# Rand Capital Corp: Form 10-Q for the period ended Jun 30, 2025

- Company: [Rand Capital Corp](/companies/rand.md) (CIK 81955)
- Form: 10-Q
- Filed: 2025-08-04
- Accepted by EDGAR: Aug 4, 2025, 08:45 ET
- Period: 2025-06-30
- Accession: 0000950170-25-101643
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/81955/000095017025101643/rand-20250630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/81955/000095017025101643/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Net income | 3 months, 2025-04-01 to 2025-06-30 | −$7.7m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2025-01-01 to 2025-06-30 | −$6.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-04-01 to 2025-06-30 | −$2.60 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2025-01-01 to 2025-06-30 | −$2.36 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-04-01 to 2025-06-30 | −$2.60 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2025-01-01 to 2025-06-30 | −$2.36 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-04-01 to 2025-06-30 | 2,969,814 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2025-01-01 to 2025-06-30 | 2,920,135 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2025-01-01 to 2025-06-30 | $8.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2025-01-01 to 2025-06-30 | $3.9m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2025-06-30 | $4.4m | us-gaap:Cash |
| Total assets | at 2025-06-30 | $57.6m | us-gaap:Assets |
| Total liabilities | at 2025-06-30 | $925.6k | us-gaap:Liabilities |
| Shareholders' equity | at 2025-06-30 | $56.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 49,120 characters.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future periods.

### FORWARD LOOKING STATEMENTS

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report that do not relate to present or historical conditions are “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements may be included in documents that are filed with the SEC. Forward-looking statements involve risks and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions, including statements related to our investment strategies and our intention to co-invest with certain of our affiliates; the impact of our election as a RIC for U.S. federal tax purposes on the payment of corporate level U.S. federal income taxes by Rand; statements regarding our liquidity and financial resources; statements regarding any capital gains fee that may be due to RCM upon a hypothetical liquidation of our portfolio and the amount of the capital gains fee that may be payable to RCM for 2025; and statements regarding our compliance with the RIC requirements as of June 30, 2025; and statements regarding future dividend payments, and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions are intended to identify forward-looking statements. Among the important factors on which such statements are based are assumptions concerning the state of the United States economy and the local markets in which our portfolio companies operate, the state of the securities markets in which the securities of our portfolio companies could be traded, liquidity within the United States financial markets, and inflation. Forward-looking statements are also subject to the risks and uncertainties described under the caption “Risk Factors” contained in Part II, Item 1A of this report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

There may be other factors not identified that affect the accuracy of our forward-looking statements. Further, any forward-looking statement speaks only as of the date when it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect, and we cannot predict all of them.

### Overview

We are an externally managed, non-diversified investment company that lends to and invests in lower middle market companies. Our investment objective is to generate current income and when possible, complement this current income with capital appreciation. As a result, our investments are primarily in higher yielding debt instruments. Our investment activities are managed by our investment adviser, Rand Capital Management, LLC (“RCM”).

We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements specified in the 1940 Act.

In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in the form of cash and contributed portfolio assets, in exchange for approximately 8.3 million shares of Rand common stock. Concurrent with the Closing, RCM, a registered investment advisor, was retained by Rand as its external investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively referred to herein as the “Transaction”). The term of the new investment advisory and management agreement (the “Investment Management Agreement”) with RCM was extended after approval of its renewal by our Board of Directors (the “Board”) in October 2024 and is currently scheduled to expire on December 31, 2025. In addition, the term of the administration agreement (the “Administration Agreement”) with RCM was extended after approval of its renewal by the Board in October 2024 and is currently scheduled to expire on December 31, 2025. The Investment Management Agreement and Administration Agreement can continue for successive annual periods after December 31, 2025 provided that such continuance is specifically approved at least annually by (i)(A) the affirmative vote of a majority of the Board or (B) the affirmative vote of a majority of our outstanding voting securities, and (ii) the affirmative vote of a majority of our directors who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”), of us, RCM or our respective affiliates.

On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our asset coverage requirement under the 1940 Act for senior securities was changed from 200% to 150%, effective January 24, 2025. We monitor our compliance with this coverage ratio on a regular basis. As of June 30, 2025, we had no senior securities outstanding and, as a result, our asset coverage ratio for senior securities as of June 30, 2025 is incalculable. For a discussion of the risks associated with our adoption of a modified asset coverage requirement of 150%, please see the discussion of risks under the caption “Risk Factors – Risks related to our Indebtedness” contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. Notwithstanding the reduction of our asset coverage requirement under the 1940 Act from 200% to 150% effective January 24, 2025, under the terms of the Credit Agreement, we are required to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of the Corporation’s assets to the sum of all of the Corporation’s obligations for borrowed money plus all capital lease obligations) of not less 300%.

Pursuant to the terms of the Investment Management Agreement, Rand pays RCM a base management fee and may pay an incentive fee, comprised of two parts: (1) the “Income Based Fee” and (2) the “Capital Gains Fee”, if specified benchmarks are met.

We elected U.S. federal tax treatment as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. As of June 30, 2025, we believe we were in compliance with the RIC requirements. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends. In addition, as a RIC, we must distribute annually to our shareholders at least 90% of our ordinary net income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Accordingly, our Board has regularly declared a quarterly cash dividend since our RIC election.

Our Board declared the following quarterly cash dividends during the six months ended June 30, 2025:

| Quarter | Dividend/Share Amount | Record Date | Payment Date |
| --- | ---: | --- | --- |
| 1st | $0.29 | March 14, 2025 | March 28, 2025 |
| 2nd | $0.29 | May 30, 2025 | June 13, 2025 |

On December 5, 2024, our Board declared a dividend in the amount of $4.20 per share. The dividend was paid in the aggregate combination of 20% in cash and 80% in newly issued shares of our common stock on January 24, 2025 to shareholders of record as of December 16, 2024. The portion of the dividend paid using our common stock increased the number of issued and outstanding shares of our common stock from 2,581,021 shares to 2,969,814 shares as of January 24, 2025.

During the second quarter, the valuation of our investment in Tilson Technology Management, Inc. (Tilson) was reduced to $0 after it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, District of Delaware. Additional information regarding the Tilson Technologies bankruptcy can be found in our Current Report on Form 8-K filed on May 30, 2025. We are monitoring the bankruptcy process through the court’s website. At March 31, 2025, our investment in Tilson had an aggregate cost basis of $2,850,015 and an aggregate fair value of $9,500,000. Our investment in Tilson represented approximately 14.5% of our net assets as of March 31, 2025 and approximately 15.3% of our total investments at fair value as of March 31, 2025.

We also separately own 211,567 Class A-1 units and 250 Class D-1 units of SQF Holdco LLC (“SQF”), which is a separate company from Tilson Technology and is not part of the Tilson Chapter 11 Proceedings. As of June 30, 2025, our investment in SQF had an aggregate cost basis of $250,000 and an aggregate fair value of $2,000,000.

We may co-invest, subject to the conditions included in the exemptive relief order we received from the SEC, with certain of our affiliates. See “SEC Exemptive Order” below. We believe these types of co-investments are likely to afford us additional investment opportunities and provide an ability to achieve greater diversification in our investment portfolio.

### SEC Exemptive Order

On October 7, 2020, Rand, RCM and certain of their affiliates received an exemptive order from the SEC to permit the Corporation to co-invest in portfolio companies with certain affiliates, including other BDCs and registered investment companies managed by RCM and certain of its affiliates, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). On March 29, 2021, the SEC granted Rand, RCM, Callodine, which holds a controlling interest in RCM, and certain of their affiliates a new exemptive order (the “New Order”) that superseded the Order and permits Rand to co-invest with affiliates managed by RCM and Callodine. Pursuant to the New Order, we are generally permitted to co-invest with affiliates covered by the New Order if a “required majority” (as defined in Section 57(o) of the 1940 Act) of Rand’s independent directors makes certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to Rand and its shareholders and do not involve overreaching in respect of Rand or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of Rand’s shareholders and is consistent with Rand’s investment objective and strategies and (3) the investment by Rand’s affiliates would not disadvantage Rand, and Rand’s participation would not be on a basis different from or less advantageous than that on which Rand’s affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit us to participate in follow-on investments in our existing portfolio companies with certain Affiliated Funds (as defined in the New Order) that do not hold any investments in such existing portfolio companies.

### Critical Accounting Policies

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (GAAP), which require the use of estimates and assumptions that affect the reported amounts of assets and liabilities. A summary of our critical accounting policies can be found in our Annual Report on Form 10-K for the year ended December 31, 2024 under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

### Financial Condition

### Overview:

|  | June 30, 2025 | December 31, 2024 | Decrease | % Decrease |
| --- | ---: | ---: | ---: | ---: |
| Total assets | $57,639,539 | $72,457,433 | $(14,817,894) | (20.5)% |
| Total liabilities | 925,585 | 7,124,913 | (6,199,328) | (87.0)% |
| Net assets | $56,713,954 | $65,332,520 | $(8,618,566) | (13.2)% |

Net asset value per share (NAV) was $19.10 at June 30, 2025 and $25.31 at December 31, 2024.

Cash approximated 7.8% of net assets at June 30, 2025, as compared to 1.3% of net assets at December 31, 2024.

During 2022, we entered into a $25 million senior secured revolving credit facility (the “Credit Facility”) with M&T Bank, as lender (the “Lender”), with the amount that we can borrow thereunder, at any given time, determined based upon a borrowing base formula. The Credit Facility has a 5-year term with a maturity date of June 27, 2027. Our borrowings under the Credit Facility bear interest at a variable rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. There was no outstanding balance drawn on the Credit Facility at June 30, 2025. See “Note 6. Senior Secured Revolving Credit Facility” in the Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

### Composition of Our Investment Portfolio

Our financial condition is dependent on the success of our portfolio holdings. The following summarizes our investment portfolio at the dates indicated:

|  | June 30, 2025 | December 31, 2024 | Decrease | % Decrease |
| --- | ---: | ---: | ---: | ---: |
| Investments, at cost | $61,277,046 | $68,120,235 | $(6,843,189) | (10.0)% |
| Unrealized (depreciation) appreciation, net | (8,912,792) | 2,697,806 | (11,610,598) | (430.4)% |
| Investments, at fair value | $52,364,254 | $70,818,041 | $(18,453,787) | (26.1)% |

Our total investments at fair value, as determined by RCM and approved by our Board, approximated 92% of net assets at June 30, 2025 as compared to approximately 108% of net assets at December 31, 2024.

Our investment objective is to generate current income and when possible, complement this current income with capital appreciation. As a result, we are focused on investing in higher yielding debt instruments and related equity investments in privately held, lower middle market companies with a committed and experienced management team in a broad variety of industries. In the past, we have also invested in publicly traded shares of other business development companies that provided income through dividends and had more liquidity than our private company equity investments, but did not own any such shares of other business development companies as of June 30, 2025.

The change in investments during the six months ended June 30, 2025, at cost, is comprised of the following:

| New investments: | Cost Increase (Decrease) |
| --- | ---: |
| ITA Acquisition, LLC (ITA) | $375,000 |
| Carolina Skiff LLC (Carolina Skiff) | 34,755 |
| Total of new investments | 409,755 |
| **Other changes to investments:** |  |
| BMP Food Service Supply Holdco, LLC (FSS) interest conversion | 435,031 |
| Caitec, Inc. (Caitec) interest conversion | 324,366 |
| Mountain Regional Equipment Solutions (MRES) interest conversion, fee conversion and OID amortization | 239,352 |
| Autotality (formerly Filterworks Acquisition USA, LLC) interest conversion | 73,675 |
| Seybert’s Billiards Corporation (Seybert’s) OID amortization and interest conversion | 64,183 |
| Highland All About People Holdings, Inc. (All About People) interest conversion | 64,176 |
| FCM Industries Holdco LLC (First Coast Mulch) interest conversion | 24,893 |
| Pressure Pro, Inc. (Pressure Pro) OID amortization and interest conversion | 22,445 |
| Mobile RN Holdings LLC (Mobile IV Nurses) interest conversion | 12,617 |
| GoNoodle, Inc. (GoNoodle) interest conversion | 7,211 |
| Total of other changes to investments | 1,267,949 |
| **Investments repaid, sold, liquidated or converted:** |  |
| GoNoodle warrant expiration | (25) |
| Pressure Pro warrant sale | (30,000) |
| Seybert’s debt repayment | (120,992) |
| HDI Acquisition LLC (Hilton) debt repayment | (1,071,824) |
| Pressure Pro debt repayment | (1,725,150) |
| Mattison Avenue Holdings LLC (Mattison) debt repayment | (5,572,902) |
| Total of investments repaid, sold, liquidated or converted | (8,520,893) |
| **Net change in investments, at cost** | **$(6,843,189)** |

### Results of Operations

#### Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024:

### Investment Income

|  | Three months ended June 30, 2025 | Three months ended June 30, 2024 | (Decrease) Increase | % (Decrease) Increase |
| --- | ---: | ---: | ---: | ---: |
| Interest from portfolio companies | $1,514,562 | $1,995,227 | $(480,665) | (24.1)% |
| Interest from other investments | 36,556 | 144 | 36,412 | 25286.1% |
| Dividend and other investment income | — | 73,175 | (73,175) | (100.0)% |
| Fee income | 51,179 | 67,603 | (16,424) | (24.3)% |
| Total investment income | $1,602,297 | $2,136,149 | $(533,852) | (25.0)% |

The total investment income during the three months ended June 30, 2025 was received from 14 portfolio companies. For the three months ended June 30, 2024, total investment income was received from 22 portfolio companies.

Interest from portfolio companies – Interest from portfolio companies was approximately 24% lower during the three months ended June 30, 2025 versus the same period in 2024 due to the fact that several interest yielding investments were repaid during the last year and new debt instruments were not originated in replacement. The proceeds were used to repay outstanding borrowed amounts under the Credit Facility. Debt instruments were repaid by Hilton, Mattison, Nailbiter, Inc. (Nailbiter), Pressure Pro, and SciAps, Inc. (SciAps).

We hold debt securities in our investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Interest can also be shifted from current cash payment to PIK as part of a loan modification. For the three months ended June 30, 2025 and 2024, 37.4% and 21.8%, respectively, of our total investment income was attributable to non-cash PIK interest income.

Interest from other investments - The increase in interest from other investments is primarily due to higher average cash balances during the three months ended June 30, 2025 versus the same period in 2024.

Dividend and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and corporations in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional discretionary distributions or dividends. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. The dividend distributions for the respective periods were:

|  | Three months ended June 30, 2025 | Three months ended June 30, 2024 |
| --- | ---: | ---: |
| FS KKR Capital Corp. (FS KKR) | $— | $36,000 |
| PennantPark Investment Corporation (Pennantpark) | — | 13,650 |
| Tilson | — | 13,125 |
| Barings BDC, Inc. (Barings) | — | 10,400 |
| Total dividend and other investment income | $— | $73,175 |

Fee income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income associated with portfolio company monitoring fees, income associated with early repayment fees and income associated with portfolio company loan modification fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees are carried on the balance sheet under the line item “Deferred revenue.”

The income associated with the amortization of financing fees was $51,179 and $52,803 for the three months ended June 30, 2025 and 2024, respectively. During the three months ended June 30, 2024, we recognized a prepayment fee of $14,800 from our investment in Pressure Pro.

### Expenses

|  | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Decrease | % Decrease |
| --- | ---: | ---: | ---: | ---: |
| Total (benefits) expenses | $(864,159) | $2,652,782 | $(3,516,941) | (132.6)% |

The decrease in total expenses during the three months ended June 30, 2025 versus the same period in 2024 was primarily due to a $3,131,000 decrease in the capital gains incentive fee expense, a $367,755 decrease in interest expense, and a $105,023 decrease in base management fees payable to RCM.

The capital gains incentive fee benefit during the three months ended June 30, 2025 is due to the calculation of the capital gains fee as required by GAAP. We are required under GAAP to accrue capital gains incentive fees on the basis of net realized capital gains and losses and net unrealized gains and losses. Our capital gains incentive fee accrual reflects the capital gains incentive fees that would be payable to RCM if our entire investment portfolio was liquidated at its fair value as of the balance sheet date, even though RCM is not entitled to this capital gains incentive fee under the Investment Management Agreement with respect to unrealized gains unless and until such gains are realized. The decrease in expense during the three months ended June 30, 2025 is attributable to a net increase in net unrealized depreciation during the quarter, which was primarily the result of the writedown of the valuation of our investment in Tilson by $9,500,000.

The decrease in interest expense resulted from lower average outstanding debt balances under the Credit Facility during the three months ended June 30, 2025 versus the same period in 2024. Interest expense for the three months ended June 30, 2025 and 2024 was $25,417 and $393,172, respectively.

The base management fee payable to RCM under the Investment Management Agreement is calculated based upon total assets less cash, and, as investments are exited or repaid, the base management fee payable to RCM will decrease accordingly. The base management fee for the three months ended June 30, 2025 and 2024 was $217,649 and $322,672, respectively.

### Net Investment Income (Loss)

The excess of investment income over total expenses, including income taxes, represents net investment income (loss). The net investment income (loss) for the three months ended June 30, 2025 and 2024 was $2,478,234 and ($517,195), respectively.

### Realized Gain on Investments

|  | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change |
| --- | ---: | ---: | ---: |
| Realized gain on investments before income taxes | $— | $428,108 | $(428,108) |

During the three months ended June 30, 2024, we recognized a net realized gain of $598,371 on the sale of 86,000 shares of Carlyle Secured Lending Inc. (Carlyle), a net realized gain of $484,834 on the sale of 195,000 shares of Pennantpark, and a net realized gain of $176,794 on the sale of 21,000 shares of Ares Capital Corporation (Ares). In addition, we recognized a realized gain of $397,264 from proceeds received from Tilson following a partial sale of certain SQF assets.

During the three months ended June 30, 2024, we liquidated our investment in Knoa Software, Inc. (Knoa), which was previously valued at $0, and recognized a realized loss of ($1,229,155).

### Change in Unrealized (Depreciation) Appreciation of Investments

|  | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change |
| --- | ---: | ---: | ---: |
| Change in unrealized (depreciation) appreciation of investments before income taxes | $(10,312,214) | $7,779,026 | $(18,091,240) |

The change in net unrealized (depreciation) appreciation, before income taxes, for the three months ended June 30, 2025, was comprised of the following:

|  | Three months ended June 30, 2025 |
| --- | ---: |
| First Coast Mulch | $484,837 |
| Inter-National Electronic Alloys LLC (EFINEA) | 200,000 |
| Mobile IV Nurses | 125,000 |
| Lumious | (189,944) |
| FSS | (250,000) |
| Carolina Skiff | (442,755) |
| MRES | (739,352) |
| Tilson | (9,500,000) |
| **Total change in net unrealized (depreciation) appreciation of investments before income taxes** | $(10,312,214) |

In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA, First Coast Mulch, and Mobile IV Nurses after a financial analysis of each of the portfolio companies indicating continued improved performance.

During the three months ended June 30, 2025, the valuation of our investments in Carolina Skiff, FSS, Lumious, and MRES were decreased after a review of their operations and financial condition.

The valuation of our investment in Tilson was reduced to zero after it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, District of Delaware. See “Overview” and our Current Report on Form 8-K filed on May 30, 2025 for additional information regarding the Tilson bankruptcy.

All of the valuation adjustments resulted from a determination of fair value in good faith by RCM, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.

The change in net unrealized appreciation (depreciation), before income taxes, for the three months ended June 30, 2024, was comprised of the following:

|  | Three months ended June 30, 2024 |
| --- | ---: |
| SciAps | $5,586,016 |
| Tilson | 1,761,000 |
| Knoa | 1,229,155 |
| Pressure Pro | 470,000 |
| FS KKR | 31,680 |
| Barings | 17,200 |
| Ares | (170,080) |
| Autotality | (196,226) |
| Pennantpark | (449,388) |
| Carlyle | (500,331) |
| **Total change in net unrealized appreciation (depreciation) of investments before income taxes** | $7,779,026 |

Barings and FS KKR are publicly traded stocks, and as such, were marked to market at the end of each quarter, using the closing price on the last trading day of the quarter.

We sold our investments in Ares, Carlyle, Knoa and Pennantpark during the three months ended June 30, 2024.

In accordance with the Corporation’s valuation policy, we increased the value of our investments in SciAps, Tilson and Pressure Pro after a financial analysis of each of the portfolio companies indicating continued improved performance.

Following the end of the second quarter of 2024, SciAps announced that it had entered into a definitive purchase agreement to be acquired by a United Kingdom based buyer for total consideration of up to $260 million, comprising of an up-front consideration payable at closing of $200 million, less standard closing adjustments, and the transaction was subject to customary closing conditions and regulatory approvals, with closing occurring later in calendar year 2024.

The valuation of our investment in Autotality, during the three months ended June 30, 2024, was decreased after a review of their operations and financial condition.

All of the valuation adjustments resulted from a determination of fair value in good faith by RCM, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.

### Net (Decrease) Increase in Net Assets from Operations

We account for our operations under GAAP for investment companies. The principal measure of our financial performance is “Net (decrease) increase in net assets from operations” on our consolidated statements of operations. The net (decrease) increase in net assets from operations for the three months ended June 30, 2025 and 2024 was ($7,736,154) and $7,737,773, respectively.

#### Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024:

### Investment Income

|  | Six months ended June 30, 2025 | Six months ended June 30, 2024 | (Decrease) Increase | % (Decrease) Increase |
| --- | ---: | ---: | ---: | ---: |
| Interest from portfolio companies | $3,191,728 | $3,808,875 | $(617,147) | (16.2)% |
| Interest from other investments | 46,939 | 2,058 | 44,881 | 2180.8% |
| Dividend and other investment income | 13,125 | 225,010 | (211,885) | (94.2)% |
| Fee income | 358,409 | 167,425 | 190,984 | 114.1% |
| Total investment income | $3,610,201 | $4,203,368 | $(593,167) | (14.1)% |

42

The total investment income during the six months ended June 30, 2025 was received from 17 portfolio companies. For the six months ended June 30, 2024, total investment income was received from 24 portfolio companies.

Interest from portfolio companies – Interest from portfolio companies was approximately 16% lower during the six months ended June 30, 2025 versus the same period in 2024 due to the fact that several interest yielding investments were repaid during the last year and new debt instruments were not originated in replacement. The proceeds were used to repay outstanding borrowed amounts under the Credit Facility. Debt instruments were repaid by Hilton, Mattison, Nailbiter, Pressure Pro, and SciAps.

We hold debt securities in our investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Interest can also be shifted from current cash payment to PIK as part of a loan modification. For the six months ended June 30, 2025 and 2024, 33.9% and 18.9%, respectively, of our total investment income was attributable to non-cash PIK interest income.

Interest from other investments - The increase in interest from other investments is primarily due to higher average cash balances during the six months ended June 30, 2025 versus the same period in 2024.

Dividend and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and corporations in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional discretionary distributions and dividends. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. The dividend distributions for the respective periods were:

|  | Six months ended June 30, 2025 | Six months ended June 30, 2024 |
| --- | ---: | ---: |
| Tilson | $13,125 | $26,250 |
| FS KKR | — | 72,000 |
| Pennantpark | — | 54,600 |
| Carlyle | — | 41,280 |
| Barings | — | 20,800 |
| Ares | — | 10,080 |
| Total dividend and other investment income | $13,125 | $225,010 |

Fee income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income from portfolio company board attendance fees, income associated with portfolio company monitoring fees, and other miscellaneous fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees are carried on the balance sheet under the line item “Deferred revenue.”

The income associated with the amortization of financing fees was $138,956 and $101,834 for the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, we recognized a prepayment fee of $167,187 from our debt investment in Mattison, a loan monitoring fee of $20,000 from our debt investment in Pressure Pro, a prepayment fee of $17,266 from our debt investment in Pressure Pro, and a loan modification fee of $15,000 from our investment in MRES.

During the six months ended June 30, 2024, we recognized prepayment fees totaling $25,782 from our investment in Pressure Pro, a loan monitoring fee of $20,000 from our investment in Pressure Pro, a loan monitoring fee of $8,814 from our investment in Mattison, a loan monitoring fee of $5,995 from our investment in Autotality, and a loan modification fee of $5,000 from our investment in Lumious.

### Expenses

|  | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Decrease | % Decrease |
| --- | ---: | ---: | ---: | ---: |
| Total (benefits) expenses | $(73,094) | $3,879,638 | $(3,952,732) | (101.9)% |

43

The decrease in total expenses during the six months ended June 30, 2025 versus the same period in 2024 was primarily due to a $3,318,300 decrease in the capital gains incentive fee expense, a $721,289 decrease in interest expense, and a $155,410 decrease in base management fees payable to RCM. The decrease was partially offset by a $119,673 increase in the income based incentive fee expense.

The capital gains incentive fee benefit during the six months ended June 30, 2025 is due to the calculation of the capital gains fee as required by GAAP. We are required under GAAP to accrue capital gains incentive fees on the basis of net realized capital gains and losses and net unrealized gains and losses. Our capital gains incentive fee accrual reflects the capital gains incentive fees that would be payable to RCM if our entire investment portfolio was liquidated at its fair value as of the balance sheet date, even though RCM is not entitled to this capital gains incentive fee under the Investment Management Agreement with respect to unrealized gains unless and until such gains are realized. The decrease in expense during the six months ended June 30, 2025 is attributable to a net increase in net unrealized depreciation in excess of realized capital gains during the period, which was primarily the result of the writedown of the valuation of our investment in Tilson by $9,500,000.

The decrease in interest expense resulted from lower average outstanding debt balances under the Credit Facility during the six months ended June 30, 2025 versus the same period in 2024. Interest expense for the six months ended June 30, 2025 and 2024 was $61,903 and $783,192, respectively.

The base management fee payable to RCM under the Investment Management Agreement is calculated based upon total assets less cash, and, as investments are exited or repaid, the base management fee payable to RCM will decrease accordingly. The base management fee for the six months ended June 30, 2025 and 2024 was $469,857 and $625,267, respectively.

The income based incentive fee is calculated quarterly in accordance with the Investment Management Agreement. The income based incentive fee accrued during the six months ended June 30, 2025 was $119,673, and results from an increase in Pre-Incentive Fee Net Investment Income above the applicable hurdle rate during the three months ended March 31, 2025, as set forth and described in the Investment Management Agreement. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during such calendar quarter, minus our operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of the Incentive Fee). Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that we have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation.

### Net Investment Income

The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the six months ended June 30, 2025 and 2024 was $3,696,349 and $322,390, respectively.

### Realized Gain on Investments

|  | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change |
| --- | ---: | ---: | ---: |
| Realized gain on investments before income taxes | $925,332 | $3,878,200 | $(2,952,868) |

During the six months ended June 30, 2025, we sold our warrant investment in Pressure Pro and recognized a realized gain of $870,000. In addition, during the six months ended June 30, 2025, we recognized a gain of $58,329 from additional proceeds received from Microcision LLC (Microcision), an investment we exited in 2022. We also recognized a realized loss of ($25) on GoNoodle when the Series C warrant expired without exercise.

During the six months ended June 30, 2024, we recognized a net realized gain of $3,450,092 on the sale of 194,934 shares of ACV Auctions, Inc. (ACV), a net realized gain of $598,371 on the sale of 86,000 shares of Carlyle, a net realized gain of $484,834 on the sale of 195,000 shares of Pennantpark, and a net realized gain of $176,794 on the sale of 21,000 shares of Ares. In addition, we recognized a realized gain of $397,264 from proceeds received from Tilson following a partial sale of certain SQF assets.

During the six months ended June 30, 2024, we liquidated our investment in Knoa, which was previously valued at $0, and recognized a realized loss of ($1,229,155).

### Change in Unrealized (Depreciation) Appreciation of Investments

|  | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change |
| --- | ---: | ---: | ---: |
| Change in unrealized (depreciation) appreciation of investments before income taxes | $(11,610,598) | $4,888,730 | $(16,499,328) |

The change in net unrealized (depreciation) appreciation, before income taxes, for the six months ended June 30, 2025, was comprised of the following:

|  | Six months ended June 30, 2025 |
| --- | ---: |
| EFINEA | $488,235 |
| First Coast Mulch | 484,837 |
| Seybert's | 256,000 |
| Mobile IV Nurses | 125,000 |
| Lumious | (189,944) |
| Carolina Skiff | (442,755) |
| FSS | (497,619) |
| Pressure Pro | (720,000) |
| MRES | (739,352) |
| ITA | (875,000) |
| Tilson | (9,500,000) |
| **Total change in net unrealized (depreciation) appreciation of investments before income taxes** | $(11,610,598) |

We sold our warrant investment in Pressure Pro during the six months ended June 30, 2025.

In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA, First Coast Mulch, Mobile IV Nurses, and Seybert’s after a financial analysis of each of the portfolio companies indicating continued improved performance.

During the six months ended June 30, 2025, the valuation of our investments in Carolina Skiff, FSS, ITA, Lumious, and MRES were decreased after a review of their operations and financial condition.

The valuation of our investment in Tilson was reduced to zero after it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court, District of Delaware. See “Overview” and our Current Report on Form 8-K filed on May 30, 2025 for additional information regarding the Tilson bankruptcy.

All of the valuation adjustments resulted from a determination of fair value in good faith by RCM, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.

The change in net unrealized appreciation (depreciation), before income taxes, for the six months ended June 30, 2024, was comprised of the following:

|  | Six months ended June 30, 2024 |
| --- | ---: |
| SciAps | $5,586,016 |
| Tilson | 1,761,000 |
| Knoa | 1,129,155 |
| Pressure Pro | 470,000 |
| Barings | 46,000 |
| FS KKR | (11,520) |
| Ares | (153,490) |
| Autotality | (196,226) |
| Carlyle | (386,811) |
| Pennantpark | (455,238) |
| ACV | (2,900,156) |
| **Total change in net unrealized appreciation (depreciation) of investments before income taxes** | $4,888,730 |

Barings and FS KKR are publicly traded stocks, and as such, were marked to market at the end of each quarter, using the closing price on the last trading day of the quarter.

We sold our investments in ACV, Ares, Carlyle, Knoa and Pennantpark during the six months ended June 30, 2024.

In accordance with the Corporation’s valuation policy, we increased the value of our investments in SciAps, Tilson and Pressure Pro after a financial analysis of each of the portfolio companies indicating continued improved performance.

Following the end of the second quarter of 2024, SciAps announced that it had entered into a definitive purchase agreement to be acquired by a United Kingdom based buyer for total consideration of up to $260 million, comprising of an up-front consideration payable at closing of $200 million, less standard closing adjustments, and the transaction was subject to customary closing conditions and regulatory approvals, with closing occurring later in calendar year 2024.

The valuation of our investment in Autotality, during the six months ended June 30, 2024, was decreased after a review of their operations and financial condition.

All of the valuation adjustments resulted from a determination of fair value in good faith by RCM, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.

### Net (Decrease) Increase in Net Assets from Operations

We account for our operations under GAAP for investment companies. The principal measure of our financial performance is “Net (decrease) increase in net assets from operations” on our consolidated statements of operations. The net (decrease) increase in net assets from operations for the six months ended June 30, 2025 and 2024 was ($6,894,707) and $9,137,154, respectively.

### Liquidity and Capital Resources

Liquidity is a measure of our ability to meet anticipated cash requirements, fund new and follow-on portfolio investments, pay distributions to our shareholders and respond to other general business demands. As of June 30, 2025, our total liquidity consisted of approximately $4,420,000 in cash and approximately $20,200,000 of unused availability on our Credit Facility.

During 2022, we entered into a $25 million Credit Facility. The amount we can borrow, at any given time, under the Credit Facility is tied to a borrowing base, which is measured as (i) 75% of the aggregate sum of the fair market values of the publicly traded equity securities we hold (other than shares of ACV Auctions, if any) plus (ii) the least of (a) 75% of the fair market value of the shares of ACV Auctions we hold, if any, (b) $6.25 million and (c) 25% of the aggregate borrowing base availability for the Credit Facility at any date of determination plus (iii) 50% of the aggregate sum of the fair market values of eligible private loans we hold that meet specified criteria plus (iv) the lesser of (a) 50% of the aggregate sum of the fair market values of unsecured private loans we hold that meet specified criteria and (b) $1.25 million minus (v) such reserves as the Lender may establish from time to time in its sole discretion. The Credit Facility has a maturity date of June 27, 2027. There was no outstanding balance drawn on the Credit Facility at

June 30, 2025. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was approximately $20,200,000 at June 30, 2025.

Our borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. At June 30, 2025, our applicable interest rate was 7.95%.

The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others covenants that prohibit, subject to certain specified exceptions, our ability to merge or consolidate with other companies, sell any material part of our assets, incur other indebtedness, incur liens on our assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires us to maintain a Tangible Net Worth (defined in the Credit Agreement as our aggregate assets, excluding intangible assets, less all of our liabilities) of not less than $50.0 million, which is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires us to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of our assets to the sum of all of our obligations for borrowed money plus all capital lease obligations) of not less than 3:1, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires us to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2.5:1, which is measured quarterly on a trailing twelve-months basis. We were in compliance with these covenants at June 30, 2025. See “Note 6. Senior Secured Revolving Credit Facility” on our Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

For the six months ended June 30, 2025, we experienced a net increase in cash of approximately $3,585,000, which is a net effect of approximately $8,077,000 of net cash provided by our operating activities and approximately $4,492,000 of net cash used in our financing activities.

The $8,077,000 of net cash provided by our operating activities during the six months ended June 30, 2025 resulted primarily from net investment income of approximately $3,696,000, approximately $9,446,000 from the sales of equity investments and repayments of debt investments, and an approximately $21,000 net decrease in operating assets. This was partially offset by approximately $410,000 used to fund new or follow-on portfolio company investments, approximately $1,224,000 in non-cash interest income, and an approximately $3,431,000 net decrease in operating liabilities.

Net cash used in financing activities during the six months ended June 30, 2025 was approximately $4,492,000. This is comprised of $600,000 repaid on the Credit Facility and approximately $3,892,000 in cash dividends paid to shareholders.

We anticipate that we will continue to fund our investment activities through cash generated through our ongoing operating activities and through borrowings under the $25 million Credit Facility. We anticipate that we will continue to exit investments. However, the timing of liquidation events with respect to our privately held investments is difficult to project.

## Market risk

As filed, 4,171 characters.

We are subject to financial market risks primarily consisting of risks resulting from changes in interest rates and the valuation of our investment portfolio.

### Interest Rate Risk

Changes in interest rates may affect our interest expense on the debt outstanding under our Credit Facility. Our debt borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. As of June 30, 2025, all of our debt investments had fixed interest rates and were not directly impacted by changes in market interest rates.

Based on our Consolidated Statement of Financial Position as of June 30, 2025, the following table shows the approximate annualized increase (decrease) in net investment income due to hypothetical base rate changes in interest rates under our Credit Facility, assuming no changes in our borrowings as of June 30, 2025. Because we often borrow money to make investments, our net investment income is dependent upon the difference between our borrowing rate and the rate we earn on the invested proceeds borrowed. In periods of rising interest rates, the rate we earn on our debt investments with fixed interest rates will remain the same, while the interest incurred on our borrowings under the Credit Facility will increase. There was no outstanding balance drawn on our Credit Facility at June 30, 2025.

|  | Impact on net investment income from a change in interest rates on our Credit Facility at: |  |  |
| --- | ---: | ---: | ---: |
|  | **1%** | **2%** | **3%** |
| Increase in interest rate | $— | $— | $— |
| Decrease in interest rate | - | - | - |

Although we believe that this analysis is indicative of our existing interest rate sensitivity under our Credit Facility at June 30, 2025, it does not adjust for changes in the credit quality, size and composition of our investment portfolio, and other business developments, including increased borrowings under our Credit Facility, that could affect our net investment income. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

We do not currently engage in any hedging activities. However, we may, in the future, hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our borrowed funds.

### Valuation Risk

We carry our investments at fair value, as determined in good faith by RCM and approved by our Board. Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio company investment while employing a consistent valuation process. Due to the inherent uncertainty of determining the fair value of portfolio investments, there are material risks associated with this determination including that estimated fair values may differ from the values that would have been used had a readily available market value for the investments existed and these differences could be material if our assumptions and judgments differ from results of actual liquidation events. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the value realized on these investments to be different than the valuations that are assigned. The types of factors that we may take into account in valuation of our investments include, as relevant, third party valuations, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to publicly-traded securities, recent sales of or offers to buy comparable companies, and other relevant factors.

## Controls and procedures

As filed, 1,363 characters.

*Disclosure Controls and Procedures.* The Corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of June 30, 2025. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s controls and procedures were effective as of June 30, 2025.

*Changes in Internal Control over Financial Reporting.* There have been no changes in our internal control over financial reporting during the Corporation’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

### PART II.

### OTHER INFORMATION

## Risk factors

As filed, 133 characters.

See the information provided under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2024.

Filed Aug 4, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-101643. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.