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

For the ~~Quarter Ended September 30, 2017~~quarterly period ended March 31, 2023

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

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~~May 8, 2023 was ~~15,936,507.~~2,705,232.

~~Item 1. Consolidated Financial Statements~~LOGAN RIDGE FINANCE CORPORATION

^ As defined in the Investment Company Act of 1940, as amended (the “1940 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 1940 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 6 month, 3 month, or 1 month L rates. SOFR loans are typically indexed to 6 month, 3 month, or 1 month SOFR rates. As of March 31, 2023, rates for the 6 month, 3 month, and 1 month L are 5.31%, 5.19%, and 4.86%, respectively. As of March 31, 2023, rates for the 12 months, 6 month, 3 month and 1 month SOFR are 4.73%, 4.90%, 4.91%, and 4.80%, respectively. As of March 31, 2023, P was 8.00%. 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, 2023.

(++) 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), unless otherwise noted.

^ As defined in the 1940 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 1940 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 (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 6 month, 3 month, or 1 month L rates. SOFR loans are typically indexed to 6 month, 3 month, or 1 month SOFR rates. As of December 31, 2022, rates for the 6 month, 3 month, and 1 month L are 5.14%, 4.77% and 4.39%, respectively. As of December 31, 2022, rates for the 6 month, 3 month, and 1 month SOFR are 4.78%, 4.59% and 4.36%, respectively. 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, 2022.

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

~~(12) The investment has been exited. The residual value reflects estimated escrow to be settled post-closing.~~

~~(13) The portfolio company is currently being charged default interest rate of prime plus 10.5%.~~

Note 2. Summary of Significant Accounting Policies

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

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

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, 2023 and December 31, 2022 and for the periods ended March 31, 2023 and 2022 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,~~2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~7, 2017.~~9, 2023.

Use of Estimates in the Preparation of Financial Statements

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.

Consolidation

~~Consolidation~~

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.

~~Segments~~

~~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.

Cash and Cash Equivalents

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.

Investment Classification

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%~~25% of the voting securities of such company and/or has greater than ~~50%~~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%~~5% or more of the voting securities of such company.

Valuation of Investments

Investment transactions are recorded on the trade date. Realized gains or losses on investments are calculated using the specific identification method as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are recognized.

~~The~~

Investments for which market quotations are available are typically valued at those market quotations. To validate market quotations, the Company ~~applies~~will utilize a number of factors to determine if the quotations are representative of fair value, ~~accounting~~including the source and number of the quotations.

Debt that is not publicly traded but for which there are external pricing sources available as of the valuation date is valued using independent broker-dealer, market maker quotations or independent pricing services. The valuation committee, comprised of members of the Investment Adviser, (the “Valuation Committee”) subjects these quotes to ~~all~~various criteria including, but not limited to, the number and quality of quotes, the deviation among the quotes and information derived from analyzing the Company’s own transactions in such investments throughout the reporting period. Generally, such investments are categorized in Level 2 of the fair value hierarchy, unless the Valuation Committee determines that the quality, quantity or deviation among quotes warrants significant adjustment to the inputs utilized.

The Board has designated the Investment Adviser as its ~~financial instruments in accordance with~~“valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and ~~ASC Topic 820 —~~~~Fair Value Measurements and Disclosures~~ ~~(“ASC 820”). ASC 820 defines~~in that role the Investment Adviser is responsible for performing fair value ~~establishes a framework used~~determinations relating to ~~measure~~all of the Company's investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and ~~requires disclosures~~procedures that have been approved by the Board. The Board remains ultimately responsible for fair value ~~measurements. In~~determinations under the 1940 Act and satisfies its responsibility through oversight of the valuation designee in accordance with ~~ASC 820,~~Rule 2a-5. Investments that are not publicly traded or whose market prices are not readily available, as is expected to be the ~~Company has categorized its financial instruments carried~~case for substantially all of the Company’s investments, are valued at fair value as determined in good faith by the Investment Adviser, based on, among other things, input of independent third-party valuation firm(s).

The Investment Adviser undertakes a multi-step valuation process, which includes, among other procedures, the ~~priority~~following:

•

The Company’s quarterly valuation process begins with each portfolio company or investment being initially valued using certain inputs, among others, provided by the investment professionals responsible for the portfolio investment in conjunction with the Company’s portfolio management team. The Company utilizes an independent valuation firm to provide valuation on each material illiquid security at least once every trailing 12-month period;

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

•

Preliminary valuations are reviewed and discussed with management of the Investment Adviser and investment professionals; and

•

the Investment Adviser will review the valuations and determine the fair value of each investment. Valuations that are not based on readily available market quotations will be valued in good faith based on, among other things, the input of, where applicable, third parties.

As part of the valuation ~~technique, into a three-level~~process, the Investment Adviser may consider other information and may use valuation methods including but not limited to (i) market quotes for similar investments, (ii) recent trading activity, (iii) discounting forecasted cash flows of the investment, (iv) models that consider the implied yields from comparable debt, (v) third-party appraisal, (vi) sale negotiations and purchase offers received from independent parties and (vii) estimated value of underlying assets to be received in liquidation or restructuring.

Due to the inherent uncertainty of determining the fair value ~~hierarchy, as discussed in Note 4.~~

~~In determining~~of investments that do not have a readily available market value, the fair value ~~the Company’s board~~ of ~~directors (the “Board”) uses various valuation approaches, and engages a third-party valuation firm, which provides an independent valuation of certain investments. In accordance with U.S. GAAP, a~~our investments may fluctuate from period to period. Additionally, the fair value ~~hierarchy~~of such investments may differ significantly from the values that would have been used had a ready market existed for ~~inputs is used~~such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a portfolio investment in ~~measuring~~a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Under existing accounting guidance, fair value is defined as the price that ~~maximizes~~the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and ~~minimizes~~minimize the use of unobservable ~~inputs by requiring that~~inputs. Inputs refer broadly to the ~~most observable inputs be used when available.~~

~~Observable inputs are those~~assumptions that market participants would use in pricing ~~the~~an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the ~~Board.~~Company. Unobservable inputs are inputs that reflect the ~~Board’s~~ assumptions ~~about the inputs~~ market participants would use in pricing ~~the~~an asset or liability developed based ~~upon~~on 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,Company classifies the inputs used to measure these fair ~~value may fall~~values into ~~different levels of~~ the ~~fair value hierarchy. In such cases,~~following hierarchy as defined by current accounting guidance:

Level 1: Unadjusted quoted prices in active markets for ~~disclosure purposes,~~identical assets or liabilities that are accessible to the ~~level~~Company.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Significant inputs that are unobservable for an asset or liability.

A financial instrument’s categorization within the ~~fair value~~valuation hierarchy ~~within which the fair value measurement in its entirety falls~~ is ~~determined~~ based onupon the lowest level of 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~~ Investments for which no external pricing sources 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~~valuation date ~~including periods~~are included in Level 3 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~~uses net asset value (“NAV”) as the ~~basis for the~~ fair value offor its equity investment in ~~CSLLF for the periods held. CSLLF recorded~~Great Lakes Funding II LLC (“Great Lakes II Joint Venture”). The Great Lakes II Joint Venture records its underlying investments at fair value on a ~~daily~~quarterly basis ~~utilizing pricing information from third-party sources.~~in accordance with the 1940 Act and U.S. GAAP.

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

Enterprise Value Waterfall Approach

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.

Asset Approach

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.~~

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Revenue Recognition

The Company’s revenue recognition policies are as follows:

Interest income and ~~paid-in-kind~~payment-in-kind (“PIK”) 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. As of March 31, 2023, we had debt investments in two portfolio companies on non-accrual status with an aggregate amortized cost of $14.2 million and an aggregate fair value of $10.0 million, which represented 6.4% and 4.9% of the investment portfolio, respectively. As of December 31, 2022, we had a debt investment in one portfolio company on non-accrual status with aggregate amortized cost of $11.9 million and an aggregate fair value of $9.7 million, which represented 5.4% and 4.8% of the investment portfolio, respectively.

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~~payment-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.

~~Loan Sales~~

~~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

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.

Deferred Financing Fees

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 consolidated statements of assets and liabilities.

Earnings per share

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.

Commitments and Contingencies

As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, the Company had ~~outstanding~~the following unfunded commitments ~~related~~ to ~~debt investments in~~ existing portfolio companies ~~of $4.0 million (CIS Secure Computing, Inc.), $2.0 million (Portrait Innovations, Inc.), $1.5 million (Kelle’s Transport Service, LLC), and $1.0 million (US Well Services, LLC). As of December~~(dollars in thousands):

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2016, the Company had outstanding unfunded commitments related to debt investments in an existing portfolio company of $1.2 million (On-Site Fuel Services, Inc.).~~2023

(Unaudited)

In addition to unfunded commitments related to debt investments, the Company also has extended a guaranty on behalf of one of our portfolio companies, whereby we have guaranteed $1.5 million of obligations of Kelle’s Transport Service, 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.


Portfolio Company	Investment	March 31, 2023		December 31, 2022
Accordion Partners LLC(1)	First Lien/Senior Secured Debt	$	498	$	897
Accordion Partners LLC (Revolver)	First Lien/Senior Secured Debt		1,148		1,531
BetaNXT, Inc. (Revolver)	First Lien/Senior Secured Debt		316		453
Bradshaw International, Inc. (Revolver)	First Lien/Senior Secured Debt		922		922
Critical Nurse Staffing, LLC(1)	First Lien/Senior Secured Debt		2,063		2,063
Critical Nurse Staffing, LLC (Revolver)	First Lien/Senior Secured Debt		240		700
Dentive, LLC(1)	First Lien/Senior Secured Debt		598		598
Dentive, LLC (Revolver)	First Lien/Senior Secured Debt		187		187
Epic Staffing Group(1)	First Lien/Senior Secured Debt		872		872
Great Lakes Funding II LLC - Series A	Joint Venture		25		80
GreenPark Infrastructure, LLC - Series M-1	Common Stock and Membership Units		732		732
Keg Logistics LLC (Revolver)	First Lien/Senior Secured Debt		—		436
Marble Point Credit Management LLC (Revolver)	First Lien/Senior Secured Debt	N/A			2,500
Premier Imaging, LLC(1)	First Lien/Senior Secured Debt		1,378		1,378
Taoglas Group Holdings Limited (Revolver)	First Lien/Senior Secured Debt		645	N/A
Wealth Enhancement Group, LLC (Revolver)	First Lien/Senior Secured Debt		438		438
Total Unfunded Commitments		$	10,062	$	13,787

(1) Delayed-draw term loan.

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, no direct losses with respect to litigation contingencies were probable as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022. 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.

Income Taxes

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%~~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%~~4.0% on undistributed income if it does not distribute at least ~~98.0%~~98.0% of its ordinary income in any calendar year and ~~98.2%~~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%~~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, 2022, 2021, 2020 and 2019 remain subject to examination by U.S. federal, state, and local tax authorities. No material interest expense or penalties have been assessed for the three months ended March 31, 2023 and 2022. 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, 2023, the aggregate net unrealized depreciation for all securities was $18.1 million. As of March 31, 2023, gross unrealized appreciation was $12.7 million and gross unrealized depreciation was $30.8 million. The aggregate cost of securities for U.S. federal income tax purposes was $221.4 million as of March 31, 2023. For U.S. federal income tax purposes, as of December 31, 2022, the aggregate net unrealized depreciation for all securities was $18.3 million. As of December 31, 2022, gross unrealized appreciation was $13.1 million and gross unrealized depreciation was $31.4 million. The aggregate cost of securities for U.S. federal income tax purposes was $221.9 million as of December 31, 2022.

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,~~both March 31, 2023 and December 31, ~~2016,~~2022, the Company recorded a net deferred tax ~~liability~~asset of ~~$2.7 million and $0.0 million, respectively.~~zero. For both the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022, the Company recorded a tax provision of zero. As of March 31, 2023 and December 31, 2022, the valuation allowance on the Company’s deferred tax asset was $4.0 million and $4.0 million, respectively. During both the three months ended March 31, 2023 and 2022, there was nochange in ~~provision for deferred taxes on unrealized appreciation on investments of $2.7 million. For~~ the ~~three and nine months ended September 30, 2016, no change in provision for deferred taxes on unrealized appreciation on investments was recorded.~~valuation allowance recognized by the Company.

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%~~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

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

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, 2023 and December 31, ~~2016,~~2022, 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.

Distributions

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~~

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.

Company Investment Risk, Concentration of Credit Risk and Liquidity Risk

The Investment ~~Advisor~~Adviser 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~~Adviser 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.

Note 3. ~~Recent Accounting Pronouncements~~

~~In January 2016, FASB issued ASU 2016-01,~~~~Financial Instruments — Overall~~ ~~(Subtopic 825-10):~~~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ (“ASU 2016-01”). 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 guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. Management is currently evaluating the impact these changes will have on the Company’s consolidated financial position or results of operations.

In October 2016, the SEC adopted new rules 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.

~~Note 4.~~ Investments and Fair Value Measurements

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, 2023, our portfolio consisted of investments in 4659 portfolio companies with a fair value of approximately ~~$471.1~~$203.3 million. As of December 31, 2022, our portfolio consisted of investments in 59 portfolio companies with a fair value of approximately $203.6 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, 2023, 1.3% of the fair value of our first lien loans consisted of last-out loans. As of December 31, 2022, 1.9% 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 the three months ended ~~September 30, 2017, the Company~~March 31, 2023, we made approximately ~~$11.4~~$7.4 million of investments and had approximately ~~$22.4~~$6.7 million in repayments and sales, resulting in net ~~repayments and sales~~deployment of approximately ~~$11.0~~$0.7 million for the period. During the three months ended ~~September 30, 2016,~~March 31, 2022, the Company made ~~approximately $26.0~~$16.4 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 of investments and had approximately $104.7~~$8.4 million in repayments and sales, resulting in net ~~repayments and sales~~deployment of approximately ~~$65.0~~$8.0 million for the period. ~~During the nine months ended September 30, 2016, the Company made approximately $53.9 million~~

As 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 of2023, 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 determiningInvestment Adviser approved the fair value of the ~~Written Call Option,~~Company’s investment portfolio of approximately $203.3 million in good faith in accordance with the ~~Company calculated the difference in~~Company’s valuation procedures. The Company’s Investment Adviser approved the fair value of the ~~underlying equity~~Company’s investment ~~in Eastport Holdings, LLC~~portfolio as of March 31, 2023 with input from third-party valuation firms and the ~~strike price~~Investment Adviser, as valuation designee, 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.

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

The composition of our investments as of ~~September 30, 2017,~~March 31, 2023, at amortized cost and fair value was as follows (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	$	144,304		65.4	%	$	137,563		67.7	%
Second Lien Debt		8,444		3.8	%		6,775		3.3	%
Subordinated Debt		26,573		12.1	%		24,696		12.1	%
Collateralized Loan Obligations		4,622		2.1	%		4,207		2.1	%
Joint Venture		470		0.2	%		456		0.2	%
Equity		36,065		16.4	%		29,640		14.6	%
Total	$	220,478		100.0	%	$	203,337		100.0	%

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 54.2 % $ 221,205 47.0 %
Second Lien Debt 32,284 7.1 30,774 6.5
Subordinated Debt 120,161 26.4 106,019 22.5
Equity and Warrants 56,081 12.3 113,108 24.0
Total $ 454,714 100.0 % $ 471,106 100.0 %

The composition of our investments as of December 31, ~~2016,~~2022, at amortized cost and fair value was as follows (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	$	143,047		64.9	%	$	136,896		67.3	%
Second Lien Debt		8,283		3.8	%		6,464		3.2	%
Subordinated Debt		26,571		12.0	%		25,851		12.7	%
Collateralized Loan Obligations		6,185		2.8	%		4,972		2.4	%
Joint Venture		414		0.2	%		403		0.2	%
Equity		36,016		16.3	%		29,006		14.2	%
Total	$	220,516		100.0	%	$	203,592		100.0	%

Investments
at
Amortized Cost Amortized Cost
Percentage of
Total Portfolio Investments
at
Fair Value Fair Value
Percentage of
Total Portfolio
First Lien Debt $ 244,647 47.6 % $ 226,578 41.8 %
Second Lien Debt 74,559 14.5 71,483 13.2
Subordinated Debt 148,849 29.0 150,232 27.8
Equity and Warrants 45,721 8.9 93,346 17.2
Total $ 513,776 100.0 % $ 541,639 100.0 %

As noted above, the Company values all investments in accordance with Rule 2a-5 under the 1940 Act and 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.

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:

	·
	•	Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

	·
	•	Level 2 — Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.

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

~~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 the 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, 2023, according to the fair value ~~hierarchy:~~

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

~~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:~~:


	Fair Value Measurements
	Level 1		Level 2		Level 3		NAV		Total
First Lien Debt	$	—	$	—	$	137,563	$	—	$	137,563
Second Lien Debt		—		—		6,775		—		6,775
Subordinated Debt		—		—		24,696		—		24,696
Collateralized Loan Obligations		—		—		4,207		—		4,207
Joint Venture		—		—		—		456		456
Equity		—		—		29,640		—		29,640
Total	$	—	$	—	$	202,881	$	456	$	203,337

Fair Value Measurements
Level 1 Level 2 Level 3 Total
Written Call Option $ — $ — $ (5,555 ) $ (5,555 )
Total $ — $ — $ (5,555 ) $ (5,555 )

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

The following table presents fair value measurements of investments, by major class, as of December 31, ~~2016 (dollars in thousands),~~2022, according to the fair value ~~hierarchy:~~

Fair Value Measurements
Level 1 Level 2 Level 3 Total
First Lien Debt $ — $ — $ 226,578 $ 226,578
Second Lien Debt — — 71,483 71,483
Subordinated Debt — — 150,232 150,232
Equity and Warrants — — 93,346 93,346
Total $ — $ — $ 541,639 $ 541,639

~~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:~~:

Fair Value Measurements
Level 1 Level 2 Level 3 Total
Written Call Option $ — $ — $ (2,736 ) $ (2,736 )
Total $ — $ — $ (2,736 ) $ (2,736 )


	Fair Value Measurements
	Level 1		Level 2		Level 3		NAV		Total
First Lien Debt	$	—	$	—	$	136,896	$	—	$	136,896
Second Lien Debt		—		—		6,464		—		6,464
Subordinated Debt		—		—		25,851		—		25,851
Collateralized Loan Obligations		—		—		4,972		—		4,972
Joint Venture		—		—		—		403		403
Equity		—		—		29,006		—		29,006
Total	$	—	$	—	$	203,189	$	403	$	203,592

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, 2023 (dollars in thousands):


	First Lien Debt			Second Lien Debt		Subordinated Debt			Collateralized Loan Obligations			Equity			Total
Balance as of January 1, 2023	$	136,896		$	6,464	$	25,851		$	4,972		$	29,006		$	203,189
Repayments/sales		(6,529	)		—		—			(97	)		(87	)		(6,713	)
Purchases		7,388			—		—			—			—			7,388
Payment-in-kind interest and dividends accrued		268			145		2			—			49			464
Accretion of original issue discount		131			16		—			127			—			274
Net realized (loss) gain on investments		—			—		—			(1,593	)		87			(1,506	)
Net change in unrealized (depreciation) appreciation on investments		(591	)		150		(1,157	)		798			585			(215	)
Balance as of March 31, 2023	$	137,563		$	6,775	$	24,696		$	4,207		$	29,640		$	202,881

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

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):

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 )


	First Lien Debt			Second Lien Debt			Subordinated Debt			Collateralized Loan Obligations			Equity			Total
Balance as of January 1, 2022	$	98,251		$	30,190		$	5,050		$	7,717		$	56,981		$	198,189
Repayments/sales		(8,096	)		—			—			(276	)		(29	)		(8,401	)
Purchases		11,285			3,086			2,022			—			—			16,393
Payment-in-kind interest and dividends accrued		—			38			44			—			50			132
Accretion of original issue discount		60			(5	)		1			343			—			399
Net realized (loss) gain on investments		13			—			—			—			(49	)		(36	)
Net unrealized appreciation (depreciation) on investments		(850	)		(89	)		(2	)		(585	)		1,755			229
Balance as of March 31, 2022	$	100,663		$	33,220		$	7,115		$	7,199		$	58,708		$	206,905

First Lien
Debt Second Lien
Debt Subordinated
Debt Equity
and Warrants Total⁽¹⁾
Balance as of January 1, 2016 $ 199,843 $ 80,610 $ 194,485 $ 98,480 $ 573,418
Repayments/sales (25,149 ) (12,750 ) (67,899 ) (21,734 ) (127,532 )
Purchases 24,489 4,850 19,474 5,136 53,949
Payment in-kind interest and dividends accrued 2,608 — 429 929 3,966
Accretion of original issue discount 170 134 2,031 — 2,335
Realized gain (loss) from investments (5,024 ) (168 ) (26,783 ) 6,404 (25,571 )
Net unrealized appreciation (depreciation) on investments (3,709 ) (560 ) 13,808 (6,679 ) 2,860
Balance as of September 30, 2016 $ 193,228 $ 72,116 $ 135,545 $ 82,536 $ 483,425

~~(1)~~

~~Excludes our $20.4 million investment in CSLLF, measured at NAV.~~

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):

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 )

The net change in unrealized ~~depreciation~~(depreciation) appreciation on investments held ~~as of September 30, 2017 and September 30, 2016,~~ was ~~$(14.0)~~$(0.1) million and ~~$(1.7)~~$0.2 million for the three months ended March 31, 2023 and 2022, respectively, and is included in net change in unrealized (depreciation) 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 ~~and (liabilities)~~ as of ~~September 30, 2017~~March 31, 2023 were as follows:


	Fair Value (in millions)		Valuation Technique	Unobservable Input	Range of Input (Weighted Average)(2)
First lien debt	$	6.1	Market	Broker/Dealer Quotes	N/A
First lien debt		110.9	Income	Required Rate of Return	6.5% – 30.0% (12.4%)
First lien debt		14.4	Enterprise Market Value	EBITDA Multiple	5.5x – 6.8x (6.1x)
First lien debt		6.2	Enterprise Market Value	Revenue Multiple	0.5x
Second lien debt		2.7	Market	Broker/Dealer Quotes	N/A
Second lien debt		3.7	Income	Required Rate of Return	2.3% – 18.7% (16.4%)
Second lien debt		0.4	Enterprise Market Value	EBITDA Multiple	4.7x
Subordinated debt		24.1	Income	Required Rate of Return	5.8% – 13.5% (11.9%)
Subordinated debt		0.6	Enterprise Market Value	EBITDA Multiple	8.5x
Collateralized Loan Obligations		4.2	Income	Discount Margin	21.5% – 24.8% (23.6%)
Equity		0.1	Income	Stock Price Time to Exit (Years) Volatility	$117.3 2.0 35.0%
Equity		27.3	Enterprise Market Value and Asset(1)	EBITDA Multiple	0.3x – 15.8x (6.3x)
Equity		2.2	Enterprise Market Value	Revenue Multiple	0.5x – 1.1x (1.1x)
	$	202.9

Fair Value
(in millions)
Valuation
Approach
Unobservable Input Range (Weighted Average)
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)
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)
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)
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)
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)
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)

~~(1)~~

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

LOGAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

(1)

$1.0 million in equity was 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 December 31, ~~2016~~2022 were as follows:


	Fair Value (in millions)		Valuation Technique	Unobservable Input	Range of Input (Weighted Average)(2)
First lien debt	$	7.4	Market	Broker/Dealer Quotes	N/A
First lien debt		123.5	Income	Required Rate of Return	6.0% – 30.0% (12.2%)
First lien debt		6.0	Enterprise Market Value	Revenue Multiple	0.4x
Second lien debt		2.6	Market	Broker/Dealer Quotes	N/A
Second lien debt		3.4	Income	Required Rate of Return	1.6% – 18.7% (16.1%)
Second lien debt		0.4	Enterprise Market Value	Revenue Multiple	4.7x
Subordinated debt		25.9	Income	Required Rate of Return	5.9% – 18.9% (10.4%)
Collateralized loan obligations		5.0	Income	Discount Margin	21.5% – 24.8% (23.6%)
Equity		0.1	Income	Stock Price Time to Exit (Years) Volatility	$115.8 2.0 35.0%
Equity		26.2	Enterprise Market Value and Asset(1)	EBITDA Multiple	3.3x – 15.8x (6.4x)
Equity		2.7	Enterprise Market Value	Revenue Multiple	0.3x – 1.0x (0.9x)
	$	203.2

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~~

(1)

$1.0 million in equity was valued using the asset approach.

(2)

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

The significant unobservable inputs used in the valuation of the Company’s investments are required rate of return, ~~adjusted EBITDA,~~ EBITDA multiples, revenue ~~revenue~~ multiples, discount margin, stock price, projected time to exit and ~~leverage ratios.~~volatility. 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~~discount margin will result in a lower (higher) estimate of fair value, respectively, while an increase (decrease) in adjusted EBITDA ~~EBITDA multiples, revenue,~~ or revenue multiples, stock price, projected time to exit (option-pricing model) or volatility will result in a higher (lower) estimate of fair ~~value.~~value, respectively.

~~On March 24, 2015,~~In August 2022, the Company ~~and Trinity Universal Insurance Company (“Trinity”~~invested in Great Lakes Funding II LLC - Series A (the “Great Lakes II Joint Venture”), a ~~subsidiary~~joint venture with an investment strategy to underwrite and hold senior, secured unitranche loans made to middle-market companies. The Company treats its investment in the Great Lakes II Joint Venture as a joint venture since an affiliate of ~~Kemper Corporation, entered into~~the Investment Adviser controls a50% voting interest in the Great Lakes II Joint Venture.

The Great Lakes II Joint Venture is a Delaware series limited liability company, ~~agreement~~and pursuant 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.

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 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~~Great Lakes Funding II LLC Limited Liability Company Agreement (the “Great Lakes II LLC Agreement”), prior to the end of the investment period with respect to each series established under the Great Lakes II LLC Agreement, each member of the predecessor series would be offered the opportunity to roll its interests into any subsequent series of the Great Lakes II Joint Venture. The Company does not pay any advisory fees in connection with its investment in the Great Lakes II Joint Venture. Certain other funds managed by ~~an ISDA 2002 Master Agreement,~~ the ~~Schedule thereto,~~Investment Adviser or its affiliates have also invested in the Great Lakes II Joint Venture.

The fair value of the Company’s investment in the Great Lakes II Joint Venture at March 31, 2023 and ~~Credit Support Annex~~December 31, 2022 was $0.4 million and $0.4 million, respectively. Fair value has been determined utilizing the net asset value as a practical expedient pursuant 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.”~~U.S. GAAP. Pursuant to the terms of the ~~TRS~~Great Lakes II LLC Agreement, ~~CSLLF selected~~the Company generally may not effect any direct or indirect sale, transfer, assignment, hypothecation, pledge or other disposition of or encumbrance upon its interests in the Great Lakes II Joint Venture, except that the Company may sell or otherwise transfer its interests with the consent of the managing members of the Great Lakes II Joint Venture or to an affiliate or a ~~portfolio~~successor to substantially all of ~~loans with a maximum market value (determined at~~ the ~~time each such loan becomes subject~~assets of the Company.

As of March 31, 2023, the Company has less than $0.1 million of unfunded commitment to the ~~TRS) of $100.0 million, which was also referred to~~Great Lakes II Joint Venture.

Note 4. Transactions With Affiliated Companies

During the three months ended March 31, 2023, the Company had investments in portfolio companies designated 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~~affiliates under the ~~minimum facility amount of $70.0 million~~1940 Act. Transactions with affiliates were 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):


Company(4)	Type of Investment	Principal Amount		Amount of Interest, Fees or Dividends Credited to Income(1)		December 31, 2022 Fair Value		Gross Additions(2)		Gross Reductions(3)			Realized Gain/(Loss)		Unrealized Appreciation (Depreciation)			March 31, 2023 Fair Value
Affiliate investments
Burgaflex Holdings, LLC	Common Stock Class B (1,085,073 shares)	$	—	$	—	$	2,190	$	—	$	—		$	—	$	(17	)	$	2,173
Burgaflex Holdings, LLC	Common Stock Class A (1,253,198 shares)		—		—		2,802		—		—			—		(54	)		2,748
					—		4,992		—		—			—		(71	)		4,921
GA Communications, Inc.	Series A-1 Preferred Stock (1,998 shares)		—		—		3,562		—		—			—		376			3,938
GA Communications, Inc.	Series B-1 Common Stock (200,000 shares)		—		—		—		—		—			—		—			—
					—		3,562		—		—			—		376			3,938
Great Lakes Funding II LLC	Series A		—		14		403		56		(1	)		—		(2	)		456
					14		403		56		(1	)		—		(2	)		456
GreenPark Infrastructure, LLC	Series A (400 Units)		—		—		200		—		—			—		—			200
GreenPark Infrastructure, LLC	Series M-1 (200 Units)		—		—		69		—		—			—		—			69
					—		269		—		—			—		—			269
MMI Holdings, LLC	First Lien Debt (12.00% Cash, Due 4/1/22)		2,600		79		2,600		—		—			—		—			2,600
MMI Holdings, LLC	Second Lien Debt (6.00% Cash, Due 4/1/22)		400		18		400		12		—			—		(12	)		400
MMI Holdings, LLC(5)	Preferred Units (1,000 units, 8.00% PIK Dividend)		—		31		1,360		31		—			—		(31	)		1,360
MMI Holdings, LLC	Common Membership Units (45 units)		—		—		—		—		—			—		—			—
					128		4,360		43		—			—		(43	)		4,360
Nth Degree Investment Group, LLC	Membership Units (6,088,000 units)		—		—		5,320		—		—			—		1,020			6,340
					—		5,320		—		—			—		1,020			6,340
RAM Payment, LLC	First Lien Debt (9.66% Cash (1 month LIBOR + 5.00%), 1.50% Floor), Due 1/4/24)		679		7		939		—		(260	)		—		—			679
RAM Payment, LLC	First Lien Debt (13.00% Cash, Due 1/4/24)		1,840		60		2,547		—		(707	)		—		—			1,840
RAM Payment, LLC(5)	Preferred Units (86,000 units, 6.00% PIK Dividend)		—		17		3,165		17		—			—		(430	)		2,752
					84		6,651		17		(967	)		—		(430	)		5,271
Sierra Hamilton Holdings Corporation	Second Lien Debt (15.00% PIK, Due 9/12/23)		4		—		4		—		—			—		—			4
Sierra Hamilton Holdings Corporation	Common Stock (27,396,364 shares)		—		—		254		—		—			—		183			437
					—		258		—		—			—		183			441
V12 Holdings, Inc.	Second Lien Debt		509		—		509		—		—			—		—			509
					—		509		—		—			—		—			509
Total Affiliate investments				$	226	$	26,324	$	116	$	(968	)	$	—	$	1,033		$	26,505

(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.

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

LOGAN RIDGE FINANCE CORPORATION

~~Below is certain summarized financial information for CSLLF as of~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

During the year ended December 31, ~~2016 and for~~2022, 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):


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)			December 31, 2022 Fair Value
Affiliate investments(6)
Burgaflex Holdings, LLC	Common Stock Class B (1,085,073 shares)	$	—	$	—	$	1,528	$	—	$	—		$	—		$	662		$	2,190
Burgaflex Holdings, LLC	Common Stock Class A (1,253,198 shares)		—		—		1,193		—		—			—			1,609			2,802
					—		2,721		—		—			—			2,271			4,992
GA Communications, Inc.	Series A-1 Preferred Stock (1,998 shares)		—		—		4,394		—		—			—			(832	)		3,562
GA Communications, Inc.	Series B-1 Common Stock (200,000 shares)		—		—		185		—		—			—			(185	)		—
					—		4,579		—		—			—			(1,017	)		3,562
Great Lakes Funding II LLC	Series A		—		14		—		517		(103	)		—			(11	)		403
					14		—		517		(103	)		—			(11	)		403
GreenPark Infrastructure, LLC	Series A (400 Units)		—		—		—		200		—			—			—			200
GreenPark Infrastructure, LLC	Series M-1 (200 Units)		—		—		—		69		—			—			—			69
					—		—		269		—			—			—			269
LJS Partners, LLC	Preferred Units (202,336 units)		—		—		843		—		(979	)		542			(406	)		—
LJS Partners, LLC	Common Membership Units (2,593,234 units)		—		—		7,164		—		(2,354	)		1,130			(5,940	)		—
					—		8,007		—		(3,333	)		1,672			(6,346	)		—
MMI Holdings, LLC	First Lien Debt (12.0% Cash, Due 4/1/22)		2,600		308		2,600		—		—			—			—			2,600
MMI Holdings, LLC	Second Lien Debt (6.0% Cash, Due 4/1/22)		400		24		400		—		—			—			—			400
MMI Holdings, LLC(5)	Preferred Units (1,000 units, 8.0% PIK Dividend)		—		118		1,898		118		—			—			(656	)		1,360
MMI Holdings, LLC	Common Membership Units (45 units)		—		—		63		—		—			—			(63	)		—
					450		4,961		118		—			—			(719	)		4,360
Nth Degree Investment Group, LLC	Membership Units (6,088,000 units)		—		—		—		—		—			—			5,320			5,320
					—		—		—		—			—			5,320			5,320
RAM Payment, LLC	First Lien Debt (6.5% Cash (1 month LIBOR + 5.0%), 1.5% Floor), Due 1/4/24)		939		82		998		—		(59	)		—			—			939
RAM Payment, LLC	First Lien Debt (12.45% Cash, Due 1/4/24)		2,547		291		2,706		—		(159	)		—			—			2,547
RAM Payment, LLC (5)	Preferred Units (86,000 units, 6.0% PIK Dividend)		—		69		3,726		69		—			—			(630	)		3,165
					442		7,430		69		(218	)		—			(630	)		6,651
Sierra Hamilton Holdings Corporation	Second Lien Debt (15.0% PIK, Due 9/12/23)		3		1		3		1		—			—			—			4
Sierra Hamilton Holdings Corporation	Common Stock (15,068,000 shares)		—		—		330		—		—			—			(76	)		254
					1		333		1		—			—			(76	)		258
V12 Holdings, Inc.	Second Lien Debt		509		—		509		—		—			—			—			509
					—		509		—		—			—			—			509
Total Affiliate investments				$	907	$	28,540	$	974	$	(3,654	)	$	1,672		$	(1,208	)	$	26,324
Control investments
Vology, Inc.	First Lien Debt (10.5% Cash (1 month LIBOR + 8.5%, 2.0% Floor), Due 3/31/22)	$	—	$	228	$	3,635	$	—	$	(3,635	)	$	—		$	—		$	—
Vology, Inc.	Class A Preferred Units (9,041,810 Units)		—		—		3,204		—		—			(5,215	)		2,011			—
Vology, Inc.	Membership Units (5,363,982 Units)		—		—		—		—		—			—			—			—
Total Control investments				$	228	$	6,839	$	—	$	(3,635	)	$	(5,215	)	$	2,011		$	—

(1)

(2)

(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.

(6)

During the second quarter of 2022, Eastport Holdings, LLC completed a refinancing and recapitalization transaction. Logan Ridge received $16.5 million in cash and $19.3 million in principal of a new debt security in exchange for all of its previous debt and equity securities, which resulted in a realized gain of approximately $16.0 million on the Company's equity interest. As a result of this transaction, Eastport Holdings, LLC is no longer an affiliate of the Company.

~~Selected Statements of Assets and Liabilities:~~LOGAN RIDGE FINANCE CORPORATION

On ~~September 24, 2013,~~July 1, 2021, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with ~~our~~the Investment ~~Advisor,~~Adviser, 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~~Adviser 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:~~Adviser:

• 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);

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

The Investment ~~Advisor’s~~Adviser’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~~Adviser 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~~Adviser’s services under the Investment Advisory Agreement or otherwise as Investment ~~Advisor~~Adviser for the Company.

Pursuant to the Investment Advisory Agreement, the Company has agreed to pay the Investment ~~Advisor~~Adviser 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%~~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 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%~~2.0% per quarter ~~(8.0%~~(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~~Adviser 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%;

~~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~~pre-incentive fee net investment income ~~to be~~(which exceeds the hurdle but is less than 2.5%) as the ~~distribution payments declared by the Board. Quarterly incentive fees are earned by~~“catch-up.” The “catch-up” is meant to provide the Investment ~~Advisor pursuant~~Adviser 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 ~~Advisory Agreement. Incentive fees subject~~Adviser (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated 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.Adviser).

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year, ~~(or upon termination~~commencing on December 31, 2021, and equals 20.0% of the ~~Investment Advisory Agreement, as of the termination date), and will equal 20% of our~~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 are excluded from the calculations of the capital gains fee. In the event that the Investment Advisory Agreement terminates 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.

The Company will defer cash payment of the portion of any incentive fee otherwise earned by the Investment ~~Advisor~~Adviser that would, when taken together with all other incentive fees paid to the Investment ~~Advisor~~Adviser during the most recent 12 full calendar month period ending on or prior to the date such payment is to be made, exceed ~~20%~~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, 2023 and December 31, ~~2016,~~2022, the Company ~~had~~did not have incentive fees payable to the Investment ~~Advisor~~Adviser related to fees earned in prior years but deferred under the incentive fee deferral mechanism.

As part of ~~$2.2 million and $6.4 million, respectively.~~the Transaction, the Investment Adviser 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.

For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the Company incurred ~~$2.4~~$0.9 million and ~~$2.6~~$1.0 million in base management fees, respectively. The Company ~~incurred $0.0 million and $1.8 million in~~did not an earn incentive ~~fees~~fee related to pre-incentive fee net investment income or capital gains for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively. For~~2022.

As of March 31, 2023 and December 31, 2022, the ~~three months ended September 30, 2017~~Company had $0.9 million and ~~2016,~~$0.9 million, respectively, of management and incentive fees payable to the Investment ~~Advisor waived~~Adviser. These amounts are reflected in the accompanying consolidated statements of assets and liabilities under the caption “Management and incentive fees ~~of $0.0 million and $0.3 million, respectively.~~payable.”

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 was renewed on May 9, 2023 for a period of one year effective July 1, 2023 and will remain in effect until July 1, 2024. It 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, 2023 and 2022, the Company ~~paid the Administrator $0.3~~accrued $0.3 million and ~~$0.8~~$0.1 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.

~~At September 30, 2017 and December 31, 2016,~~As a BDC, the Company ~~had the following receivables from (payables to) related parties relating~~is subject to certain ~~management fees, incentive fees, reimbursable expenses, and other payments owed~~regulatory restrictions in making its investments. For example, BDCs generally are not permitted to ~~related parties (dollars~~co-invest with certain affiliated entities in ~~thousands):~~

~~These amounts are reflected~~transactions originated by the BDC or its affiliates in the ~~accompanying consolidated statements~~absence of ~~assets and liabilities under the captions, “Due from related parties”, “Management and incentive fee payable” and “Due to related parties.”~~

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.

The Company, through its two wholly owned subsidiaries, uses debenture leverage provided through the SBA to fund a portion of its investment portfolio. As of September 30, 2017 and December 31, 2016, the Company has $170.7 million of 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 and Fund III had total assets of approximately $344.0 million and $349.4 million, respectively. On June 10, 2014, the Company received an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term. On April 10, 2023, superseding a prior exemptive order granted on October 23, 2018, the SEC ~~exempting~~issued an order granting an application for exemptive relief to us and certain of our affiliates that allows BDCs managed by the Investment Adviser, including Logan Ridge, to co-invest, subject to the satisfaction of certain conditions, in certain private placement transactions, with other funds managed by the Investment Adviser or its affiliates, certain proprietary accounts of the Investment Adviser or its affiliates and any future funds that are advised by the Investment Adviser or its affiliated investment advisers.

Under the terms of the exemptive order, in order for the Company ~~Fund II, and Fund III from certain provisions~~to participate in a co-investment transaction a “required majority” (as defined in Section 57(0) of the 1940 ~~Act (including an exemptive order granting relief from~~Act) of the ~~asset coverage requirements for~~Company's independent directors must conclude that (i) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching with respect of the Company or its stockholders on the part of any person concerned, and (ii) the proposed transaction is consistent with the interests of the Company's stockholders and is consistent with the Company's investment objectives and strategies and certain ~~indebtedness issued by Fund II and Fund III as SBICs) and from certain reporting requirements mandated~~criteria established by the ~~Securities Exchange Act~~Board.

The members of the senior management and investment teams of the Investment Adviser serve or may serve as ~~amended, with respect~~officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. In serving in these multiple and other capacities, they may have obligations to ~~Fund II and Fund III.~~other clients or investors in those entities, the fulfillment of which may or may not be in the Company's best interests or in the best interest of the Company's stockholders. The ~~Company intends to comply~~Company's investment objectives may overlap with the ~~conditions~~investment objectives of ~~the order.~~such investment funds, accounts or other investment vehicles.

The weighted average interest rate for all SBA-guaranteed debentures as of September 30, 2017 and December 31, 2016 was 3.29%. In addition to the stated interest rate, the SBA also charges an annual fee on all 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%.

The following table summarizes the interest expense and annual charges, and deferred financing costs on the SBA-guaranteed debentures for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

On May 16, 2017 ~~and December 31, 2016, the Company’s issued and outstanding SBA-guaranteed debentures mature as follows (dollars in thousands):~~

~~On June 16, 2014,~~, the Company issued ~~$113.4~~$70.0 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):

~~On May 16, 2017, the Company issued $70.0 million in aggregate principal amount of 6.0%~~6.0% fixed-rate notes due May 31, 2022 (the “2022 Notes”). On May 25, 2017, the Company issued an additional ~~$5.0~~$5.0 million in aggregate principal amount of the 2022 Notes pursuant to a partial exercise of the underwriters’ overallotment option. 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. On May 31, 2022, the remaining 2022 Notes reached maturity, and the

entire outstanding principal of the 2022 Notes became payable and was paid by the Company. Accordingly, as of March 31, 2023 and December 31, 2022, there were no 2022 Notes outstanding.

The 2022 Notes ~~will~~were scheduled to mature on May 31, 2022 and ~~may~~could 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%~~100% of the outstanding principal, plus accrued and unpaid interest. Interest ison the 2022 Notes was payable ~~quarterly beginning August 31, 2017.~~quarterly. The 2022 Notes were listed on the NASDAQ Global Select Market under the trading symbol “CPTAL” with a par value of $25.00 per share.

On May 26, 2017, the Company issued ~~$50.0~~$50.0 million in aggregate principal amount of ~~5.75%~~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~~$2.1 million in aggregate principal amount of the 2022 Convertible Notes pursuant to a partial exercise of the underwriters’ overallotment option. ~~Interest is~~On May 31, 2022, the 2022 Convertible Notes reached maturity, and the entire outstanding principal of the 2022 Convertible Notes became payable, ~~quarterly beginning August~~and was paid by the Company. Accordingly, as of March 31, ~~2017.~~2023 and December 31, 2022, there were no 2022 Convertible Notes outstanding.

The 2022 Convertible Notes ~~are~~were 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~~$25.00 principal amount of 2022 Convertible Notes (equivalent to an initial conversion price of approximately ~~$15.71~~$15.71 per share of common stock). The initial conversion premium iswas approximately ~~14.0%~~14.0%. As a result of the reverse stock split, the conversion rate for the 2022 Convertible Notes was 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~~was obligated to deliver shares of its common stock (and cash in lieu of fractional shares). The conversion rate iswas subject to adjustment if certain events ~~occur~~occurred 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 iswas 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~~could require the Company to repurchase for cash all or part of their 2022 Convertible Notes at a repurchase price equal to ~~100.0%~~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~~were not redeemable prior to maturity and no “sinking fund” iswas provided for the 2022 Convertible Notes.

On October 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”) 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, 2023 and December 31, 2022, the Company had $50.0 million and $50.0 million, respectively in 2026 Notes outstanding.

On October ~~17, 2014,~~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~~(“the KeyBank Credit Facility”), with ~~ING Capital, LLC,~~the investment adviser at 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,~~U.S. Bank National Association, as custodian. The KeyBank Credit Facility was amended on May 10, 2022 and October 20, 2022. Under the ~~lenders party thereto. On June 16, 2017,~~KeyBank Credit Facility, the Lenders have agreed to extend credit to CBL in an aggregate principal amount of up to $75.0 million as of May 10, 2022, with an uncommitted accordion feature that allows the Company ~~entered into an amendment~~ to ~~its Credit Facility with ING Capital, LLC (the “Amendment”). Pursuant to the Amendment, the Credit Facility currently provides for borrowings~~borrow up to ~~$114.5 million and may be increased up to $200.0 million pursuant to its “accordion” feature.~~an additional $125.0 million. The KeyBank Credit Facility matures on ~~June 16, 2021.~~

May 10, 2027, unless there is an earlier termination or event of default.The period during which the Lenders may make loans to CBL under the KeyBank Credit Facility commenced on October 30, 2020 and will continue through May 10, 2025, unless there is an earlier termination or event of default.Borrowings under the KeyBank Credit Facility bear interest at 1M Term SOFR plus 2.90% during 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 month LIBOR plus 1.0%. The Company’s ability 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 manage 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 tenor3-year revolving 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). 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 Company3.25% thereafter, with a 0.40% 1M Term SOFR floor. CBL will also pay an unused commitment fee at a rate of ~~2.50%~~(1) 1.00% if utilization is less than or equal to 30.0%, (2) 0.65% if utilization is greater than 30.0% but less than or equal to 60.0%, or (3) 0.35% if utilization is greater than 60.0%, 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, 2023 and December 31, 2022, there were draws of $58.4 million and $55.9 million, respectively, on the KeyBank Credit Facility. The KeyBank Credit Facility ~~exceeds~~includes customary affirmative and negative covenants, including certain limitations on the ~~outstanding amount~~incurrence of ~~loans under~~additional indebtedness and liens, as well as

usual and customary events of default for revolving credit facilities of this nature. As of March 31, 2023 and December 31, 2022, assets pledged to secure the KeyBank Credit Facility had a fair value of $125.5 million and ~~0.50% per annum on any remaining unused portion of the Credit Facility.~~$111.3 million, respectively.

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. For the quarter ended March 31, 2023, the Company made a distribution of $0.18 per share to stockholders of record as of March 20, 2023. The ~~following table summarizes the Company’s~~Company's Board determined not to declare a distribution ~~declarations~~ for the ~~nine months~~quarter ended ~~September 30, 2017 (dollars in thousands, except share and per share data):~~

~~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):~~

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:

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.~~2022 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.

We are a Maryland corporation that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “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”~~Adviser”), and ~~Capitala Advisors Corp.~~BC Partners Management LLC (the “Administrator”) provides the administrative services necessary for us to operate.

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, 2023, our asset coverage ratio was 175%. 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.

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. Accordingly, as of March 31, 2023 and December 31, 2022, there were no SBA-guaranteed debentures.

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, was licensed under the SBIC Act until June 10, 2021 and has elected to be regulated as ~~BDCs~~BDC under the 1940 Act. Fund II, our subsidiary, was licensed under the SBIC Act until March 1, 2019 and has elected to be regulated as a BDC under the 1940 Act.

~~The Company is considered an investment company as defined in Accounting Standards Codification (“ASC”) Topic 946~~~~– Financial Services – Investment Companies~~ ~~(“ASC 946”).~~

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.

In addition, we evaluate strategic opportunities available to us, including mergers with unaffiliated funds and affiliated funds, divestures, spin-offs, joint ventures and other similar transactions from time to time. An example of an opportunity we are currently in the initial stages of evaluating is a potential merger with one or more of our affiliated 1940 Act funds, which may result in the use of an exchange ratio other than NAV-for-NAV (including but not limited to relative market price) in connection therewith.

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 Adviser 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 Adviser 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 Adviser 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.”

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 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.

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.

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.

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.

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.

Our primary operating expenses include the payment of investment advisory fees to our Investment ~~Advisor,~~Adviser, 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~~Adviser 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):

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.

The Board has designated the Investment Adviser as its ~~financial instruments in accordance with~~“valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and ~~ASC Topic 820 —~~ ~~Fair Value Measurements and Disclosures~~ ~~(“ASC 820”). ASC 820 defines~~in that role the Investment Adviser is responsible for performing fair value ~~establishes a framework used~~determinations relating to ~~measure~~all of the Company's investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and ~~requires disclosures~~procedures that have been approved by the Board. The Board remains ultimately responsible for fair value ~~measurements. In~~determinations under the 1940 Act and satisfies its responsibility through oversight of the valuation designee in accordance with ~~ASC 820,~~Rule 2a-5. Investments that are not publicly traded or whose market prices are not readily available, as is expected to be the ~~Company has categorized its financial instruments carried~~case for substantially all of the Company’s investments, are valued at fair value as determined in good faith by the Investment Adviser, based on, among other things, input of independent third-party valuation firm(s).

The Investment Adviser undertakes a multi-step valuation process, which includes, among other procedures, the ~~priority~~following:

As part of the valuation ~~technique, into a three-level~~process, the Investment Adviser may consider other information and may use valuation methods including but not limited to (i) market quotes for similar investments, (ii) recent trading activity, (iii) discounting forecasted cash flows of the investment, (iv) models that consider the implied yields from comparable debt, (v) third party appraisal, (vi) sale negotiations and purchase offers received from independent parties and (vii) estimated value of underlying assets to be received in liquidation or restructuring.

Due to the inherent uncertainty of determining the fair value ~~hierarchy as discussed in Note 4 to our consolidated financial statements.~~

~~In determining~~of investments that do not have a readily available market value, the fair value of our ~~board~~investments may fluctuate from period to period. Additionally, the fair value of ~~directors (the “Board”) uses various valuation approaches,~~such investments may differ significantly from the values that would have been used had a ready market existed for such investments and ~~engages~~may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a ~~third-party independent valuation firm, which provides positive assurance on~~portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments ~~it reviews. In accordance with U.S. GAAP, a~~may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Under existing accounting guidance, fair value ~~hierarchy~~is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for ~~inputs is used in measuring fair value~~the investment. This accounting guidance emphasizes valuation techniques that ~~maximizes~~maximize the use of observable market inputs and ~~minimizes~~minimize the use of unobservable ~~inputs by requiring that~~inputs. Inputs refer broadly to the ~~most observable inputs be used when available.~~

~~Observable inputs are those~~assumptions that market participants would use in pricing ~~the~~an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the ~~Board.~~Company. Unobservable inputs are inputs that reflect the ~~Boards’~~ assumptions ~~about the inputs~~ market participants would use in pricing ~~the~~an asset or liability developed based ~~upon~~on the best information available in the circumstances.

The ~~fair value hierarchy is categorized into three levels based on~~Company classifies the inputs used to measure these fair values into the following hierarchy as ~~follows:~~defined by current accounting guidance:

Level 1 ~~— Valuations based on unadjusted~~1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible to the ~~Company has the ability to access. Valuation adjustments and block discounts are not applied to~~ Company.

Level ~~1 securities. Since valuations are based on~~2: Quoted prices for similar assets or liabilities in active markets, or 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~~for identical or similar assets or liabilities in markets that are not active, or ~~for which all significant~~other observable inputs ~~are observable, either directly or indirectly.~~other than quoted prices.

Level 3 ~~— Valuations based on~~3: Significant inputs that are unobservable ~~and significant to~~for an asset or liability.

A financial instrument’s categorization within 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 valuationhierarchy 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 onupon the lowest level of 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~~ Investments for which no external pricing sources 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~~valuation date ~~including periods~~are included in Level 3 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~~uses net asset value (“NAV”) as the ~~basis for the~~ fair value offor its equity investment in ~~CSLLF for the periods held. CSLLF recorded~~Great Lakes Funding II LLC (“Great Lakes II Joint Venture”). The Great Lakes II Joint Venture records its underlying investments at fair value on a ~~daily~~quarterly basis ~~utilizing pricing information from third-party sources.~~in accordance with the 1940 Act and U.S. GAAP.

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.

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.

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.~~

Interest income and ~~paid-in-kind~~payment-in-kind (“PIK”) 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.

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.~~

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, 2022, 2021, 2020 and 2019 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, 2023 and 2022. 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,~~both March 31, 2023 and December 31, ~~2016,~~2022, the Company recorded a net deferred tax ~~liability~~asset of ~~$2.7 million and $0.0 million, respectively.~~zero. For both the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022, the Company recorded a ~~change in~~tax provision ~~for~~of zero. As of March 31, 2023 and December 31, 2022, the valuation allowance on the Company’s deferred ~~taxes on unrealized appreciation on investments of $2.7 million. For~~tax asset was $4.0 million and $4.0 million, respectively. During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2023 and 2022, there was no change in ~~provision for deferred taxes on unrealized appreciation on investments was recorded.~~the valuation allowance recognized by the Company.

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, 2023 and December 31, ~~2016,~~2022, 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, 2023 and December 31, ~~2016.~~2022. 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.

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, 2023, our portfolio consisted of investments in 4659 portfolio companies with a fair value of approximately ~~$471.1~~$203.3 million. As of December 31, 2022, our portfolio consisted of investments in 59 portfolio companies with a fair value of approximately $203.6 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, 2023, 1.3% of the fair value of our first lien loans consisted of last-out loans. As of December 31, 2022, 1.9% 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, 2023, we made approximately ~~$11.4~~$7.4 million of investments and had approximately ~~$22.4~~$6.7 million in repayments and sales, resulting in net ~~repayments and sales~~deployment of approximately ~~$11.0~~$0.7 million for the period. During the three months ended ~~September 30, 2016,~~March 31, 2022, we made approximately ~~$26.0~~$16.4 million of investments and had approximately ~~$111.9~~$8.4 million in repayments and sales, resulting in net ~~investments~~deployment of approximately ~~$85.9~~$8.0 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,~~2023, our debt investment portfolio, which represented ~~76.0%~~83.1% of the fair value of our total portfolio, had a weighted average annualized yield of approximately ~~12.9%, exclusive~~10.7% (excluding income from non-accruals and collateralized loan obligations). As of March 31, 2023, 16.6% 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,~~2022, our debt investment portfolio, which represented ~~82.8%~~83.2% 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.~~10.4% (excluding income from non-accruals and collateralized loan obligations). As of December 31, ~~2016, 57.1%~~2022, 17.2% 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, 2023, the Company’s Adviser approved the fair value of the Company’s investment portfolio of approximately $203.3 million in good faith in accordance with the Company’s valuation procedures. The Company’s Adviser approved the fair value of the Company’s investment portfolio as of March 31, 2023 with input from third-party valuation firms and the Investment Adviser, as valuation designee, based on information known or knowable as of the valuation date, including trailing and forward looking data.

As of March 31, 2023, we had debt investments in two portfolio companies on non-accrual status with an aggregate amortized cost of $14.2 million and an aggregate fair value of $10.0 million, which represented 6.4% and 4.9% of the investment portfolio, respectively. As of December 31, 2022, we had a debt investment in one portfolio company on non-accrual status with aggregate amortized cost of $11.9 million and an aggregate fair value of $9.7 million, which represented 5.4% and 4.8% of the investment portfolio, respectively.

The following table summarizes the amortized cost and the fair value of investments ~~and cash and cash equivalents~~ as of ~~September 30, 2017~~March 31, 2023 (dollars in thousands):

The following table summarizes the amortized cost and the fair value of investments ~~and cash and cash equivalents~~ as of December 31, ~~2016~~2022 (dollars in thousands):

The following table shows the portfolio composition by industry grouping at fair value as of March 31, 2023 and December 31, 2022 (dollars in thousands):

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):

~~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:~~

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, 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.

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.

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 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.

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):~~

~~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):~~

Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 were as follows (dollars in thousands):

The composition of our investment income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was as follows (dollars in thousands):

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, 2023, total investment income ~~decreased by $5.0~~increased $1.9 million, or ~~29.1%~~57.5%, compared to the three months ended ~~September 30, 2016.~~March 31, 2022. The increase from the prior period ~~over period decline~~ was driven ~~primarily~~ by ~~a $5.1 million decline~~an increase in interest income ~~due to less average investments outstanding and an increase in non-accrual investments. For~~from $3.2 million for the three months ended ~~September 30, 2017, PIK~~March 31, 2022 to $4.8 million for the three months ended March 31, 2023. The increase in interest income ~~increased by $0.4 million~~is primarily due to a larger interest earning debt portfolio as well as increases in base rates for the three months ended March 31, 2023 compared to the three months ended ~~September 30, 2016, primarily due to investment restructurings that provided for an increase in the~~March 31, 2022. PIK ~~rate being charged. For the three months ended September 30, 2017, we generated $0.2~~income increased from $0.1 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, 2022 to $0.5 million ~~in non-origination fees.~~

~~For~~for the ~~nine~~three months ended ~~September 30, 2017, total investment~~March 31, 2023. The increase in PIK income ~~decreased by $12.3 million, or 23.8%, compared to the nine months ended September 30, 2016. The period over period decline~~ was ~~driven primarily by a $11.7 million decline in interest income~~ due to ~~less average debt investments outstanding and~~ an increase in ~~non-accrual investments. For the nine~~investments with a contractual PIK rate as well as non-recurring fee income of $0.2 million that was paid in-kind during three months ended September 30, 2017, PIK income increased by $1.7 million compared to the nine months ended September 30, 2016, primarily due to investment restructurings that provided for an increase to the PIK rate being charged. For the nine 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, 2023.

The composition of our expenses for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016~~2022 was as follows (dollars in thousands):

For the three months ended ~~September 30, 2017,~~March 31, 2023, operating expenses decreased ~~$2.0~~by $0.2 million, or ~~20.3%~~4.7%, compared to the three months ended ~~September 30, 2016. For~~March 31, 2022. Interest and financing expenses decreased from $2.2 million for the three months ended ~~September 30, 2017, interest and financing expenses decreased $0.4~~March 31, 2022 to $2.1 million for the three months ended March 31, 2023 primarily due to lower average outstanding debt as well as a lower cost of debt capital during the three months ended March 31, 2023 compared to the three months ended ~~September 30, 2016, due primarily to lower Credit Facility utilization during the period. Management~~March 31, 2022 . Base management fees declined ~~by $0.2 million,~~ from ~~$2.6~~$1.0 million for the three months ended ~~September 30, 2016~~March 31, 2022 to ~~$2.4~~$0.9 million for the three months ended ~~September 30, 2017,~~March 31, 2023, due to lower average assets under management. ~~Incentive fees, net of incentive fee waiver, declined by $1.5 million,~~General and administrative expenses decreased from ~~$1.5~~$1.0 million for the three months ended ~~September 30, 2016~~March 31, 2022 to ~~$0.0~~$0.8 million for the three months ended ~~September 30, 2017,~~March 31, 2023, primarily due to ~~lower pre-incentive fee net investment income.~~higher professional fees in the prior year.

For 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 repayment of the 2021 Notes. The increase in expenses related to the loss on extinguishment of debt was offset by (i) a decline in management fees, from $8.0 million for the nine months ended September 30, 2016 to $7.4 million for the nine months ended September 30, 2017, 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 the nine 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.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, we recognized ~~$(10.3)~~$1.5 million ~~and $(0.7) million, respectively,~~ of net realized losses on our portfolio ~~investments.~~investments, respectively. During the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2022, we recognized ~~$(17.0)~~less than $0.1 million ~~and $(24.9) million, respectively,~~ of net realized losses on our portfolio ~~investments.~~investments, respectively.

Net change in unrealized 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, 2023, 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) million of net~~change in unrealized depreciation on investments. For the three months ended ~~September 30, 2016~~March 31, 2022, we ~~had $8.5~~recognized $0.2 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 on 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.

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.

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, we recorded a net decrease in net assets resulting from operations of ~~$(5.8) million and $(6.4) million, respectively.~~$0.7 million. Based on the weighted average shares of common stock outstanding for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, our per share net decrease in net assets resulting from operations was ~~$(0.36) and $(0.40), respectively.~~ $0.24.

For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2022, we recorded a net ~~increase (decrease)~~decrease in net assets resulting from operations of ~~$(2.0) million and $1.1 million, respectively.~~$0.9 million. Based on the weighted average shares of common stock outstanding for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2022, our per share net ~~increase~~decrease in net assets resulting from operations was ~~$(0.13) and $0.07, respectively.~~$0.32.

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, 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, 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, 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., 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. 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, 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):~~

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, 2023.

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~~(“the KeyBank Credit Facility”) with ~~ING Capital, LLC,~~the investment adviser at 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 the lenders party thereto. On June 16, 2017, we entered into an amendment to our~~U.S. Bank National Association, as custodian. The KeyBank Credit Facility ~~with ING Capital, LLC (the “Amendment”). Pursuant to~~was amended on May 10, 2022 and October 20, 2022. Under the ~~Amendment, the~~KeyBank Credit Facility, ~~currently provides for borrowings~~the Lenders have agreed to extend credit to CBL in an aggregate principal amount of up to ~~$114.5~~$75.0 million ~~and may be increased~~as of May 10, 2022, with an uncommitted accordion feature that allows the Company to borrow up to ~~$200.0 million pursuant to its “accordion” feature.~~an additional $125.0 million. The KeyBank Credit Facility matures on May 10, 2027, unless there is an earlier termination or event of default. The period during which the Lenders may make loans to CBL under the KeyBank Credit Facility commenced on October 30, 2020 and will continue through May 10, 2025, unless there is an earlier termination or event of default. Borrowings under the KeyBank Credit Facility bear interest at 1M Term SOFR plus 2.90% during the 3-year revolving period and 3.25% thereafter, with a 0.40% 1M Term SOFR floor. CBL will also pay an unused commitment fee at a rate of (1) 1.00% if utilization is less than or equal to 30.0%, (2) 0.65% if utilization is greater than 30.0% but less than or equal to 60.0%, or (3) 0.35% if utilization is greater than 60.0%, per annum on the unutilized portion of the aggregate commitments under the KeyBank Credit Facility. As of March 31, 2023 , there were draws of $58.4 million on the KeyBank Credit Facility. 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 March 31, 2023, assets pledged to secure the KeyBank Credit Facility had a fair value of $125.5 million.

2032 Convertible Notes

On April 1, 2022, the Company issued $15.0 million in aggregate principal amount of 5.25% fixed-rate convertible notes due April 1, 2032 (the “2032 Convertible Notes”).

The 2032 Convertible Notes are convertible, at the holder’s option and at any time on or prior to the close of business on the business day immediately preceding the maturity date, into such number of shares of the Company’s common stock as is equal to the principal balance of the notes being converted on such date divided by the “Conversion Price,” as described below. The Company will not issue more than 539,503 shares of common stock in the aggregate under the purchase agreement governing the 2032 Convertible Notes (the “Purchase Agreement”); however, such number of shares may be adjusted from time to time to give effect to any forward or reverse stock splits with respect to the common stock as well as any further adjustments described in the purchase agreement. The “Conversion Price” will be equal to the average “Closing Sale Price” for the five “Trading Days” immediately prior to the relevant “Conversion Date,” as those terms are defined in the Purchase Agreement, subject to certain anti-dilutive provisions, as further described in the Purchase Agreement. No holder of a 2032 Convertible Note will be entitled to convert any such note or portion thereof if such conversion would result in more than $7,500,000 in principal amount of 2032 Convertible Notes being converted in any such calendar quarter. The Company has determined that the embedded conversion option in the 2032 Convertible Notes is not required to be separately accounted for as a derivative under U.S. GAAP.

The Company obtained an Investment Grade rating from a Nationally Recognized Statistical Rating Organization (“NRSRO”) with respect to the 2032 Convertible Notes. The 2032 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 2032 Convertible Notes are downgraded below Investment Grade by an NRSRO or the 2032 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 2032 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,” as defined in the Purchase Agreement, the Company will generally be required to make an offer to purchase the outstanding 2032 Convertible Notes at a price equal to 100% of the principal amount of such 2032 Convertible Notes plus accrued and unpaid interest to the repurchase date. The 2032 Convertible Notes are redeemable prior to maturity. No “sinking fund” is provided for the 2032 Convertible Notes.

As of March 31, 2023, the Company had $15.0 million in 2032 Convertible Notes outstanding.

2026 Notes

On October 29, 2021, we issued $50.0 million in aggregate principal amount of 5.25% fixed rate notes due October 30, 2026 (the “2026 Notes”) pursuant to a supplemental indenture with U.S. Bank National Association (the “Trustee”), which supplements that certain base indenture, dated as of June 16, ~~2021.~~ 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.

As of ~~September 30, 2017, we~~March 31, 2023, the Company had ~~$0.0 outstanding and $114.5~~approximately $50.0 million ~~available under the Credit Facility.~~in aggregate principal amount of 2026 Notes outstanding.

2022 Notes

On April 13, 2015, we completed an underwritten offering of 3,500,000 shares of our common stock at a public offering price of $18.32 per share. The total proceeds received in the offering net of underwriting discounts and offering costs were approximately $61.7 million.

On May 16, 2017, we issued ~~$70.0~~$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~~$5.0 million in aggregate principal amount of the 2022 Notes pursuant to a partial exercise of the underwriters’ overallotment option. On November 1, 2021, we notified the Trustee for the 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. On May 31, 2022, the 2022 Notes reached maturity, and the entire outstanding principal of the 2022 Notes became payable and was paid by the Company. Accordingly, as of March 31, 2023, there were no 2022 Notes outstanding.

The 2022 Notes ~~will mature on May 31, 2022, and may be redeemed~~were subject to redemption 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 ison the 2022 Notes was payable ~~quarterly beginning August 31, 2017.~~quarterly. The 2022 Notes ~~are~~were listed on the NASDAQ Global Select Market under the trading symbol “CPTAL” with a par value of $25.00 per share.

2022 Convertible Notes

On May 26, 2017, we issued ~~$50.0~~$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~~$2.1 million in aggregate principal amount of the 2022 Convertible Notes pursuant to a partial exercise of the underwriters’ overallotment option. On May 31, 2022, the 2022 Convertible Notes reached maturity, and the entire outstanding principal of the 2022 Convertible Notes became payable, and was paid by the Company. Accordingly, as of March 31, 2023, there were no 2022 Convertible Notes outstanding.

Interest ison the 2022 Convertible Notes was payable ~~quarterly beginning August 31, 2017.~~quarterly. The 2022 Convertible Notes ~~are~~were listed on the NASDAQ Capital Market under the trading symbol “CPTAG” with a par value of $25.00 per share.

~~As of September 30, 2017, Fund II had $26.2 million~~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, 2023, our asset coverage ~~requirements for certain indebtedness issued by Fund II~~ratio was 175%. If our asset coverage ratio falls below 150% due a decline in the fair market of our portfolio, we may be limited in our ability to raise additional debt.

Cash 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. We intend to comply with the conditions of the order.Cash Equivalents

As of ~~September 30, 2017,~~March 31, 2023, we had ~~$52.3~~$9.3 million in cash and cash ~~equivalents, and our net assets totaled $226.3 million.~~equivalents.

We have entered into two contracts under which we have material future commitments: the Investment Advisory Agreement, pursuant to which the Investment ~~Advisor~~Adviser 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, 2023 are as follows (dollars in ~~thousands)~~millions):

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. The Company’s Board determined not to declare a distribution for the first quarter of 2022. For the quarter ended March 31, 2023, the Company made a distribution of $0.18 per share to stockholders of record as of March 20, 2023.

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.

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, 2022. 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 tables summarize our distributions declared from January 2, 2015 to September 30, 2017:~~

~~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~~Adviser. The Company is externally managed by the Investment Adviser, an affiliate of ~~our Board, is~~BC Partners, pursuant to the ~~managing partner and chief investment officer~~Investment Advisory Agreement. Mr. Goldthorpe, an interested member of the ~~Investment Advisor, and M. Hunt Broyhill, a member of our~~ Board, has ana direct or indirect ~~controlling~~pecuniary interest in the Investment ~~Advisor.~~

~~In addition,~~Adviser. The Investment Adviser is a registered investment adviser under the Investment Advisers Act of 1940, as amended. The Investment Adviser is an affiliate of BC Partners Advisors L.P. for U.S. regulatory purposes. Mount Logan Capital Inc. is the Investment Advisor also manages CapitalSouth Partners SBIC Fund IV, L.P. (“Fund IV”), a private investment limited partnership providing financing solutions to smaller and lower middle-market companies that had its first closing in March 2013 and obtained SBA approval for its SBIC license in April 2013. In addition to Fund IV, affiliatesultimate control person of the Investment ~~Advisor may manage several affiliated funds whereby institutional limited partners~~Adviser.

Under the Investment Advisory Agreement, fees payable to the Investment Adviser equal (i) the Base Management Fee and (ii) the Incentive Fee. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in ~~Fund IV have the opportunity to co-invest with Fund IV in portfolio investments. An affiliate~~effect from year-to-year if approved annually by a majority of the ~~Investment Advisor also manages Capitala Private Credit Fund V, L.P. (“Fund V”);~~Board or by the holders of a 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 other funds inmajority of the ~~future that may have investment mandates that are similar, in whole~~outstanding shares, and, in ~~part, with ours. To~~each case, a majority of the ~~extent permitted~~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 ~~1940 Act~~Board, shall from time to time deem to be necessary or useful to perform its obligations under the applicable Administration Agreement. The Administrator also provides to the Company portfolio collection functions for and ~~interpretation~~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 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 ~~SEC staff, the Investment Advisor~~costs of compensation and related expenses of its ~~affiliates may determine that an investment is appropriate for us~~chief financial officer and ~~for one or more of those other funds. In such event, depending~~chief compliance officer and their respective staffs.

On April 10, 2023, superseding a prior exemptive order granted on the availability of such investment and other appropriate factors, the Investment Advisor or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions ofOctober 23, 2018, 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~~issued an order granting an application for exemptive relief to us and certain of our affiliates that allows BDCs managed by the Investment Adviser, including Logan Ridge, to co-invest, subject to the satisfaction of certain conditions, in certain private placement transactions, with other funds managed by the ~~SEC to permit an investment fund~~Investment Adviser or its affiliates, certain proprietary accounts of the Investment Adviser or its affiliates and ~~one~~any future funds that are advised by the Investment Adviser 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” (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,~~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.~~

As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, the Company had the following outstanding unfunded commitments ~~related~~ to ~~debt investments in~~ existing portfolio companies of $4.0 million (CIS Secure Computing, Inc.), $2.0 million (Portrait Innovations, Inc.), $1.5 million (Kelle’s Transport Service, LLC), and $1.0 million (US Well Services, LLC). As of December 31, 2016, the Company had outstanding unfunded commitments related to debt investments in an existing portfolio company of $1.2 million (On-Site Fuel Services, Inc.).companies:

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.

On May 9, 2023, the Company’s Board of Directors approved a distribution of $0.22 per share payable on May 31, 2023 to stockholders of record as of May 22, 2023.

~~On October 31, 2017, the Company funded $2.0 million of its unfunded commitment to CIS Secure Computing, Inc.~~

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, 2023, we did not engage in hedging activities.

As of ~~September 30, 2017,~~March 31, 2023, we held 1748 securities bearing a variable rate of interest. Our variable rate investments represent approximately ~~41.8%~~83.4% of the fair value of our total debt investments. As of ~~September 30, 2017, 10.2%~~March 31, 2023, none of our 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, 2023, we had ~~$0.0~~$58.4 million outstanding on our KeyBank Credit Facility, which has a variable rate of interest at ~~one month LIBOR~~one-month SOFR + ~~3.0%~~2.90%, subject to an

interest rate floor of 0.40%. As of ~~September 30, 2017,~~March 31, 2023, all of our other interest paying liabilities, consisting of ~~$170.7~~$50.0 million in ~~SBA-guaranteed debentures, $75.0~~2026 Notes and $15.0 million in ~~2022 Notes, and $52.1 million in 2022~~2032 Convertible 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, 2023 consolidated statements 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):

As of ~~September 30, 2017~~March 31, 2023 (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.

Management has not identified any change in the Company’s internal control over financial reporting that occurred during the ~~third~~first quarter of ~~2017~~2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~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. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. 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.

~~During~~Other than the ~~quarter~~shares issued pursuant to our DRIP, we did not engage in any sales of unregistered securities during the three months ended ~~September 30, 2017, we~~March 31, 2023. We issued ~~28,136~~a total of 140 shares of common stock under our ~~DRIP. The issuances were~~DRIP during the three months ended March 31, 2023. This issuance was not subject to the registration requirements ~~under~~of the Securities ~~Act~~Act. For the three months ended March 31, 2023, the aggregate value of ~~1933, as amended. The cash paid for~~the shares of our common stock issued under our DRIP ~~during~~was less than $0.1 million.

The following table sets forth information regarding recent repurchases of shares of our common stock.

(1) On March 6, 2023, the ~~quarter ended September 30, 2017 was approximately $0.3 million. Other than~~Company’s Board of Directors authorized a new share repurchase program, whereby the Company may repurchase up to an aggregate of $5.0 million of its outstanding common shares ~~issued under our DRIP during~~in the ~~quarter ended September 30, 2017, we did~~open market. Unless extended or discontinued by the Company’s Board of Directors, the repurchase program will terminate on March 31, 2024. The repurchase program may be extended, modified or discontinued at any time for any reason without prior notice. The repurchase program does not ~~sell~~obligate the Company to acquire any ~~unregistered equity securities.~~specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18 and accomplished through a Rule 10b5-1 plan, which sets certain restrictions on the method, timing, price and volume of share repurchases.

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

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.


Title of Each Class	Trading symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	LRFC	NASDAQ Global Select Market

	~~Capitala Finance Corp.~~	~~Yes~~ x
		Yesx	No ¨

	~~Capitala Finance Corp.~~	~~Yes~~ ¨
		Yesx	No ¨

~~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, 2023 (unaudited) and December 31, ~~2016~~2022	3

	Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	4

	Consolidated Statements of Changes in Net Assets for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	5

	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 (unaudited)	6

	Consolidated Schedules of Investments as of ~~September 30, 2017~~March 31, 2023 (unaudited) and December 31, ~~2016~~2022	7

	Notes to Consolidated Financial Statements as of ~~September 30, 2017~~and for the period ended March 31, 2023 (unaudited)	17 11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42 29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63 39

Item 4.	Controls and Procedures	64 40

PART II.	OTHER INFORMATION	64 40

Item 1.	Legal Proceedings	64 40

Item 1A.	Risk Factors	64 40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64 40

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


	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

	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, 2023			As of December 31, 2022
	(unaudited)
ASSETS
Investments at fair value:
Non-control/non-affiliate investments (amortized cost of $192,249 and $191,435, respectively)	$	176,832		$	177,268
Affiliate investments (amortized cost of $28,229 and $29,081, respectively)		26,505			26,324
Total investments at fair value (amortized cost of $220,478 and $220,516, respectively)		203,337			203,592
Cash and cash equivalents		9,347			6,793
Interest and dividend receivable		1,209			1,578
Prepaid expenses		2,514			2,682
Other assets		62			65
Total assets	$	216,469		$	214,710
LIABILITIES
2026 Notes (net of deferred financing costs and original issue discount of $1,333 and $1,421, respectively)		48,667			48,579
2032 Convertible Notes (net of deferred financing costs and original issue discount of $1,088 and $1,117, respectively)		13,912			13,883
KeyBank Credit Facility (net of deferred financing costs of $1,238 and $1,322, respectively)		57,140			54,615
Management and incentive fees payable		932			933
Interest and financing fees payable		1,469			973
Accounts payable and accrued expenses		516			722
Total liabilities	$	122,636		$	119,705
Commitments and contingencies (Note 2)
NET ASSETS
Common stock, par value $0.01, 100,000,000 common shares authorized, 2,709,583 and 2,711,068 common shares issued and outstanding, respectively	$	27		$	27
Additional paid in capital		191,007			191,038
Total distributable loss		(97,201	)		(96,060	)
Total net assets	$	93,833		$	95,005
Total liabilities and net assets	$	216,469		$	214,710
Net asset value per share	$	34.63		$	35.04


	For the Three Months Ended September 30						For the Nine Months Ended September 30						For the Three Months Ended March 31,
	2017			2016			2017			2016			2023				2022
INVESTMENT INCOME
Interest and fee income:
Interest income:
Non-control/non-affiliate investments	$	6,935		$	10,520		$	23,978		$	31,870		$	4,604			$	2,383
Affiliate investments		1,187			1,150			3,344			4,754			164				719
Control investments		1,639			3,545			5,209			8,681			—				95
Total interest and fee income		9,761			15,215			32,531			45,305
Total interest income														4,768				3,197
Payment-in-kind interest and dividend income:
Non-control/non-affiliate investments		1,103			1,176			3,810			2,966			416		(1)		85
Affiliate investments		611			101			1,254			293			48				47
Control investments		166			241			574			707
Total payment-in-kind interest and dividend income		1,880			1,518			5,638			3,966			464				132
Dividend income:
Non-control/non-affiliate investments		-			-			168			206			—				—
Affiliate investments		555			29			612			86			14				—
Control investments		25			545			330			2,135
Total dividend income		580			574			1,110			2,427			14				—
Other Income		48			42			125			85
Interest income from cash and cash equivalents		43			8			85			15
Other income:
Non-control/non-affiliate investments														10				—
Affiliate investments														—				8
Total other income														10				8
Total investment income		12,312			17,357			39,489			51,798			5,256				3,337

EXPENSES
Interest and financing expenses		4,585			4,938			14,726			14,990			2,069				2,188
Loss on extinguishment of debt		-			-			2,732			-
Base management fee		2,417			2,619			7,436			8,049			930				1,027
Incentive fees		-			1,782			1,308			5,155
Directors' expense														135				103
Administrative service fees														257				120
General and administrative expenses		900			889			2,941			2,984			792				950
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:
Total expenses														4,183				4,388
NET INVESTMENT INCOME (LOSS)														1,073				(1,051	)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments:
Non-control/non-affiliate investments														(1,506	)			(36	)
Net realized loss on investments														(1,506	)			(36	)
Net change in unrealized (depreciation) appreciation on investments:
Non-control/non-affiliate investments		(10,381	)		1,192			(5,336	)		1,261			(1,250	)			(1,150	)
Affiliate investments		98			(18,222	)		4,587			(26,303	)		1,033				1,303
Control investments		-			-			-			145			—				76
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

Net change in unrealized (depreciation) appreciation on investments														(217	)			229
Total net realized and change in unrealized (loss) gain on investments														(1,723	)			193
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS													$	(650	)		$	(858	)
NET DECREASE IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC & DILUTED (SEE NOTE 9)													$	(0.24	)		$	(0.32	)
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING – BASIC & DILUTED (SEE NOTE 9)														2,710,990				2,711,068
DISTRIBUTIONS PAID PER SHARE	$	0.39		$	0.47		$	1.17		$	1.41		$	0.18			$	—

	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


	Common Stock					Additional			Total
	Number of					Paid in			Distributable
For the Three Months Ended March 31, 2023 and 2022	Shares			Par Value		Capital			Loss			Total
BALANCE, December 31, 2022		2,711,068		$	27	$	191,038		$	(96,060	)	$	95,005
Net investment income		—			—		—			1,073			1,073
Net realized loss on investments		—			—		—			(1,506	)		(1,506	)
Net change in unrealized depreciation on investments		—			—		—			(217	)		(217	)
Repurchase of common stock		(1,625	)		—		(34	)		—			(34	)
Stock issued under dividend reinvestment plan		140			—		3			—			3
Distributions declared		—			—		—			(491	)		(491	)
BALANCE, March 31, 2023		2,709,583		$	27	$	191,007		$	(97,201	)	$	93,833

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

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 - 188.5%
First Lien/Senior Secured Debt - 141.1%
Accordion Partners LLC	Industrials	11.17%	SOFR + 6.25%	0.75%	08/29/2029		4,952	$	4,844		$	4,850		(12)(16)
Accordion Partners LLC (Revolver)	Industrials	11.06%	SOFR + 6.25%	0.75%	08/31/2028		383		352			354		(12)
Accurate Background, LLC	Information Technology	11.16%	L + 6.00%	1.00%	03/26/2027		4,447		4,140			4,302		(16)
AIDC Intermediateco 2, LLC (Peak Technologies)	Information Technology	11.06%	SOFR + 6.40%	1.00%	07/22/2027		4,988		4,910			4,877		(16)
Alternative Biomedical Solutions, LLC	Healthcare	8.00%	—	—	06/30/2023		7,103		7,103			6,183
American Academy Holdings, LLC	Healthcare	15.84%	L + 5.75%, 5.25% PIK	1.00%	01/01/2025		2,536		2,517			2,523		(16)
American Clinical Solutions, LLC	Healthcare	11.81%	L + 7.00%, 4.81% PIK	1.00%	12/31/2024		4,039		4,039			3,662
AP Core Holdings II, LLC	Information Technology	10.34%	L + 5.50%	0.75%	07/21/2027		1,156		1,143			1,127		(16)
AP Core Holdings II, LLC	Information Technology	10.34%	L + 5.50%	0.75%	07/21/2027		1,250		1,236			1,220		(16)
BetaNXT, Inc.	Financials	10.42%	SOFR + 5.75%	—	07/01/2029		2,985		2,812			2,743		(16)
BetaNXT, Inc. (Revolver)	Financials	9.15%	SOFR + 4.25%	—	07/01/2027		137		137			100		(12)
Bradshaw International, Inc.	Consumer Discretionary	10.63%	L + 5.75%	1.00%	10/21/2027		500		490			462		(16)
Bradshaw International, Inc. (Revolver)	Consumer Discretionary	—	L + 5.75%	1.00%	10/21/2026		—		(17	)		(69	)	(12)(17)
CIMSense	Financials	10.54%	SOFR + 5.50%	1.00%	12/17/2026		2,915		2,897			2,784		(16)
Critical Nurse Staffing, LLC	Healthcare	10.80%	L + 6.00%	1.00%	10/30/2026		5,849		5,762			5,810		(12)(16)
Critical Nurse Staffing, LLC (Revolver)	Healthcare	10.95%	L + 6.00%	1.00%	10/30/2026		760		747			755		(12)
Datalink, LLC	Healthcare	11.80%	SOFR + 6.75%	1.00%	11/23/2026		5,827		5,827			5,804		(16)
Dentive, LLC	Healthcare	11.90%	SOFR + 7.00%	1.00%	12/26/2028		1,215		1,172			1,161		(16)
Dentive, LLC (Revolver)	Healthcare	—	SOFR + 7.00%	1.00%	12/23/2028		—		(5	)		(6	)	(12)(17)
Dodge Data & Analytics LLC	Information Technology	9.79%	SOFR + 4.75%	0.50%	02/12/2029		1,489		1,470			1,260		(16)
Epic Staffing Group	Industrials	10.64%	SOFR + 5.75%	—	06/28/2029		4,097		3,834			3,907		(12)(16)
Florida Food Products, LLC	Consumer Staples	9.81%	SOFR + 5.00%	0.75%	10/18/2028		1,995		1,888			1,936		(16)
Fortis Payment Solutions	Financials	10.25%	SOFR + 5.25%	1.00%	02/13/2026		2,911		2,897			2,893		(16)
Grindr Capital, LLC	Information Technology	13.02%	SOFR + 8.00%	—	11/15/2027		2,000		1,982			1,980		(16)
Heads Up Technologies	Industrials	10.55%	SOFR + 5.50%	0.75%	08/10/2028		2,919		2,892			2,875		(16)
Hudson Hospital OpCo, LLC	Healthcare	12.77%	SOFR + 8.00%	3.00%	11/04/2023		3,060		3,060			3,032		(16)
HUMC Opco, LLC	Healthcare	12.77%	SOFR + 8.00%	3.00%	11/04/2023		3,913		3,913			3,874		(16)
IJKG OpCo, LLC	Healthcare	12.77%	SOFR + 8.00%	3.00%	11/04/2023		2,040		2,040			2,022		(16)
JO ET Holdings Limited	Information Technology	18.03%	SOFR + 6.00%, 7.00% PIK	1.00%	12/15/2026		1,079		1,064			1,072		(16)
Jurassic Quest Holdings, LLC	Entertainment	11.62%	L + 7.50%	2.00%	05/01/2024		7,730		7,730			7,577		(16)
Keg Logistics LLC	Consumer Discretionary	10.93%	L + 6.00%	1.00%	11/23/2027		7,441		7,354			7,226		(16)
Keg Logistics LLC (Revolver)	Consumer Discretionary	10.91%	L + 6.00%	1.00%	11/23/2027		872		862			847
Lucky Bucks, LLC	Consumer Discretionary	10.43%	L + 5.50%	0.75%	07/21/2027		2,955		2,914			946
Material Handling Systems, Inc.	Industrials	12.37%	P + 4.56%	1.00%	06/08/2029		1,990		1,803			1,756		(16)
Money Transfer Acquisition Inc.	Financials	13.16%	SOFR + 8.25%	1.00%	12/14/2027		6,956		6,825			6,826		(16)
Neptune BidCo US Inc.	Communication Services	9.74%	SOFR + 5.00%	0.50%	04/11/2029		1,000		895			902		(16)
Patriot Pickle, Inc.	Consumer Staples	9.55%	SOFR + 4.50%	—	04/13/2027		2,911		2,891			2,875		(16)
Premier Imaging, LLC	Healthcare	10.84%	L + 6.00%	1.00%	01/02/2025		2,590		2,562			2,525		(12)(16)
RN Enterprises, LLC	Healthcare	11.32%	SOFR + 6.50%	1.00%	12/23/2025		1,980		1,943			1,940		(16)
Sequoia Healthcare Management, LLC	Healthcare Management	—	—	—	11/04/2023		11,935		11,935			9,392		(7)
Shock Doctor, Inc.	Consumer Discretionary	10.20%	SOFR + 5.25%	1.00%	05/14/2024		2,679		2,672			2,639		(16)
South Street Securities Holdings, Inc.	Financials	9.00%	—	—	09/20/2027		450		383			369
STG Logistics	Industrials	10.83%	SOFR + 6.00%	0.75%	03/24/2028		2,481		2,410			2,429		(16)
Symplr Software, Inc.	Healthcare	9.28%	SOFR + 4.50%	0.75%	12/22/2027		1,683		1,680			1,508		(16)
Taoglas Group Holdings Limited	Information Technology	11.90%	SOFR + 7.00%	1.00%	02/28/2029		2,355		2,285			2,284		(16)
Taoglas Group Holdings Limited (Revolver)	Information Technology	—	SOFR + 7.00%	1.00%	02/28/2029		—		(19	)		(19	)	(17)
Wealth Enhancement Group, LLC	Financials	10.89%	SOFR + 6.01%	1.00%	10/02/2027		6,941		6,916			6,930		(16)
Wealth Enhancement Group, LLC (Revolver)	Financials	—	SOFR + 6.00%	1.00%	10/02/2027		—		(2	)		(1	)	(12)(17)
Total First Lien/Senior Secured Debt									139,185			132,444
Second Lien/Senior Secured Debt - 6.3%
American Academy Holdings, LLC	Healthcare	14.50% PIK	—	—	03/01/2028		3,712		3,634			3,165
BLST Operating Company, LLC	Online Merchandise Retailer	13.17%	L + 8.50%	1.50%	08/28/2025		929		929			873		(8)(16)
Ivanti Software, Inc.	Information Technology	12.21%	L + 7.25%	0.50%	12/01/2028		3,000		2,987			1,824
Total Second Lien/Senior Secured Debt									7,550			5,862
Subordinated Debt - 26.3%
Eastport Holdings, LLC	Business Services	13.67%	SOFR + 8.50%	1.00%	09/29/2027		19,250		19,250			19,094		(16)
Lucky Bucks, LLC	Consumer Discretionary	—	—	—	05/29/2028		2,263		2,229			577		(7)
Tubular Textile Machinery, Inc.	Textile Equipment Manufacturer	5.00%	—	—	10/29/2027		5,094		5,094			5,025
Total Subordinated Debt									26,573			24,696
Collateralized Loan Obligations - 4.5%
JMP Credit Advisors CLO IV Ltd.	Financials	5.47%	—	—	07/17/2029		7,891		1,827			1,412		(13)(15)
JMP Credit Advisors CLO V Ltd.	Financials	27.49%	—	—	07/17/2030		7,320		2,795			2,795		(13)(15)
Total Collateralized Loan Obligations									4,622			4,207
Preferred Stock and Units - 2.4%
Alternative Biomedical Solutions, LLC - Series A	Healthcare	—	—	—	—		15,864		1,277			—
Alternative Biomedical Solutions, LLC - Series B	Healthcare	—	—	—	—		55,166		3,950			—
Alternative Biomedical Solutions, LLC - Series C	Healthcare	—	—	—	—		78,900		—			—
American Academy Holdings, LLC	Healthcare	—	—	—	—		102,261		—			122		(6)
Jurassic Quest Holdings, LLC	Entertainment	—	—	—	—		467,784		480			164		(6)
MicroHoldco, LLC	General Industrial	—	—	—	—		740,237		749			688		(11)
Taylor Precision Products, Inc. - Series C	Household Product Manufacturer	—	—	—	—		379		758			758
U.S. BioTek Laboratories, LLC - Class A	Testing Laboratories	—	—	—	—		500		540			518
Total Preferred Stock and Units		—	—	—	—				7,754			2,250

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	%

	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		54.2	%	$	221,205		47.0	%
Second Lien Debt		32,284		7.1			30,774		6.5
Subordinated Debt		120,161		26.4			106,019		22.5
Equity and Warrants		56,081		12.3			113,108		24.0
Total	$	454,714		100.0	%	$	471,106		100.0	%

	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	$	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)
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)
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)
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)
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)
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)

		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	)

	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

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


	Outstanding Principal		Fair Value		Level 1		Level 2		Level 3
2026 Notes	$	50,000	$	50,000	$	—	$	—	$	50,000
2032 Convertible Notes		15,000		15,000		—		—		15,000
KeyBank Credit Facility		58,378		58,378		—		—		58,378
Total	$	123,378	$	123,378	$	—	$	—	$	123,378

	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 March 31,
	2023(1)			2022(2)
Net decrease in net assets resulting from operations - basic and diluted	$	(650	)	$	(858	)
Weighted average common stock outstanding – basic and diluted		2,710,990			2,711,068
Net decrease in net assets per share from operations - basic and diluted	$	(0.24	)	$	(0.32	)