Oxford Square Capital Corp. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_______________________________

FORM 10-Q

_______________________________

		(Mark One)
		☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 814-00638

_______________________________

OXFORD SQUARE CAPITAL CORP.

(Exact name of registrant as specified in its charter)

_______________________________

		MARYLAND		20-0188736
		(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

8 SOUND SHORE DRIVE, SUITE 255
GREENWICH, CONNECTICUT 06830

(Address of principal executive office)

(203) 983-5275

(Registrant’s telephone number, including area code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	OXSQ	NASDAQ Global Select Market LLC
6.50% Notes due 2024	OXSQL	NASDAQ Global Select Market LLC
6.25% Notes due 2026	OXSQZ	NASDAQ Global Select Market LLC
5.50% Notes due 2028	OXSQG	NASDAQ Global Select Market LLC

_______________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

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

		Large accelerated filer ☐		Accelerated filer ☐
		Non-accelerated filer ☒		Smaller Reporting company ☐
		Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of October 28, 2021, was 49,655,275.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Consolidated Statements of Assets and Liabilities as of September 30, 2021 (unaudited) and December 31, 2020	1
	Consolidated Schedule of Investments as of September 30, 2021 (unaudited)	2
	Consolidated Schedule of Investments as of December 31, 2020	9
	Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	16
	Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2021 and 2020 (unaudited)	17
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	18
	Notes to Consolidated Financial Statements (unaudited)	19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	64
PART II. OTHER INFORMATION		66
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
SIGNATURES		69

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS
Non-affiliated/non-control investments (cost: $494,745,225 and $407,547,351, respectively)	$	421,013,356		$	294,674,000
Affiliated investments (cost: $16,836,822 and $16,836,822, respectively)		73,571			—
Cash equivalents		19,541,086			59,137,284
Interest and distributions receivable		3,278,404			2,299,259
Securities sold not settled		—			950,000
Other assets		788,168			597,238
Total assets	$	444,694,585		$	357,657,781
LIABILITIES
Notes payable – 6.50% Unsecured Notes, net of deferred issuance costs of $812,204 and $1,055,065, respectively	$	63,558,021		$	63,315,160
Notes payable – 6.25% Unsecured Notes, net of deferred issuance costs of $1,068,693 and $1,243,082, respectively		43,722,057			43,547,668
Notes payable – 5.50% Unsecured Notes, net of deferred issuance costs of $2,636,484 and $0, respectively		77,863,516			—
Securities purchased not settled		6,489,812			23,156,556
Base Fee and Net Investment Income Incentive Fee payable to affiliate		1,774,727			1,159,703
Accrued interest payable		1,216,109			478,191
Accrued expenses		425,627			573,977
Total liabilities		195,049,869			132,231,255
COMMITMENTS AND CONTINGENCIES (Note 13)
NET ASSETS
Common stock, $0.01 par value, 100,000,000 shares authorized; 49,655,275 and 49,589,607 shares issued and outstanding, respectively		496,552			495,895
Capital in excess of par value		452,938,551			452,650,210
Total distributable earnings/(accumulated losses)		(203,790,387	)		(227,719,579	)
Total net assets		249,644,716			225,426,526
Total liabilities and net assets	$	444,694,585		$	357,657,781
Net asset value per common share	$	5.03		$	4.55

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited)
September 30, 2021

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% OF NET ASSETS
Senior Secured Notes
Business Services
Access CIG, LLC
second lien senior secured notes, 7.83% (LIBOR + 7.75%), (0.00% floor) due February 27, 2026(4)(5)(14)(15)	February 14, 2018	$	16,754,000	$	16,823,086	$	16,712,115

ConvergeOne Holdings, Inc.
first lien senior secured notes, 5.08% (LIBOR + 5.00%), (0.00% floor) due January 4, 2026(4)(5)(6)(14)(15)	June 4, 2021		5,363,405		5,305,922		5,336,588
second lien senior secured notes, 8.58% (LIBOR + 8.50%), (0.00% floor) due January 4, 2027(4)(5)(14)(15)	June 3, 2021		15,000,000		14,348,430		14,500,050

Convergint Technologies, LLC
second lien senior secured notes, 7.50% (LIBOR + 6.75%), (0.75% floor) due March 31, 2029(4)(5)(15)	March 18, 2021		11,000,000		10,947,712		11,055,000

OMNIA Partners, Inc.
second lien senior secured notes, 7.63% (LIBOR + 7.50%), (0.00% floor) due May 22, 2026(4)(5)(6)(14)(16)	May 17, 2018		13,813,460		13,769,412		13,433,590

Premiere Global Services, Inc.
first lien senior secured notes, 7.50% (LIBOR + 6.50%), (1.00% floor) due June 8, 2023(4)(5)(6)(10)(17)(28)	October 1, 2019		11,821,914		11,469,896		2,127,945
replacement revolver, 7.50% (LIBOR + 6.50%), (1.00% floor) due December 7, 2021(4)(5)(10)(17)(28)	September 17, 2021		2,452,012		2,378,999		1,593,808
second lien senior secured notes, 0.50% Cash, 10.00% PIK (LIBOR + 9.00%) (1.00% floor) due June 6, 2024(3)(4)(5)(10)(17)	October 1, 2019		12,268,213		9,817,795		—

RSA Security, LLC
second lien senior secured notes, 8.50% (LIBOR + 7.75%), (0.75% floor) due April 27, 2029(4)(5)(16)	April 16, 2021		9,533,333		9,372,950		9,271,166

Verifone Systems, Inc.
first lien senior secured notes, 4.13% (LIBOR + 4.00%), (0.00% floor) due August 20, 2025(4)(5)(6)(14)(16)	August 9, 2018		19,733,779		19,050,252		19,339,103
Total Business Services				$	113,284,454	$	93,369,365	37.4	%

Diversified Insurance
AIS Intermediate, LLC
first lien senior secured notes, 5.13% (LIBOR + 5.00%), (0.00% floor) due August 15, 2025(4)(5)(6)(14)(16)	January 7, 2021	$	16,329,959	$	15,864,476	$	16,003,360

AmeriLife Group LLC
second lien senior secured notes, 9.50% (LIBOR + 8.50%), (1.00% floor) due March 18, 2028(4)(5)(10)	March 18, 2020		11,000,000		10,812,891		11,000,000
Total Diversified Insurance				$	26,677,367	$	27,003,360	10.8	%

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) — (continued)
September 30, 2021

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% OF NET ASSETS
Senior Secured Notes – (continued)
Healthcare
Careismatic Brands, Inc. (f/k/a New Trojan Parent, Inc.)
second lien senior secured notes, 7.75% (LIBOR + 7.25%), (0.50% floor) due January 5, 2029(4)(5)(16)	January 22, 2021	$	12,000,000	$	11,937,237	$	11,940,000

HealthChannels, Inc. (f/k/a ScribeAmerica, LLC)
first lien senior secured notes, 4.58% (LIBOR + 4.50%), (0.00% floor) due April 3, 2025(4)(5)(6)(14)(15)	October 31, 2018		19,540,543		19,143,761		18,514,664

Keystone Acquisition Corp.
first lien senior secured notes, 6.25% (LIBOR + 5.25%), (1.00% floor) due May 1, 2024(4)(5)(6)(14)(16)	May 10, 2017		7,324,353		7,309,426		7,205,332
second lien senior secured notes, 10.25% (LIBOR + 9.25%), (1.00% floor) due May 1, 2025(4)(5)(14)(16)	May 10, 2017		13,000,000		12,908,501		12,317,500

Viant Medical Holdings, Inc.
first lien senior secured notes, 3.83% (LIBOR + 3.75%), (0.00% floor) due July 2, 2025(4)(5)(6)(14)(15)	June 26, 2018		9,700,000		9,698,749		9,384,750
second lien senior secured notes, 7.83% (LIBOR + 7.75%), (0.00% floor) due July 2, 2026(4)(5)(14)(15)	June 26, 2018		5,000,000		4,965,573		4,768,750
Total Healthcare				$	65,963,247	$	64,130,996	25.7	%

Plastics Manufacturing
Spectrum Holdings III Corp. (f/k/a KPEX Holdings, Inc.)
first lien senior secured notes, 4.25% (LIBOR + 3.25%), (1.00% floor) due January 31, 2025(4)(5)(6)(10)(14)	June 24, 2020	$	15,004,800	$	14,114,800	$	14,667,192
Total Plastics Manufacturing				$	14,114,800	$	14,667,192	5.9	%

Software
Aspect Software, Inc.
first lien senior secured notes, 6.00% (LIBOR + 5.25%), (0.75% floor) due May 8, 2028(4)(5)(6)(14)(16)	May 18, 2021	$	7,980,000	$	7,854,088	$	7,880,250
second lien senior secured notes, 9.75% (LIBOR + 9.00%), (0.75% floor) due May 7, 2029(4)(5)(14)(16)	May 3, 2021		7,000,000		6,794,778		6,947,500

BMC Software, Inc.
first lien senior secured notes, 3.88% (LIBOR + 3.75%), (0.00% floor) due October 2, 2025(4)(5)(6)(16)	September 22, 2021		498,561		494,822		496,691
second lien senior secured notes, 6.00% (LIBOR + 5.50%), (0.50% floor) due March 1, 2026(4)(5)(16)	September 22, 2021		1,000,000		995,000		1,011,250

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) — (continued)
September 30, 2021

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% OF NET ASSETS
Senior Secured Notes – (continued)
Software – (continued)
Quest Software, Inc.
first lien senior secured notes, 4.38% (LIBOR + 4.25%), (0.00% floor) due May 16, 2025(4)(14)(16)	August 17, 2021	$	5,000,000	$	5,000,000	$	4,987,500
second lien senior secured notes, 8.38% (LIBOR + 8.25%), (0.00% floor) due May 18, 2026(4)(5)(14)(16)	May 17, 2018		13,353,672		13,241,641		13,320,288
Total Software				$	34,380,329	$	34,643,479	13.9	%

Telecommunications Services
Global Tel Link Corp.
second lien senior secured notes, 8.33% (LIBOR + 8.25%), (0.00% floor) due November 29, 2026(4)(5)(14)(15)	November 20, 2018	$	17,000,000	$	16,777,206	$	15,810,000
Total Telecommunication Services				$	16,777,206	$	15,810,000	6.3	%

Utilities
CLEAResult Consulting, Inc.
second lien senior secured notes, 7.34% (LIBOR + 7.25%), (0.00% floor) due August 10, 2026(4)(5)(15)	August 3, 2018	$	7,650,000	$	7,665,910	$	7,497,000
Total Utilities				$	7,665,910	$	7,497,000	3.0	%
Total Senior Secured Notes				$	278,863,313	$	257,121,392	103.0	%

Collateralized Loan Obligation – Equity Investments
Structured Finance
Atlas Senior Loan Fund XI, Ltd.
CLO subordinated notes, estimated yield 5.53% due July 26, 2031(9)(11)(12)(18)(24)	April 5, 2019	$	5,725,000	$	3,693,709	$	2,633,500

Babson CLO Ltd. 2015-I
CLO subordinated notes, estimated yield 14.92% due January 20, 2031(9)(11)(12)(18)	July 26, 2018		8,512,727		3,317,477		3,064,582

BlueMountain CLO 2014-2 Ltd.
CLO subordinated notes, estimated yield 5.06% due October 20, 2030(9)(11)(12)(18)	April 3, 2019		6,374,000		2,584,668		1,975,940

Carlyle Global Market Strategies CLO 2013-2, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 18, 2029(9)(11)(12)(18)(24)	March 19, 2013		6,250,000		2,875,297		2,027,314

Carlyle Global Market Strategies CLO 2021-6, Ltd.
CLO subordinated notes, estimated yield 16.63% due July 15, 2034(9)(11)(12)(14)(18)	June 30, 2021		44,600,000		34,868,693		33,450,000

Cedar Funding II CLO, Ltd.
CLO subordinated notes, estimated yield 12.47% due April 20, 2034(9)(11)(12)(18)	October 23, 2013		18,000,000		11,735,954		10,440,000

Cedar Funding VI CLO, Ltd.
CLO subordinated notes, estimated yield 13.03% due April 20, 2034(9)(11)(12)(18)	May 15, 2017		7,700,000		7,029,749		6,622,000

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) — (continued)
September 30, 2021

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% OF NET ASSETS
Collateralized Loan Obligation – Equity Investments – (continued)
Structured Finance – (continued)
CIFC Funding 2014-3, Ltd.
CLO subordinated notes, estimated yield 6.55% due October 22, 2031(9)(11)(12)(18)(24)	January 24, 2017	$	10,000,000	$	5,075,108	$	4,000,000

Dryden 43 Senior Loan Fund
CLO subordinated notes, estimated yield 15.99% due April 20, 2034(9)(11)(12)(18)	June 1, 2021		10,000,000		6,949,753		7,000,000

Madison Park Funding XVIII, Ltd.
CLO subordinated notes, estimated yield 33.84% due October 21, 2030(9)(11)(12)(18)(24)	May 22, 2020		12,500,000		5,314,583		7,610,000

Madison Park Funding XIX, Ltd.
CLO subordinated notes, estimated yield 15.04% due January 22, 2028(9)(11)(12)(18)(24)	May 11, 2016		5,422,500		3,789,025		3,633,075

Nassau 2019-I Ltd.
CLO subordinated notes, estimated yield 6.94% due April 15, 2031(9)(11)(12)(14)(18)(24)	April 11, 2019		23,500,000		15,987,169		12,889,750

Octagon Investment Partners 45, Ltd.
CLO subordinated notes, estimated yield 36.75% due October 15, 2032(9)(11)(12)(18)	May 13, 2020		3,750,000		2,299,992		3,218,338

Octagon Investment Partners 49, Ltd.
CLO subordinated notes, estimated yield 18.24% due Janaury 15, 2033(9)(11)(12)(14)(18)	December 11, 2020		28,875,000		22,047,225		22,216,204

Sound Point CLO XVI, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 25, 2030(9)(11)(12)(14)(18)	August 1, 2018		45,500,000		31,376,308		20,020,000

Telos CLO 2013-3, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 17, 2026(9)(11)(12)(18)(24)	January 25, 2013		14,447,790		6,237,524		1,011,345

Telos CLO 2013-4, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 17, 2030(9)(11)(12)(18)(24)	May 20, 2015		11,350,000		6,125,652		2,390,467

Telos CLO 2014-5, Ltd.
CLO subordinated notes, estimated yield 0.00% due April 17, 2028(9)(11)(12)(18)	April 11, 2014		28,500,000		18,179,226		3,990,000

THL Credit Wind River 2012-1 CLO, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 15, 2026(9)(11)(12)(18)	June 11, 2015		7,500,000		2,904,463		15,000

Venture XVII, Ltd.
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24)	January 27, 2017		6,200,000		2,856,084		1,027,589

Venture XX, Ltd.
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24)	July 27, 2018		3,000,000		1,188,093		720,000

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) — (continued)
September 30, 2021

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT/SHARES		COST		FAIR VALUE(2)		% OF NET ASSETS
Collateralized Loan Obligation – Equity Investments – (continued)
Structured Finance – (continued)
Venture 35 CLO, Limited
CLO subordinated notes, estimated yield 19.87% due October 22, 2031(9)(11)(12)(18)	December 7, 2020	$	5,000,000	$	2,497,748	$	2,700,000

Venture 39 CLO, Limited
CLO subordinated notes, estimated yield 27.93% due April 15, 2033(9)(11)(12)(18)	May 8, 2020		5,150,000		3,059,564		4,017,000

Vibrant CLO V, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 20, 2029(9)(11)(12)(18)	April 27, 2017		13,475,000		5,048,399		592,900

West CLO 2014-1, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 18, 2026(9)(11)(12)(18)(24)	May 12, 2017		9,250,000		1,434,147		203,500

Westcott Park CLO, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 20, 2028(9)(11)(12)(18)	September 16, 2020		19,000,000		—		1,216,000

Zais CLO 6, Ltd.
CLO subordinated notes, estimated yield 0.12% due July 15, 2029(9)(11)(12)(18)	May 3, 2017		10,500,000		6,869,860		3,360,000

CLO Equity Side Letter Related Investments(11)(12)(13)(25)(26)					536,442		1,847,460
Total Structured Finance				$	215,881,912	$	163,891,964	65.7	%
Total Collateralized Loan Obligation – Equity Investments				$	215,881,912	$	163,891,964	65.7	%

Common Stock
IT Consulting
Unitek Global Services, Inc.
common equity(7)(27)	January 13, 2015		1,244,188	$	684,960	$	—
Total IT Consulting				$	684,960	$	—	0.0	%
Total Common Stock				$	684,960	$	—	0.0	%

Preferred Stock
IT Consulting
Unitek Global Services, Inc.
Series B Preferred Stock(3)(17)(21)(27)	June 26, 2019		13,917,585	$	9,002,159	$	—
Series B Senior Preferred Stock(3)(17)(22)(27)	June 26, 2019		6,608,380		4,535,443		—
Series B Super Senior Preferred Stock(3)(17)(23)(27)	June 26, 2019		3,678,526		2,614,260		73,571
Total IT Consulting				$	16,151,862	$	73,571	0.0	%
Total Preferred Equity				$	16,151,862	$	73,571	0.0	%
Total Investments in Securities(8)				$	511,582,047	$	421,086,927	168.7	%

Cash Equivalents
First American Government Obligations Fund(19)				$	19,541,086	$	19,541,086
Total Cash Equivalents				$	19,541,086	$	19,541,086	7.8	%
Total Investments in Securities and Cash Equivalents				$	531,123,133	$	440,628,013	176.5	%

____________

(1) The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS (unaudited) — (continued)
September 30, 2021

(2) Fair value is determined in good faith by the Board of Directors of the Company.

(3) As of September 30, 2021, the portfolio includes $12,268,213 principal amount of debt investments and 24,204,491 shares of preferred stock investments which contain a PIK provision.

(4) Notes bear interest at variable rates and are subject to an interest rate floor where disclosed. The rate disclosed is as of September 30, 2021.

(5) Cost value reflects accretion of original issue discount or market discount, or amortization of premium.

(6) Cost value reflects repayment of principal

(7) Non-income producing at the relevant period end.

(8) Aggregate gross unrealized appreciation for U.S. federal income tax purposes is $610,073; aggregate gross unrealized depreciation for U.S. federal income tax purposes is $126,905,152. Net unrealized depreciation is $126,295,079 based upon an estimated tax cost basis of $547,382,006 as of September 30, 2021.

(9) Cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.

(10) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.

(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of September 30, 2021, the Company held qualifying assets that represented 62.5% of its total assets.

(12) Investment not domiciled in the United States.

(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investments.

(14) Aggregate investments represent greater than 5% of net assets.

(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.

(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.

(17) As of September 30, 2021, this debt or preferred equity investment was on non-accrual status. The aggregate fair value of these investments was approximately $3.8 million.

(18) The CLO subordinated notes and income notes are considered equity positions in CLO vehicles. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s securities less contractual payments to debt holders and fund expenses. The estimated yield indicated is based on the prior quarters ending investment cost (for previously existing portfolio investments) or the original cost for those investments made during the current quarter, as well as, a current projection of the future cash flows. Such projections are periodically reviewed and adjusted, and the estimated yield may not ultimately be realized.

(19) Represents cash equivalents held in money market accounts as of September 30, 2021.

(20) The fair value of the investment was determined using significant unobservable inputs. See “Note 4. Fair Value.”

(21) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 13.5% per annum payable in additional shares.

(22) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 19.0% per annum payable in additional shares.

(23) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 20.0% per annum payable in additional shares.

(24) The investment is co-invested with the Company’s affiliates. See “Note 7. Related Party Transactions.”

(25) The CLO equity side letter related investments have acquisition dates from October 2013 through June 2021. There were no additional acquisitions during quarter ended September 30, 2021.

(26) Cost value reflects amortization.

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(27) These investments are deemed to be an “affiliate,” as defined in the Investment Company Act of 1940. In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned between 5% and 25% of its voting securities. We do not “control” any of our portfolio companies. Fair value as of June 30, 2021 and September 30, 2021, along with transactions during the quarter ended September 30, 2021 in these affiliated investments are as follows:

Name of Issuer	Title of Issue	Amount of Interest or Dividends Credited to Income(a)		Fair Value as of June 30, 2021		Gross Additions(b)		Gross Reductions(c)		Net change in Unrealized Appreciation		Fair Value as of September 30, 2021
AFFILIATED INVESTMENT:
Unitek Global Systems, Inc.	Common Stock	$	—	$	—	$	—	$	—	$	—	$	—
	Series B Preferred Stock		—		—		—		—		—		—
	Series B Senior Preferred Stock		—		—		—		—		—		—
	Series B Super Senior Preferred Stock		—		—		—		—		73,571		73,571
Total Affiliated Investment			—		—		—		—		73,571		73,571
Total Control Investment			—		—		—		—		—		—
TOTAL CONTROL AND AFFILIATED INVESTMENTS		$	—	$	—	$	—	$	—	$	73,571	$	73,571

____________

(a) Represents the total amount of interest or distributions credited to income for the portion of the year an investment was an affiliate investment.

(b) Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees. For the quarter ended September 30, 2021, a total of approximately $0.9 million of paid-in-kind dividends were entitled to be received yet deemed uncollectible.

(c) Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs.

(28) As part of a restructuring completed on September 17, 2021, a portion of the Company’s investment in the first lien senior secured notes of Premiere Global Services, Inc. was converted into a like amount of a new revolving credit facility (the “Replacement Revolver”). The maturity date of the Replacement Revolver is December 7, 2021, compared to the maturity date of first lien senior secured notes of June 8, 2023. The cost basis of the Replacement Revolver was established by allocating a portion of the cost basis from the first lien senior secured notes pro-rata based on the amount of principal that was converted from the first lien senior secured notes to the Replacement Revolver. The Replacement Revolver has no unfunded commitment and is on non-accrual status as of September 30, 2021.

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes
Aerospace and Defense
Novetta, LLC
first lien senior secured notes, 6.00% (LIBOR + 5.00%), (1.00% floor) due October 16, 2022(4)(5)(6)(16)	November 20, 2014	$	5,414,630	$	5,374,499	$	5,378,514
Total Aerospace and Defense				$	5,374,499	$	5,378,514	2.4	%

Business Services
Access CIG, LLC
second lien senior secured notes, 7.98% (LIBOR + 7.75%), (0.00% floor) due February 27, 2026(4)(5)(14)(16)	February 14, 2018	$	16,754,000	$	16,833,452	$	16,502,690

Convergint Technologies, LLC
second lien senior secured notes, 7.50% (LIBOR + 6.75%), (0.75% floor) due February 2, 2026(4)(5)(15)	January 29, 2018		1,500,000		1,493,444		1,440,000

Imagine! Print Solutions, Inc.
second lien senior secured notes, 9.75% (LIBOR + 8.75%), (1.00% floor) due June 21, 2023(4)(5)(16)(17)	June 14, 2017		15,000,000		13,605,559		175,000

OMNIA Partners, Inc.
second lien senior secured notes, 7.75% (LIBOR + 7.50%), (0.00% floor) due May 22, 2026(4)(5)(14)(16)	May 17, 2018		14,000,000		13,947,515		13,090,000

Premiere Global Services, Inc.
first lien senior secured notes, 7.50% (LIBOR + 6.50%), (1.00% floor) due June 8, 2023(4)(5)(6)(10)(14)	October 1, 2019		14,280,354		13,809,512		11,808,425
second lien senior secured notes, 10.00%, 0.50% Cash, 10.00% PIK (LIBOR + 9.00%) (1.00% floor) due June 6, 2024(3)(4)(5)(14)(16)(17)	October 1, 2019		11,383,000		9,817,795		4,069,423

Verifone Systems, Inc.
first lien senior secured notes, 4.22% (LIBOR + 4.00%), (0.00% floor) due August 20, 2025(4)(5)(6)(14)(16)	August 9, 2018		13,839,695		13,242,682		13,355,306
Total Business Services				$	82,749,959	$	60,440,844	26.8	%

Diversified Insurance
AmeriLife Group LLC
second lien senior secured notes, 9.50% (LIBOR + 8.50%), (1.00% floor) due March 18, 2028(4)(5)(6)(10)	March 18, 2020	$	11,000,000	$	10,797,257	$	10,807,500
Total Diversified Insurance				$	10,797,257	$	10,807,500	4.8	%

(continued on next page)

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2020

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes – (continued)
Education
Cambium Learning Group, Inc.
second lien senior secured notes, 9.50% (LIBOR + 8.50%), (1.00% floor) due December 18, 2026(4)(5)(6)(14)(16)	October 8, 2020	$	15,000,000	$	14,521,360	$	14,587,500
Total Education				$	14,521,360	$	14,587,500	6.5	%

Healthcare
Keystone Acquisition Corp.
first lien senior secured notes, 6.25% (LIBOR + 5.25%), (1.00% floor) due May 1, 2024(4)(5)(6)(14)(16)	May 10, 2017	$	7,381,574	$	7,361,671	$	6,938,680
second lien senior secured notes, 10.25% (LIBOR + 9.25%), (1.00% floor) due May 1, 2025(4)(5)(14)(16)	May 10, 2017		13,000,000		12,892,244		11,570,000

Viant Medical Holdings, Inc.
first lien senior secured notes, 3.90% (LIBOR + 3.75%), (0.00% floor) due July 2, 2025(4)(5)(6)(14)(15)	June 26, 2018		9,775,000		9,773,664		9,424,762
second lien senior secured notes, 7.90% (LIBOR + 7.75%), (0.00% floor) due July 2, 2026(4)(5)(14)(15)	June 26, 2018		5,000,000		4,960,791		4,418,750

HealthChannels, Inc. (f/k/a ScribeAmerica, LLC)
first lien senior secured notes, 4.65% (LIBOR + 4.50%), (0.00% floor) due April 3, 2025(4)(5)(6)(15)	October 31, 2018		9,761,529		9,711,098		9,322,260
Total Healthcare				$	44,699,468	$	41,674,452	18.5	%

Plastics Manufacturing
Spectrum Holdings III Corp. (f/k/a KPEX Holdings, Inc.)
first lien senior secured notes, 4.25% (LIBOR + 3.25%), (1.00% floor) due January 31, 2025(4)(5)(6)(10)	June 24, 2020	$	7,441,675	$	6,692,041	$	6,995,175
Total Plastics Manufacturing				$	6,692,041	$	6,995,175	3.1	%

Software
Quest Software, Inc.
second lien senior secured notes, 8.46% (LIBOR + 8.25%), (0.00% floor) due May 18, 2026(4)(5)(14)(16)	May 17, 2018	$	13,353,672	$	13,224,594	$	13,286,904
Total Software				$	13,224,594	$	13,286,904	5.9	%

Telecommunications Services
Global Tel Link Corp.
second lien senior secured notes, 8.40% (LIBOR + 8.25%), (0.00% floor) due November 29, 2026(4)(5)(14)(15)	November 20, 2018	$	17,000,000	$	16,753,439	$	11,798,000
Total Telecommunication Services				$	16,753,439	$	11,798,000	5.2	%

(continued on next page)

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2020

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Senior Secured Notes – (continued)
Utilities
CLEAResult Consulting, Inc.
second lien senior secured notes, 7.40% (LIBOR + 7.25%), (0.00% floor) due August 10, 2026(4)(5)(15)	August 3, 2018	$	7,650,000	$	7,669,188	$	7,191,000
Total Utilities				$	7,669,188	$	7,191,000	3.2	%
Total Senior Secured Notes				$	202,481,805	$	172,159,889	76.4	%

Collateralized Loan Obligation – Equity Investments
Structured Finance
AMMC CLO XI, Ltd.
CLO subordinated notes, estimated yield 11.32% due April 30, 2031(9)(11)(12)(18)(24)	March 12, 2015	$	4,000,000	$	2,539,582	$	1,940,000

Atlas Senior Loan Fund XI, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 26, 2031(9)(11)(12)(18)(24)	April 5, 2019		5,725,000		4,141,149		2,633,500

Babson CLO Ltd. 2015-I
CLO subordinated notes, estimated yield 0.29% due January 20, 2031(9)(11)(12)(18)	July 26, 2018		2,840,000		1,653,709		994,000

BlueMountain CLO 2014-2 Ltd.
CLO subordinated notes, estimated yield 13.38% due October 20, 2030(9)(11)(12)(18)	April 3, 2019		6,374,000		2,833,521		1,975,940

Carlyle Global Market Strategies CLO 2013-2, Ltd.
CLO subordinated notes, estimated yield 9.09% due January 18, 2029(9)(11)(12)(18)(24)	March 19, 2013		6,250,000		3,411,887		1,814,517

Cedar Funding II CLO, Ltd.
CLO subordinated notes, estimated yield 3.75% due June 09, 2030(9)(11)(12)(18)	October 23, 2013		18,000,000		11,586,521		7,200,000

Cedar Funding VI CLO, Ltd.
CLO subordinated notes, estimated yield 0.00% due October 20, 2028(9)(11)(12)(18)	May 15, 2017		7,700,000		6,994,901		4,620,000

CIFC Funding 2014-3, Ltd.
CLO subordinated notes, estimated yield 10.12% due October 22, 2031(9)(11)(12)(18)(25)	January 24, 2017		10,000,000		5,705,502		4,100,000

Madison Park Funding XVIII, Ltd.
CLO subordinated notes, estimated yield 33.06% due October 21, 2030(9)(11)(12)(18)(24)	May 22, 2020		12,500,000		5,486,110		7,125,000

Madison Park Funding XIX, Ltd.
CLO subordinated notes, estimated yield 13.24% due January 22, 2028(9)(11)(12)(18)(24)	May 11, 2016		5,422,500		4,402,485		3,741,525

(continued on next page)

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2020

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT		COST		FAIR VALUE(2)		% of Net Assets
Collateralized Loan Obligation – Equity Investments – (continued)
Structured Finance – (continued)
Nassau 2019-I Ltd.
CLO subordinated notes, estimated yield 13.53% due April 15, 2031(9)(11)(12)(14)(18)(24)	April 11, 2019	$	23,500,000	$	17,716,348	$	11,750,000

Octagon Investment Partners 37, Ltd.
CLO subordinated notes, estimated yield 46.94% due July 25, 2030(9)(11)(12)(18)(24)	May 12, 2020		3,598,540		1,639,258		2,770,876

Octagon Investment Partners 45, Ltd.
CLO subordinated notes, estimated yield 32.04% due October 15, 2032(9)(11)(12)(18)	May 13, 2020		3,750,000		2,202,802		3,127,571

Octagon Investment Partners 49, Ltd.
CLO subordinated notes, estimated yield 20.25% due January 15, 2033(9)(11)(12)(14)(18)	December 11, 2020		28,875,000		22,162,586		21,907,317

Sound Point CLO XVI, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 25, 2030(9)(11)(12)(14)(18)	August 1, 2018		45,500,000		36,012,913		18,200,000

Telos CLO 2013-3, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 17, 2026(9)(11)(12)(18)(24)	January 25, 2013		14,447,790		6,237,524		144,478

Telos CLO 2013-4, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 17, 2030(9)(11)(12)(18)(24)	May 20, 2015		11,350,000		6,775,608		1,994,913

Telos CLO 2014-5, Ltd.
CLO subordinated notes, estimated yield 0.00% due April 17, 2028(9)(11)(12)(18)	April 11, 2014		28,500,000		18,179,226		285,000

Venture XVII, Ltd.
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24)	January 27, 2017		6,200,000		3,511,052		568,265

Venture XX, Ltd.
CLO subordinated notes, estimated yield 0.00% due April 15, 2027(9)(11)(12)(18)(24)	July 27, 2018		3,000,000		1,216,869		150,000

Venture 35 CLO, Limited
CLO subordinated notes, estimated yield 23.16% due October 22, 2031(9)(11)(12)(18)	December 7, 2020		3,000,000		1,452,178		1,410,000

Venture 39 CLO, Limited
CLO subordinated notes, estimated yield 35.57% due April 15, 2033(9)(11)(12)(18)	May 8, 2020		5,150,000		2,916,223		4,068,500

Vibrant CLO V, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 20, 2029(9)(11)(12)(18)	April 27, 2017		13,475,000		10,535,500		4,716,250

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2020

COMPANY/INVESTMENT(1)(20)	ACQUISITION DATE	PRINCIPAL AMOUNT/ SHARES		COST		FAIR VALUE(2)		% of Net Assets
Collateralized Loan Obligation – Equity Investments – (continued)
Structured Finance – (continued)
West CLO 2014-1, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 18, 2026(9)(11)(12)(18)(24)	May 12, 2017	$	9,250,000	$	4,870,097	$	1,942,500

Westcott Park CLO, Ltd.
CLO subordinated notes, estimated yield 27.60% due July 20, 2028(9)(11)(12)(18)	September 16, 2020		19,000,000		8,742,550		10,070,000

THL Credit Wind River 2012-1 CLO, Ltd.
CLO subordinated notes, estimated yield 0.00% due January 15, 2026(9)(11)(12)(18)	June 11, 2015		7,500,000		3,157,112		—

Zais CLO 6, Ltd.
CLO subordinated notes, estimated yield 0.00% due July 15, 2029(9)(11)(12)(18)	May 3, 2017		10,500,000		7,381,532		1,890,000

CLO Equity Side Letter Related Investments(11)(12)(13)(25)(26)					1,600,801		1,373,959
Total Structured Finance				$	205,065,546	$	122,514,111	54.3	%
Total Collateralized Loan Obligation – Equity Investments				$	205,065,546	$	122,514,111	54.3	%

Common Stock
IT Consulting
Unitek Global Services, Inc.
common equity(7)(27)	January 13, 2015		1,244,188	$	684,960	$	—
Total IT Consulting				$	684,960	$	—	0.0	%
Total Common Stock				$	684,960	$	—	0.0	%

Preferred Stock
IT Consulting
Unitek Global Services, Inc.
Series B Preferred Stock(3)(17)(21)(27)	June 26, 2019		12,598,456	$	9,002,159	$	—
Series B Senior Preferred Stock(3)(17)(22)(27)	June 26, 2019		5,749,537		4,535,443		—
Series B Super Senior Preferred Stock(3)(17)(23)(27)	June 26, 2019		3,177,649		2,614,260		—
Total IT Consulting				$	16,151,862	$	—	0.0	%
Total Preferred Equity				$	16,151,862	$	—	0.0	%
Total Investments in Securities(8)				$	424,384,173	$	294,674,000	130.7	%

Cash Equivalents
First American Government Obligations Fund(19)				$	59,137,284	$	59,137,284
Total Cash Equivalents				$	59,137,284	$	59,137,284	26.2	%
Total Investments in Securities and Cash Equivalents				$	483,521,457	$	353,811,284	156.9	%

____________

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2020

(2) Fair value is determined in good faith by the Board of Directors of the Company.

(3) As of December 31, 2020, the portfolio includes $11,383,000 principal amount of debt investments and 21,525,642 shares of preferred stock investments which contain a PIK provision.

(4) Notes bear interest at variable rates and are subject to an interest rate floor where disclosed. The rate disclosed is as of December 31, 2020.

(5) Cost value reflects accretion of original issue discount or market discount, or amortization of premium.

(6) Cost value reflects repayment of principal.

(7) Non-income producing at the relevant period end.

(8) Aggregate gross unrealized appreciation for U.S. federal income tax purposes is $7,604,740; aggregate gross unrealized depreciation for U.S. federal income tax purposes is $146,059,439. Net unrealized depreciation is $138,454,699 based upon an estimated tax cost basis of $433,128,699 as of December 31, 2020.

(9) Cost reflects accretion of effective yield less any cash distributions received or entitled to be received from CLO equity investments.

(10) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 180-day LIBOR.

(11) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of December 31, 2020, the Company held qualifying assets that represented 63.3% of its total assets.

(12) Investment not domiciled in the United States.

(13) Fair value represents discounted cash flows associated with fees earned from CLO equity investments.

(14) Aggregate investments represent greater than 5% of net assets.

(15) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 30-day LIBOR.

(16) The principal balance outstanding for this debt investment, in whole or in part, is indexed to 90-day LIBOR.

(17) As of December 31, 2020, this debt or preferred equity investment was on non-accrual status. The aggregate fair value of these investments was approximately $4.2 million.

(19) Represents cash equivalents held in money market accounts as of December 31, 2020.

(20) The fair value of the investment was determined using significant unobservable inputs. See “Note 3. Fair Value.”

(21) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 13.5% per annum payable in additional shares.

(22) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 19.0% per annum payable in additional shares.

(23) The Company holds preferred stock in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 20.0% per annum payable in additional shares.

(24) The investment is co-invested with the Company’s affiliates. See “Note 7. Related Party Transactions.”

(25) The CLO equity side letter related investments have acquisition dates from October 2013 to December 2020.

(26) Cost value reflects amortization.

(continued on next page)

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED SCHEDULE OF INVESTMENTS — (continued)
December 31, 2020

(27) These investments are deemed to be an “affiliate,” as defined in the Investment Company Act of 1940. In general, under the 1940 Act, we would be presumed to “control” a portfolio company if we owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if we owned between 5% and 25% of its voting securities. We do not “control” any of our portfolio companies. Fair value as of December 31, 2019 and December 31, 2020 along with transactions during the year ended December 31, 2020 in these affiliated investments are as follows:

Name of Issuer	Title of Issue	Amount of Interest or Dividends Credited to Income(a)		Fair Value as of December 31, 2019		Gross Additions(b)		Gross Reductions(c)		Net change in Unrealized Depreciation			Fair Value as of December 31, 2020
AFFILIATED INVESTMENT:
Unitek Global Systems, Inc.	Common Stock	$	—	$	—	$	—	$	—	$	—		$	—
	Series B Preferred Stock		—		—		—		—		—			—
	Series B Senior Preferred Stock		—		620,812		—		—		(620,812	)		—
	Series B Super Senior Preferred Stock		—		2,195,978		—		—		(2,195,978	)		—
Total Affiliated Investment			—		2,816,790		—		—		(2,816,790	)		—
Total Control Investment			—		—		—		—		—			—
TOTAL CONTROL AND AFFILIATED INVESTMENTS		$	—	$	2,816,790	$	—	$	—	$	(2,816,790	)	$	—

____________

(a) Represents the total amount of interest or distributions credited to income for the portion of the year an investment was an affiliate investment. During the year ended December 31, 2020, these securities were on non-accrual status, due to declining performance.

(b) Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees. For the year ended December 31, 2020, a total of approximately $3.1 million of paid-in-kind dividends were entitled to be received yet deemed uncollectible.

(c) Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs.

See Accompanying Notes.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
INVESTMENT INCOME
From non-affiliated/non-control investments:
Interest income – debt investments	$	4,527,514	$	4,492,647		$	12,351,940		$	15,020,284
Income from securitization vehicles and investments		5,071,854		3,568,516			13,849,299			11,545,539
Other income		198,263		163,976			798,088			738,625
Total investment income from non-affiliated/non-control investments		9,797,631		8,225,139			26,999,327			27,304,448
Total investment income		9,797,631		8,225,139			26,999,327			27,304,448
EXPENSES
Interest expense		3,090,535		1,908,206			7,405,358			5,988,116
Base Fee		1,774,727		1,123,450			4,598,461			3,365,332
Professional fees		349,626		321,059			1,604,845			1,228,794
Compensation expense		185,855		185,659			551,452			554,288
General and administrative		414,920		416,486			1,258,610			1,195,166
Total expenses before incentive fees		5,815,663		3,954,860			15,418,726			12,331,696
Net Investment Income Incentive Fees		—		—			—			—
Total expenses		5,815,663		3,954,860			15,418,726			12,331,696
Net investment income		3,981,968		4,270,279			11,580,601			14,972,752
Net change in unrealized appreciation/(depreciation) on investments:
Non-Affiliate/non-control investments		5,558,192		21,580,813			39,141,482			(42,698,711	)
Affiliated investments		73,571		(634,089	)		73,571			(2,816,790	)
Total net change in unrealized appreciation/(depreciation) on investments		5,631,763		20,946,724			39,215,053			(45,515,501	)
Net realized gains/(losses):
Non-affiliated/non-control investments		1,651,408		(4,368,235	)		(11,239,243	)		(7,405,716	)
Extinguishment of debt		—		—			—			(5,211	)
Total net realized gains/(losses)		1,651,408		(4,368,235	)		(11,239,243	)		(7,410,927	)
Net increase/(decrease) in net assets resulting from operations	$	11,265,139	$	20,848,768		$	39,556,411		$	(37,953,676	)
Net increase in net assets resulting from net investment income per common share (Basic and Diluted):	$	0.08	$	0.09		$	0.23		$	0.30
Net increase/(decrease) in net assets resulting from operations per common share (Basic and Diluted):	$	0.23	$	0.42		$	0.80		$	(0.77	)
Weighted average shares of common stock outstanding (Basic and Diluted):		49,634,535		49,589,607			49,610,734			49,439,478
Distributions per share	$	0.105	$	0.105		$	0.315		$	0.507

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)

	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Increase/(decrease) in net assets from operations:
Net investment income	$	3,981,968		$	4,270,279		$	11,580,601		$	14,972,752
Net change in unrealized appreciation/(depreciation) on investments		5,631,763			20,946,724			39,215,053			(45,515,501	)
Net realized gains/(losses)		1,651,408			(4,368,235	)		(11,239,243	)		(7,410,927	)
Net increase/(decrease) in net assets resulting from operations		11,265,139			20,848,768			39,556,411			(37,953,676	)
Distributions to stockholders
Distributions from net investment income		(4,221,385	)		(4,321,734	)		(12,866,360	)		(20,798,823	)
Tax return of capital distributions		(990,202	)		(885,174	)		(2,760,859	)		(4,260,000	)
Total distributions to stockholders		(5,211,587	)		(5,206,908	)		(15,627,219	)		(25,058,823	)
Capital share transactions:
Issuance of common stock (net of underwriting fees and offering costs of $0, $0, $0, and $51,779, respectively)		—			—			—			5,821,240
Reinvestment of distributions		128,228			—			288,998			161,186
Net increase in net assets from capital share transactions		128,228			—			288,998			5,982,426
Total increase/(decrease) in net assets		6,181,780			15,641,860			24,218,190			(57,030,073	)
Net assets at beginning of period		243,462,936			175,326,609			225,426,526			247,998,542
Net assets at end of period	$	249,644,716		$	190,968,469		$	249,644,716		$	190,968,469
Capital share activity:
Shares issued		—			—			—			1,098,277
Shares issued from reinvestment of distributions		30,853			—			65,668			42,343
Net increase in capital share activity		30,853			—			65,668			1,140,620

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase/(decrease) in net assets resulting from operations	$	39,556,411		$	(37,953,676	)
Adjustments to reconcile net increase/(decrease) in net assets resulting from operations to net cash provided by operating activities:
Accretion of discounts on investments		(548,821	)		(985,420	)
Amortization of discount on notes payable and deferred debt issuance costs		556,627			428,825
Increase in investments due to PIK interest income		—			(187,080	)
Purchases of investments		(172,198,699	)		(46,937,026	)
Repayments of principal		22,723,623			29,270,739
Proceeds from the sale of investments		5,819,281			28,857,740
Net realized losses on investments		11,239,243			7,405,716
Reductions to CLO equity cost value		30,050,754			6,594,188
Net change in unrealized (appreciation)/depreciation on investments		(39,215,053	)		45,515,501
(Increase)/Decrease in interest and distributions receivable		(979,145	)		1,940,879
Increase in other assets		(190,930	)		(166,842	)
Increase/(Decrease) in accrued interest payable		737,918			(150,974	)
Increase/(Decrease) in Base Fee and Net Investment Income Incentive Fee payable		615,024			(357,204	)
Decrease in accrued expenses		(148,350	)		(348,346	)
Net cash (used in)/provided by operating activities		(101,982,117	)		32,927,020

CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid (net of stock issued under distribution reinvestment plan of $288,998 and $161,186, respectively)		(15,338,221	)		(24,897,637	)
Proceeds from issuance of 5.50% Unsecured Notes		80,500,000			—
Deferred Debt Issuance Costs Paid		(2,775,860	)		—
Principal repayment of credit facility		—			(28,090,601	)
Proceeds from issuance of common stock		—			5,873,019
Underwriting fees and offering costs for the issuance of common stock		—			(51,779	)
Net cash provided by/(used in) financing activities		62,385,919			(47,166,998	)
Net decrease in cash equivalents and restricted cash		(39,596,198	)		(14,239,978	)
Cash equivalents and restricted cash, beginning of period		59,137,284			16,460,938
Cash equivalents and restricted cash, end of period	$	19,541,086		$	2,220,960
NON-CASH FINANCING ACTIVITIES
Value of shares issued in connection with distribution reinvestment plan	$	288,998		$	161,186

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	6,110,816		$	5,715,475
Securities purchased not settled	$	6,489,812		$	—

See Accompanying Notes.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS

Interim consolidated financial statements of Oxford Square Capital Corp. (“OXSQ” and, together with its subsidiary for the periods during which it was held, the “Company”), are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair statement of the results for the interim period included herein. The current period’s consolidated results of operations are not necessarily indicative of results that may be achieved for the year. The interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”).

NOTE 2. ORGANIZATION

OXSQ was incorporated under the General Corporation Laws of the State of Maryland (“MGCL”) on July 21, 2003 and is a non-diversified, closed-end investment company. OXSQ has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, OXSQ has elected to be treated for tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with its 2003 taxable year. The Company’s investment objective is to maximize its total return, by investing primarily in corporate debt securities and collateralized loan obligation (“CLO”) structured finance investments that own corporate debt securities.

OXSQ’s investment activities are managed by Oxford Square Management, LLC (“Oxford Square Management”). Oxford Square Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member, and Charles M. Royce, a member of OXSQ’s Board of Directors (the “Board”) who holds a minority, non-controlling interest in Oxford Square Management. Under the investment advisory agreement with Oxford Square Management (the “Investment Advisory Agreement”), OXSQ has agreed to pay Oxford Square Management an annual base investment advisory fee (the “Base Fee”) based on its gross assets as well as an incentive fee based on its performance. For further details, please refer to “Note 7. Related Party Transactions.”

The Company’s consolidated operations include the activities of its wholly-owned subsidiary, Oxford Square Funding 2018, LLC (“OXSQ Funding”) for the periods during which it was held. OXSQ Funding, a special purpose vehicle, was formed for the purpose of entering into a credit facility (the “Credit Facility”) with Citibank, N.A. Refer to “Note 6. Borrowings” for additional information on the Company’s borrowings.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, OXSQ Funding for the periods during which it was held. All inter-company accounts and transactions have been eliminated upon consolidation.

The Company follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies. Certain prior period figures have been reclassified from those originally published in quarterly and annual reports to conform to the current period presentation for comparative purposes.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

In the normal course of business, the Company may enter into contracts that contain a variety of representations and provide indemnifications. The Company’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based upon experience, the Company expects the risk of loss related to such representations and indemnifications to be remote.

USE OF ESTIMATES

The consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates, and these differences could be material.

CONSOLIDATION

As provided under Regulation S-X and ASC Topic 946-810, Consolidation (“ASC 946-810”), the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or a controlled operating company whose business consists of providing services to the Company for the periods during which it was held. The Company previously consolidated OXSQ Funding in its financial statements in accordance with ASC 946-810 until it was dissolved in June 2020.

Cash and Cash Equivalents

Cash equivalents consist of demand deposits and highly liquid investments with original maturities of three months or less. The Company places its cash equivalents with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation insured limit. Cash equivalents are classified as Level 1 assets and are included on the Company’s consolidated schedule of investments. Cash equivalents are carried at cost or amortized cost which approximates fair value.

INVESTMENT VALUATION

The Company measures its investment portfolio at fair value in accordance with the provisions of ASC 820, Fair Value Measurement (“ASC 820”). Estimates made in the preparation of the Company’s consolidated financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. The Company believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments the Company makes.

ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 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. ASC 820-10 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company considers the attributes of current market conditions on an on-going basis and has determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, all of OXSQ’s investments are based upon “Level 3” inputs as of September 30, 2021.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

The Board determines the value of its investment portfolio each quarter. In connection with that determination, members of Oxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. The Company has and may continue to engage third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although the Board ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the consolidated statements of operations as net change in unrealized appreciation/depreciation on investments.

Rule 2a-5 under the 1940 Act was adopted by the SEC in December 2020 and establishes requirements for determining fair value in good faith for purposes of the 1940 Act. The Company is evaluating the impact of adopting Rule 2a-5 on the consolidated financial statements and intends to comply with the new rule’s requirements on or before the compliance date in September 2022.

Syndicated Loans (Including Senior Secured Notes)

In accordance with ASC 820-10, the Company’s valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which the Company obtains indicative bid quotes for purposes of determining the fair value of its syndicated loan investments has shown attributes of illiquidity as described by ASC 820-10. During such periods of illiquidity, when the Company believes that the non-binding indicative bids received from agent banks for certain syndicated loan investments that it owns may not be determinative of their fair value, or when no market indicative quote is available, the Company has and may continue to engage third-party valuation firms to provide assistance in valuing certain syndicated investments that the Company owns. The third-party valuation firms may use the income or market approach in arriving at a valuation. Unobservable inputs utilized could include discount rates derived from estimated credit spreads and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples. In addition, Oxford Square Management analyzes each syndicated loan by reviewing the portfolio company’s financial statements, covenant compliance and recent trading activity in the security, if known, and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases, the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any. All information is presented to the Board for its determination of fair value of these investments.

Collateralized Loan Obligations — Debt and Equity

The Company holds a number of debt and equity positions in CLO investment vehicles and CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, the Company considers the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. The Company also considers those instances in which the record date for an equity distribution payment falls on or before the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

bids-wanted-in-competition. In addition, the Company considers the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. In periods of illiquidity and volatility, the Company may rely more heavily on other metrics, including but not limited to, the collateral manager, time left in the reinvestment period, expected cash flows and overcollateralization ratios, instead of the Company’s generated valuation yields. Oxford Square Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to the Board for its determination of fair value of these investments.

Bilateral Investments (Including Equity)

Bilateral investments (as defined below) for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by the Board, upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of OXSQ’s bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the current quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by Oxford Square Management. All information is presented to the Board for its determination of fair value of these investments.

The term “Bilateral investments” means debt and equity investments directly negotiated between the Company and a portfolio company, but excludes syndicated loans (i.e., corporate loans arranged by an agent on behalf of a company, portions of which are held by multiple investors in addition to OXSQ).

Refer to “Note 4. Fair Value” in the notes to the Company’s consolidated financial statements for more information on investment valuation and the Company’s portfolio of investments.

INVESTMENT INCOME

Interest Income

Interest income is recorded on an accrual basis using the contractual rate applicable to each debt investment and includes the accretion of market discounts and/or original issue discount (“OID”) and amortization of market premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. The Company generally restores non-accrual loans to accrual status when past due principal and interest is paid and, in the Company’s judgment, is likely to remain current. As of September 30, 2021, the Company had three debt investments that were on non-accrual status. As of December 31, 2020, the Company had two debt investments that were on non-accrual status.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Interest income also includes a payment-in-kind (“PIK”) component on certain investments in the Company’s portfolio. Refer to the section below, “Payment-In-Kind,” for a description of PIK income and its impact on interest income.

Payment-In-Kind

The Company has debt and preferred stock investments in its portfolio that contain contractual PIK provisions. PIK interest and preferred stock dividends are computed at their contractual rates and are accrued into income and recorded as interest and dividend income, respectively. The PIK amounts are added to the principal balances on the capitalization dates. Upon capitalization, the PIK portions of the investments are valued at their respective fair values. If the Company believes that a PIK is not fully expected to be realized, the PIK investment would be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends would be reversed from the related receivable through interest or dividend income, respectively. PIK investments on non-accrual status are restored to accrual status once it becomes probable that such PIK will be ultimately collectible in cash. For the three and nine months ended September 30, 2021 and 2020, no PIK dividends were recognized as dividend income.

Income from Securitization Vehicles and Investments

Income from investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective interest method in accordance with the provisions of ASC 325-40, based upon estimated cash flows, amounts and timing, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. We monitor the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly, investment income recognized on CLO equity securities in the consolidated statement of operations differs from both the tax-basis investment income and from the cash distributions actually received by the Company during the period.

Other Income

Other income includes prepayment, amendment, and other fees earned by the Company’s loan investments, distributions from fee letters and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a CLO equity investment and are based upon a percentage of the collateral manager’s fees above the amortized cost, and are recorded as other income when earned. The Company may also earn success fees associated with its investments in certain securitization vehicles or CLO warehouse facilities, which are contingent upon a repayment of the warehouse by a permanent CLO securitization structure; such fees are earned and recognized when the repayment is completed.

Preferred Stock Dividends

The Company holds preferred stock investments in its portfolio that contain cumulative preferred dividends that accumulate quarterly. The Company will generally record cumulative preferred dividends as investment income when they are received or declared by the portfolio company’s board of directors or upon any voluntary or involuntary liquidation, dissolution or winding up of the portfolio company, and are collectible. There were no cumulative preferred dividends recorded as dividend income during the three and nine months ended September 30, 2021 and 2020, as the Company deemed them to be uncollectible.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs consist of fees and expenses incurred in connection with the closing or amending of credit facilities and debt offerings, and are capitalized at the time of payment. These costs are amortized using the straight line method over the terms of the respective credit facilities and debt securities. The amortized expenses are included in interest expense in the Company’s consolidated financial statements. The unamortized deferred debt issuance costs are included on the Company’s statement of assets and liabilities as a direct deduction from the related debt liability. Upon early termination or partial principal pay down of debt, or a credit facility, the unamortized costs related to such debt are accelerated into realized losses on extinguishment of debt on the Company’s consolidated statement of operations.

EQUITY OFFERING COSTS

Equity offering costs consist of fees and expenses incurred in connection with the registration and public offer and sale of the Company’s common stock, including legal, accounting and printing fees. These costs are deferred at the time of incurrence and are subsequently charged as a reduction to capital when the offering takes place or as shares are issued. Deferred costs are periodically reviewed and expensed if the related registration is no longer active.

SHARE REPURCHASES

From time to time, the Board may authorize a share repurchase program under which shares are purchased in open market transactions. Since the Company is incorporated in Maryland, MGCL requires share repurchases to be accounted for as a share retirement. The cost of repurchased shares is charged against capital on the settlement date.

SECURITIES TRANSACTIONS

Securities transactions are recorded on the trade date. Realized gains and losses on investments sold are recorded on the basis of specific identification. Distributions received on CLO equity investments which were optionally redeemed are first applied to the remaining cost basis until it is reduced to zero, after which distributions are recorded as realized gains. An optional redemption feature of a CLO allows a majority of the holders of the equity securities issued by the CLO issuer, after the end of a specified non-call period, to cause the redemption of the secured notes issued by the CLO with proceeds of either the liquidation of the CLO’s assets or through a refinancing with new debt. The optional redemption is effectively a voluntary prepayment of the secured debt issued by the CLO prior to the stated maturity of such debt.

U.S. FEDERAL INCOME TAXES

The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not be subject to U.S. federal income tax on the portion of its taxable income and gains timely distributed to stockholders. To qualify for RIC tax treatment, OXSQ is required to distribute at least 90% of its investment company taxable income annually, meet diversification requirements quarterly and file Form 1120-RIC, as defined by the Code.

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 among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

The Company recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities. Through September 30, 2021, management has analyzed the Company’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Company’s 2021 tax returns. The Company identifies its major tax jurisdictions as U.S Federal and Connecticut State. The Company did not have any uncertain tax positions that met the recognition measurement criteria of ASC 740-10-25, Income Taxes, nor did the company have any unrecognized tax benefits as of the periods presented herein. The Company’s current tax year, 2020, 2019, and 2018 federal tax returns remain subject to examination by the Internal Revenue Service.

For tax purposes, the cost basis of the portfolio investments as of September 30, 2021 and December 31, 2020, was approximately $547,382,006 and $433,128,699, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848),” which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. ASU No. 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates and is currently evaluating the impact of adopting ASU No. 2020-04 and 2021-01 on the consolidated financial statements, however, the impact of the adoption is not expected to be material.

Other than the aforementioned guidance, the Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.

NOTE 4. FAIR VALUE

The Company’s assets measured at fair value by investment type on a recurring basis as of September 30, 2021 were as follows:

	Fair Value Measurements at Reporting Date Using
Assets ($ in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Senior Secured Notes	$	—	$	—	$	257.1	$	257.1
CLO Equity		—		—		163.9		163.9
Equity and Other Investments		—		—		0.1		0.1
Total Investments at fair value		—		—		421.1		421.1
Cash equivalents		19.5		—		—		19.5
Total assets at fair value	$	19.5	$	—	$	421.1	$	440.6

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 4. FAIR VALUE (cont.)

The Company’s assets measured at fair value by investment type on a recurring basis as of December 31, 2020 were as follows:

	Fair Value Measurements at Reporting Date Using
Assets ($ in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Senior Secured Notes	$	—	$	—	$	172.2	$	172.2
CLO Equity		—		—		122.5		122.5
Equity and Other Investments		—		—		—		—
Total Investments at fair value		—		—		294.7		294.7
Cash equivalents		59.1		—		—		59.1
Total	$	59.1	$	—	$	294.7	$	353.8

Significant Unobservable Inputs for Level 3 Investments

The following tables provide quantitative information about the Company’s Level 3 fair value measurements as of September 30, 2021 and December 31, 2020, respectively. The Company’s valuation policy, as described above, establishes parameters for the sources and types of valuation analysis, as well as the methodologies and inputs that the Company uses in determining fair value. If the Valuation Committee or Oxford Square Management determines that additional techniques, sources or inputs are appropriate or necessary in a given situation, such additional work will be undertaken. The tables, therefore, are not all-inclusive, but provide information on the significant Level 3 inputs that are pertinent to the Company’s fair value measurements. The weighted average calculations in the table below are based on principal balances for all debt related calculations and CLO equity.

Quantitative Information about Level 3 Fair Value Measurements

Impact to
Fair Value
from an Increase in Input(2)

Assets ($ in millions)

Fair Value
as of
September 30,
2021

Valuation Techniques/
Methodologies

Unobservable Input

Range/Weighted Average(1)

Senior Secured Notes

171.0

Market quotes

NBIB(3)

93.0% – 101.1%/97.2%

82.4

Recent transactions

Actual trade/payoff(4)

96.8% – 99.8%/98.5%

3.7

Enterprise value(8)

LTM EBITDA(9)

54.9 million/ncm(5)

Increase

Market multiples(9)

4.0x – 5.0x/4.5x

Increase

CLO equity

147.1

Market quotes

NBIB(3)

7.0% – 86.0%/49.5%

12.9

Recent transactions

Actual trade/payoff(4)

54.9%/ncm(5)

1.8

Discounted cash flow(6)

Discount rate(7)

10.2% – 12.9%/12.3%

Decrease

2.0

Liquidation Net Asset Value(8)

NBIB(3)

0.2% – 6.4%/4.1%

Equity/Other Investments

0.1

Enterprise value(8)

LTM EBITDA(9)

18.7 million/ncm(5)

Increase

NCY EBITDA(9)

19.0 million/ncm(5)

Increase

Market multiples(9)

6.5x – 8.0x/7.3x

Increase

Total Fair Value for
Level 3 Investments(10)

421.1

____________

(1) Weighted averages are calculated based on fair value of investments.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 4. FAIR VALUE (cont.)

the value of a comparable company) that is multiplied by the historic and/or expected EBITDA of a company in order to estimate the company’s value. An increase in the Market/EBITDA multiple, in isolation, net of adjustments, would result in an increase in a fair value measurement.

(3) The Company generally uses prices provided by an independent pricing service, or broker or agent bank non-binding indicative bid prices (“NBIB”), on or near the valuation date as the primary basis for the fair value determinations for syndicated notes, and CLO debt and equity investments, which may be adjusted for pending equity distributions as of valuation date. These bid prices are non-binding, and may not be determinative of fair value. Each bid price is evaluated by the Valuation Committee in conjunction with additional information compiled by Oxford Square Management, including financial performance, recent business developments, and, in the case of CLO debt and equity investments, performance and covenant compliance information as provided by the independent trustee.

(4) Prices provided by independent pricing services are evaluated in conjunction with actual trades and payoffs and, in certain cases, the value represented by actual trades or payoffs may be more representative of fair value as determined by the Valuation Committee.

(5) The calculation of weighted average for a range of values for a single investment within a given asset category is not considered to provide a meaningful representation (“ncm”).

(6) The Company will calculate the fair value of certain CLO equity investments based upon the net present value of expected contractual payment streams discounted using estimated market yields for the equity tranche of the respective CLO vehicle. The Company will also consider those investments in which the record date for an equity distribution payment falls on or before the last day of the period, and the likelihood that a prospective purchaser would require an adjustment to the transaction price representing substantially all of the pending distribution.

(7) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.

(8) For senior secured notes and equity investments, third-party valuation firms evaluate the financial and operational information of the portfolio companies that the Company provides to them, as well as independent market and industry information that they consider appropriate in forming an opinion as to the fair value of the Company’s securities. In those instances where the carrying value and/or internal credit rating of the investment does not require the use of a third-party valuation firm, a valuation is prepared by Oxford Square Management, which may include liquidation analysis or which may utilize a subsequent transaction to provide an indication of fair value.

(9) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on the most recently available twelve-month financial statements and projections provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.

(10) Total may not sum due to rounding.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 4. FAIR VALUE (cont.)

	Quantitative Information about Level 3 Fair Value Measurements
Assets ($ in millions)	Fair Value as of December 31, 2020		Valuation Techniques/ Methodologies	Unobservable Input	Range/Weighted Average(1)	Impact to Fair Value from an Increase in Input(2)
Senior Secured Notes	$	95.4	Market quotes	NBIB(3)	69.4% – 99.3%/90.8%	NA
		60.9	Recent transactions	Actual trade/payoff(4)	1.2% – 99.5%/78.3%	NA
		11.8	Discounted cash flow(6)	Discount rate(7)	16.8% – 18.1%/ncm(5)	Decrease
		4.1	Enterprise value(8)	EBITDA(9)	$92.0 million/ncm(5)	Increase
				Market multiples(9)	6.0x – 7.0x/ncm(5)	Increase

CLO		96.1	Market quotes	NBIB(3)	0.0% – 79.0%/34.0%	NA
		25.0	Recent transactions	Actual trade/payoff(4)	75.9% – 83.4%/76.7%	NA
		1.4	Discounted cash flow(6)	Discount rate(7)	11.7% – 21.1%/14.9%	Decrease

Equity/Other		—	Enterprise value(8)	EBITDA(9)	$19.8 million/ncm(5)	Increase
				Market multiples(9)	5.6x – 6.5x/ncm(5)	Increase
Total Fair Value for Level 3 Investments	$	294.7

____________

(1) Weighted averages are calculated based on fair value of investments.

(2) The impact on the fair value measurement of an increase in each unobservable input is in isolation. The discount rate is the rate used to discount future cash flows in a discounted cash flow calculation. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. Market/EBITDA multiples refer to the input (often derived from the value of a comparable company) that is multiplied by the historic and/or expected EBITDA of a company in order to estimate the company’s value. An increase in the Market/EBITDA multiple, in isolation, net of adjustments, would result in an increase in a fair value measurement.

(5) The calculation of weighted average for a range of values for a single investment within a given asset category is not considered to provide a meaningful representation (“ncm”).

(7) Discount rate represents the rate at which future cash flows are discounted to calculate a present value, reflecting market assumptions for risk.

(9) EBITDA, or earnings before interest expense, taxes, depreciation and amortization, is an unobservable input which is generally based on the most recently available twelve month financial statements provided by the portfolio company. Market multiples, also an unobservable input, represent an estimation of where market participants might value an enterprise based upon information available for comparable companies in the market.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 4. FAIR VALUE (cont.)

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of September 30, 2021, and the level of each financial liability within the fair value hierarchy:

($ in millions)	Carrying Value(1)		Fair Value(2)		Level 1		Level 2		Level 3
6.50% Unsecured Notes	$	63.6	$	65.1	$	—	$	65.1	$	—
6.25% Unsecured Notes		43.7		46.3		—		46.3		—
5.50% Unsecured Notes		77.9		80.6		—		80.6		—
Total	$	185.2	$	192.0	$	—	$	192.0	$	—

____________

(1) Carrying value is net of unamortized deferred debt issuance costs. Unamortized deferred debt issuance costs associated with the 6.50% Unsecured Notes totaled approximately $0.8 million as of September 30, 2021. Unamortized deferred debt issuance costs associated with the 6.25% Unsecured Notes totaled approximately $1.1 million as of September 30, 2021. Unamortized deferred debt issuance costs associated with the 5.50% Unsecured Notes totaled approximately $2.6 million as of September 30, 2021.

(2) For the 6.50% Unsecured Notes, 6.25% Unsecured Notes and 5.50% Unsecured Notes, fair value is based upon the closing price on the last day of the period. The 6.50% Unsecured Notes, 6.25% Unsecured Notes and 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQL”, “OXSQZ”, and “OXSQG”, respectively).

The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of December 31, 2020 and the level of each financial liability within the fair value hierarchy:

($ in millions)	Carrying Value(1)		Fair Value		Level 1		Level 2		Level 3
6.50% Unsecured Notes(2)	$	63.3	$	64.3	$	—	$	64.3	$	—
6.25% Unsecured Notes(3)		43.5		45.1		—		45.1		—
Total	$	106.8	$	109.4	$	—	$	109.4	$	—

____________

(1) Carrying value is net of deferred debt issuance costs. Deferred debt issuance costs associated with the 6.5% Unsecured Notes totaled approximately $1.1 million as of December 31, 2020. Deferred debt issuance costs associated with the 6.25% Unsecured Notes totaled approximately $1.2 million as of December 31, 2020.

(2) For the 6.50% Unsecured Notes, fair value is based upon the closing price on the last day of the period. The 6.50% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQL”).

(3) For the 6.25% Unsecured Notes, fair value is based upon the closing price on the last day of the period. The 6.25% Unsecured Notes are listed on the NASDAQ Global Select Market (trading symbol “OXSQZ”).

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 4. FAIR VALUE (cont.)

A reconciliation of the fair value of investments for the three months ended September 30, 2021, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			CLO Equity			Equity and Other Investments		Total(2)
Balance at June 30, 2021	$	242.0		$	162.8			—	$	404.8
Net realized gains included in earnings		—			1.7			—		1.7
Net unrealized appreciation included in earnings(2)		(2.5	)		8.1			0.1		5.6
Accretion of discount		0.2			—			—		0.2
Purchases		23.1			—			—		23.1
Repayments and Sales		(5.7	)		—			—		(5.7	)
Reductions to CLO Equity cost value(1)		—			(8.6	)		—		(8.6	)
Non-cash interest and dividend income due to PIK		—			—			—		—
Transfers in and/or (out) of level 3		—			—			—		—
Balance at September 30, 2021(2)	$	257.1		$	163.9		$	0.1	$	421.1
Net change in unrealized depreciation on Level 3 investments still held as of September 30, 2021	$	(2.5	)	$	7.7		$	0.1	$	5.3

____________

(1) Reduction to cost value on the Company’s CLO equity investments represents the difference between distributions received, or entitled to be received, of approximately $13.6 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $5.0 million.

(2) Totals may not sum due to rounding.

A reconciliation of the fair value of investments for the nine months ended September 30, 2021, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			CLO Equity			Equity and Other Investments		Total(2)
Balance at December 31, 2020	$	172.2		$	122.5		$	—	$	294.7
Net realized losses included in earnings(2)		(13.4	)		2.3			—		(11.2	)
Unrealized appreciation included in earnings(2)		8.6			30.6			0.1		39.2
Accretion of discount		0.5			—			—		0.5
Purchases(2)		112.0			43.5			—		155.6
Repayments and Sales		(22.7	)		(4.9	)		—		(27.6	)
Reductions to CLO Equity cost value(1)		—			(30.1	)		—		(30.1	)
Non-cash interest and dividend income due to PIK		—			—			—		—
Transfers in and/or (out) of level 3		—			—			—		—
Balance at September 30, 2021(2)	$	257.1		$	163.9		$	0.1	$	421.1
Net change in unrealized depreciation on Level 3 investments still held as of September 30, 2021	$	(4.8	)	$	30.7		$	0.1	$	26.0

____________

(1) Reduction to cost value on the Company’s CLO equity investments represents the difference between distributions received, or entitled to be received, of approximately $43.6 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $13.5 million.

(2) Totals may not sum due to rounding.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 4. FAIR VALUE (cont.)

A reconciliation of the fair value of investments for the year ended December 31, 2020, utilizing significant unobservable inputs, is as follows:

($ in millions)	Senior Secured Notes			CLO Debt			CLO Equity			Equity and Other Investments			Total(2)
Balance at December 31, 2019	$	240.5		$	0.8		$	120.6		$	2.8		$	364.8
Realized losses included in earnings		(2.2	)		2.3			(8.3	)		—			(8.2	)
Unrealized depreciation included in earnings		(1.6	)		0.1			(5.5	)		(2.8	)		(9.8	)
Accretion of discount		1.2			0.2			—			—			1.4
Purchases(2)		39.2			8.2			46.5			—			93.8
Repayments and Sales		(105.2	)		(11.5	)		(17.9	)		—			(134.6	)
Reductions to CLO equity cost value(1)		—			—			(13.0	)		—			(13.0	)
Non-cash interest and dividend income due to PIK		0.3			—			—			—			0.3
Transfers in and/or (out) of level 3		—			—			—			—			—
Balance at December 31, 2020(2)	$	172.2		$	—		$	122.5		$	—		$	294.7
Net change in unrealized depreciation on Level 3 investments still held as of December 31, 2020	$	(2.0	)	$	—		$	(14.2	)	$	(2.8	)	$	(19.0	)

____________

(1) Reduction to cost value on the Company’s CLO equity investments represents the difference between distributions received, or entitled to be received, of approximately $28.4 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $15.4 million.

(2) Totals may not sum due to rounding.

The following table shows the fair value of the Company’s portfolio of investments by asset class as of September 30, 2021 and December 31, 2020:

	September 30, 2021				December 31, 2020
($ in millions)	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
Senior Secured Notes	$	257.1	61.1	%	$	172.2	58.4	%
CLO Equity		163.9	38.9	%		122.5	41.6	%
Equity and Other Investments		0.1	0.0	%		—	0.0	%
Total	$	421.1	100.0	%	$	294.7	100.0	%

NOTE 5. Cash and Cash Equivalents

As of September 30, 2021 and December 31, 2020, respectively, cash and cash equivalents were as follows:

		September 30, 2021			December 31, 2020
Cash and Cash Equivalents		$	19,541,086		$	59,137,284

For further details regarding the composition of cash and cash equivalents refer to “Note 3. Summary of Significant Accounting Policies.”

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 6. BORROWINGS

In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150%, immediately after such borrowing. As of September 30, 2021 and December 31, 2020, the Company’s asset coverage for borrowed amounts was 229% and 304%, respectively.

The following are the Company’s outstanding principal amounts, carrying values and fair values of the Company’s borrowings as of September 30, 2021 and December 31, 2020. The fair value of the 6.50% Unsecured Notes (as defined below), 6.25% Unsecured Notes (as defined below), and the 5.50% Unsecured Notes (as defined below) are based upon the closing price on the last day of the period and are listed on the NASDAQ Global Select Market (trading symbol OXSQL, OXSQZ, and OXSQG, respectively).

	As of
	September 30, 2021						December 31, 2020
($ in millions)	Principal Amount		Carrying Value(1)		Fair Value		Principal Amount		Carrying Value(1)		Fair Value
6.50% Unsecured Notes	$	64.4	$	63.6	$	65.1	$	64.4	$	63.3	$	64.3
6.25% Unsecured Notes		44.8		43.7		46.3		44.8		43.5		45.1
5.50% Unsecured Notes		80.5		77.9		80.6		—		—		—
Total	$	189.7	$	185.2	$	192.0	$	109.2	$	106.8	$	109.4

____________

(1) The Carrying Value represents the aggregate principal amount outstanding less the unamortized deferred issuance costs. As of September 30, 2021, the total unamortized deferred issuance costs for the 6.50% Unsecured Notes, 6.25% Unsecured Notes, and 5.50% Unsecured Notes was approximately $0.8 million, $1.1 million, and $2.6 million, respectively. As of December 31, 2020, the total unamortized deferred issuance costs for the 6.50% Unsecured Notes, and 6.25% Unsecured Notes was approximately $1.1 million, and $1.2 million, respectively.

The weighted average stated interest rate and weighted average maturity on the Company’s borrowings as of September 30, 2021 were 6.02% and 4.8 years, respectively, and as of December 31, 2020 were 6.40% and 4.1 years, respectively.

The tables below summarize the components of interest expense for the three and nine months ended September 30, 2021 and September 30, 2020, respectively:

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
($ in thousands)	Stated Interest Expense		Amortization of Deferred Debt Issuance Costs		Total		Stated Interest Expense		Amortization of Deferred Debt Issuance Costs		Total
6.50% Unsecured Notes	$	1,046.0	$	81.8	$	1,127.9	$	3,138.0	$	242.9	$	3,380.9
6.25% Unsecured Notes		699.9		58.8		758.6		2,099.6		174.4		2,274.0
5.50% Unsecured Notes		1,106.9		97.2		1,204.1		1,611.1		139.4		1,750.5
Total(1)	$	2,852.7	$	237.8	$	3,090.5	$	6,848.7	$	556.6	$	7,405.4

____________

(1) Totals may not sum due to rounding

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 6. BORROWINGS (cont.)

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
($ in thousands)	Stated Interest Expense		Amortization of Deferred Debt Issuance Costs		Total		Stated Interest Expense		Amortization of Deferred Debt Issuance Costs		Total
6.50% Unsecured Notes	$	1,046.0	$	81.8	$	1,127.8	$	3,138.0	$	243.8	$	3,381.8
6.25% Unsecured Notes		699.9		58.8		758.7		2,099.6		175.0		2,274.6
Credit Facility(1)		—		—		—		262.2		4.8		267.0
Repo Facility		21.7		—		21.7		64.7		—		64.7
Total	$	1,767.6	$	140.6	$	1,908.2	$	5,564.5	$	423.6	$	5,988.1

____________

(1) The Credit Facility was fully repaid on March 24, 2020.

Notes Payable — 6.50% Unsecured Notes Due 2024 (the “6.50% Unsecured Notes”)

On April 12, 2017, the Company completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of the 6.50% Unsecured Notes. The 6.50% Unsecured Notes mature on March 30, 2024, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after March 30, 2020. The 6.50% Unsecured Notes bear interest at a rate of 6.50% per year, payable quarterly on March 30, June 30, September 30, and December 30 of each year.

The aggregate accrued interest payable on the 6.50% Unsecured Notes as of September 30, 2021 was approximately $12,000. As of September 30, 2021, the Company had unamortized deferred debt issuance costs relating to the 6.50% Unsecured Notes of approximately $0.8 million. The deferred debt issuance costs are being amortized over the term of the 6.50% Unsecured Notes and are included in interest expense in the consolidated statements of operations. The cash paid and the effective annualized interest rate for the three months ended September 30, 2021 were approximately $1.0 million and 6.95%, respectively. The cash paid and the effective annualized interest rate for the nine months ended September 30, 2021 were approximately $3.1 million and 7.02%, respectively.

Notes Payable — 6.25% Unsecured Notes Due 2026 (the “6.25% Unsecured Notes”)

On April 3, 2019, the Company completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of 6.25% Unsecured Notes. The 6.25% Unsecured Notes will mature on April 30, 2026, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after April 30, 2022. The 6.25% Unsecured Notes bear interest at a rate of 6.25% per year payable quarterly on January 31, April 30, July 31, and October 31, of each year.

The aggregate accrued interest payable on the 6.25% Unsecured Notes as of September 30, 2021 was approximately $0.5 million. As of September 30, 2021, the Company had unamortized deferred debt issuance costs of approximately $1.1 million relating to the 6.25% Unsecured Notes. The deferred debt issuance costs are being amortized over the term of the 6.25% Unsecured Notes and are included in interest expense in the consolidated statements of operations. The cash paid and the effective annualized interest rate for the three months ended September 30, 2021 were approximately $0.7 million and 6.72%, respectively. The cash paid and the effective annualized interest rate for the nine months ended September 30, 2021 were approximately $2.1 million and 6.79%, respectively.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 6. BORROWINGS (cont.)

Notes Payable — 5.50% Unsecured Notes Due 2028 (the “5.50% Unsecured Notes”)

On May 20, 2021, the Company completed an underwritten public offering of approximately $80.5 million in aggregate principal amount of 5.50% Unsecured Notes. The 5.50% Unsecured Notes will mature on July 31, 2028, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after May 31, 2024. The 5.50% Unsecured Notes bear interest at a rate of 5.50% per year payable quarterly on January 31, April 30, July 31, and October 31, of each year.

The aggregate accrued interest payable on the 5.50% Unsecured Notes as of September 30, 2021 was approximately $0.7 million. As of September 30, 2021, the Company had unamortized deferred debt issuance costs of approximately $2.6 million relating to the 5.50% Unsecured Notes. The deferred debt issuance costs are being amortized over the term of the 5.50% Unsecured Notes and are included in interest expense in the consolidated statements of operations. The cash paid and the effective annualized interest rate for the three months ended September 30, 2021 were approximately $0.9 million and 5.93%, respectively. The cash paid and the effective annualized interest rate for the nine months ended September 30, 2021 were approximately $0.9 million and 5.92%, respectively.

Notes Payable — Credit Facility

On June 21, 2018, OXSQ Funding entered into the Credit Facility with Citibank, N.A. Subject to certain exceptions, pricing under the Credit Facility was based on the LIBOR for an interest period equal to three months plus a spread of 2.25% per annum payable quarterly on March 21, June 21, September 21 and December 21. Pursuant to the terms of the credit agreement governing the Credit Facility, OXSQ Funding borrowed approximately $95.2 million. The Credit Facility had a mandatory amortization schedule such that 15.0% of the principal amount outstanding as of June 21, 2018 would have become due and payable on June 21, 2019. On each payment date occurring thereafter, an additional 6.25% of the remaining principal amount outstanding would have been due and payable. All remaining principal and accrued and unpaid interest would have been due and payable on the final maturity date, June 21, 2020.

The Credit Facility was collateralized by a pool of loans initially consisting of loans sold by OXSQ to OXSQ Funding. OXSQ was able to sell and contribute additional loans to OXSQ Funding from time to time. OXSQ acted as the collateral manager of the loans owned by OXSQ Funding, and retained a residual interest through its ownership of OXSQ Funding.

On October 12, 2018, OXSQ Funding amended the Credit Facility with Citibank, N.A. Under the amended Credit Facility, an additional borrowing amount of approximately $37.3 million was made under the same terms as the existing credit agreement. The Company posted additional collateral with a principal amount of approximately $76.4 million. All other existing terms of the Credit Facility remained unchanged.

The Company prepaid the remaining outstanding principal of approximately $28.1 million in March 2020, and unilaterally terminated the Credit Facility as of March 24, 2020 in accordance with its terms. In connection with the early repayment and termination of the Credit Facility, the Company was required to pay a prepayment fee equal to $21,413. The Company recognized a net extinguishment loss of approximately $5,000 for the nine months ended September 30, 2020, which consisted of unamortized deferred debt issuance costs. These costs are recorded within realized losses on extinguishment of debt in the consolidated statements of operations for the nine months ended September 30, 2020.

As the Credit Facility was repaid and terminated as of March 24, 2020, there was no cash paid for interest for the three and nine months ended September 30, 2021.

Table of Contents

OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 6. BORROWINGS (cont.)

Repurchase Transaction Facility

On October 18, 2019, the Company entered into a $10 million repurchase transaction facility (the “Repo Facility”) with Nomura Securities International, Inc. (“Nomura”). Pursuant to the Master Repurchase Agreement (“MRA”) and a transaction facility confirmation, the Company may sell securities to Nomura from time to time with a corresponding repurchase obligation at an agreed-upon price 30 to 60 days after the sale date (“Reverse Repo”). The Repo Facility has a funding cost of 1-month LIBOR plus 2.05% per annum for each Reverse Repo transaction and is subject to a facility fee of 0.85% per annum on the full $10 million facility amount. The Repo Facility expired without extension by the Company on October 18, 2020. The Company accounts for these Reverse Repo transactions as secured financings for the financial reporting purposes in accordance with GAAP. There was no cash paid in facility fees for the three and nine months ended September 30, 2021, as the Repo Facility expired without extension by the Company on October 18, 2020.

NOTE 7. RELATED PARTY TRANSACTIONS

The Company pays Oxford Square Management a fee for its services under the Investment Advisory Agreement consisting of — a base investment advisory fee the (“Base Fee”) based on its gross assets, as described below, and two types of incentive fees. The cost of both the Base Fee and any incentive fees earned by Oxford Square Management are ultimately borne by the Company’s common stockholders.

As described in greater detail under Item 1. Business — Investment Advisory Agreement — Advisory Fee in its Annual Report on Form 10-K for the year ended December 31, 2020, the Company first calculates the Base Fee and any incentive fee under the terms of the Investment Advisory Agreement, then calculates the Base Fee and any incentive fee under the terms of the fee waiver letter unilaterally adopted by Oxford Square Management, effective April 1, 2016 (the “2016 Fee Waiver”), and, finally, adopts the lower of two combined results as the total fees payable to Oxford Square Management.

Base Fee

The Base Fee is payable quarterly in arrears, calculated based on a percentage of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters, and appropriately prorated for any partial quarter. Accordingly, the Base Fee will be payable regardless of whether the value of the Company’s gross assets has decreased during the quarter.

Under the terms of the Investment Advisory Agreement, the Base Fee is calculated at an annual rate of 2.00%, and appropriately adjusted for any equity or debt capital raises, repurchases, or redemptions during the current calendar quarter.

Under the terms of the 2016 Fee Waiver, for the purpose of calculating the amount of total advisory fees (if any) to be waived during a particular calendar quarter, the Base Fee (as a portion of the total calculation) is calculated at an annual rate of 1.50%, and adjusted pro rata for any share issuances, debt issuances, repurchases or redemptions during the current calendar quarter; provided, however, that no Base Fee is payable on the cash proceeds received by the Company in connection with any share or debt issuances until such proceeds have been invested in accordance with the Company’s investment objectives.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 7. RELATED PARTY TRANSACTIONS (cont.)

The following table represents the portion of the total advisory fee ascribed to the Base Fee (pursuant to the 2016 Fee Waiver calculation) for the three and nine months ended September 30, 2021 and 2020, respectively:

($ in millions)		Three months ended September 30, 2021			Three months ended September 30, 2020			Nine months ended September 30, 2021			Nine months ended September 30, 2020
Base Fee		$	1.8		$	1.1		$	4.6		$	3.4

The Base Fee payable to Oxford Square Management as of September 30, 2021 and December 31, 2020 was $1,774,727 and $1,159,703, respectively.

Incentive Fee

The incentive fees are commonly referred to as the “Income Incentive Fee” and the “Capital Gains Incentive Fee,” with the first fee payable quarterly in arrears and the second fee payable in arrears at the end of each calendar year.

Net Investment Income Incentive Fee

The first fee (the “Net Investment Income Incentive Fee”), is determined by reference to the Company’s “Pre-Incentive Fee Net Investment Income” (as defined below). Given that this incentive fee is payable without regard to any gain, loss or unrealized depreciation that may occur during the quarter, Oxford Square Management’s incentive fee may be payable notwithstanding a decline in net asset value that quarter.

Under the terms of the Investment Advisory Agreement, the Net Investment Income Incentive Fee is calculated based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter.

• For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter minus the Company’s operating expenses for the quarter (including the Base Fee, expenses payable under the administration agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest, and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

• Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to one-fourth of an annual “hurdle rate.” The annual hurdle rate is determined as of the immediately preceding December 31st by adding 5.0% to the interest rate then payable on the most recently issued five-year U.S. Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rates for the 2021 and 2020 calendar years, calculated as of the immediately preceding December 31st, were 5.36% and 6.69% respectively, under the terms of the Investment Advisory Agreement. The Company’s net investment income (to the extent not distributed to shareholders) used to calculate the Net Investment Income Incentive Fee was also included in the amount of gross assets used to calculate the 2% Base Fee.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 7. RELATED PARTY TRANSACTIONS (cont.)

a. The operation of the incentive fee with respect to the Company’s Pre-Incentive Fee Net Investment Income for each quarter is as follows:

i. no incentive fee is payable to Oxford Square Management in any calendar quarter in which the Pre-Incentive Fee Net Investment Income does not exceed one fourth of the annual hurdle rate (5.36% for the 2021 calendar year).

ii. 20% of the amount of the Pre-Incentive Fee Net Investment Income, if any, that exceeds one-fourth of the annual hurdle rate (5.36% for the 2021 calendar year) in any calendar quarter is payable to Oxford Square Management (i.e., once the hurdle rate is reached, 20% of all Pre-Incentive Fee Net Investment Income thereafter will be allocated to Oxford Square Management).

Under the terms of the 2016 Fee Waiver, for the purpose of calculating the amount of total advisory fees (if any) to be waived during a particular calendar quarter, the Income Incentive Fee (as a portion of the total calculation) is calculated based on the amount by which (x) the “Pre-Incentive Fee Net Investment Income” (as defined below) for the calendar quarter exceeds (y) the “Preferred Return Amount” (as defined below) for the calendar quarter.

a. A “Preferred Return Amount” is calculated on a quarterly basis by multiplying 1.75% by the Company’s net asset value at the end of the immediately preceding calendar quarter.

b. The Net Investment Income Incentive Fee is then calculated as follows:

(a) no Net Investment Income Incentive Fee is payable to Oxford Square Management in any calendar quarter in which the “Pre-Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”

(b) 100% of the “Pre-Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch-Up Amount” determined on a quarterly basis by multiplying 2.1875% by OXSQ’s net asset value at the end of such calendar quarter; and

(c) for any quarter in which the “Pre-Incentive Fee Net Investment Income” exceeds the “Catch-Up Amount,” the Net Investment Income Incentive Fee will be 20% of the amount of the “Pre-Incentive Fee Net Investment Income” for such quarter.

c. There is no accumulation of amounts from quarter to quarter for the “Preferred Return Amount,” and accordingly there is no claw back of amounts previously paid to Oxford Square Management if the “Pre-Incentive Fee Net Investment Income” for subsequent quarters is below the quarterly “Preferred Return Amount,” and there is no delay of payment of incentive fees to Oxford Square Management if the “Pre-Incentive Fee Net Investment Income” for prior quarters is below the quarterly “Preferred Return Amount” for the quarter for which the calculation is being made.

d. The calculation of the Company’s Net Investment Income Incentive Fee is subject to a total return requirement that provides that a Net Investment Income Incentive Fee will not be payable to Oxford Square Management except to the extent 20% of the “cumulative net increase in net assets resulting from operations” (which is the amount, if positive, of the sum of the “Pre-Incentive Fee Net Investment Income,” realized gains and losses and unrealized appreciation and depreciation) during the calendar quarter for which such fees are being calculated and the eleven (11) preceding quarters exceeds the cumulative Net Investment Income Incentive Fees accrued and/or paid for such eleven (11) preceding quarters.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 7. RELATED PARTY TRANSACTIONS (cont.)

In the event that the advisory fee calculations under the 2016 Fee Waiver produce a higher combined Base Fee and Net Investment Income Incentive Fee for any quarterly period, the combined fees are set to the original (lower) level, calculated pursuant to the Investment Advisory Agreement. In the event that advisory fee calculations under the 2016 Fee Wavier produce a lower combined Base Fee and Net Investment Income Incentive Fee for that quarterly period, those lower combined fees are adopted for that quarterly period. In either case, the lower level of combined fees is used for that quarter, and, accordingly, the advisory fee payable to Oxford Square Management can only be reduced, and never increased, as a result of the 2016 Fee Waiver.

There were no Net Investment Income Incentive Fees for the three and nine months ended September 30, 2021 and 2020.

There was no Net Investment Income Incentive Fee payable to Oxford Square Management as of September 30, 2021 and December 31, 2020.

Capital Gains Incentive Fee

The Capital Gains Incentive Fee, which is calculated identically under the Investment Advisory Agreement and under the 2016 Fee Waiver, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20% of the Company’s “Incentive Fee Capital Gains,” which consists of its realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation for that calendar year. For accounting purposes only, in order to reflect the theoretical Capital Gains Incentive Fee that would be payable for a given period as if all unrealized gains were realized, the Company will accrue a Capital Gains Incentive Fee based upon net realized gains and unrealized depreciation for that calendar year (in accordance with the terms of the Investment Advisory Agreement), plus unrealized appreciation on investments held at the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of Capital Gains Incentive Fees in subsequent periods. Amounts paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement.

The amount of Capital Gains Incentive Fee expense related to the hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to Oxford Square Management in the event of a complete liquidation of the Company’s portfolio as of period end and the termination of the Investment Advisory Agreement on such date. Also, it should be noted that the Capital Gains Incentive Fee expense fluctuates with the Company’s overall investment results.

There were no Capital Gains Incentive Fees based on hypothetical liquidation for the three and nine months ended September 30, 2021 and 2020. There were no accrued Capital Gains Incentive Fees payable to Oxford Square Management as of September 30, 2021, and December 31, 2020.

Administration Agreement

The Company has also entered into the Administration Agreement with Oxford Funds under which Oxford Funds provides administrative services for the Company. The Company pays Oxford Funds an allocable portion of overhead and other expenses incurred by Oxford Funds on its behalf under the Administration Agreement, including a portion of the rent and the compensation of the chief financial officer, accounting staff and other administrative support personnel, which creates potential conflicts of interest that the Board must monitor. The Company also reimburses Oxford Funds for the costs associated with the functions performed by OXSQ’s Chief Compliance Officer that Oxford Funds pays on the Company’s behalf pursuant to the terms of an agreement between the Company and Alaric Compliance Services, LLC.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 7. RELATED PARTY TRANSACTIONS (cont.)

Oxford Square Management is controlled by Oxford Funds, its managing member. Charles M. Royce, a member of the Board, holds a minority, non-controlling interest in Oxford Square Management. Oxford Funds manages the business and internal affairs of Oxford Square Management. Jonathan H. Cohen, the Company’s Chief Executive Officer, as well as a Director, is the managing member of Oxford Funds. Saul B. Rosenthal, the Company’s President and Chief Operating Officer, is also the President and Chief Operating Officer of Oxford Square Management and a member of Oxford Funds. Messrs. Cohen and Rosenthal together control the equity interests in Oxford Funds.

For the three months ended September 30, 2021 and 2020, the Company incurred approximately $186,000 and $186,000, respectively, in compensation expenses for the services of employees allocated to the administrative activities of the Company, pursuant to the Administration Agreement with Oxford Funds. For the nine months ended September 30, 2021 and 2020, the Company incurred approximately $551,000 and $554,000, respectively, in compensation expenses. In addition, the Company incurred approximately $13,000 and $14,000 for facility costs allocated under the Administration Agreement for the three months ended September 30, 2021 and 2020, respectively. The Company incurred approximately $38,000 and $43,000 for facility costs for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there was approximately $17,000 payable under the Administration Agreement. As of December 31, 2020, there were no amounts payable under the Administration Agreement.

Co-Investment Exemptive Relief

On June 14, 2017, the SEC issued an order permitting the Company and certain of its affiliates to complete negotiated co-investment transactions in portfolio companies, subject to certain conditions (the “Order”). Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are permitted, together with any future BDCs, registered closed-end funds and certain private funds, each of whose investment adviser is the Company’s investment adviser or an investment adviser controlling, controlled by, or under common control with the Company’s investment adviser, to co-invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing the Company’s stockholders with access to a broader array of investment opportunities.

Pursuant to the Order, the Company is permitted to co-invest in such investment opportunities with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of its independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s then-current investment objective and strategies.

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, the Company was permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in its existing portfolio companies with certain private funds managed by the Company’s investment adviser or its affiliates and covered by the Order, even if such private funds had not previously invested in such existing portfolio company. Without this order, private funds would generally not be able to participate in such follow-on investments with the Company unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with the Company. Although the conditional exemptive order has expired, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action to the extent any BDC with an existing co-investment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 8. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net increase/(decrease) in net assets resulting from net investment income and operations per share for the three and nine months ended September 30, 2021 and 2020, respectively:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Net investment income	$	3,981,968	$	4,270,279	$	11,580,601	$	14,972,752
Weighted average common shares outstanding		49,634,535		49,589,607		49,610,734		49,439,478
Net increase in net assets resulting from net investment income per common share	$	0.08	$	0.09	$	0.23	$	0.30
Net increase/(decrease) in net assets resulting from operations	$	11,265,139	$	20,848,768	$	39,556,411	$	(37,953,676	)
Net increase/(decrease) in net assets resulting from operations per common share	$	0.23	$	0.42	$	0.80	$	(0.77	)

NOTE 9. DISTRIBUTIONS

The Company intends to continue to operate so as to qualify to be taxed as a RIC under the Code and, as such, the Company would not be subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify to be taxed as a RIC, the Company is required, among other requirements, to distribute at least 90% of its annual investment company taxable income, as defined by the Code. The amount to be paid out as a distribution each quarter is determined by the Board and is based upon the annual taxable income estimated by the management of the Company. Income calculated in accordance with U.S. federal income tax regulations differs substantially from GAAP income. To the extent that the Company’s cumulative undistributed taxable earnings fall below the amount of distributions declared, however, a portion of the total amount of the Company’s distributions for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.

The Company intends to comply with the applicable provisions of the Code pertaining to RICs to make distributions of taxable income sufficient to relieve it of substantially all federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on such income. The Company will accrue excise tax on estimated excess taxable income, if any, as required.

The Company has adopted an “opt out” distribution reinvestment plan for its common stockholders. As a result, if the Company makes a cash distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of the Company’s common stock, unless they specifically “opt out” of the distribution reinvestment plan so as to receive cash distributions. During the three months ended September 30, 2021, the Company issued 30,853 shares of common stock for approximately $128,000 to stockholders in connection with the distribution reinvestment plan. The Company did not issue any shares of common stock during the three months ended September 30, 2020 in connection with the distribution reinvestment plan. During the nine months ended September 30, 2021 and 2020, the Company issued 65,668 and 42,343 shares, respectively, of common stock for approximately $289,000 and $161,000, respectively, to stockholders in connection with the distribution reinvestment plan. During the three months ended September 30, 2021, as part of the Company’s dividend reinvestment plan for its common stockholders, the Company’s dividend reinvestment administrator did not purchase any shares of common stock in the open market to satisfy the reinvestment portion of the Company’s dividends. During the three months ended September 30, 2020, the Company’s dividend reinvestment administrator purchased 41,198 shares of common stock for approximately $112,000 in the open market to satisfy the reinvestment portion of the Company’s dividends. During the nine months ended September 30, 2021 and 2020, the Company’s dividend reinvestment

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 9. DISTRIBUTIONS (cont.)

administrator purchased 23,202 shares and 129,370 shares, respectively, of common stock for approximately $91,000 and $420,000, respectively, in the open market to satisfy the reinvestment portion of the Company’s dividends. On each of January 29, February 26, March 31, April 30, May 28, June 30, July 30, August 31, and September 30, 2021, the Company paid monthly distributions of approximately $1.7 million, or $0.035 per share.

For U.S. federal income tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. These capital losses can be carried forward for an indefinite period and will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Company had a net long-term capital loss carryforward of $90,816,505 available to be carried forward for an indefinite period. The tax character of distributions for the three and nine months ended September 30, 2021, represented, on an estimated basis, $0.085 and $0.259 per share, respectively, from ordinary income and $0.020 and $0.056 per share, respectively, as a tax return of capital. For the three and nine months ended September 30, 2021, the amounts and sources of distributions reported are only estimates (based on an average of the reported tax character historically) and are not being provided for U.S. tax reporting purposes. Because the Company believes the historical tax characteristics of distributions is the most useful information which is readily available, the Company has used the average of all years from inception of the Company in providing the estimates herein. However, the timing and character of distributions for federal income tax purposes (which are determined in accordance with the U.S. federal tax rules which may differ from GAAP) may be materially different than the historical information the Company used in providing the estimates herein. The final determination of the source of all distributions in 2021 will be made after year-end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099-DIV notice. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations.

NOTE 10. NET ASSET VALUE PER SHARE

The Company’s net asset value per share as of September 30, 2021, and December 31, 2020, was $5.03 and $4.55, respectively. In determining the Company’s net asset value per share, the Board determined in good faith the fair value of the Company’s portfolio investments for which reliable market quotations are not readily available.

NOTE 11. SHARE ISSUANCE PROGRAM

On August 1, 2019, the Company entered into an Equity Distribution Agreement with Ladenburg Thalmann & Co. through which the Company may offer for sale, from time to time, up to $150.0 million of the Company’s common stock through an At-the-Market (“ATM”) offering. For the three and nine months ended September 30, 2021, the Company did not sell any shares of common stock pursuant to the ATM offering. For the three ended September 30, 2020, the Company did not sell any shares of common stock pursuant to the ATM offering. The Company sold a total of 1,098,277 shares of common stock pursuant to the ATM during the nine months ended September 30, 2020. The total amount of capital raised net of underwriting fees and offering costs was approximately $5.8 million during the nine months ended September 30, 2020.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 12. INVESTMENT INCOME

The following table sets forth the components of investment income for the three and nine months ended September 30, 2021 and 2020, respectively:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020
Interest Income
Stated interest income	$	4,314,099	$	4,019,584
Original issue discount and market discount income		183,518		402,314
Payment-in-kind income		—		63,775
Discount income derived from unscheduled remittances at par		29,897		6,974
Total interest income	$	4,527,514	$	4,492,647
Income from securitization vehicles	$	5,071,854	$	3,568,516
Commitment, amendment and other fee income
Fee letters	$	112,323	$	162,782
Loan prepayment and bond call fees		—		—
All other fees		85,940		1,194
Total commitment, amendment and other fee income	$	198,263	$	163,976
Total investment income	$	9,797,631	$	8,225,139

	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Interest Income
Stated interest income	$	11,286,252	$	13,583,930
Original issue discount and market discount income		548,820		985,420
Payment-in-kind income		—		187,080
Discount income derived from unscheduled remittances at par		516,868		263,854
Total interest income	$	12,351,940	$	15,020,284
Income from securitization vehicles	$	13,849,299	$	11,545,539
Commitment, amendment and other fee income
Fee letters	$	333,193	$	489,291
Loan prepayment and bond call fees		300,000		200,000
All other fees		164,895		49,334
Total commitment, amendment and other fee income	$	798,088	$	738,625
Total investment income	$	26,999,327	$	27,304,448

The 1940 Act requires that a BDC offer significant managerial assistance to its portfolio companies. The Company may receive fee income for managerial assistance it renders to portfolio companies in connection with its investments. For the three and nine months ended September 30, 2021 and 2020, respectively, the Company received no fee income for managerial assistance.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 13. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company enters into a variety of undertakings containing a variety of warranties and indemnifications that may expose the Company to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote. As of September 30, 2021, the Company had an approximately $5.4 million commitment to purchase a senior secured note investment. Such outstanding commitment is summarized in the following table:

Name of Portfolio Company		Investment Type		Commitment
RSA Security, LLC		Delayed Draw 2nd Lien Term Loan		$	5,371,000

The Company is not currently subject to any material legal proceedings. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings, if any, cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its consolidated results of operations and financial condition.

NOTE 14. FINANCIAL HIGHLIGHTS

Financial highlights for the three and nine months ended September 30, 2021 and 2020, respectively, are as follows:

	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Per Share Data
Net asset value at beginning of period	$	4.91		$	3.54		$	4.55		$	5.12
Net investment income(1)		0.08			0.09			0.23			0.30
Net realized and unrealized (losses)/gains(2)		0.15			0.33			0.57			(1.06	)
Net (decrease)/increase in net asset value from operations		0.23			0.42			0.80			(0.76	)
Distributions per share from net investment income		(0.09	)		(0.09	)		(0.26	)		(0.42	)
Tax return of capital distributions(3)		(0.02	)		(0.02	)		(0.06	)		(0.09	)
Total distributions		(0.11	)		(0.11	)		(0.32	)		(0.51	)
Effect of shares issued/repurchased, gross		—			—			—			—
Net asset value at end of period	$	5.03		$	3.85		$	5.03		$	3.85
Per share market value at beginning of period	$	4.91		$	2.80		$	3.05		$	5.44
Per share market value at end of period	$	4.05		$	2.47		$	4.05		$	2.47
Total return based on Market Value(4)		(15.52	)%		(8.22	)%		42.66	%		(46.71	)%
Total return based on Net Asset Value(5)		4.58	%		11.72	%		17.47	%		(14.90	)%
Shares outstanding at end of period		49,655,275			49,589,607			49,655,275			49,589,607

Ratios/Supplemental Data(8)
Net assets at end of period (000’s)	$	249,645		$	190,968		$	249,645		$	190,968
Average net assets (000’s)	$	246,554		$	183,148		$	241,062		$	186,744
Ratio of expenses to average net assets(6)		9.44	%		8.64	%		8.53	%		8.80	%
Ratio of net investment income to average net assets(6)		6.46	%		9.33	%		6.41	%		10.69	%
Portfolio turnover rate(7)		1.39	%		3.22	%		8.20	%		15.71	%

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 14. FINANCIAL HIGHLIGHTS (cont.)

____________

(1) Represents per share net investment income for the period, based upon weighted average shares outstanding.

(2) Net realized and unrealized gains/(losses) include rounding adjustments to reconcile change in net asset value per share.

(3) Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The ultimate tax character of the Company’s earnings cannot be determined until tax returns are prepared after the end of the fiscal year. The amounts and sources of distributions reported are only estimates (based on an average of the reported tax character historically) and are not being provided for U.S. tax reporting purposes.

(4) Total return based on market value equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming distribution reinvestment prices obtained under the Company’s distribution reinvestment plan, excluding any discounts. Total return is not annualized.

(5) Total return based on net asset value equals the increase or decrease of ending net asset value over beginning net asset value, plus distributions, divided by the beginning net asset value. Total return is not annualized.

(6) Annualized.

(7) Portfolio turnover rate is calculated using the lesser of the year-to-date cash investment sales and debt repayments or year-to-date cash investment purchases over the average of the total investments at fair value.

(8) The following table provides supplemental performance ratios (annualized) measured for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Ratio of expenses to average net assets:
Operating expenses before incentive fees	9.44	%	8.64	%	8.53	%	8.80	%
Net investment income incentive fees	—	%	—	%	—	%	—	%
Ratio of expenses, excluding interest expense to average net assets	4.42	%	4.47	%	4.43	%	4.53	%

NOTE 15. RISKS AND UNCERTAINTIES

The interests the Company has acquired in CLO vehicles are generally thinly traded or have only a limited trading market. CLO vehicles are typically privately offered and sold, even in the secondary market. As a result, investments in CLO vehicles may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO vehicles carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the fact that the Company’s investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO vehicle or unexpected investment results. The Company’s net asset value may also decline over time if the Company’s principal recovery with respect to CLO equity investments is less than the price that the Company paid for those investments.

The Company places its cash in an overnight money market account and, at times, cash and cash equivalents may exceed the Federal Deposit Insurance Corporation insured limit. In addition, the Company’s portfolio may be concentrated in a limited number of portfolio companies, which will subject the Company to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that the Company holds or if those sectors experience a market downturn.

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OXFORD SQUARE CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(unaudited)

NOTE 16. SUBSEQUENT EVENTS

The following distributions payable to stockholders are shown below:

Date Declared	Record Date	Payable Date	Per Share Distribution Amount Declared
July 22, 2021	October 15, 2021	October 29, 2021	$0.035
July 22, 2021	November 16, 2021	November 30, 2021	$0.035
July 22, 2021	December 17, 2021	December 31, 2021	$0.035
October 22, 2021	January 17, 2021	January 31, 2021	$0.035
October 22, 2021	February 14, 2021	February 28, 2021	$0.035
October 22, 2021	March 17, 2021	March 31, 2021	$0.035

The Company’s management evaluated subsequent events through the date of issuance of these consolidated financial statements and noted no other events that necessitate adjustments to or disclosure in the financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Oxford Square Capital Corp., 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. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

• our future operating results, including our ability to achieve objectives as a result of the current COVID-19 pandemic;

• our business prospects and the prospects of our portfolio companies;

• the impact of investments that we expect to make;

• our contractual arrangements and relationships with third parties;

• the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

• the ability of our portfolio companies and CLO investments to achieve their objectives, including as a result of the COVID-19 pandemic;

• the valuation of our investments in portfolio companies and CLOs, particularly those having no liquid trading market, and the impact of the COVID-19 pandemic thereon;

• market conditions and our ability to access alternative debt markets and additional debt and equity capital, and the impact of the COVID-19 pandemic thereon;

• our expected financings and investments;

• the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our portfolio companies and CLO investments and the impact of the COVID-19 pandemic thereon; and

• the ability of our investment adviser to locate suitable investments for us and monitor and administer our investments and the impact of the COVID-19 pandemic thereon.

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

• an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio companies’ and CLO investments ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies and CLO investments;

• a contraction of available credit and/or an inability to access the equity markets, including as a result of the current COVID-19 pandemic, could impair our lending and investment activities;

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

• currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and

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• the risks, uncertainties and other factors we identify in Item 1A. — Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

Except where the context requires otherwise, the terms “OXSQ,” “Company,” “we,” “us” and “our” refer to Oxford Square Capital Corp. together with its subsidiary Oxford Square Funding 2018, LLC (“OXSQ Funding”), for the periods during which it was held; “Oxford Square Management” refers to Oxford Square Management, LLC; and “Oxford Funds” refers to Oxford Funds, LLC.

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.

OVERVIEW

Our investment objective is to maximize our portfolio’s total return. Our primary focus is to seek an attractive risk-adjusted total return by investing primarily in corporate debt securities and in collateralized loan obligation (“CLO”), which are structured finance investments that own corporate debt securities. CLO investments may also include warehouse facilities, which are early-stage CLO vehicles intended to aggregate loans that may be used to form the basis of a traditional CLO vehicle. We operate as a closed-end, non-diversified management investment company and have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We have elected to be treated for tax purposes as a regulated investment company (“RIC”), under the Internal Revenue Code of 1986, as amended (the “Code”).

Our investment activities are managed by Oxford Square Management, LLC (“Oxford Square Management”), a registered investment adviser under the Investment Advisers Act of 1940, as amended. Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member and a related party, Charles M. Royce, a member of Oxford Square Capital Corp.’s Board of Directors (the “Board”) who holds a minority, non-controlling interest in Oxford Square Management. Jonathan H. Cohen, our Chief Executive Officer, and Saul B. Rosenthal, our President, are the controlling members of Oxford Funds. Under an investment advisory agreement (the “Investment Advisory Agreement”), we have agreed to pay Oxford Square Management an annual base investment advisory fee (the “Base Fee”) calculated on gross assets, and an incentive fee based upon our performance. Under an amended and restated administration agreement (the “Administration Agreement”), we have agreed to pay or reimburse Oxford Funds, as administrator, for certain expenses incurred in operating the Company. Our executive officers and directors, and the executive officers of Oxford Square Management and Oxford Funds, serve or may serve as officers and directors of entities that operate in a line of business similar to our own. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.

We generally expect to invest between $5 million and $50 million in each of our portfolio companies, although this investment size may vary proportionately as the size of our capital base changes and market conditions warrant. We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of September 30, 2021, our debt investments had stated interest rates of between 3.83% and 10.25% and maturity dates of between 2 and 91 months. In addition, our portfolio had a weighted average annualized yield on debt investments of approximately 7.5% as of September 30, 2021.

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The weighted average annualized yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our fees and expenses. The weighted average annualized yield was computed using the effective interest rates as of September 30, 2021, including accretion of original issue discount (“OID”). There can be no assurance that the weighted average annualized yield will remain at its current level.

We have historically borrowed funds to make investments and may continue to borrow funds to make investments. As a result, we are exposed to the risks of leverage, which may be considered a speculative investment technique. Borrowings, also known as leverage, magnify the potential for gain and loss on amounts invested and therefore increase the risks associated with investing in our securities. In addition, the costs associated with our borrowings, including any increase in the management fee payable to Oxford Square Management, will be borne by our common stockholders.

In addition, as a BDC under the 1940 Act, we are required to make available significant managerial assistance, for which we may receive fees, to our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. These fees would be generally non-recurring, however in some instances they may have a recurring component. We have received no fee income for managerial assistance to date.

To the extent possible, we will generally seek to invest in loans that are collateralized by a security interest in the borrower’s assets or guaranteed by a principal to the transaction. Interest payments, if not deferred, are normally payable quarterly with most debt investments having scheduled principal payments on a monthly or quarterly basis. When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock.

During the quarter ended September 30, 2021, the U.S. loan market modestly strengthened versus the quarter ended June 30, 2021. U.S. loan prices, as defined by the S&P/LSTA Leveraged Loan Index, increased from 98.37% of par as of June 30, 2021 to 98.62% of par on September 30, 2021. As of September 30, 2021, the Company’s Board of Directors approved the fair value of the Company’s investment portfolio of approximately $421.1 million in good faith in accordance with the Company’s valuation procedures.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified investment valuation and investment income as critical accounting policies.

Investment Valuation

We fair value our investment portfolio in accordance with the provisions of ASC 820, Fair Value Measurement and Disclosure (“ASC 820”). Estimates made in the preparation of our consolidated financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We believe that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make.

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develop its own assumptions. We consider the attributes of current market conditions on an on-going basis and have determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, almost all of our investments are based upon “Level 3” inputs as of September 30, 2021.

Our Board determines the value of our investment portfolio each quarter. In connection with that determination, members of Oxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information. We also engage third-party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although our Board ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the consolidated statement of operations as net change in unrealized appreciation/depreciation.

Syndicated Loans (Including Senior Secured Notes)

In accordance with ASC 820-10, our valuation procedures specifically provide for the review of indicative quotes supplied by the large agent banks that make a market for each security. However, the marketplace from which we obtain indicative bid quotes for purposes of determining the fair value of our syndicated loan investments has shown attributes of illiquidity as described by ASC-820-10. During such periods of illiquidity, when we believe that the non-binding indicative bids received from agent banks for certain syndicated investments that we own may not be determinative of their fair value or when no market indicative quote is available, we may engage third-party valuation firms to provide assistance in valuing certain syndicated investments that we own. The third-party valuation firms may use the income or market approach in arriving at a valuation. Unobservable inputs utilized could include discount rates derived from estimated credit spreads and earnings before interest, taxes, depreciation, and amortization multiples. In addition, Oxford Square Management analyzes each syndicated loan by reviewing the company’s financial statements, covenant compliance and recent trading activity in the security (if known), and other business developments related to the portfolio company. All available information, including non-binding indicative bids which may not be determinative of fair value, is presented to the Valuation Committee to consider in its determination of fair value. In some instances, there may be limited trading activity in a security even though the market for the security is considered not active. In such cases the Valuation Committee will consider the number of trades, the size and timing of each trade, and other circumstances around such trades, to the extent such information is available, in its determination of fair value. The Valuation Committee will evaluate the impact of such additional information, and factor it into its consideration of the fair value that is indicated by the analysis provided by third-party valuation firms, if any.

Collateralized Loan Obligations — Debt and Equity

We have acquired a number of debt and equity positions in CLO investment vehicles and CLO warehouse investments. These investments are special purpose financing vehicles. In valuing such investments, we consider the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period-end, as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles. We also consider those instances in which the record date for an equity distribution payment falls on the last day of the period, and the likelihood that a prospective purchaser would require a downward adjustment to the indicative price representing substantially all of the pending distribution. Additional factors include any available information on other relevant transactions including firm bids and offers in the market and information resulting from bids-wanted-in-competition. In addition, we consider the operating metrics of the specific investment vehicle, including compliance with collateralization tests, defaulted and restructured securities, and payment defaults, if any. Oxford Square Management or the Valuation Committee may request an additional analysis by a third-party firm to assist in the valuation process of CLO investment vehicles. All information is presented to our Board for its determination of fair value of these investments.

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Bilateral Investments (Including Equity)

Bilateral investments (as defined below) for which market quotations are readily available are valued by an independent pricing agent or market maker. If such market quotations are not readily available, under the valuation procedures approved by our Board upon the recommendation of the Valuation Committee, a third-party valuation firm will prepare valuations for each of our bilateral investments that, when combined with all other investments in the same portfolio company, (i) have a value as of the previous quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, and (ii) have a value as of the current quarter of greater than or equal to 2.5% of its total assets as of the previous quarter, after taking into account any repayment of principal during the current quarter. In addition, in those instances where a third-party valuation is prepared for a portfolio investment which meets the parameters noted in (i) and (ii) above, the frequency of those third-party valuations is based upon the grade assigned to each such security under its credit grading system as follows: Grade 1, at least annually; Grade 2, at least semi-annually; Grades 3, 4, and 5, at least quarterly. Bilateral investments which do not meet the parameters in (i) and (ii) above are not required to have a third-party valuation and, in those instances, a valuation analysis will be prepared by Oxford Square Management. Oxford Square Management also retains the authority to seek, on our behalf, additional third party valuations with respect to both our bilateral portfolio securities and our syndicated loan investments. Our Board retains ultimate authority as to the third-party review cycle as well as the appropriate valuation of each investment.

See “Note 4. Fair Value” in the notes to our consolidated financial statements for more information on investment valuation and our portfolio of investments.

Investment Income

Interest Income

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to restructuring such that the interest income is deemed to be collectible. We generally restore non-accrual loans to accrual status when past due principal and interest is paid and, in our judgment, is likely to remain current. As of September 30, 2021, we had three debt investments that were on non-accrual status.

Interest income also includes a payment-in-kind (“PIK”) component on certain investments in our portfolio. Refer to the section below, “Payment-In-Kind,” for a description of PIK income and its impact on interest income.

Payment-In-Kind

We have debt and preferred stock investments in our portfolio that contain contractual PIK provisions. PIK interest and preferred stock dividends are computed at their contractual rates and are accrued into income and added to the principal balances on the capitalization dates. Upon capitalization, the PIK portions of the investments are valued at their respective fair values. If we believe that a PIK is not fully expected to be realized, the PIK investment would be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends would be reversed from the related receivable through interest or dividend income, respectively. PIK investments on non-accrual status are restored to accrual status once it becomes probable that such PIK will be ultimately collectible in cash. For the three and nine months ended September 30, 2021, no PIK preferred stock dividends were recognized as dividend income.

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Income from Securitization Vehicles and Equity Investments

Income from investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective yield method in accordance with the provisions of ASC 325-40, based upon estimated cash flows, amounts and timing including those CLO equity investments that have not made their inaugural distribution for the relevant period end. We monitor the expected residual payments, and effective yield is determined and updated periodically, as needed. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax-basis investment income and from the cash distributions actually received by us during the period.

Other Income

Other income includes prepayment, amendment, and other fees earned by our loan investments, distributions from fee letters and success fees associated with portfolio investments. Distributions from fee letters are an enhancement to the return on a CLO equity investment and are based upon a percentage of the collateral manager’s fees above the amortized cost, and are recorded as other income when earned. We may also earn success fees associated with our investments in certain securitization vehicles or CLO warehouse facilities, which are contingent upon a repayment of the warehouse by a permanent CLO structure; such fees are earned and recognized when the repayment is completed.

Recently Issued Accounting Standards

See “Note 3. Summary of Significant Account Policies” to our consolidated financial statements for a description of recent accounting pronouncements, including the impact on our consolidated financial statements.

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

The total fair value of our investment portfolio was approximately $421.1 million and $294.7 million as of September 30, 2021, and December 31, 2020, respectively. The increase in the value of investments during the nine month period ended September 30, 2021, was due primarily to net unrealized appreciation on our investment portfolio of approximately $39.2 million (which incorporates reductions to CLO equity cost value of $30.1 million) and $155.6 million of investments acquired, which was partially offset by $22.7 million of debt repayments, $4.9 million of sales of investments and realized losses of $11.2 million.

A reconciliation of the investment portfolio for the nine months ended September 30, 2021 and the year ended December 31, 2020 follows:

($ in millions)	September 30, 2021			December 30, 2020
Beginning investment portfolio	$	294.7		$	364.8
Portfolio investments acquired		155.6			93.8
Debt repayments		(22.7	)		(80.4	)
Sales of securities		(4.9	)		(54.2	)
Reductions to CLO equity cost value(1)		(30.1	)		(13.0	)
Non-cash interest income due to PIK		—			0.3
Accretion of discounts on investments		0.5			1.4
Net change in unrealized appreciation/(depreciation) on investments		39.2			(9.8	)
Net realized loss on investments		(11.2	)		(8.2	)
Ending investment portfolio(2)	$	421.1		$	294.7

____________

(1) For the nine months ended September 30, 2021, the reduction to cost value on our CLO equity investments of approximately $30.1 million represented the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, for the nine months ended September 30, 2021, of approximately $43.6 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $13.5 million. For the year ended December 31, 2020,

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the reduction to cost value on our CLO equity investments of approximately $13.0 million represented the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, for the year ended December 31, 2020, of approximately $28.4 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $15.4 million.

(2) Totals may not sum due to rounding.

During the nine months ended September 30, 2021, we purchased approximately $155.6 million in portfolio investments, which includes additional investments of approximately $52.0 million in existing portfolio companies and approximately $103.6 million in new portfolio companies. During the year ended December 31, 2020, we purchased approximately $93.8 million in portfolio investments, including additional investments of approximately $22.1 million in existing portfolio companies and approximately $71.8 million in new portfolio companies.

In certain instances, we receive investment proceeds based on the scheduled amortization of the outstanding loan balances and from the sales of portfolio investments. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period.

For the nine months ended September 30, 2021 and the year ended December 31, 2020, we recognized proceeds from the sales of securities of approximately $4.9 million and $54.2 million, respectively. Also, during the nine months ended September 30, 2021 and the year ended December 31, 2020, we had debt repayments of approximately $22.7 million and $80.4 million, respectively.

As of September 30, 2021, we had investments in debt securities of, or loans to, 19 portfolio companies, with a fair value of approximately $257.1 million, and CLO equity investments of approximately $163.9 million.

As of December 31, 2020, we had investments in debt securities of, or loans to, 16 portfolio companies, with a fair value of approximately $172.2 million, and CLO equity investments of approximately $122.5 million. Interest income on our debt investments included approximately $0.3 million in PIK interest, which, as described in “— Overview” above, is added to the carrying value of our investments, reduced by repayments of principal.

The following table indicates the quarterly portfolio investment activity for the past seven quarters:

Three Months Ended ($ in millions)	Purchases of Investments		Debt Repayments		Reductions to CLO Equity Cost(1)		Sales of Investments
September 30, 2021	$	23.1	$	5.7	$	8.6	$	—
June 30, 2021		99.5		0.6		15.5		3.0
March 31, 2021		32.9		16.4		6.0		1.8
Total 2021 to date(2)	$	155.6	$	22.7	$	30.1	$	4.9
December 31, 2020	$	46.9	$	51.1	$	6.4	$	25.4
September 30, 2020		18.3		0.6		2.0		8.3
June 30, 2020		21.3		16.7		2.6		9.5
March 31, 2020		7.4		12.0		2.0		11.1
Total 2020	$	93.8	$	80.4	$	13.0	$	54.2

____________

(1) Represents reductions to CLO equity cost value (representing distributions received, or entitled to be received, in excess of effective yield interest income and amortized cost adjusted CLO fee note income).

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The following table shows the fair value of our portfolio of investments by asset class as of September 30, 2021 and December 31, 2020:

	September 30, 2021				December 31, 2020
($ in millions)	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
Senior Secured Notes	$	257.1	61.1	%	$	172.2	58.4	%
CLO Equity		163.9	38.9	%		122.5	41.6	%
Equity and Other Investments		0.1	0.0	%		—	0.0	%
Total	$	421.1	100.0	%	$	294.7	100.0	%

Qualifying assets must represent at least 70.0% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of September 30, 2021, we held qualifying assets that represented 62.5% of our total assets. No additional non-qualifying assets were acquired during the periods when qualifying assets were less than 70.0% of the total assets.

The following table shows our portfolio of investments by industry at fair value, as of September 30, 2021 and December 31, 2020:

	September 30, 2021				December 31, 2020
	Investments at Fair Value		Percentage of Fair Value		Investments at Fair Value		Percentage of Fair Value
	($ in millions)				($ in millions)
Structured finance(1)	$	163.9	38.9	%	$	122.5	41.6	%
Business services		93.4	22.2	%		60.4	20.5	%
Healthcare		64.1	15.2	%		41.7	14.1	%
Software		34.6	8.2	%		13.3	4.5	%
Diversified insurance		27.0	6.4	%		10.8	3.7	%
Telecommunication services		15.8	3.8	%		11.8	4.0	%
Plastics Manufacturing		14.7	3.5	%		7.0	2.4	%
Utilities		7.5	1.8	%		7.2	2.4	%
IT consulting		0.1	0.0	%		—	—	%
Aerospace and defense		—	0.0	%		5.4	1.8	%
Education		—	0.0	%		14.6	5.0	%
Total	$	421.1	100.0	%	$	294.7	100.0	%

____________

(1) Reflects our equity investments in CLOs as of September 30, 2021, and December 31, 2020, respectively.

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PORTFOLIO GRADING

We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of September 30, 2021 and December 31, 2020, our portfolio had a weighted average grade of 2.0 and 2.1, respectively, based upon the fair value of the debt investments in the portfolio. Equity securities and investments in CLOs are not graded.

As of September 30, 2021 and December 31, 2020, our debt investment portfolio was graded as follows:

($ in millions)		September 30, 2021
Grade	Summary Description	Principal Value		Percentage of Debt Portfolio		Portfolio at Fair Value		Percentage of Debt Portfolio
1	Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue.	$	—	—	%	$	—	—	%
2	Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche.		259.6	90.7	%		253.4	98.6	%
3	Closer monitoring is required. Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche.		—	—	%		—	—	%
4	A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche.		—	—	%		—	—	%
5	Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status.		26.5	9.3	%		3.7	1.4	%
	Total	$	286.1	100.0	%	$	257.1	100.0	%

($ in millions)		December 31, 2020
Grade	Summary Description	Principal Amount		Percentage of Debt Portfolio		Portfolio at Fair Value		Percentage of Debt Portfolio
1	Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue.	$	—	—	%	$	—	—	%
2	Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche.		167.9	80.5	%		156.1	90.7	%
3	Closer monitoring is required. Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche.		14.3	6.8	%		11.8	6.9	%
4	A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status. Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche.		—	—	%		—	—	%
5	Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status.		26.4	12.7	%		4.2	2.5	%
	Total(1)	$	208.5	100.0	%	$	172.2	100.0	%

____________

(1) Totals may not sum due to rounding.

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We expect that a portion of our investments will be in the grades 3, 4 or 5 categories from time to time, and, as such, we will be required to work with troubled portfolio companies to improve their business and protect our investment. The number and amount of investments included in grades 3, 4 or 5 may fluctuate from period to period.

RESULTS OF OPERATIONS

Set forth below is a comparison of our results of operations for the three and nine months ended September 30, 2021 to the three and nine months ended September 30, 2020.

Investment Income

Investment income for the three months ended September 30, 2021 and September 30, 2020 was approximately $9.8 million and $8.2 million, respectively. Investment income for the nine months ended September 30, 2021 and September 30, 2020 was approximately $27.0 million and $27.3 million, respectively. The following tables set forth the components of investment income for the three and nine months ended September 30, 2021 and September 30, 2020:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020
Interest Income
Stated interest income	$	4,314,099	$	4,019,584
Original issue discount and market discount income		183,518		402,314
Payment-in-kind income		—		63,775
Discount income derived from unscheduled remittances at par		29,897		6,974
Total interest income	$	4,527,514	$	4,492,647
Income from securitization vehicles	$	5,071,854	$	3,568,516
Commitment, amendment and other fee income
Fee letters		112,323		162,782
Loan prepayment and bond call fees		—		—
All other fees		85,940		1,194
Total commitment, amendment and other fee income	$	198,263	$	163,976
Total investment income	$	9,797,631	$	8,225,139

	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Interest Income
Stated interest income	$	11,286,252	$	13,583,930
Original issue discount and market discount income		548,820		985,420
Payment-in-kind income		—		187,080
Discount income derived from unscheduled remittances at par		516,868		263,854
Total interest income	$	12,351,940	$	15,020,284
Income from securitization vehicles	$	13,849,299	$	11,545,539
Commitment, amendment and other fee income
Fee letters	$	333,193	$	489,291
Loan prepayment and bond call fees		300,000		200,000
All other fees		164,895		49,334
Total commitment, amendment and other fee income	$	798,088	$	738,625
Total investment income	$	26,999,327	$	27,304,448

The increase in total investment income for the three months ended September 30, 2021 was primarily due to an increase in income from securitization vehicles. The decrease in total investment income for the nine months ended September 30, 2021 was primarily due to a decrease in interest income, partially offset by an increase in income from securitization vehicles.

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The total principal value of income producing debt investments as of September 30, 2021 and September 30, 2020 was approximately $259.6 million and $228.3 million, respectively. As of September 30, 2021, our debt investments had a range of stated interest rates of 3.83% and 10.25% and maturity dates of between 2 and 91 months compared to a range of stated interest rates of 3.91% to 10.25% and maturity dates between 8 and 130 months as of September 30, 2020. In addition, our total debt portfolio had a weighted average yield on debt investments of approximately 7.5% as of September 30, 2021, compared to approximately 8.3% as of September 30, 2020. As of September 30, 2021, three debt investments were on non-accrual status with a combined fair value of approximately $3.7 million and total principal value of approximately $26.5 million.

Income from securitization vehicles for the three months ended September 30, 2021 and September 30, 2020, was approximately $5.1 million and $3.6 million, respectively. Income from securitization vehicles for the nine months ended September 30, 2021 and September 30, 2020, was approximately $13.8 million and $11.5 million, respectively. The total principal outstanding on our investments in CLOs as of September 30, 2021 and September 30, 2020, was approximately $370.1 million and $306.6 million, respectively. The weighted average yield on CLO equity investments as of September 30, 2021 and September 30, 2020, was approximately 9.1% and 7.7%, respectively.

Operating Expenses

Total expenses for the three months ended September 30, 2021 and 2020 were approximately $5.8 million and $4.0 million, respectively. Total expenses for the nine months ended September 30, 2021 and 2020, were approximately $15.4 million and $12.3 million, respectively. Those amounts consisted of base management fees, interest expense, professional fees, compensation expense, general and administrative expenses, and incentive fees.

The Base Fee for the three months ended September 30, 2021 was approximately $1.8 million compared with $1.1 million for the three months ended September 30, 2020. The Base Fee for the nine months ended September 30, 2021 was approximately $4.6 million compared with $3.4 million for the nine months ended September 30, 2020. The increase for the three and nine months ended September 30, 2021 was due largely to an increase in the weighted average gross assets.

Interest expense for the three and nine months ended September 30, 2021, was approximately $3.1 million and $7.4 million, respectively, which primarily relates to our 5.50% unsecured notes due 2028 (the “5.50% Unsecured Notes), 6.25% unsecured notes due 2026 (the “6.25% Unsecured Notes”) and 6.50% unsecured notes due 2024 (the “6.50% Unsecured Notes”), compared to interest expense of approximately $1.9 million and $6.0 million for the three and nine months ended September 30, 2020, which relates to our 6.25% Unsecured Notes, 6.50% Unsecured Notes, the repurchase transaction facility (the “Repo Facility”) and the credit facility entered into between Oxford Square Funding 2018, LLC, a special purpose vehicle and wholly-owned subsidiary of OXSQ, and Citibank, N.A. (the “Credit Facility”). The increase for the three and nine months ended September 30, 2021 was a result of the issuance of the 5.50% Unsecured Notes in May 2021, partially offset by the retirement of the Repo Facility and the Credit Facility.

Professional fees, consisting of legal, consulting, valuation, audit and tax fees, were approximately $0.3 million for the three months ended September 30, 2021, compared to approximately $0.3 million for the three months ended September 30, 2020. Professional fees were approximately $1.6 million for the nine months ended September 30, 2021, compared to approximately $1.2 million for the nine months ended September 30, 2020. The increase for the three and nine months ended September 30, 2021 was primarily due to higher legal fees.

Compensation expense was approximately $0.2 million for the three months ended September 30, 2021, compared to $0.2 million for the three months ended September 30, 2020. Compensation expense was approximately $0.6 million for the nine months ended September 30, 2021, compared to $0.6 million for the nine months ended September 30, 2020. Compensation expense reflects the allocation of compensation expenses for the services of our Chief Financial Officer, accounting personnel, and other administrative support staff.

General and administrative expenses, consisting primarily of directors’ fees, insurance, listing fees, transfer agent and custodian fees, office supplies, facilities costs and other expenses, were approximately $0.4 million for the three months ended September 30, 2021, compared to $0.4 million for the three months ended September 30, 2020. General and administrative expenses were approximately $1.3 million for the nine months ended September 30, 2021, compared to $1.2 million for the nine months ended September 30, 2020. Office supplies, facilities costs and other expenses are allocated to us under the terms of the Administration Agreement.

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Incentive Fees

There was no net investment income incentive fee (“Net Investment Income Incentive Fee”) recorded for the three and nine months ended September 30, 2021 and 2020 due to the total return requirement. The Net Investment Income Incentive Fee is calculated and payable quarterly in arrears based on the amount by which (x) the “Pre-Incentive Fee Net Investment Income” for the immediately preceding calendar quarter exceeds (y) the “Preferred Return Amount” for the calendar quarter. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income accrued during the calendar quarter minus our operating expenses for the quarter (including the Base Fee, expenses payable under the Administration Agreement with Oxford Funds, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). For more information, see “Note 7. Related Party Transactions” in the notes to our consolidated financial statements.

The expense attributable to the capital gains incentive fee (the “Capital Gains Incentive Fee”), as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period. That expense (or the reversal of such an expense) related to that hypothetical liquidation of the portfolio (and assuming no other changes in realized or unrealized gains and losses) would only become payable to our investment adviser in the event of a complete liquidation of our portfolio as of period end and the termination of the Investment Advisory Agreement on such date. For the three and nine months ended September 30, 2021 and 2020, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio.

The amount of the Capital Gains Incentive Fee which will actually be payable is determined in accordance with the terms of the Investment Advisory Agreement and is calculated as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). The terms of the Investment Advisory Agreement state that the Capital Gains Incentive Fee calculation is based on net realized gains, if any, offset by gross unrealized depreciation for the calendar year. No effect is given to gross unrealized appreciation in this calculation. For the three and nine months ended September 30, 2021 and 2020, such an accrual was not required under the terms of the Investment Advisory Agreement.

Realized and Unrealized Gains/Losses on Investments

For the three months ended September 30, 2021, we recognized net realized gains on investments of approximately $1.7 million, which reflects additional proceeds received in excess of cost from a CLO equity investment, partially offset by a realized loss incurred from the extinguishment of a CLO equity side letter related investment.

For the three months ended September 30, 2021, our net change in unrealized appreciation was approximately $5.6 million, composed of $14.0 million in gross unrealized appreciation, $8.7 million in gross unrealized depreciation and approximately $0.3 million relating to the reversal of prior period net unrealized depreciation as investment gains were realized. This includes net unrealized appreciation of approximately $8.6 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $13.6 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $5.0 million.

The most significant components of the net change in unrealized appreciation during the three months ended September 30, 2021, were as follows (in millions):

Portfolio Company	Net Change in Unrealized Appreciation (Depreciation)
Nassau 2019-I, Ltd.	$	2.6
Sound Point CLO XVI, Ltd.		2.2
Telos CLO 2014-5, Ltd.		1.7
Westcott Park CLO, Ltd.		(2.2	)
Premiere Global Services, Inc.		(4.1	)
Net all other		5.4
Total	$	5.6

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For the nine months ended September 30, 2021, we recognized net realized losses on investments of approximately $11.2 million, which primarily reflects the extinguishment of a debt investment which was previously on non-accrual status.

For the nine months ended September 30, 2021, our net change in unrealized appreciation was approximately $39.2 million, composed of $40.3 million in gross unrealized appreciation, $14.3 million in gross unrealized depreciation and approximately $13.2 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized. This includes net unrealized appreciation of approximately $30.1 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $43.6 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $13.5 million.

The most significant components of the net change in unrealized appreciation during the nine months ended September 30, 2021, were as follows (in millions):

Portfolio Company	Net Change in Unrealized Appreciation (Depreciation)
Imagine! Print Solutions, Inc.	$	13.4
Sound Point CLO XVI, Ltd.		6.5
Global Tel Link Corp.		4.0
Telos CLO 2014-5, Ltd.		3.7
Premiere Global Services, Inc.		(12.2	)
Net all other		23.8
Total	$	39.2

Net Increase in Net Assets Resulting from Net Investment Income

Net investment income for the three months ended September 30, 2021 and September 30, 2020 was approximately $4.0 million and $4.3 million, respectively. Net investment income for the nine months ended September 30, 2021 and September 30, 2020 was approximately $11.6 million and $15.0 million, respectively. The decrease in net investment income was primarily due to a decrease in interest income and an increase in interest expense, partially offset by an increase in income from securitization vehicles and investments.

For the three and nine months ended September 30, 2021, the net increase in net assets resulting from net investment income per common share was $0.08 and $0.23 (basic and diluted), compared to the net increase in net assets resulting from net investment income per share of $0.09 and $0.30 (basic and diluted) for the three and nine months ended September 30, 2020.

Net Increase/(Decrease) in Net Assets Resulting from Operations

Net increase in net assets resulting from operations for the three months ended September 30, 2021 was approximately $11.3 million compared with a net increase in net assets resulting from operations of approximately $20.8 million for the three months ended September 30, 2020. For the nine months ended September 30, 2021, the net increase in net assets resulting from operations was approximately $39.6 million compared with a net decrease in net assets resulting from operations of approximately $38.0 million for the nine months ended September 30, 2020.

For the three months ended September 30, 2021, the net increase in net assets resulting from operations per common share was $0.23 (basic and diluted), compared to a net increase in net assets resulting from operations per share of $0.42 (basic and diluted) for the three months ended September 30, 2020. For the nine months ended September 30, 2021, the net increase in net assets resulting from operations per common share was $0.80 (basic and diluted), compared to a net decrease in net assets resulting from operations per share of $0.77 (basic and diluted) for the nine months ended September 30, 2020.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2021, cash and cash equivalents were approximately $19.5 million as compared to approximately $59.1 million as of December 31, 2020. For the nine months ended September 30, 2021, net cash used in operating activities for the period, consisting primarily of the items described in “— Results of Operations,” was approximately $102.0 million, largely reflecting purchases of investments of approximately $172.2 million and net change in unrealized appreciation of approximately $39.2 million, partially offset by proceeds from principal repayments and sales of investments of approximately $28.5 million and net realized losses on investments of approximately $11.2 million. For the nine months ended September 30, 2021, net cash provided by financing activities was approximately $62.4 million, reflecting the issuance of the 5.50% Unsecured Notes, partially offset by payments of distributions.

Contractual Obligations

A summary of our significant contractual payment obligations as of September 30, 2021, is as follows:

			Payments Due by Period
Contractual obligations (in millions)	Principal Amount		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Long-term debt obligations:
6.50% Unsecured Notes	$	64.4	$	—	$	64.4	$	—	$	—
6.25% Unsecured Notes		44.8		—		—		44.8		—
5.50% Unsecured Notes		80.5		—		—		—		80.5
	$	189.7	$	—	$	64.4	$	44.8	$	80.5

See “Note 6. Borrowings” in the notes to our consolidated financial statements.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into a variety of undertakings containing a variety of warranties and indemnifications that may expose us to some risk of loss. The risk of future loss arising from such undertakings, while not quantifiable, is expected to be remote. As of September 30, 2021, we had an approximately $5.4 million commitment to purchase a senior secured note investment. Such outstanding commitment is summarized in the following table:

Name of Portfolio Company		Investment Type		Commitment
RSA Security, LLC		Delayed Draw 2nd Lien Term Loan		$	5,371,000

Share Issuance Program

On August 1, 2019, we entered into an Equity Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of the Company’s common stock through an At-the-Market (“ATM”) offering. For the three and nine months ended September 30, 2021, we did not sell any shares of common stock pursuant to the ATM offering.

Borrowings

In accordance with the 1940 Act, with certain limited exceptions, as of September 30, 2021, we were only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, was at least 150%, immediately after such borrowing. As of September 30, 2021 and December 31, 2020, our asset coverage for borrowed amounts was approximately 229% and 304%, respectively.

On April 6, 2018, 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, the Company’s asset coverage requirements for senior securities was changed from 200% to 150%, effective as of April 6, 2019.

The weighted average stated interest rate and weighted average maturity on all of the Company’s debt outstanding as of September 30, 2021, were 6.02% and 4.8 years, respectively, and as of December 31, 2020, were 6.40% and 4.1 years, respectively.

On April 12, 2017, we completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of the 6.50% Unsecured Notes. The 6.50% Unsecured Notes will mature on March 30, 2024, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after March 30,

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2020. The 6.50% Unsecured Notes bear interest at a rate of 6.50% per year payable quarterly on March 30, June 30, September 30, and December 30 of each year. The 6.50% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQL.”

On June 21, 2018, Oxford Square Funding 2018, LLC, a special purpose vehicle and wholly-owned subsidiary of OXSQ (“OXSQ Funding”), entered into the Credit Facility with Citibank, N.A. Subject to certain exceptions, pricing under the Credit Facility was based on the LIBOR for an interest period equal to three months plus a spread of 2.25% per annum payable quarterly on March 21, June 21, September 21 and December 21. Pursuant to the terms of the credit agreement governing the Credit Facility, OXSQ Funding borrowed approximately $95.2 million. The Credit Facility had a mandatory amortization schedule such that 15.0% of the principal amount outstanding as of June 21, 2018 was due and payable on June 21, 2019. On each payment date occurring thereafter, an additional 6.25% of the remaining principal amount outstanding was due and payable. On October 12, 2018, OXSQ Funding amended the Credit Facility with Citibank, N.A., and an additional borrowing amount of approximately $37.3 million was made under the same terms as the existing credit agreement. We repaid the remaining outstanding principal on March 24, 2020 of approximately $17.1 million and did not extend the maturity of the Credit Facility.

On April 3, 2019, we completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of the 6.25% Unsecured Notes. The 6.25% Unsecured Notes will mature on April 30, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after April 30, 2022. The 6.25% Unsecured Notes bear interest at a rate of 6.25% per year payable quarterly on January 31, April 30, July 31, and October 31 of each year. The 6.25% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQZ.”

On May 20, 2021, we completed an underwritten public offering of approximately $80.5 million in aggregate principal amount of the 5.50% Unsecured Notes. The 5.50% Unsecured Notes will mature on July 31, 2028, and may be redeemed in whole or in part at any time or from time to time at our option on or after May 31, 2024. The 5.50% Unsecured Notes bear interest at a rate of 5.50% per year payable quarterly on January 31, April 30, July 31, and October 31 of each year. The 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQG.”

See “Note 6. Borrowings” in the notes to our consolidated financial statements.

Distributions

In order to qualify for tax treatment as a RIC, and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and short-term capital gains to our stockholders on an annual basis.

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our taxable ordinary income or capital gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is taxable ordinary income or capital gains. The final determination of the nature of our distributions can only be made upon the filing of our tax return. We have until October 15, 2022, to file our federal income tax return for the year ended December 31, 2021.

For the quarter ended September 30, 2021, management estimated that a tax return of capital occurred of approximately $0.02 per share. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a BDC under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure stockholders that they will receive any distributions.

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The following table reflects the cash distributions, including distributions reinvested, if any, per share that our Board has declared on our common stock from the beginning of 2020 through March 2022:

Date Declared	Record Date	Payment Date	Total Distributions		GAAP net investment income			Distributions in excess of/ (less than) GAAP net investment income(1)
Fiscal 2021
October 22, 2021	March 17, 2022	March 31, 2022	$	0.035	$	N/A		$	—
October 22, 2021	February 14, 2022	February 28, 2022		0.035		N/A			—
October 22, 2021	January 17, 2022	January 31, 2022		0.035		N/A			—
Total (First Quarter 2022)				0.105		—	(3)		—

July 22, 2021	December 17, 2021	December 31, 2021	$	0.035	$	N/A		$	—
July 22, 2021	November 16, 2021	November 30, 2021		0.035		N/A			—
July 22, 2021	October 15, 2021	October 29, 2021		0.035		N/A			—
Total (Fourth Quarter 2021)				0.105		—	(3)		—

April 22, 2021	September 16, 2021	September 30, 2021	$	0.035	$	N/A		$	—
April 22, 2021	August 17, 2021	August 31, 2021		0.035		N/A			—
April 22, 2021	July 16, 2021	July 30, 2021		0.035		N/A			—
Total (Third Quarter 2021)				0.105		0.08			0.02

February 23, 2021	June 16, 2021	June 30, 2021	$	0.035	$	N/A		$	—
February 23, 2021	May 14, 2021	May 28, 2021		0.035		N/A			—
February 23, 2021	April 16, 2021	April 30, 2021		0.035		N/A			—
Total (Second Quarter 2021)				0.105		0.06			0.05

October 22, 2020	March 17, 2021	March 31, 2021	$	0.035	$	N/A		$	—
October 22, 2020	February 12, 2021	February 26, 2021		0.035		N/A			—
October 22, 2020	January 15, 2021	January 29, 2021		0.035		N/A			—
Total (First Quarter 2021)				0.105		0.10			—

Fiscal 2020
September 11, 2020	December 16, 2020	December 31, 2020	$	0.035	$	N/A		$	—
September 11, 2020	November 13, 2020	November 30, 2020		0.035		N/A			—
September 11, 2020	October 16, 2020	October 30, 2020		0.035		N/A			—
Total (Fourth Quarter 2020)				0.105		0.10			—

June 1, 2020	September 16, 2020	September 30, 2020	$	0.035	$	N/A		$	—
June 1, 2020	August 17, 2020	August 31, 2020		0.035		N/A			—
June 1, 2020	July 17, 2020	July 31, 2020		0.035		N/A			—
Total (Third Quarter 2020)				0.105		0.09			0.01

February 24, 2020	June 15, 2020	June 30, 2020	$	0.067	$	N/A		$	—
February 24, 2020	May 14, 2020	May 29, 2020		0.067		N/A			—
February 24, 2020	April 15, 2020	April 30, 2020		0.067		N/A			—
Total (Second Quarter 2020)				0.201		0.09			0.11

October 25, 2019	March 17, 2020	March 31, 2020	$	0.067	$	N/A		$	—
October 25, 2019	February 14, 2020	February 28, 2020		0.067		N/A			—
October 25, 2019	January 17, 2020	January 31, 2020		0.067		N/A			—
Total (First Quarter 2020)				0.201		0.13			0.07
Total (2020)			$	0.612	$	0.40	(2)	$	0.21	(2)

____________

(1) The tax characterization of cash distributions for the year ending December 31, 2021 will not be known until the tax return for such years are finalized. For the year ending December 31, 2021, the amounts and sources of distributions reported are only estimates and are not being provided for U.S. tax reporting purposes. The final determination of the source of all distributions in 2021 will be made after year-end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099-DIV notice. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations.

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(2) Totals may not sum due to rounding.

(3) We have not yet reported investment income for this period.

Related Parties

We have a number of business relationships with affiliated or related parties, including the following:

• We have entered into the Investment Advisory Agreement with Oxford Square Management. Oxford Square Management is controlled by Oxford Funds, its managing member. In addition to Oxford Funds, Oxford Square Management is owned by Charles M. Royce, a member of our Board, who holds a minority, non-controlling interest in Oxford Square Management as the non-managing member. Oxford Funds, as the managing member of Oxford Square Management, manages the business and internal affairs of Oxford Square Management. In addition, Oxford Funds provides us with office facilities and administrative services pursuant to the Administration Agreement.

• Messrs. Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, at Oxford Bridge Management, LLC, the investment adviser to the Oxford Bridge, LLC and Oxford Bridge II, LLC (together, the “Oxford Bridge Funds”), and at Oxford Gate Management, LLC, the investment adviser to Oxford Gate Master Fund, LLC, Oxford Gate, LLC and Oxford Gate (Bermuda), LLC (collectively, the ”Oxford Gate Funds”). Oxford Funds is the managing member of both Oxford Bridge Management, LLC and Oxford Gate Management, LLC. In addition, Bruce L. Rubin serves as the Chief Financial Officer and Secretary, and Gerald Cummins serves as the Chief Compliance Officer of both Oxford Bridge Management, LLC and Oxford Gate Management, LLC.

• Messrs. Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non-diversified closed-end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Lane Management, LLC. Oxford Funds provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Lane Management, LLC. In addition, Bruce L. Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Lane Capital Corp. and Chief Financial Officer and Treasurer of Oxford Lane Management, LLC, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Lane Capital Corp. and Oxford Lane Management, LLC.

As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs. Cohen and Rosenthal to manage Oxford Lane Capital Corp., the Oxford Bridge Funds and the Oxford Gate Funds, respectively, on the other hand.

Oxford Square Management, Oxford Lane Management, LLC, Oxford Bridge Management, LLC and Oxford Gate Management, LLC are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., the Oxford Bridge Funds and the Oxford Gate Funds. Where investments are suitable for more than one entity, the allocation policy generally provides that, depending on size and subject to current and anticipated cash availability, the absolute size of the investment as well as its relative size compared to the total assets of each entity, current and anticipated weighted average costs of capital, among other factors, a desired investment amount will be determined by the adviser to each entity. If the investment opportunity is of a size sufficient for each entity to receive its desired investment amount, then each entity would be allocated that investment amount; otherwise, the investment amount would be apportioned on a pro rata basis.

On June 14, 2017, the Securities and Exchange Commission issued an order permitting the Company and certain of its affiliates to complete negotiated co-investment transactions in portfolio companies, subject to certain conditions (the “Order”). Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are permitted, together with any future BDCs, registered closed-end funds and certain private funds, each of whose investment adviser is the Company’s investment adviser or an investment adviser controlling, controlled by, or under common control with the Company’s investment adviser, to co-invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing the Company’s stockholders with access to a broader array of investment opportunities. Pursuant to the Order, we are permitted to co-invest in such investment opportunities with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of

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our independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of our stockholders and is consistent with our then-current investment objective and strategies. In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to BDCs with existing co-investment orders, through December 31, 2020, we were permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in our existing portfolio companies with certain other funds managed by our investment adviser or its affiliates and covered by the Order, even if such private funds had not previously invested in such existing portfolio company. Without this order, private funds would generally not be able to participate in such follow-on investments with us unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with us. Although the conditional exemptive order has expired, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extent that any BDC with an existing co-investment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein.

In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board reviews these procedures on an annual basis.

We have also adopted a Code of Business Conduct and Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Business Conduct and Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Business Conduct and Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict. Our Audit Committee is charged with approving any waivers under our Code of Ethics. As required by the NASDAQ Global Select Market corporate governance listing standards, the Audit Committee of our Board is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

Information concerning related party transactions is included in the consolidated financial statements and related notes, appearing elsewhere in this quarterly report on Form 10-Q.

RECENT DEVELOPMENTS

The following distributions payable to stockholders are shown below:

Date Declared	Record Date	Payable Dates	Per Share Distribution Amount Declared
July 22, 2021	October 15, 2021	October 29, 2021	$0.035
July 22, 2021	November 16, 2021	November 30, 2021	$0.035
July 22, 2021	December 17, 2021	December 31, 2021	$0.035
October 22, 2021	January 17, 2021	January 31, 2021	$0.035
October 22, 2021	February 14, 2021	February 28, 2021	$0.035
October 22, 2021	March 17, 2021	March 31, 2021	$0.035

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are subject to financial market risks, including changes in interest rates. As of September 30, 2021, all debt investments in our portfolio were at variable interest rates, representing approximately $286.1 million in principal debt. As of September 30, 2021, all except three of our variable rate investments were income producing. The variable rates are based upon the five-year U.S. Department of Treasury note, the Prime rate or LIBOR, and, in the case of our bilateral investments, are generally reset annually, whereas our non-bilateral investments generally reset quarterly. We expect that future debt investments will generally be made at variable rates. Many of the variable rate investments contain interest rate floors.

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 the investments in our portfolio with fixed interest rates.

On March 5, 2021, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings); (ii) the overnight and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining nine LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA’s proposed new powers that the UK government is legislating to grant to them.

Based on our Consolidated Statements of Assets and Liabilities as of September 30, 2021, the following table shows the annualized impact on net investment income of hypothetical base rate changes in interest rates for our settled investments (considering interest rate floors for floating rate instruments), excluding CLO equity investments. The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of September 30, 2021. These hypothetical calculations are based on a model of the investments in our portfolio, held as of September 30, 2021, and are only adjusted for assumed changes in the underlying base interest rates. Although management believes that this analysis is indicative of our existing interest rate sensitivity, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including a change in the level of our borrowings, that could affect the net increase (or decrease) in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

Hypothetical Change in LIBOR	Estimated Percentage change in Investment Income
Up 300 basis points	19.9	%
Up 200 basis points	13.2	%
Up 100 basis points	6.6	%
Down 25 basis points	(0.4	)%

ITEM 4. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

As of September 30, 2021 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time

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periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

(b) Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not currently subject to any material legal proceedings. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings, if any, cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. Other than the risk factors set forth below, there have been no material changes known to us during the nine months ended September 30, 2021, to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.

We are subject to risks related to corporate social responsibility.

Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.

Cybersecurity risks and cyber incidents may adversely affect our business or the businesses of our portfolio companies by causing disruptions to our operations or to the operations of our portfolio companies, a compromising or corruption of our confidential information or the confidential information of our portfolio companies and/or damage to our business relationships or the business relationships of our portfolio companies, all of which could negatively impact the business, financial condition and operating results of us or our portfolio companies.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of the information resources of us or our portfolio companies. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our portfolio companies or third-party vendors for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. Despite careful security and controls design, the information technology systems of our portfolio companies and our third-party vendors, may be subject to security breaches and cyber-attacks the result of which could include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to business relationships. As our, our portfolio companies’ and our third party vendor’s reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided by third-party service providers, and the information systems of our portfolio companies and third-party vendors. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, do not guarantee that a cyber-incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident. Further, the remote working conditions resulting from the COVID-19 pandemic have heightened our and our portfolio companies’ vulnerability to a cybersecurity risk or incident.

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We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.

Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. The Biden Administration has proposed significant changes to the existing U.S. tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S. tax rules. The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our investors of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our common stock.

The interest rates of our term loans to our portfolio companies that extend beyond 2021 might be subject to change based on recent regulatory changes, including the decommissioning of LIBOR.

LIBOR is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in term loans we extend to portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR.

To identify a successor rate for U.S. dollar LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the U.S. Federal Reserve Board and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. On July 29, 2021, the ARCC formally recommended SOFR as its preferred alternative replacement rate for LIBOR. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere or, whether the COVID-19 outbreak will have further effect on LIBOR transition plans.

The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market and/or transferability of value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations. In addition, while the majority of our LIBOR-linked loans contemplate that LIBOR may cease to exist and allow for amendment to a new base rate without the approval of 100% of the lenders we will still need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate, in order to replace LIBOR with the new standard that is established, which may have an adverse effect on our overall financial condition or results of operations. Following the replacement of LIBOR, some or all of these credit agreements may bear interest at a lower interest rate, which could have an adverse impact on the value and liquidity of our investment in these portfolio companies and our results of operations. Moreover, we may need to renegotiate certain terms of our credit facilities. If we are unable to do so, amounts drawn under our credit facilities may bear interest at a higher rate, which would increase the cost of our borrowings and, in turn, affect our results of operations.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Sales of Unregistered Equity Securities

While we did not engage in unregistered sales of equity securities during the quarter ended September 30, 2021, we issued 30,853 shares of common stock under our distribution reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value for the shares of common stock issued under the distribution reinvestment plan during the quarter ended September 30, 2021 was approximately $128,000. During the quarter ended September 30, 2021, as part of our distribution reinvestment plan for our common stockholders, our dividend reinvestment administrator did not purchase any shares of our common stock in the open market to satisfy the reinvestment portion of our distributions.

Issuer Purchases of Equity Securities

During the quarter ended September 30, 2021, no common stock was repurchased by the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

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

3.1		Articles of Incorporation (Incorporated by reference to Exhibit a. to the Registrant’s Registration Statement on Form N-2 (File No. 333-109055), filed on September 23, 2003).
3.2		Articles of Amendment (Incorporated by reference to Exhibit 3.1 to the Registrant’s current report on Form 8-K filed December 3, 2007).
3.3		Third Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.3 to the Registrant’s report on Form 10-Q filed on November 7, 2016).
3.4		Articles of Amendment (Incorporated by reference to Exhibit 3.1 to the Registrant’s current report on Form 8-K filed March 20, 2018).
3.5		Articles of Amendment (Incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K filed March 20, 2018).
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
32.1		Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.*
32.2		Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.*

____________

* Filed herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	OXFORD SQUARE CAPITAL CORP.
Date: October 28, 2021	By:	/s/ Jonathan H. Cohen
		Jonathan H. Cohen
		Chief Executive Officer
		(Principal Executive Officer)
Date: October 28, 2021	By:	/s/ Bruce L. Rubin
		Bruce L. Rubin
		Chief Financial Officer
		(Principal Accounting Officer)