, 2015 0.0500
February 26, 2015 April 23, 2015⁽¹⁾ April 29, 2015 0.0500
February 26, 2015 May 21, 2015⁽¹⁾ May 28, 2015 0.0500
February 26, 2015 June 22, 2015⁽¹⁾ June 29, 2015 0.0500
February 26, 2015 July 23, 2015⁽¹⁾ July 30, 2015 0.0500
February 26, 2015 August 21, 2015⁽¹⁾ August 28, 2015 0.0500
February 26, 2015 September 23, 2015⁽¹⁾ September 29, 2015 0.0500
February 26, 2015 October 23, 2015⁽¹⁾ October 29, 2015 0.0500
February 26, 2015 November 20, 2015⁽¹⁾ November 27, 2015 0.0500
February 26, 2015 December 22, 2015⁽¹⁾ December 30, 2015 0.0500
April 1, 2015 April 23, 2015 April 29, 2015 0.1567
April 1, 2015 May 21, 2015 May 28, 2015 0.1567
April 1, 2015 June 22, 2015 June 29, 2015 0.1567
July 1, 2015 July 23, 2015 July 30, 2015 0.1567
July 1, 2015 August 21, 2015 August 28, 2015 0.1567
July 1, 2015 September 23, 2015 September 29, 2015 0.1567
October 1, 2015 October 23, 2015 October 29, 2015 0.1567
October 1, 2015 November 20, 2015 November 27, 2015 0.1567
October 1, 2015 December 22, 2015 December 30, 2015 0.1567
Total Distributions Declared and Distributed $ 2.38

~~(1)~~

~~On February 26, 2015, the Company’s Board declared a special distribution of $0.50 per share of the Company’s common stock, which was paid monthly over the remainder of 2015.~~

Related Parties

~~We have~~On July 1, 2021, we entered into the Investment Advisory Agreement with the Investment Advisor. ~~Joseph B. Alala, our chief executive officer and chairman of our Board,~~The Company is ~~the managing partner and chief investment officer of~~externally managed by the Investment Advisor, ~~and M. Hunt Broyhill, a~~an affiliate of BC Partners, pursuant to the Investment Advisory Agreement. Mr. Goldthorpe, an interested member of ~~our~~the Board, has ana direct or indirect ~~controlling~~pecuniary interest in the Investment Advisor.

~~In addition,~~ The Investment Advisor is a registered investment adviser under the Investment Advisers Act of 1940, as amended. The Investment Advisor is an affiliate of BC Partners Advisors L.P. for U.S. regulatory purposes. Mount Logan Capital Inc. is the ultimate control person of the Investment Advisor.

Under the Investment Advisory Agreement, fees payable to the Investment Advisor equal (i) the Base Management Fee and (ii) the Incentive Fee. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect from year-to-year if approved annually by a majority of the Board or by the holders of a majority of the outstanding shares, and, in each case, a majority of the independent directors.

Pursuant to the Administration Agreement, the Administrator provides administrative services to the Company necessary for the operations of the Company, which include providing to the Company office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities and such other services as the Administrator, subject to review by the Board, shall from time to time deem to be necessary or useful to perform its obligations under the applicable Administration Agreement. The Administrator also ~~manages CapitalSouth Partners SBIC Fund IV, L.P. (“Fund IV”), a private investment limited partnership~~provides to the Company portfolio collection functions for and is responsible for the financial and other records that the Company is required to maintain and prepares, prints and disseminates reports to the Company's stockholders and reports and all other materials filed with the SEC.

For providing ~~financing solutions~~these services, facilities and personnel, the Company reimburses the Administrator the allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company's allocable portion of the costs of compensation and related expenses of its chief financial officer and chief compliance officer and their respective staffs.

On October 23, 2018, the SEC issued an order granting an application for exemptive relief to ~~smaller and lower middle-market companies~~an affiliate of our Investment Advisor that ~~had its first closing in March 2013 and obtained SBA approval for its SBIC license in April 2013. In addition to Fund IV, affiliates of~~allows BDCs managed by the Investment Advisor, ~~may manage several affiliated funds whereby institutional limited partners in Fund IV have the opportunity~~including Logan Ridge, to co-invest, ~~with Fund IV~~subject to the satisfaction of certain conditions, in ~~portfolio investments. An affiliate of the Investment Advisor also manages Capitala Private Credit Fund V, L.P. (“Fund V”); a~~certain private ~~investment limited partnership providing financing solutions to lower middle-market and traditional middle-market companies. The Investment Advisor and its affiliates may also manage~~placement transactions, with other funds ~~in the future that may have investment mandates that are similar, in whole and in part, with ours. To the extent permitted~~managed by the 1940 Act and interpretation of the SEC staff, the Investment Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Advisor or its affiliates ~~may determine~~and any future funds that ~~we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted~~are advised by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Advisor’s allocation procedures. We do not expect to make co-investments, or otherwise compete for investment opportunities, with Fund IV because its focus and investment strategy differ from our own. However, we do expect to make co-investments with Fund V given its similar investment strategy.

~~On September 10, 2015, we, Fund II, Fund III, Fund V, and~~ the Investment Advisor ~~filed an application for exemptive relief with the SEC to permit an investment fund and one~~ or ~~more other~~its affiliated investment ~~funds, including future affiliated investment funds,~~advisers. Under the terms of the exemptive order, in order for Logan Ridge to participate in ~~the same investment opportunities through~~ a ~~proposed~~ co-investment program where such participation would otherwise be prohibited under the 1940 Act. On June 1, 2016, the SEC issued an order (the “Order”) permitting this relief. Pursuant to the Order, we are permitted to co-invest in such investment opportunities with our affiliates iftransaction, a ~~“required majority”~~"required majority" (as defined in Section ~~57(o)~~57(0) of the 1940 Act) of ~~our~~Logan Ridge's independent ~~directors make certain conclusions in connection with a co-investment transaction, including, but not limited to,~~directors; must conclude that ~~(1)~~(i) the terms of the ~~potential co-investment~~proposed transaction, including the consideration to be paid, are reasonable and fair to usLogan Ridge and ~~our~~its stockholders and do not involve overreaching inwith respect of usLogan Ridge or ~~our~~its stockholders on the part of any person concerned, and ~~(2)~~(ii) the ~~potential co-investment~~proposed transaction is consistent with the interests of ~~our~~Logan Ridge's stockholders and is consistent with Logan Ridge's investment objectives and strategies and certain

criteria established by the Board. We believe this relief may not only enhance our ~~then-current~~ability to further our investment ~~objective~~objectives and ~~strategies.~~strategies, but may also increase favorable investment opportunities for us, in part by allowing us to participate in larger investments, together with our co-investment affiliates, than would be available to us in the absence of such relief.

~~On August 31, 2016, the Company sold assets~~Prior to ~~FSC II in exchange for 100% of the partnership interests in FSC II. Concurrent~~July 1, 2021, we were party to an administration agreement with our then administrator, Capitala Advisors Corp. As administrator, Capitala Advisors Corp. provided us with the ~~sale of these assets~~office facilities and administrative services necessary to FSC II, the Company received cash consideration of $47.6 million from an affiliated third-party purchaser in exchange for 100% of the partnership interests of FSC II. The Company’s Board pre-approved this transaction pursuant to Section 57(f) of the 1940 Act. Capitala Advisors Corp., the Company’s administrator, also serves as the administrator to FSC II.

~~We have~~conduct our day-to-day operations. On July 1, 2021, we entered into a ~~license agreement with the Investment Advisor, pursuant to which the Investment Advisor has agreed to grant us a non-exclusive, royalty-free license to use the name “Capitala.”~~

~~We have entered into the~~new Administration Agreement with our ~~Administrator.~~current Administrator, BC Partners Management LLC. Pursuant to the terms of the Administration Agreement, our Administrator provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. ~~Mr. Alala, our chief executive officer and chairman of our Board, is the chief executive officer, president and a director of our Administrator.~~

~~Off-balance sheet arrangements~~Off-Balance Sheet Arrangements

As of ~~September 30, 2017,~~March 31, 2022, the Company had outstanding unfunded commitments related to debt investments in existing portfolio companies of ~~$4.0~~$0.4 million ~~(CIS Secure Computing,~~to American Academy Holdings, LLC, $4.7 million to Accordion Partners LLC, $0.9 million to Bradshaw International, Inc.), ~~$2.0~~$3.1 million ~~(Portrait Innovations, Inc.),~~to Critical Nurse Staffing, LLC, $0.9 million to Keg Logistics LLC, $1.5 million ~~(Kelle’s Transport Service, LLC),~~to Premiere Imaging, LLC, and ~~$1.0~~$3.0 million ~~(US Well Services, LLC)~~to Wealth Enhancement Group, LLC. As of December 31, ~~2016,~~2021, the Company had outstanding unfunded commitments related to debt investments in an existing portfolio ~~company~~companies of ~~$1.2~~$9.0 million ~~(On-Site Fuel Services,~~to Accordion Partners LLC, $0.7 million to Bradshaw International, Inc.).

~~In addition~~, $3.1 million to ~~unfunded commitments related~~Critical Nursing Staffing, Inc., $3.5 million to ~~debt investments, the Company also has extended a guaranty on behalf of one of our portfolio companies, whereby we have guaranteed $1.5~~J5 Infrastructure Partners, LLC, $0.9 million ~~of obligations of Kelle’s Transport Service,~~to Keg Logistics LLC, $2.5 million to Marble Point Credit Management LLC, $1.9 million to Premiere Imaging, LLC, and $3.5 million to Wealth Enhancement Group, LLC. As of September 30, 2017 we have not been required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the fair value of this guaranty to be immaterial.

We have no other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Developments

~~Distributions~~On April 1, 2022, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) governing the issuance of $15.0 million in aggregate principal amount of 5.25% Convertible Notes due 2032 (the “Convertible Notes”) in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The Convertible Notes have not been registered under the Securities Act or any state securities laws and may not be reoffered or resold in the United States absent registration or an applicable exemption from such registration requirements. The Convertible Notes were delivered and paid for on April 1, 2022. The Convertible Notes will mature on April 1, 2032 (the “Maturity Date”). The net proceeds to the Company were $13,650,000, after deducting estimated offering expenses. Capitalized terms used but not defined herein have the meanings ascribed to them in the Purchase Agreement.

~~On October 2, 2017 our Board declared~~The Company obtained an Investment Grade rating from a Nationally Recognized Statistical Rating Organization (“NRSRO”) with respect to the ~~following distributions:~~Convertible Notes. The Convertible Notes have a fixed interest rate of 5.25% per annum payable semi-annually on March 31 and September 30 of each year, commencing on September 30, 2022, subject to a step up of 0.75% per annum to the extent that the Convertible Notes are downgraded below Investment Grade by an NRSRO or the Convertible Notes no longer maintain a rating from an NRSRO. The Company will also be required to pay an additional interest rate of 2.0% per annum (x) on any overdue payment of interest and (y) during the continuance of an Event of Default. The Company intends to use the net proceeds from the offering of the Convertible Notes for general corporate purposes, which may include repaying outstanding indebtedness, making opportunistic investments and paying corporate expenses. In addition, on the occurrence of a Change in Control Repurchase Event or Delisting Event, the Company will generally be required to make an offer to purchase the outstanding Convertible Notes at a price equal to 100% of the principal amount of such Convertible Notes plus accrued and unpaid interest to the repurchase date.

~~Portfolio Activity~~

On ~~October 31, 2017,~~May 10, 2022, CBL, a direct, wholly owned, consolidated subsidiary of the Company, ~~funded $2.0~~amended its existing senior secured revolving credit agreement (the “Amended KeyBank Credit Facility"), dated as of October 30, 2020 (and amended as of July 1, 2021) with the Investment Advisor as collateral manager, the lenders from time to time parties thereto (each a “Lender”), KeyBank National Association, as administrative agent, and U.S. Bank National Association, as custodian. Under the Amended KeyBank Credit Facility, the Lender agreed to extend credit to CBL in an initial commitment equal to an aggregate principal amount of $75.0 million. CBL may borrow up to an additional $125.0 million through an incremental uncommitted accordion feature in accordance with the terms and in the manner described in the Amended KeyBank Credit Facility.

The period during which the Lender may make loans to CBL under the Amended KeyBank Credit Facility and will continue through May 12, 2025, unless there is an earlier termination or event of ~~its unfunded~~default (the “Commitment Termination Date”). The Amended KeyBank Credit Facility will mature on May 10, 2027, unless there is an earlier termination or event of default. Borrowings under the Amended KeyBank Credit Facility will bear interest at a floating forward-looking term rate equal to term SOFR plus an applicable margin of 2.90% until the Commitment Termination Date and 3.25% thereafter. The Company will also pay an unused commitment ~~to CIS Secure Computing, Inc.~~fee, depending on the level of utilization, at a rate of 1.00%, 0.65%, or 0.35% per annum on the unutilized portion of the aggregate commitments under the Amended KeyBank Credit Facility.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments and cash and cash equivalents. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options, and forward contracts subject to the requirements of the 1940 Act. For the ~~nine~~three months ended ~~September 30, 2017,~~ March 31, 2022, we did not engage in hedging activities.

As of ~~September 30, 2017,~~March 31, 2022, we held 1728 securities bearing a variable rate of interest. Our variable rate investments represent approximately ~~41.8%~~ 75.7% of ~~the~~the fair value of our total debt investments. As of ~~September 30, 2017, 10.2%~~March 31, 2022, 100.0% of the variable rate securities were yielding interest at a rate equal to the established interest rate ~~floor or interest rate ceiling and 89.8% of variable rate securities were yielding interest at a rate above its existing floor or were not subject to an interest rate~~ floor. As of ~~September 30, 2017,~~March 31, 2022, we had ~~$0.0 million~~ nothing outstanding on our KeyBank Credit Facility, which has a variable rate of interest at ~~one month~~one-month LIBOR + ~~3.0%~~3.5%. Our KeyBank Credit Facility is subject to an interest rate floor such that the minimum interest rate is 4.25%. As of ~~September 30, 2017,~~March 31, 2022, all of our other interest paying liabilities, consisting ~~of $170.7 million in SBA-guaranteed debentures, $75.0~~of $22.8 million in 2022 Notes, $52.1 million in 2022 Convertible Notes and ~~$52.1~~$50.0 million in ~~2022 Convertible~~2026 Notes were bearing interest at a fixed rate.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In addition, in a prolonged low interest rate environment, including a reduction of LIBOR to zero, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results.

Based on our ~~September 30, 2017~~March 31, 2022 consolidated ~~statements~~statement of assets and liabilities, the following table shows the annual impact on net income (excluding the potential related incentive fee impact) of base rate changes in interest rates (considering interest rate floors for variable rate securities) assuming no changes in our investment and borrowing structure (dollars in thousands):

Basis Point Change Increase
(decrease)
in interest
income (Increase)
decrease in
interest
expense Increase
(decrease)
in net income
Up 300 basis points $ 4,314 $ — $ 4,314
Up 200 basis points $ 2,858 $ — $ 2,858
Up 100 basis points $ 1,401 $ — $ 1,401
Down 100 basis points $ (651 ) $ — $ (651 )
Down 200 basis points $ (651 ) $ — $ (651 )
Down 300 basis points $ (651 ) $ — $ (651 )


Basis Point Change	Increase (decrease) in interest income			(Increase) decrease in interest expense		Increase (decrease) in net income
Up 300 basis points	$	2,258		$	—	$	2,258
Up 200 basis points		1,374			—		1,374
Up 100 basis points		605			—		605
Down 100 basis points		(135	)		—		(135	)
Down 200 basis points		(135	)		—		(135	)
Down 300 basis points		(135	)		—		(135	)

Item 4. Controls and Procedures

~~(a)~~

~~Evaluation of Disclosure Controls and Procedures~~

(a)

Evaluation of Disclosure Controls and Procedures

As of ~~September 30, 2017~~March 31, 2022 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

~~(b)~~

~~Changes in Internal Control Over Financial Reporting~~

(b)

Changes in Internal Controls Over Financial Reporting

Management has not identified any change in the Company’s internal control over financial reporting that occurred during the ~~third~~first quarter of ~~2017~~2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~None of us,~~We and our ~~Investment Advisor or Administrator or any of the Legacy Funds,~~subsidiaries are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or ~~against~~ our ~~Investment Advisor or Administrator or any of the Legacy Funds.~~subsidiaries. From time to time, we, or our ~~Investment Advisor or Administrator, or any of the Legacy Funds~~subsidiaries may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings, if any, cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2021 (the “Annual Report on Form 10-K”), which could materially affect our business, financial condition and/or operating results. The risks described in ~~our~~the Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. ~~During the nine months ended September 30, 2017, there~~There have been no material changes from the risk factors set forth in ~~our~~the Annual Report on Form ~~10-K for the year ended December 31, 2016.~~10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended September 30, 2017, we issued 28,136 shares of common stock under our DRIP. The issuances were not subject to the registration requirements under the Securities Act of 1933, as amended. The cash paid for shares of common stock issued under our DRIP during the quarter ended September 30, 2017 was approximately $0.3 million. Other than the shares issued under our DRIP during the quarter ended September 30, 2017, we did not sell any unregistered equity securities.None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

~~Exhibit~~
~~Number~~ Exhibit
Number		Description of Document
3.1		Articles of Amendment and Restatement(1)

3.2		Articles of Amendment (4)

3.3		Certificate of Limited Partnership of CapitalSouth Partners Fund II Limited Partnership(2)

~~3.3~~3.4		Certificate of Limited Partnership of CapitalSouth Fund III, L.P. (f/k/a CapitalSouth Partners SBIC Fund III, L.P.⁾(2)

~~3.4~~3.5		Bylaws(1)

~~3.5~~3.6		Form of Amended and Restated Limited Partnership Agreement of CapitalSouth Partners Fund II Limited Partnership(3)

~~3.6~~3.7		Form of Amended and Restated Agreement of Limited Partnership of Certificate of Limited Partnership of CapitalSouth Fund III, L.P. (f/k/a CapitalSouth Partners SBIC Fund III, L.P.⁾(3)

~~4.1~~		~~Form of Common Stock Certificate~~⁽¹⁾

~~11.1~~		~~Computation of Per Share Earnings (included in the notes to the consolidated financial statements contained in this report)~~

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)


(1)		Previously filed in connection with the Pre-Effective Amendment No. 1 to ~~Capitala~~Logan Ridge Finance ~~Corp.’s~~Corporation’s registration statement on Form N-2 (File No. 333-188956) filed on September 9, 2013.

(2)		Previously filed in connection with Pre-Effective Amendment No. 2 to ~~Capitala~~Logan Ridge Finance ~~Corp.’s~~Corporation’s registration statement on Form N-2 (File No. 333-188956) filed on September ~~16,~~17, 2013.

(3)		Previously filed in connection with Pre-Effective Amendment No. 5 to ~~Capitala~~Logan Ridge Finance ~~Corp.’s~~Corporation’s registration statement on Form N-2 (File No. 333-188956) filed on September 24, 2013.

(4)		Previously filed in connection with Logan Ridge Finance Corporation's report on Form 8-K on August 4, 2020.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~Date: November 6, 2017~~	By	~~/s/ Joseph B. Alala III~~
Date: May 12, 2022	By	~~Joseph B. Alala III~~ /s/ Ted Goldthorpe
		Ted Goldthorpe
		Chief Executive Officer and President
		(Principal Executive Officer)
		~~Capitala~~ Logan Ridge Finance ~~Corp.~~Corporation

~~Date: November 6, 2017~~ Date: May 12, 2022	By	/s/ ~~Stephen A. Arnall~~Jason Roos
		~~Stephen A. Arnall~~ Jason Roos
		Chief Financial Officer
		(Principal Financial ~~and Accounting~~ Officer)
		~~Capitala~~ Logan Ridge Finance ~~Corp.~~Corporation

~~Capitala Finance Corp.~~
	Large accelerated filer	¨	Accelerated filer	x ¨

	Non-accelerated filer	¨ x	Smaller reporting company	¨

			Emerging growth company	x ¨

		~~Page~~
		Page
PART I.	FINANCIAL INFORMATION	3

Item 1.	Consolidated Financial Statements	3

	Consolidated Statements of Assets and Liabilities as of ~~September 30, 2017~~March 31, 2022 (unaudited) and December 31, ~~2016~~2021	3

	Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (unaudited)	4

	Consolidated Statements of Changes in Net Assets for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (unaudited)	5

	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 (unaudited)	6

	Consolidated Schedules of Investments as of ~~September 30, 2017~~March 31, 2022 (unaudited) and December 31, ~~2016~~2021	7

	Notes to Consolidated Financial Statements as of ~~September 30, 2017~~and for the period ended March 31, 2022 (unaudited)	17 13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42 30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63 40

Item 4.	Controls and Procedures	64 41

PART II.	OTHER INFORMATION	64 41

Item 1.	Legal Proceedings	64 41

Item 1A.	Risk Factors	64 41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64 41

Item 3.	Defaults Upon Senior Securities	64 41

Item 4.	Mine Safety Disclosures	64 41

Item 5.	Other Information	64 41

Item 6.	Exhibits	65 42

Signatures		66 43

	As of
	September 30, 2017			December 31, 2016
	(unaudited)
ASSETS
Investments at fair value
Non-control/non-affiliate investments (amortized cost of $276,221 and $391,706, respectively)	$	274,795		$	393,525
Affiliate investments (amortized cost of $76,414 and $39,279, respectively)		98,101			61,464
Control investments (amortized cost of $102,079 and $82,791, respectively)		98,210			86,650
Total investments at fair value (amortized cost of $454,714 and $513,776, respectively)		471,106			541,639
Cash and cash equivalents		52,307			36,281
Interest and dividend receivable		4,246			5,735
Due from related parties		74			182
Prepaid expenses		409			506
Other assets		82			72
Total assets	$	528,224		$	584,415

LIABILITIES
SBA debentures (net of deferred financing costs of $2,454 and $2,911, respectively)	$	168,246		$	167,789
2021 Notes (net of deferred financing costs of $0 and $3,025, respectively)		-			110,413
2022 Notes (net of deferred financing costs of $2,618 and $0, respectively)		72,382			-
2022 Convertible Notes (net of deferred financing costs of $1,658 and $0, respectively)		50,430			-
Credit Facility (net of deferred financing costs of $1,096 and $759, respectively)		(1,096	)		43,241
Due to related parties		-			35
Management and incentive fee payable		2,228			6,426
Interest and financing fees payable		1,512			2,657
Accounts payable and accrued expenses		-			536
Deferred tax liability		2,660			-
Written call option at fair value (proceeds of $20 and $20, respectively)		5,555			2,736
Total liabilities	$	301,917		$	333,833

Commitments and contingencies (Note 2)

NET ASSETS
Common stock, par value $.01, 100,000,000 common shares authorized, 15,930,631 and 15,868,045 common shares issued and outstanding, respectively	$	159		$	159
Additional paid in capital		240,897			240,184
Undistributed net investment income		15,684			22,973
Accumulated net realized losses from investments		(38,630	)		(37,881	)
Net unrealized appreciation on investments, net of deferred taxes		13,732			27,863
Net unrealized depreciation on written call option		(5,535	)		(2,716	)
Total net assets	$	226,307		$	250,582
Total liabilities and net assets	$	528,224		$	584,415

Net asset value per share	$	14.21		$	15.79


	As of March 31,			As of December 31,
	2022			2021
	(unaudited)
ASSETS
Investments at fair value:
Non-control/non-affiliate investments (amortized cost of $140,329 and $131,829, respectively)		137,341		$	129,991
Affiliate investments (amortized cost of $49,790 and $49,803, respectively)		62,649			61,359
Control investments (amortized cost of $8,850 and $8,850, respectively)		6,915			6,839
Total investments at fair value (amortized cost of $198,969 and $190,482, respectively)		206,905			198,189
Cash and cash equivalents		15,838			39,056
Interest and dividend receivable		1,025			929
Prepaid expenses		3,137			3,358
Receivable for unsettled trades		7,086			685
Total assets	$	233,991		$	242,217
LIABILITIES
2022 Notes (net of deferred financing costs of $18 and $46, respectively)	$	22,815		$	22,787
2022 Convertible Notes (net of deferred financing costs of $67 and $167, respectively)		52,020			51,921
2026 Notes (net of deferred financing costs and original issue discount of $1,540 and $1,552, respectively)		48,460			48,448
KeyBank Credit Facility (net of deferred financing costs of $305 and $353, respectively)		(305	)		(353	)
Management and incentive fees payable		1,027			1,065
Interest and financing fees payable		1,595			911
Payable for unsettled trades		1,478			9,265
Accounts payable and accrued expenses		730			1,144
Total liabilities	$	127,820		$	135,188
Commitments and contingencies (Note 2)
NET ASSETS
Common stock, par value $0.01, 100,000,000 common shares authorized, 2,711,068 and 2,711,068 common shares issued and outstanding, respectively	$	27		$	27
Additional paid in capital		188,846			188,846
Total distributable loss		(82,702	)		(81,844	)
Total net assets	$	106,171		$	107,029
Total liabilities and net assets	$	233,991		$	242,217
Net asset value per share	$	39.16		$	39.48

	Common Stock
	Number of Shares		Par Value		Additional Paid in Capital		Undistributed Net Investment Income			Accumulated Net Realized Losses			Net Unrealized Appreciation on Investments, net of Deferred Taxes			Net Unrealized Depreciation on Written Call Option			Total

BALANCE, December 31, 2015		15,777,345	$	158	$	239,104	$	8,570		$	(1,299	)	$	22,269		$	-		$	268,802
Net investment income		-		-		-		22,293			-			-			-			22,293
Net realized loss from investments		-		-		-		-			(24,897	)		-			-			(24,897	)
Net change in unrealized appreciation on investments		-		-		-		-			-			4,557			-			4,557
Net change in unrealized depreciation on written call option		-		-		-		-			-			(898	)		-			(898	)
Distributions to Shareholders:
Stock issued under dividend reinvestment plan		66,814		-		813		-			-			-			-			813
Distributions declared		-		-		-		(22,293	)		-			-			-			(22,293	)
BALANCE, September 30, 2016		15,844,159	$	158	$	239,917	$	8,570		$	(26,196	)	$	25,928		$	-		$	248,377

BALANCE, December 31, 2016		15,868,045	$	159	$	240,184	$	22,973		$	(37,881	)	$	27,863		$	(2,716	)	$	250,582
Net investment income		-		-		-		11,304			-			-			-			11,304
Net realized loss from investments		-		-		-		-			(749	)		-			-			(749	)
Net change in unrealized depreciation on investments		-		-		-		-			-			(11,471	)		-			(11,471	)
Net change in unrealized depreciation on written call option		-		-		-		-			-			-			(2,819	)		(2,819	)
Change in provision for deferred taxes on unrealized appreciation on investments		-		-		-		-			-			(2,660	)		-			(2,660	)
Distributions to Shareholders:
Stock issued under dividend reinvestment plan		62,586		-		713		-			-			-			-			713
Distributions declared		-		-		-		(18,593	)		-			-			-			(18,593	)
BALANCE, September 30, 2017		15,930,631	$	159	$	240,897	$	15,684		$	(38,630	)	$	13,732		$	(5,535	)	$	226,307


	¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the Three Months Ended September 30						For the Nine Months Ended September 30
	2017			2016			2017			2016
INVESTMENT INCOME
Interest and fee income:
Non-control/non-affiliate investments	$	6,935		$	10,520		$	23,978		$	31,870
Affiliate investments		1,187			1,150			3,344			4,754
Control investments		1,639			3,545			5,209			8,681
Total interest and fee income		9,761			15,215			32,531			45,305
Payment-in-kind interest and dividend income:
Non-control/non-affiliate investments		1,103			1,176			3,810			2,966
Affiliate investments		611			101			1,254			293
Control investments		166			241			574			707
Total payment-in-kind interest and dividend income		1,880			1,518			5,638			3,966
Dividend income:
Non-control/non-affiliate investments		-			-			168			206
Affiliate investments		555			29			612			86
Control investments		25			545			330			2,135
Total dividend income		580			574			1,110			2,427
Other Income		48			42			125			85
Interest income from cash and cash equivalents		43			8			85			15
Total investment income		12,312			17,357			39,489			51,798

EXPENSES
Interest and financing expenses		4,585			4,938			14,726			14,990
Loss on extinguishment of debt		-			-			2,732			-
Base management fee		2,417			2,619			7,436			8,049
Incentive fees		-			1,782			1,308			5,155
General and administrative expenses		900			889			2,941			2,984
Expenses before incentive fee waiver		7,902			10,228			29,143			31,178
Incentive fee waiver (See Note 5)		-			(312	)		(958	)		(1,673	)
Total expenses, net of fee waivers		7,902			9,916			28,185			29,505

NET INVESTMENT INCOME		4,410			7,441			11,304			22,293

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND WRITTEN CALL OPTION:
Net realized gain (loss) from investments:
Non-control/non-affiliate investments		(10,381	)		1,192			(5,336	)		1,261
Affiliate investments		98			(18,222	)		4,587			(26,303	)
Control investments		-			-			-			145
Total realized loss from investments		(10,283	)		(17,030	)		(749	)		(24,897	)
Net unrealized appreciation (depreciation) on investments:
Non-control/non-affiliate investments		9,605			(8,217	)		(3,245	)		(6,915	)
Affiliate investments		(1,472	)		15,230			(498	)		3,060
Control investments		(4,946	)		1,461			(7,728	)		8,412
Total unrealized appreciation (depreciation) from investments		3,187			8,474			(11,471	)		4,557
Net unrealized depreciation on written call option		(407	)		(898	)		(2,819	)		(898	)
Change in provision for deferred taxes on unrealized appreciation on investments		(2,660	)		-			(2,660	)		-
Net loss on investments and written call option		(10,163	)		(9,454	)		(17,699	)		(21,238	)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(5,753	)	$	(2,013	)	$	(6,395	)	$	1,055

NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC AND DILUTED	$	(0.36	)	$	(0.13	)	$	(0.40	)	$	0.07

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED		15,911,160			15,829,878			15,891,636			15,807,801

DISTRIBUTIONS PAID PER SHARE	$	0.39		$	0.47		$	1.17		$	1.41


	Common Stock
For the Three Months Ended March 31, 2022 and 2021	Number of Shares		Par Value		Additional Paid in Capital (1)		Total Distributable Loss			Total
BALANCE, December 31, 2021		2,711,068	$	27	$	188,846	$	(81,844	)	$	107,029
Net investment loss		—		—		—		(1,051	)		(1,051	)
Net realized loss on investments		—		—		—		(36	)		(36	)
Net change in unrealized appreciation on investments		—		—		—		229			229
BALANCE, March 31, 2022		2,711,068	$	27	$	188,846	$	(82,702	)	$	106,171

BALANCE, December 31, 2020		2,711,068	$	27	$	229,481	$	(120,561	)	$	108,947
Net investment loss		—		—		—		(783	)		(783	)
Net realized loss on investments		—		—		—		(14,023	)		(14,023	)
Net change in unrealized appreciation on investments		—		—		—		27,160			27,160
BALANCE, March 31, 2021		2,711,068	$	27	$	229,481	$	(108,207	)	$	121,301

Company^{(1), (2), (3), (4)}		Industry	Type of Investment	Principal Amount		Cost		Fair Value		% of Net Assets

Non-control/non-affiliated investments - 121.5%

American Clinical Solutions, LLC		Healthcare	First Lien Debt (10.5% Cash, 1% PIK, Due 6/11/20)	$	9,045	$	9,045	$	7,571		3.3	%
							9,045		7,571		3.3	%

American Exteriors, LLC		Replacement Window Manufacturer	First Lien Debt (10% PIK, Due 1/1/19)⁽⁵⁾⁽⁶⁾		7,847		5,429		2,706		1.2	%

American Exteriors, LLC		Replacement Window Manufacturer	Common Stock Warrants (10% fully diluted)				-		-		0.0	%
							5,429		2,706		1.2	%

AmeriMark Direct, LLC		Consumer Products	First Lien Debt (12.75% Cash, Due 9/8/21)		19,400		18,980		19,400		8.6	%
							18,980		19,400		8.6	%

B&W Quality Growers, LLC		Farming	Membership Unit Warrants (91,739 Units)				-		5,724		2.5	%
	��						-		5,724		2.5	%

BigMouth, Inc.		Consumer Products	First Lien Debt (13.2% Cash, Due 11/14/21)⁽⁷⁾		9,964		9,964		9,964		4.4	%

BigMouth, Inc.		Consumer Products	Series A Preferred Stock (350,000 shares, 8% PIK)⁽⁸⁾				375		771		0.3	%
							10,339		10,735		4.7	%

Bluestem Brands, Inc.		Online Merchandise Retailer	First Lien Debt (8.74% Cash (1 month LIBOR + 7.5%, 1% Floor), Due 11/7/20)		4,092		4,015		3,840		1.7	%
							4,015		3,840		1.7	%

Brunswick Bowling Products, Inc.		Bowling Products	First Lien Debt (8% Cash (1 month LIBOR + 6%, 2% Floor), Due 5/22/20)		1,600		1,600		1,600		0.7	%

Brunswick Bowling Products, Inc.		Bowling Products	First Lien Debt (16.25% Cash (1 month LIBOR + 14.25%, 2% Floor), Due 5/22/20)		5,586		5,586		5,586		2.5	%

Brunswick Bowling Products, Inc.		Bowling Products	Preferred Shares (2,966 shares, 8% PIK)⁽⁸⁾				3,597		6,144		2.7	%
							10,783		13,330		5.9	%

Burke America Parts Group, LLC		Home Repair Parts Manufacturer	Membership Units (14 units)				5		3,213		1.4	%
							5		3,213		1.4	%

California Pizza Kitchen, Inc.		Restaurant	Second Lien Debt (11.24% Cash (1 month LIBOR + 10%, 1% Floor), Due 8/23/23)		5,000		4,874		4,874		2.2	%
							4,874		4,874		2.2	%

Caregiver Services, Inc.		In-Home Healthcare Services	Common Stock (293,186 shares)				258		44		0.0	%

Caregiver Services, Inc.		In-Home Healthcare Services	Common Stock Warrants (655,908 units)⁽⁹⁾				264		98		0.0	%
							522		142		0.0	%

Cedar Electronics Holding Corp.		Consumer Electronics	Subordinated Debt (12% Cash, Due 12/26/20)⁽⁶⁾		21,550		21,550		8,477		3.7	%
							21,550		8,477		3.7	%

CIS Secure Computing, Inc.		Government Services	First Lien Debt (9.73% Cash (1 month LIBOR + 8.5%, 1% Floor), 1% PIK, Due 9/14/22)⁽¹⁰⁾		7,070		7,070		7,070		3.1	%

CIS Secure Computing, Inc.		Government Services	Common Stock (46,163 shares)				1,000		1,000		0.4	%


Investment (1), (2), (3), (4), (5)	Industry	Interest Rate (+)	Reference Rate and Spread (+)	Floor (+)	Maturity	Par/Shares (++)		Cost			Fair Value			Footnotes
Investments in Non-Control, Non-Affiliate Portfolio Companies - 129.4%
First Lien/Senior Secured Debt - 85.5%
Accordion Partners LLC	Industrials	6.50%	L + 5.50%	1.00%	09/24/2027	$	6,748	$	6,640		$	6,639		(12)
Accordion Partners LLC (Revolver)	Industrials	6.50%	L + 5.50%	1.00%	09/30/2026		2,500		2,433			2,439		(13)
Accurate Background, LLC	Information Technology	7.00%	L + 6.00%	1.00%	03/26/2027		2,985		2,737			2,850
Alternative Biomedical Solutions, LLC	Healthcare	8.00%	—	—	12/18/2022		6,941		6,941			6,442
American Academy Holdings, LLC	Healthcare	12.00%	L + 11.00%	1.00%	01/01/2025		2,078		2,054			2,053		(17)
American Clinical Solutions, LLC	Healthcare	7.00%	—	—	12/31/2022		3,500		3,500			3,386
AP Core Holdings II, LLC	Information Technology	6.25%	L + 5.50%	0.75%	07/21/2027		1,219		1,202			1,211
AP Core Holdings II, LLC	Information Technology	6.25%	L + 5.50%	0.75%	07/21/2027		1,250		1,233			1,250
BigMouth, Inc.	Consumer Products	—	—	—	11/14/2021		1,513		758			803		(7)(25)
Bradshaw International, Inc.	Consumer Discretionary	6.75%	L + 5.75%	1.00%	10/21/2027		505		493			490
Bradshaw International, Inc. (Revolver)	Consumer Discretionary	—	L + 5.75%	1.00%	10/21/2026		—		(22	)		(22	)	(14)
Critical Nurse Staffing, LLC	Healthcare	7.00%	L + 6.00%	1.00%	10/30/2026		5,909		5,797			5,780		(15)
Critical Nurse Staffing, LLC (Revolver)	Healthcare	—	L + 6.00%	1.00%	10/30/2026		—		(16	)		(16	)	(16)
Dodge Data & Analytics LLC	Information Technology	5.25%	L + 4.75%	0.50%	02/10/2029		1,500		1,478			1,478
Freedom Electronics, LLC (First Out)	Electronic Machine Repair	7.00%	L + 5.00%	2.00%	12/20/2023		2,581		2,581			2,581		(26)
Freedom Electronics, LLC (Last Out)	Electronic Machine Repair	8.67%	—	—	12/20/2023		5,632		5,632			5,584		(10)(26)
HUMC Opco, LLC	Healthcare	9.00%	—	—	01/14/2022		4,527		4,527			4,441		(26)
JO ET Holdings Limited	Information Technology	14.00%	SOFR+6.00%, 7.00% PIK	1.00%	12/15/2026		1,015		980			996
Jurassic Quest Holdings, LLC	Entertainment	9.50%	L + 7.50%	2.00%	05/01/2024		8,230		8,230			8,223		(26)
Keg Logistics LLC	Consumer Discretionary	7.00%	L + 6.00%	1.00%	11/23/2027		7,516		7,410			7,432
Keg Logistics LLC (Revolver)	Consumer Discretionary	—	L + 6.00%	1.00%	11/23/2027		—		(12	)		(10	)	(18)
Lucky Bucks, LLC	Consumer Discretionary	6.25%	L + 5.50%	0.75%	07/21/2027		2,963		2,909			2,911
Marble Point Credit Management LLC	Financials	7.00%	L + 6.00%	1.00%	08/11/2028		5,727		5,584			5,629
Marble Point Credit Management LLC (Revolver)	Financials	7.00%	L + 6.00%	1.00%	08/11/2028		2,500		2,477			2,457
Premier Imaging, LLC	Healthcare	7.00%	L + 6.00%	1.00%	12/29/2028		2,496		2,459			2,456		(20)
Rotolo Consultants, Inc.	Industrials	9.00%	L + 8.00%	1.00%	12/21/2026		998		988			984
Sequoia Healthcare Management, LLC	Healthcare Management	—	—	—	01/14/2022		11,935		11,935			6,247		(7)
Symplr Software, Inc.	Healthcare	5.25%	SOFR + 4.50%	0.75%	06/30/2022		1,700		1,696			1,678
Wealth Enhancement Group, LLC	Financials	6.75%	L + 5.75%	1.00%	10/02/2027		4,339		4,316			4,289		(21)
Wealth Enhancement Group, LLC (Revolver)	Financials	6.75%	L + 5.75%	1.00%	10/02/2027		108		105			105		(22)
Total First Lien/Senior Secured Debt									97,045			90,786
Second Lien/Senior Secured Debt - 14.9%
American Academy Holdings, LLC	Healthcare	14.50% PIK	—	—	03/01/2028		3,219		3,124			3,123
BLST Operating Company, LLC	Online Merchandise Retailer	10.00%	L + 8.50%	1.50%	08/28/2025		1,780		1,780			1,780		(8)(26)
Ivanti Software, Inc.	Information Technology	7.75%	L + 7.25%	0.50%	12/01/2028		7,000		6,965			6,930		(26)
Mandolin Technology Intermediate Holdings, Inc.	Information Technology	7.00%	L + 6.50%	0.50%	07/23/2029		4,000		3,972			3,975
Total Second Lien/Senior Secured Debt									15,841			15,808
Subordinated Debt - 6.7%
Lucky Bucks, LLC	Consumer Discretionary	12.50% PIK	—	—	05/29/2028		2,062		2,023			2,008
Tubular Textile Machinery, Inc.	Textile Equipment Manufacturer	5.00%	—	—	10/29/2027		5,094		5,094			5,107
Total Subordinated Debt									7,117			7,115
Collateralized Loan Obligations - 6.8%
JMP Credit Advisors CLO IV Ltd.	Financials	9.64%	—	—	07/17/2029		7,891		3,602			3,236		(19)(24)
JMP Credit Advisors CLO V Ltd.	Financials	13.60%	—	—	07/17/2030		7,320		4,504			3,963		(19)(24)
Total Collateralized Loan Obligations									8,106			7,199
Preferred Stock and Units - 2.7%
Alternative Biomedical Solutions, LLC - Series A	Healthcare	—	—	—	—		14,656		1,275			479
Alternative Biomedical Solutions, LLC - Series B	Healthcare	—	—	—	—		50,964		3,946			—
Alternative Biomedical Solutions, LLC - Series C	Healthcare	—	—	—	—		78,900		—			—
Jurassic Quest Holdings, LLC	Entertainment	—	—	—	—		467,784		480			420		(6)
MicroHoldco, LLC	General Industrial	—	—	—	—		740,237		749			645
Taylor Precision Products, Inc. - Series C	Household Product Manufacturer	—	—	—	—		379		758			758
U.S. BioTek Laboratories, LLC - Class A	Testing Laboratories	—	—	—	—		500		540			607
Total Preferred Stock and Units		—	—	—	—				7,748			2,909
Common Stock and Membership Units - 12.7%		—	—	—	—
Alternative Biomedical Solutions, LLC	Healthcare	—	—	—	—		20,092		800			—
Alternative Biomedical Solutions, LLC - Membership Unit Warrants	Healthcare	—	—	—	—		49,295		—			—
American Clinical Solutions, LLC - Class A	Healthcare	—	—	—	—		6,030,384		3,198			5,687		(6)
BLST Operating Company, LLC - Class A	Online Merchandise Retailer	—	—	—	—		217,013		286			4,174		(6)
Burke America Parts Group, LLC	Home Repair Parts Manufacturer	—	—	—	—		14		5			3,055		(6)
Freedom Electronics, LLC	Electronic Machine Repair	—	—	—	—		181,818		182			230
U.S. BioTek Laboratories, LLC - Class C	Testing Laboratories	—	—	—	—		578		1			378
Total Common Stock and Membership Units									4,472			13,524
Total Investments in Non-Control, Non-Affiliate Portfolio Companies									140,329			137,341

Company^{(4) , (5)}	Industry	Type of Investment	Principal Amount		Cost		Fair Value		% of Net Assets

Non-control/non-affiliated investments - 157.1%

AAE Acquisition, LLC	Industrial Equipment Rental	Second Lien Debt (12% Cash, Due 3/31/18)	$	11,000	$	11,000	$	10,755		4.3	%

AAE Acquisition, LLC	Industrial Equipment Rental	Membership Units (14% fully diluted)				17		-		0.0	%
						11,017		10,755		4.3	%

American Clinical Solutions, LLC	Healthcare	First Lien Debt (10.5% Cash (3 month LIBOR + 9.5%, 1% Floor), Due 6/11/20)⁽¹³⁾		9,034		9,034		8,582		3.4	%
						9,034		8,582		3.4	%

American Exteriors, LLC	Replacement Window Manufacturer	First Lien Debt (10% PIK, Due 1/1/17)^{(1) (2)}		6,456		4,679		2,571		1.0	%

American Exteriors, LLC	Replacement Window Manufacturer	Common Stock Warrants (10% fully diluted)				-		-		0.0	%
						4,679		2,571		1.0	%

AmeriMark Direct, LLC	Consumer Products	First Lien Debt (12.75% Cash, Due 9/8/21)		19,700		19,192		19,542		7.8	%
						19,192		19,542		7.8	%

B&W Quality Growers, LLC	Farming	Subordinated Debt (14% Cash, Due 7/23/20)		6,000		5,996		6,000		2.4	%

B&W Quality Growers, LLC	Farming	Membership Unit Warrants (91,739 Units)				20		5,779		2.3	%
						6,016		11,779		4.7	%

BigMouth, Inc.	Consumer Products	First Lien Debt (12.6% Cash, Due 11/14/21)⁽³⁾		10,313		10,313		10,313		4.1	%

BigMouth, Inc.	Consumer Products	Series A Preferred Stock (350,000 shares, 8% PIK)⁽⁶⁾				354		354		0.1	%
						10,667		10,667		4.2	%

Bluestem Brands, Inc.	Online Merchandise Retailer	First Lien Debt (8.5% Cash (1 month LIBOR + 7.5%, 1% Floor), Due 11/7/20)		4,279		4,169		4,169		1.7	%
						4,169		4,169		1.7	%

Brock Holdings III, Inc.	Industrial Specialty Services	Second Lien Debt (10% Cash (1 month LIBOR + 8.25%, 1.75% Floor), Due 3/16/18)		5,000		4,935		4,750		1.9	%
						4,935		4,750		1.9	%

Brunswick Bowling Products, Inc.	Bowling Products	First Lien Debt (8% Cash (1 month LIBOR + 6.0%, 2% Floor), Due 5/22/20)		1,600		1,600		1,600		0.6	%

Brunswick Bowling Products, Inc.	Bowling Products	First Lien Debt (16.25% Cash (1 month LIBOR + 14.25%, 2% Floor), Due 5/22/20)		5,586		5,586		5,586		2.2	%

Brunswick Bowling Products, Inc.	Bowling Products	Preferred Shares (2,966 shares, 8% PIK)⁽⁶⁾				3,384		5,317		2.1	%
						10,570		12,503		4.9	%

Burke America Parts Group, LLC	Home Repair Parts Manufacturer	Membership Units (14 units)				5		1,408		0.6	%
						5		1,408		0.6	%

California Pizza Kitchen, Inc.	Restaurant	Second Lien Debt (11% Cash (1 month LIBOR + 10%, 1% Floor), Due 8/23/23)		5,000		4,857		4,857		1.9	%
						4,857		4,857		1.9	%

Caregiver Services, Inc.	In-Home Healthcare Services	Common Stock (293,186 shares)				258		137		0.1	%

Caregiver Services, Inc.	In-Home Healthcare Services	Common Stock Warrants (655,908 units)⁽⁷⁾				264		309		0.1	%
						522		446		0.2	%

Cedar Electronics Holding Corp.	Consumer Electronics	Subordinated Debt (12% Cash, Due 12/26/20)		21,550		21,550		20,818		8.3	%
						21,550		20,818		8.3	%

Community Choice Financial, Inc.	Financial Services	First Lien Debt (18% Cash (1 month LIBOR + 17%, 1% Floor), Due 3/30/18)⁽¹⁾⁽⁸⁾		15,000		15,000		15,000		6.0	%
						15,000		15,000		6.0	%

Construction Partners, Inc.	Construction Services	Second Lien Debt (11.5% Cash, Due 6/12/20)		9,500		9,500		9,500		3.8	%
						9,500		9,500		3.8	%

Corporate Visions, Inc.	Sales & Marketing Services	Subordinated Debt (9% Cash, 2% PIK, Due 11/29/21)		16,267		16,267		15,648		6.2	%

Corporate Visions, Inc.	Sales & Marketing Services	Common Stock (15,750 shares)				1,575		728		0.3	%
						17,842		16,376		6.5	%

CSM Bakery Solutions, LLC	Bakery Supplies Distributor	Second Lien Debt (8.75% Cash (1 month LIBOR + 7.75%, 1% Floor), Due 8/7/22)		12,000		11,813		10,776		4.3	%
						11,813		10,776		4.3	%

Emerging Markets Communications, LLC	Satellite Communications	Second Lien Debt (10.625% Cash (1 month LIBOR + 9.625%, 1% Floor), Due 7/1/22)		5,000		4,946		5,000		2.0	%
						4,946		5,000		2.0	%

Flavors Holdings, Inc.	Food Product Manufacturer	First Lien Debt (6.75% Cash (1 month LIBOR + 5.75%, 1% Floor), Due 4/3/20)		7,100		6,930		6,411		2.6	%

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
First Lien Debt	$	—	$	—	$	221,205	$	221,205
Second Lien Debt		—		—		30,774		30,774
Subordinated Debt		—		—		106,019		106,019
Equity and Warrants		—		—		113,108		113,108
Total	$	—	$	—	$	471,106	$	471,106

	First Lien Debt			Second Lien Debt			Subordinated Debt			Equity and Warrants			Total
Balance as of January 1, 2017	$	226,578		$	71,483		$	150,232		$	93,346		$	541,639
Reclassifications		(4,659	)		—			(9,000	)		13,659			—
Repayments/sales		(21,798	)		(45,804	)		(22,092	)		(15,015	)		(104,709	)
Purchases		31,308			4,000			1,182			3,200			39,690
Payment in-kind interest and dividends accrued		3,609			688			651			690			5,638
Accretion of original issue discount		199			299			570			—			1,068
Realized gain (loss) from investments		(7,119	)		(1,456	)		—			7,826			(749	)
Net unrealized appreciation (depreciation) on investments		(6,913	)		1,564			(15,524	)		9,402			(11,471	)
Balance as of September 30, 2017	$	221,205		$	30,774		$	106,019		$	113,108		$	471,106

	Written Call Option
Balance as of January 1, 2017	$	(2,736	)
Net unrealized depreciation on Written Call Option		(2,819	)
Balance as of September 30, 2017	$	(5,555	)

	Written Call Option
Balance as of January 1, 2016	$	—
Net unrealized depreciation on Written Call Option		(898	)
Proceeds from Written Call Option		(20	)
Balance as of September 30, 2016	$	(918	)

	Fair Value (in millions)			Valuation Approach	Unobservable Input	Range (Weighted Average)
First lien debt	$	173.3		Income	Required Rate of Return Leverage Ratio Adjusted EBITDA	9.5% - 18.0% (14.2%) 2.0x – 6.4x (4.1x) $1.8 million - $166.0 million ($24.1 million)
First lien debt	$	53.3		Enterprise Value Waterfall and Asset⁽¹⁾	EBITDA Multiple Adjusted EBITDA Revenue Multiple Revenue	4.5x – 9.0x (6.3x) $2.5 million - $34.3 million ($13.1 million) 0.3x – 0.3x (0.3x) $88.1 million - $88.1 million ($88.1 million)
Second lien debt	$	71.5		Income	Required Rate of Return Leverage Ratio Adjusted EBITDA	10.0% - 17.3% (13.3%) 0.0x – 7.5x (5.0x) $8.1 million - $166.0 million ($76.5 million)
Subordinated debt	$	114.6		Income	Required Rate of Return Leverage Ratio Adjusted EBITDA	11.5% – 20.0% (13.6%) 1.5x – 6.7x (4.1x) 2.0 million - $63.7 million ($21.4 million)
Subordinated debt	$	35.6		Enterprise Value Waterfall and Asset⁽¹⁾	EBITDA Multiple Adjusted EBITDA	5.0x – 8.7x (6.3x) $1.8 million – $27.6 million ($15.7 million)
Equity and warrants	$	93.3		Enterprise Value Waterfall	EBITDA Multiple Adjusted EBITDA	4.5x – 12.2x (7.6%) $1.8 million - $63.7 million ($17.5 million)
Written Call Option	$	(2.7	)	Enterprise Value Waterfall	EBITDA Multiple Adjusted EBITDA	6.25x – 6.25x (6.25x) $27.6 million - $27.6 million ($27.6 million)

		For the Three Months Ended September 30, 2016				For the Nine Months Ended September 30, 2016
Average notional par amount of contract		$	68,935			$	74,674

	As of December 31, 2016
ASSETS
Receivable due on Total Return Swap	$	82
Total assets	$	82

LIABILITIES
Distribution payable	$	82
Total liabilities	$	82

NET ASSETS
Total net assets	$	—
Total liabilities and net assets	$	82

	For the Three Months			For the Nine Months
	Ended			Ended
	September 30, 2016			September 30, 2016

Administrative and legal expenses	$	(15	)	$	(131	)
Net operating loss	$	(15	)	$	(131	)

Net realized gain on Total Return Swap	$	1,374		$	2,810
Net unrealized appreciation on Total Return Swap		775			2,380
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	2,134		$	5,059

	September 30, 2017			December 31, 2016
CapitalSouth Corporation	$	74		$	182
CapitalSouth Partners Florida Sidecar Fund II, L.P.		—			(35	)
Capitala Investment Advisors, LLC		(2,228	)		(6,426	)
Total	$	(2,154	)	$	(6,279	)

Fixed Maturity Date	Interest Rate			SBA Annual Charge			September 30, 2017		December 31, 2016
March 1, 2019		4.620	%		0.941	%		5,000		5,000
September 1, 2020		3.215	%		0.285	%		19,000		19,000
March 1, 2021		4.084	%		0.515	%		15,700		15,700
March 1, 2021		4.084	%		0.285	%		46,000		46,000
March 1, 2022		2.766	%		0.285	%		10,000		10,000
March 1, 2022		2.766	%		0.515	%		50,000		50,000
March 1, 2023		2.351	%		0.515	%		25,000		25,000
							$	170,700	$	170,700

	Carrying Value⁽¹⁾		Fair Value		Level 1		Level 2		Level 3
SBA debentures	$	170,700	$	173,577	$	—	$	—	$	173,577
2022 Notes		75,000		75,900		75,900		—		—
2022 Convertible Notes		52,088		51,983		51,983		—		—
Credit Facility		—		—		—		—		—
Total	$	297,788	$	301,460	$	127,883	$	—	$	173,577

	As of
Balance Sheet – CableOrganizer Acquisition, LLC	September 30, 2017			December 31, 2016
Current assets	$	8,859		$	5,589
Noncurrent assets		9,714			9,872
Total assets	$	18,573		$	15,461

Current liabilities	$	8,365		$	4,219
Noncurrent liabilities		12,247			11,882
Total liabilities	$	20,612		$	16,101

Total deficit	$	(2,039	)	$	(640	)

	For the nine months ended
Statements of Operations – CableOrganizer Acquisition, LLC	September 30, 2017			September 30, 2016
Net sales	$	21,926		$	17,440
Cost of goods sold		15,558			11,703
Gross profit	$	6,368		$	5,737

Other expenses	$	7,767		$	6,877
Loss before income taxes		(1,399	)		(1,140	)
Income tax benefit		—			—
Net loss	$	(1,399	)	$	(1,140	)

	As of
Balance Sheet – Eastport Holdings, LLC	September 30, 2017		December 31, 2016
Current assets	$	93,749	$	96,175
Noncurrent assets		150,772		145,802
Total assets	$	244,521	$	241,977

Current liabilities	$	153,294	$	157,622
Noncurrent liabilities		44,558		41,355
Total liabilities	$	197,852	$	198,977

Total equity	$	46,669	$	43,000

	For the nine months ended
Statements of Operations – Eastport Holdings, LLC	September 30, 2017		September 30, 2016
Net sales	$	415,289	$	388,036
Cost of goods sold		308,434		305,926
Gross profit	$	106,855	$	82,110

Other expenses	$	102,116	$	76,195
Income before income taxes		4,739		5,915
Income tax provision		650		1,596
Net income	$	4,089	$	4,319

	As of
Balance Sheet – Kelle’s Transport Services, LLC	September 30, 2017			December 31, 2016
Current assets	$	8,863		$	8,415
Noncurrent assets		12,379			13,374
Total assets	$	21,242		$	21,789

Current liabilities	$	12,073		$	4,664
Noncurrent liabilities		17,487			14,962
Total liabilities	$	29,560		$	19,626

Total equity(deficit)	$	(8,318	)	$	2,163

	For the nine months ended
Statements of Operations – Kelle’s Transport Services, LLC	September 30, 2017			September 30, 2016
Net sales	$	38,594		$	49,095
Cost of goods sold		37,879			41,198
Gross profit	$	715		$	7,897

Other expenses	$	10,906		$	9,219
Loss before income taxes		(10,191	)		(1,322	)
Income tax provision		—			43
Net loss	$	(10,191	)	$	(1,365	)

	As of
	September 30,			December 31,
Balance Sheets - Navis Holdings, Inc.	2017			2016
Current assets	$	4,967		$	4,655
Noncurrent assets		3,131			3,446
Total assets	$	8,098		$	8,101

Current liabilities	$	2,473		$	2,448
Noncurrent liabilities		7,006			6,719
Total liabilities	$	9,479		$	9,167

Total deficit	$	(1,381	)	$	(1,066	)

	For the three months ended						For the nine months ended
Basic and diluted	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Net increase (decrease) in net assets from operations – basic and diluted	$	(5,753	)	$	(2,013	)	$	(6,395	)	$	1,055
Weighted average common shares outstanding – basic and diluted		15,911,160			15,829,878			15,891,636			15,807,801
Net increase (decrease) in net assets per share from operations – basic and diluted	$	(0.36	)	$	(0.13	)	$	(0.40	)	$	0.07

Date Declared	Record Date	Payment Date	Amount Per Share		Cash Distribution		DRIP Shares Issued		DRIP Share Value
January 3, 2017	January 20, 2017	January 30, 2017	$	0.13	$	1,993		5,304	$	70
January 3, 2017	February 20, 2017	February 27, 2017		0.13		1,993		5,195		70
January 3, 2017	March 23, 2017	March 30, 2017		0.13		1,998		4,948		67
April 3, 2017	April 19, 2017	April 27, 2017		0.13		1,996		5,164		69
April 3, 2017	May 23, 2017	May 29, 2017		0.13		1,990		5,880		76
April 3, 2017	June 21, 2017	June 29, 2017		0.13		1,969		7,959		97
July 3, 2017	July 21, 2017	July 28, 2017		0.13		1,995		5,889		73
July 3, 2017	August 23, 2017	August 30, 2017		0.13		1,957		13,162		111
July 3, 2017	September 20, 2017	September 28, 2017		0.13		1,989		9,085		80
Total Distributions Declared and Distributed			$	1.17	$	17,880		62,586	$	713

	As of September 30, 2017					As of December 31, 2016
Investment Performance Rating	Investments at Fair Value		Percentage of Total Investments			Investments at Fair Value		Percentage of Total Investments
1	$	188,611		40.0	%	$	183,826		33.9	%
2		149,196		31.7			215,058		39.7
3		106,529		22.6			125,381		23.2
4		26,770		5.7			17,374		3.2
5		—		—			—		—
Total	$	471,106		100.0	%	$	541,639		100.0	%

Basis Point Change	Increase (decrease) in interest income			(Increase) decrease in interest expense		Increase (decrease) in net income
Up 300 basis points	$	4,314		$	—	$	4,314
Up 200 basis points	$	2,858		$	—	$	2,858
Up 100 basis points	$	1,401		$	—	$	1,401
Down 100 basis points	$	(651	)	$	—	$	(651	)
Down 200 basis points	$	(651	)	$	—	$	(651	)
Down 300 basis points	$	(651	)	$	—	$	(651	)