Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this quarterly report on Form 10-Q, except where the context suggests otherwise, the terms "we," us," our" and the "Company" refer to Audax Credit BDC Inc. The information contained in this section should be read in the conjunction with the financial statements and notes to the financial statements appearing elsewhere in this quarterly report.

This quarterly report and other statements contain forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as "anticipates," "expects," "intends," "plans," "will," "may," "continue," "believes," "seeks," "estimates," "would," "could," "should," "targets," "projects," and variations of these words and similar expressions are intended to identify forward-looking statements. 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:

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. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report 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 our Annual Report as well as risk factors described or identified in other filings we may make with the SEC from time to time. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. The forward-looking statements and projections contained in this quarterly report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

OVERVIEW

Audax Credit BDC Inc. is a Delaware corporation that was formed on January 29, 2015. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under Subchapter M of the Code.

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in senior secured debt of privately owned U.S. middle market companies. We intend to invest at least 80% of our net assets plus the amount of any borrowings in "credit instruments," which we define as any fixed income instruments.

Although we have no present intention of doing so, we may decide to incur leverage. If we do incur leverage, we anticipate that it will be used in limited circumstances and on a short-term basis for purposes such as funding distributions. As a BDC, we are limited in our use of leverage under the 1940 Act. Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act (the "SBCAA"), which was signed into law on March 23, 2018, provides that a BDC's required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not "interested persons" (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. In addition, as a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of Common Stock over the next year following the calendar quarter in which the approval was obtained. In determining whether to use leverage, we would analyze the maturity, covenants and interest rate structure of the proposed borrowings, as well as the risks of such borrowings within the context of our investment outlook and the impact of leverage on our investment portfolio. The amount of any leverage that we will employ as a BDC will be subject to oversight by our Board of Directors.

We generate revenue in the form of interest on the debt securities that we hold in our portfolio companies. The senior debt we invest in generally has stated terms of three to ten years. Our senior debt investments generally bear interest at a floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions, although we do not expect to do so. OID as well as market discount and premium are accreted and amortized in determining our interest income. We record any prepayment premiums on loans and debt securities as income.

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

Portfolio Composition

The fair value of our investments, comprised of syndicated loans and equity, as of September 30, 2025, was approximately $402,439,076 and held in 259 portfolio companies as of September 30, 2025. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2024, was approximately $410,031,275, and we held investments in 244 portfolio companies as of December 31, 2024.

During the nine months ended September 30, 2025, we invested in 99 new syndicated investments for a combined $49,413,377 and in existing investments for a combined $17,536,463. We also received $68,280,167 in repayments from investments and $2,406,278 from investments sold during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, we invested in 84 new syndicated investments for a combined $67,864,094 and in existing investments for a combined $23,671,676. We also received $65,130,510 in repayments from investments and $15,229,825 from investments sold during the nine months ended September 30, 2024.

In addition, for the three and nine months ended September 30, 2025, we had a change in unrealized depreciation of approximately $255,865 and $3,557,685, respectively, and realized gains (losses) of $(2,214,146) and $(1,904,291), respectively. For the three and nine months ended September 30, 2024, we had a change in unrealized depreciation of approximately $1,364,648 and $3,521,232, respectively, and realized gains (losses) of $(181,064) and $(394,505), respectively.

Our investment activity for the nine months ended September 30, 2025 and 2024, is presented below:

As of September 30, 2025 and December 31, 2024, our entire portfolio consisted of non-controlled/non-affiliated investments.

RECENT DEVELOPMENTS

Subsequent to September 30, 2025 through November 12, 2025, the Company invested $12,615,703 at cost in 51 different portfolio companies.

RESULTS OF OPERATIONS

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and/or losses and net change in unrealized appreciation and depreciation.

Revenue

Total investment income for the three and nine months ended September 30, 2025 and 2024 is presented in the table below.

Total investment income for the three months ended September 30, 2025 decreased to $9,850,258 from $10,829,368 for the three months ended September 30, 2024, and was primarily driven by a decrease in interest rate spreads over the period. Total investment income for the nine months ended September 30, 2025 decreased to $29,715,168 from $32,061,117 for the nine months ended September 30, 2024, and was primarily driven by a decrease in interest rate spreads over the period. As of September 30, 2025 and 2024, the size of our debt portfolio was $406,357,921 and $396,691,794 at amortized cost, respectively, with total debt principal amount outstanding of $411,112,250 and $401,700,943, respectively.

Expenses

Total expenses net of waivers for the three and nine months ended September 30, 2025 and 2024, were as follows:

The increase in base management fees before waivers for the three months ended September 30, 2025 in comparison to the three months ended September 30, 2024 was driven by our increasing average gross assets balance. For the three months ended September 30, 2025 and 2024, we accrued gross base management fees before waivers of $1,072,534 and $1,061,088, respectively. Offsetting those fees, we recognized base management fee waivers of $375,387 and $371,381 for three months ended September 30, 2025 and 2024, respectively.

The increase in base management fees before waivers for the nine months ended September 30, 2025 in comparison to the nine months ended September 30, 2024 was driven by our increasing average gross assets balance. For the nine months ended September 30, 2025 and 2024, we accrued gross base management fees before waivers of $3,222,365 and $3,158,434, respectively. Offsetting those fees, we recognized base management fee waivers of $1,127,828 and $1,105,452 for nine months ended September 30, 2025 and 2024, respectively.

The decrease in incentive fees before waivers for the three months ended September 30, 2025 in comparison to the three months ended September 30, 2024 was driven by our decrease in net investment income. For the three months ended September 30, 2025 and 2024, we accrued incentive fees related to net investment income before waivers of $1,311,584 and $1,465,399, respectively. Offsetting those fees for the three months ended September 30, 2025 and 2024, we recognized incentive fee waivers of $985,739 and $902,083, respectively.

The decrease in incentive fees before waivers for the nine months ended September 30, 2025 in comparison to the nine months ended September 30, 2024 was driven by our decrease in net investment income. For the nine months ended September 30, 2025 and 2024, we accrued incentive fees related to net investment income before waivers of $3,961,738 and $4,315,250, respectively. Offsetting those fees for the nine months ended September 30, 2025 and 2024, we recognized incentive fee waivers of $2,720,021 and $2,694,707, respectively.

Additionally, we accrued $66,250 and $198,750 of administrative fees for each of the three and nine months ended September 30, 2025 and 2024, respectively. Refer to Note 4 - Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

During the three and nine months ended September 30, 2025, we incurred professional fees of $174,764 and $497,138, respectively, related to audit fees, tax fees, and legal fees. During the three and nine months ended September 30, 2024, we incurred professional fees of $147,656 and $503,583, respectively, related to audit fees, tax fees, and legal fees.

During the three and nine months ended September 30, 2025, we incurred expenses related to fees paid to our independent directors of $68,250 and $209,250, respectively. During the three and nine months ended September 30, 2024, we incurred expenses related to fees paid to our independent directors of $69,000 and $216,000, respectively.

During the three and nine months ended September 30, 2025, we incurred no interest expense in connection with our short-term borrowings. During the three and nine months ended September 30, 2024, we incurred no interest expense in connection with our

short-term borrowings. Refer to Note 8 - Borrowings in the notes accompanying our financial statements for more information related to interest expense.

Realized and Unrealized Gains and Losses

We recognized $(2,214,146) and $(181,064) in net realized gains for the three months ended September 30, 2025 and 2024, respectively. We recognized $(1,904,291) and $(394,505) in net realized gains (losses) for the nine months ended September 30, 2025 and 2024, respectively.

Net change in unrealized appreciation (depreciation) on investments for the three and nine months ended September 30, 2025 and 2024 was as follows:

Net change in unrealized depreciation on investments during the three months ended September 30, 2025 was primarily due to the change in the results and financial position of the portfolio companies. Net change in unrealized appreciation on investments during the three months ended September 30, 2024 was primarily due to the change in the results and financial position of the portfolio companies.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We generate cash primarily from the net proceeds of any offering of shares of our Common Stock, from cash flows from interest and fees earned from our investments, and from principal repayments and proceeds from sales of our investments. Our primary use of cash is investments in portfolio companies, payments of our expenses, cash distributions to our stockholders, and repurchases of common stock from our stockholders. As of September 30, 2025 and December 31, 2024, we had cash of $16,968,969 and $19,737,091, respectively.

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2025 was $22,622,833. The primary operating activities during this period were investments in portfolio companies. The Company invested $49,413,377 in new portfolio investments and $17,536,463 in existing portfolio investments during the nine months ended September 30, 2025. This was offset by repayments of bank loans and sales of investments of $68,280,167 and $2,406,278, respectively. Net cash provided by operating activities for the nine months ended September 30, 2024 was $19,835,485. The primary operating activities during this period were investments in portfolio companies. The Company invested $67,864,094 in new portfolio investments and $23,671,676 in existing portfolio investments during the nine months ended September 30, 2024. This was offset by repayments of bank loans and sales of investments of $65,130,510 and $15,229,825, respectively.

As of September 30, 2025, we had 145 investments with unfunded commitments of $36,923,538. As of December 31, 2024, we had 109 investments with unfunded commitments of $37,896,006. We believe that, as of both September 30, 2025 and December 31, 2024, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

The following table summarizes our total portfolio activity during the nine months ended September 30, 2025 and 2024:

Financing Activities

Net cash used in our financing activities for the nine months ended September 30, 2025 was $25,390,955, which consisted of $25,390,955 of distributions paid to our common stockholders during the period. Net cash used in our financing activities for the nine months ended September 30, 2024 was $19,706,883, which consisted of $37,000,000 from issuances of 3,948,773 shares to our stockholders in connections with our capital calls during the period, $30,000,000 in repurchases of 3,201,708 shares to our stockholders in connection with the Tender Offer during the period, and $26,706,883 of distributions paid to our common stockholders during the period.

Equity Activity

An investor made capital commitments to us in the amounts set forth below as of the date opposite each capital commitment:

As of September 30, 2025, there were no unfunded capital commitments by the Company's investors.

The number of shares of our Common Stock issued and outstanding as of September 30, 2025 and December 31, 2024, were 47,020,464 and 47,020,454, respectively.

Distributions to Stockholders - Common Stock Distributions

We have elected to be treated, and intend to qualify annually, as a RIC for U.S. federal income tax purposes. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on ordinary income or capital gains that we timely distribute as dividends for U.S. federal income tax purposes to our stockholders. To qualify to be taxed as a RIC and thus avoid corporate-level income tax on the income that we distribute as dividends to our stockholders, we are required to distribute dividends to our stockholders each taxable year generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to the deduction for any dividends paid. To avoid a 4% excise tax on undistributed earnings, we are required to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections) for such calendar year, (ii) 98.2% of our capital gain net income, adjusted for certain ordinary losses, for the one-year period ending October 31 of that calendar year and (iii) any income or capital gains recognized, but not distributed, in preceding calendar years and on which we incurred no federal income tax. We intend to make

distributions to stockholders on an annual basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our Board of Directors and will largely be driven by portfolio specific events and tax considerations.

We may fund our cash distributions from any sources of funds available, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Adviser. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from an offering. As a result, a portion of the distributions may represent a return of capital 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. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act. We declared distributions of $25,391,047, or $0.540 per share during the nine months ended September 30, 2025. We declared distributions of $26,706,974, or $0.580 per share during the nine months ended September 30, 2024.

The determination of the tax attributes of the Company's distributions, including distributions in connection with tender offers, are made annually at the end of the Company's taxable year, based upon the Company's taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full taxable year. The actual tax characteristics of distributions to stockholders will be reported to the Company's stockholders subject to information reporting after the close of the calendar year.

Related Party Fees

For the three months ended September 30, 2025 and 2024, we recorded base management fees of $1,072,534 and $1,061,088, respectively. Offsetting these fees were waivers to the base management fees of $375,387 and $371,381, respectively, as set forth within the accompanying statements of operations. For the nine months ended September 30, 2025 and 2024, we recorded base management fees of $3,222,365 and $3,158,434, respectively. Offsetting these fees were waivers to the base management fees of $1,127,828 and $1,105,452, respectively, as set forth within the accompanying statements of operations.

For the three months ended September 30, 2025 and 2024, we recorded incentive fees of $1,311,584 and $1,465,399, respectively. Offsetting these waivers to the incentive fees of $985,739 and $902,083, respectively, as set forth within the accompanying statements of operations. For the nine months ended September 30, 2025 and 2024, we recorded incentive fees of $3,961,738 and $4,315,250, respectively. Offsetting these waivers to the incentive fees of $2,720,021 and $2,694,707, respectively, as set forth within the accompanying statements of operations.

For both the three months ended September 30, 2025 and 2024, we recorded administrative fees of $66,250, as set forth within the accompanying statements of operations. For both the nine months ended September 30, 2025 and 2024, we recorded administrative fees of $198,750, as set forth within the accompanying statements of operations.

Fees due to related parties as of September 30, 2025 and December 31, 2024 on our accompanying statements of assets and liabilities were as follows:

Tender Offers

To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct tender offers. Our tenders for shares of Common Stock, if any, are conducted on such terms as may be determined by our Board of Directors and in accordance with the requirements of applicable law, including Section 23(c) of the 1940 Act and Regulation M under the Exchange Act.

CRITICAL ACCOUNTING POLICIES

This discussion of our operations is based upon our financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our financial statements.

Valuation of Investments

On December 3, 2020, the SEC announced that it adopted the Valuation Rule, which established an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. Pursuant to the Valuation Rule, which became effective on September 8, 2022, our Board of Directors designated the Adviser as our Valuation Designee to perform fair value determinations relating to the value of our assets for which market quotations are not readily available in good faith. Such valuation by the Valuation Designee must be made in good faith and may be based on, among other things, the input of independent third-party valuation firms, where applicable. The Valuation Designee's valuation process is subject to our Board of Directors' oversight.

In accordance with the 1940 Act, our Board of Directors has the ultimate responsibility for reviewing the good faith fair value determination of our investments for which market quotations are not readily available based on our Policy and for overseeing the Valuation Designee. Such review and oversight include receiving written fair value determinations and supporting materials provided by the Valuation Designee and any independent third-party valuation firms as may be used by the Valuation Designee or our Board of Directors from time to time.

As part of the valuation process, the Valuation Designee may take into account the following types of factors, if relevant, in determining the fair value of our investments: applicable market yields and multiples; security covenants; call protection provisions; information rights; comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public; comparable merger and acquisition transactions; the nature and realizable value of any collateral; the portfolio company's ability to make payments and its earnings and discounted cash flow; available current market data, including relevant and applicable markets in which the portfolio company does business; and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Valuation Designee will consider the pricing indicated by the external event in its valuation of the portfolio investment.

The Valuation Designee utilizes the following multi-step process in determining fair value for our investments for which market quotations are not "readily available":

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the 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 from the valuations currently assigned.

The Valuation Designee determines fair value in good faith for all our investments without readily available market quotations by using methodologies consistent with the principles of the valuation approaches set forth in ASC 820, Section 2(a)(41) of the 1940 Act and Rule 2a-5 thereunder.

ASC 820 defines fair value as "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." Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same - to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

The three-level hierarchy for fair value measurement is defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We do not adjust the quoted price for these instruments, even in situations where we hold a large position, and a sale could reasonably be expected to impact the quoted price.

Level 2 - Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Pursuant to the framework set forth above, the Valuation Designee values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Valuation Designee may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers' quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Valuation Designee determines whether the quote obtained is sufficient in accordance with GAAP to determine the fair value of the security. If determined adequate, the Valuation Designee uses the quote obtained.

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Valuation Designee, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available.

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

Subject to the oversight of our Board of Directors, the Valuation Designee has the overall responsibility for the implementation and monitoring of our pricing policies to ensure fair, accurate and current valuations.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined). Realized gains and losses on investments are determined based on the identified cost method.

Realized gains and losses on investments are determined based on the identified cost method.

Refer to Note 3 - Investments in the notes to our accompanying financial statements included elsewhere in this annual report for additional information regarding fair value measurements and our application of ASC 820.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OID, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. 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 realized.

PIK Interest

We may have investments in our portfolio that contain a PIK interest provision. Any PIK interest will be added to the principal balance of such investments and is recorded as income if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be included in the amounts paid out by us to stockholders in the form of distributions, even if we have not collected any cash.

U.S. Income Taxes

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to incur any corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. To qualify and maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements as well as distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any distributions paid.

Depending on the level of taxable income earned in a taxable year, we may choose to retain taxable income in excess of current year distributions into the next taxable year. We would then incur a 4% excise tax on such taxable income, as required. To the

extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we will accrue an excise tax, if any, on estimated excess taxable income as taxable income is earned. We did not accrue any excise tax for the fiscal years ended December 31, 2024, 2023, and 2022.

Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Permanent differences may also result from differences in classification in certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether any relevant tax positions would "more-likely-than-not" be sustained by the applicable tax authority. Tax positions not deemed to meet the "more-likely-than-not" threshold are reversed and recorded as a tax benefit or expensed in the current fiscal year. All penalties and interest associated with any income taxes accrued are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax law, regulations and interpretations thereof. Our accounting policy on income taxes is critical because if we are unable to qualify, or once qualified, maintain our tax status as a RIC, we would be required to record a provision for corporate-level U.S. federal income taxes, as well as any related state or local taxes which may be significant to our financial results.

COMMITMENTS AND CONTINGENCIES

From time to time, we, or the Adviser, may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we nor the Adviser is currently subject to any material legal proceedings.

Unfunded commitments to provide funds to portfolio companies are not reflected in our accompanying statements of assets and liabilities. Our unfunded commitments may be significant from time to time. These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. We use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments. As of September 30, 2025, we had 145 investments with unfunded commitments of $36,923,538. As of December 31, 2024, we had 109 investments with unfunded commitments of $37,896,006. We believe that, as of September 30, 2025 and December 31, 2024, we had sufficient assets to adequately cover any obligations under our unfunded commitments.