Oxford Square Capital Corp.

Company Overview

Business Model: OXFORD SQUARE CAPITAL CORP. is a closed-end, non-diversified management investment company regulated as a Business Development Company ("BDC") under the Investment Company Act of 1940 and has elected to be treated as a Regulated Investment Company ("RIC") for U.S. federal income tax purposes. Its investment objective is to maximize total return by primarily investing in corporate debt securities and, to a lesser extent, collateralized loan obligation ("CLO") structured finance investments, including warehouse facilities. The company may also invest in publicly traded debt and/or equity securities. Capital is generally used by corporate borrowers to finance organic growth, acquisitions, recapitalizations, and working capital. Investment decisions are based on extensive analysis of portfolio companies' business operations, recurring revenues, cash flow, costs, and asset value. Individual portfolio investments typically range from $5.0 million to $25.0 million, diversified across numerous investments with few exceeding 5% of the total portfolio. The company invests in both fixed and variable interest rate structures and generally targets entities operating for at least one year, with employees, revenues, and positive cash flow, often backed by financial or strategic sponsors. A portion of the portfolio consists of below investment grade ("junk") securities, including highly levered CLO equity and junior debt tranches. The company historically uses leverage to make investments.

Market Position: OXFORD SQUARE CAPITAL CORP. operates in a highly competitive market, competing with hedge funds, CLO investment vehicles, other BDCs, investment banks, commercial banks, and specialty finance companies. The company identifies its competitive advantages as expertise in credit analysis and monitoring investments in middle-market companies and CLO structures, coupled with an established transaction sourcing network comprising private equity funds, companies, brokers, and bankers. In 2025, the broader corporate loan and CLO equity markets experienced weakness, with the Morningstar/LSTA US Leveraged Loan Index decreasing by 0.69%. Higher credit quality loans outperformed lower credit quality loans, and the loan market's credit quality improved, with the default rate decreasing to 3.35% at the end of 2025 from 4.70% at the end of 2024.

Recent Strategic Developments: In 2025, OXFORD SQUARE CAPITAL CORP. fully redeemed its $44.8 million aggregate principal amount of 6.25% Unsecured Notes, which were subsequently delisted. The company completed an underwritten public offering of approximately $74.8 million in aggregate principal amount of 7.75% Unsecured Notes due 2030. Additionally, it sold 15,910,780 shares of common stock through an At-the-Market ("ATM") offering, raising approximately $34.8 million net of underwriting fees and offering costs. The Board of Directors authorized a 12-month share repurchase program on October 30, 2025, for up to $25.0 million of outstanding common stock, though no shares were repurchased in 2025. On January 6, 2026, the company received updated co-investment exemptive relief from the SEC, allowing it and certain affiliated managed funds to participate in negotiated co-investment transactions under a "fair and equitable" allocation framework.

Geographic Footprint: OXFORD SQUARE CAPITAL CORP. is organized under Maryland law and has its principal place of business in Greenwich, Connecticut, United States. The company primarily invests in U.S.-based senior secured loans. However, its investment strategy also includes securities issued by foreign entities, such as foreign CLO vehicles formed under the laws of the Cayman Islands. While most investments are U.S. dollar-denominated, some foreign currency exposure exists.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Net Margin (Net Investment Income / Total Investment Income): 56.0% (2025) vs. 61.9% (2024)

Investment in Growth:

• Purchases of Investments: $92.1 million (2025) vs. $112.2 million (2024)
• Strategic Investments: In 2025, purchases included $57.9 million in senior secured notes, $30.2 million in CLO equity, and $4.0 million in equity and other investments.

Business Segment Analysis

OXFORD SQUARE CAPITAL CORP. operates as a single operating and reporting segment. The following tables detail its portfolio composition by asset class and industry.

Portfolio Composition by Asset Class (Fair Value)

Key Growth Drivers:

• Investment Activity (2025): The company purchased $92.1 million in portfolio investments, including $30.9 million in existing portfolio companies and $61.2 million in new portfolio companies. This compares to $112.2 million in purchases in 2024.
• Debt Repayments: Loan principal repayments totaled $47.6 million in 2025, down from $75.0 million in 2024.
• Sales of Securities: Sales amounted to $10.7 million in 2025, compared to $11.8 million in 2024.
• Unrealized Depreciation: The portfolio experienced a net change in unrealized depreciation of $24.3 million in 2025, a shift from net unrealized appreciation of $75.7 million in 2024.
• Realized Losses: Net realized losses on investments were $16.8 million in 2025, significantly lower than $96.2 million in 2024.

Operational Metrics:

• Weighted Average Annualized Yield on Debt Investments: Approximately 14.53% as of December 31, 2025, a decrease from 15.76% as of December 31, 2024.
• CLO Leverage: CLO vehicles in the portfolio had an average leverage of 6.69 times as of December 31, 2025, with a range of approximately 0.10 times to 10.88 times.
• Debt Investment Grading: The weighted average grade of the debt investment portfolio was 2.2 as of December 31, 2025, indicating a slight improvement from 2.3 as of December 31, 2024.

Portfolio Composition by Industry (Fair Value)

Top Ten Industries of CLO Holdings (Par Value) - December 31, 2025:

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No common stock was repurchased during the year ended December 31, 2025. The Board authorized a 12-month Share Repurchase Program on October 30, 2025, for up to $25.0 million in aggregate.
• Dividend Payments: Total distributions to stockholders were $32.1 million ($0.42 per share) for the year ended December 31, 2025.
• Future Capital Return Commitments: The Share Repurchase Program is expected to be in effect until October 30, 2026, unless extended or fully expended.

Balance Sheet Position:

• Cash and Equivalents: $51.9 million as of December 31, 2025, up from $34.9 million as of December 31, 2024.
• Total Debt: $155.3 million (principal amount) as of December 31, 2025, compared to $125.3 million as of December 31, 2024. This includes $80.5 million of 5.50% Unsecured Notes due 2028 and $74.8 million of 7.75% Unsecured Notes due 2030. The 6.25% Unsecured Notes ($44.8 million) were fully repaid in 2025.
• Net Cash Position: -$103.4 million (Cash and Equivalents less Total Debt Principal) as of December 31, 2025.
• Debt Maturity Profile:
  • 5.50% Unsecured Notes: $80.5 million due in 3-5 years (July 31, 2028).
  • 7.75% Unsecured Notes: $74.8 million due in more than 5 years (July 31, 2030).

Cash Flow Generation:

• Operating Cash Flow: Net cash used in operating activities was $13.7 million for the year ended December 31, 2025, a decrease from $25.7 million provided by operating activities in 2024.
• Free Cash Flow: Not explicitly stated.

Operational Excellence

Production & Service Model: OXFORD SQUARE CAPITAL CORP.'s investment activities are managed by Oxford Square Management, which provides day-to-day operations and investment advisory services. The investment process involves identifying opportunities through brokers, investment banks, and direct company relationships, followed by due diligence on management, financial sponsors, business operations, financial condition, and structured finance vehicles. Investment characteristics focus on asset and earnings quality, often seeking senior secured positions and loan covenants. For CLO investments, the company evaluates indenture structures, underlying collateral loans, projected cash flows, and compliance with covenants. The company monitors portfolio companies' financial trends quarterly or monthly, assessing business development, financial statements, and projections, and employs a credit grading system for debt investments. As a BDC, the company is required to offer significant managerial assistance to portfolio companies, though no fee income has been received for this to date.

Supply Chain Architecture: Key Suppliers & Partners:

• Investment Adviser: Oxford Square Management – manages investment activities and provides advisory services.
• Administrator: Oxford Funds – furnishes office facilities, equipment, and clerical, bookkeeping, and record-keeping services.
• Compliance Consulting: ACA Group, LLC – provides Chief Compliance Officer services.
• Sales Agents: Ladenburg Thalmann & Co. Inc. and Lucid Capital Markets, LLC – facilitate At-the-Market common stock offerings.
• Valuation Firms: Third-party firms are engaged to assist in valuing certain syndicated loans and bilateral investments.
• Pricing Services & Brokers: Recognized industry pricing services and brokers provide indicative prices for CLO debt and equity investments and arrange transactions.
• Independent Trustee: Provides operating metrics and compliance information for CLO investment vehicles.

Facility Network:

• Headquarters: 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut – occupied under an Administration Agreement with Oxford Funds.
• No other material real estate or physical properties are owned.

Operational Metrics:

• Portfolio Turnover Rate: 23.23% for the year ended December 31, 2025, compared to 33.66% for 2024.
• Asset Coverage for Borrowed Amounts: Approximately 191% as of December 31, 2025, exceeding the 1940 Act requirement of 150%.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Channel Partners: The company sources new prospective corporate debt investments and CLO market opportunities through a network of brokers, investment banks, direct company relationships, private equity funds, and other financial/strategic sponsors.
• Digital Platforms: Utilizes an At-the-Market (ATM) offering for the sale of common stock.

Customer Portfolio: Enterprise Customers: The company's portfolio companies are primarily small to medium-sized businesses, including those with broadly syndicated loans, narrowly syndicated loans, and private deals. Many of these companies receive financial backing from other financial or strategic sponsors.

• Customer Concentration: The investment portfolio is diversified across a large number of investments, with few exceeding 5% of the total portfolio. The ten largest portfolio company investments accounted for 48.3% of the total portfolio fair value as of December 31, 2025.

Geographic Revenue Distribution: The company primarily invests in U.S.-based entities, but also includes investments in foreign entities, such as CLO vehicles formed under the laws of the Cayman Islands. Specific revenue distribution by geographic region is not disclosed.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The broader corporate loan and CLO equity markets experienced weakness in 2025, with the Morningstar/LSTA US Leveraged Loan Index declining. This performance was influenced by investment outflows and macroeconomic headwinds, partially offset by robust CLO issuance. Credit quality in the loan market improved in 2025, evidenced by a decrease in the default rate to 3.35% from 4.70% in 2024. The company operates in a highly competitive market for investment opportunities.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The company competes with a wide array of entities, including hedge funds, other CLO investment vehicles, other equity and non-equity based investment funds (including other BDCs), investment banks, and traditional financial services companies such as commercial banks and specialty finance companies. Many competitors possess greater financial and managerial resources.

Emerging Competitive Threats: The filing notes general risks from new entrants, disruptive technologies, and alternative solutions, but does not specify emerging competitive threats.

Competitive Response Strategy: The company's strategy involves leveraging its expertise in credit analysis and investment monitoring for middle-market companies and CLO structures. It also relies on its established deal sourcing network to identify and capitalize on investment opportunities, while maintaining overall portfolio liquidity.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The company is exposed to capital markets volatility and economic uncertainty, which can negatively impact its business, operations, and investment valuations. This includes risks from U.S. debt ceiling concerns, government shutdowns, and geopolitical tensions. Interest rate fluctuations significantly impact net investment income, as the company uses leverage and its portfolio includes variable-rate investments. Rising rates can increase portfolio company debt costs. Technology Disruption: The rapid evolution of Artificial Intelligence ("AI") and machine learning technology presents risks, including inaccurate or biased outputs, increased operational and compliance risks, and potential misuse, which could lead to financial, reputational, or legal harm. Customer Concentration: The investment portfolio may be concentrated in a limited number of portfolio companies, increasing the risk of significant loss if any company defaults or if specific sectors experience downturns. Illiquidity of Investments: A large percentage of investments are in non-publicly traded securities, making them less liquid and difficult to sell quickly, potentially leading to realized values significantly below recorded fair values. Geopolitical Exposure: Investments in foreign entities, including Cayman Islands-formed CLOs, expose the company to risks such as changes in exchange control regulations, political instability, foreign taxes, less liquid markets, higher transaction costs, and difficulties in enforcing contractual obligations.

Operational & Execution Risks

Supply Chain Vulnerabilities: The company is highly dependent on Oxford Square Management for investment advisory services and Oxford Funds for administrative services. Key Personnel Dependency: Future success relies heavily on the continued service and coordination of key management personnel, particularly Jonathan H. Cohen (CEO) and Saul B. Rosenthal (President and COO). Their departure could materially adversely affect the company. Management of Growth: Effective management of the existing portfolio and future growth depends on the investment adviser's ability to identify, analyze, invest in, and finance companies, as well as access to acceptable financing terms. Corporate Governance & Disclosure: Compliance with increasingly complex corporate governance, public disclosure, and accounting requirements leads to higher expenses and diversion of management time. Conflicts of Interest: Potential conflicts exist due to the management team's roles in other affiliated entities (e.g., Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Gate Funds, Oxford Bridge II, LLC) and the fee structure. An allocation policy and co-investment exemptive relief are in place to manage these conflicts. Covenant-Lite Loans: Investments in covenant-lite loans, which lack financial maintenance covenants, may increase exposure to losses by hindering the ability to reprice credit risk or restructure problematic loans. CLO Investment Risks: CLO investments are riskier and less transparent than direct loans, subject to high leverage, repayment priority of senior debt holders, complex legal documentation, and potential for "priming transactions" or payment reductions if collateralization/interest coverage tests fail. Information Systems Failures & Cybersecurity: High dependence on internal and third-party information systems makes the company vulnerable to failures, cyber-attacks, and data breaches, which could disrupt operations, lead to financial losses, litigation, and reputational damage. Cash Management: Cash balances held at financial institutions may exceed federally insured limits, exposing the company to loss if these institutions fail.

Financial & Regulatory Risks

Market & Financial Risks: Inability to obtain additional capital due to regulatory or market price constraints could force curtailment of investment activities, decrease net asset value, and adversely affect distributions. Inflation could increase funding costs and impact portfolio companies' ability to meet obligations. RIC Qualification Failure: Failure to maintain RIC tax treatment would subject the company to U.S. federal income tax at corporate rates, substantially reducing net assets and income available for distribution. PIK Income/Dividends: Accrued Payment-In-Kind ("PIK") interest or dividends may not be received in cash, potentially requiring asset sales to meet distribution requirements, and the investment adviser is not obligated to reimburse fees based on uncollected PIK income. CLO Withholding Tax: CLO vehicles may be subject to a 30% withholding tax under FATCA if they fail to comply with reporting requirements, reducing distributions to equity and junior debt holders. Subordinated Liens: Investments with subordinated liens are subject to control by senior creditors, and collateral value may be insufficient to repay all obligations in default. Non-Amortizing Debt: Most debt investments have significant principal due at maturity, requiring portfolio companies to raise additional capital, which may lead to default if they are unable to do so. Prepayment Risk: Portfolio companies may prepay loans, potentially reducing yields if returned capital cannot be reinvested at comparable or higher rates. Regulatory Environment & Compliance: The company is subject to evolving BDC and RIC regulations, as well as international securitization rules (EU/UK Securitization Regulations, JFSA JRR Rule) that may impact investment opportunities, liquidity, and pricing of CLO securities. Capital Loss Carryforward: As of December 31, 2025, the company had $7.7 million in short-term and $241.6 million in long-term capital losses available to be carried forward indefinitely for tax purposes.

Innovation & Technology Leadership

Research & Development Focus: OXFORD SQUARE CAPITAL CORP. does not explicitly detail its own internal research and development focus or innovation pipeline. However, its investment portfolio includes exposure to "Artificial Intelligence" and "High tech industries" through its direct investments and underlying CLO holdings, indicating an investment interest in these technology areas.

Intellectual Property Portfolio: Not explicitly stated for OXFORD SQUARE CAPITAL CORP.

Technology Partnerships: Not explicitly stated for OXFORD SQUARE CAPITAL CORP.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The company's future success is significantly dependent on the continued service and coordination of its senior management team, particularly Jonathan H. Cohen and Saul B. Rosenthal, neither of whom is subject to an employment contract.

Board Composition: The Board of Directors is classified into three classes serving staggered three-year terms. It includes two interested directors (Jonathan H. Cohen and Charles M. Royce) and three independent directors (Steven P. Novak, George Stelljes III, and Barry Osherow). Steven P. Novak serves as Chairman of the Board. The Audit Committee, composed of Messrs. Novak, Osherow (Chairman), and Stelljes, consists entirely of independent directors, with Mr. Novak identified as an "audit committee financial expert." The Compensation Committee, also composed of independent directors (Messrs. Novak (Chairman), Osherow, and Stelljes), is responsible for reviewing and recommending the Investment Advisory Agreement and Administration Agreement, and approving independent director compensation.

Human Capital Strategy

Workforce Composition: OXFORD SQUARE CAPITAL CORP. has no direct employees. Its day-to-day investment operations are managed by Oxford Square Management. Administrative support, including the Chief Financial Officer and accounting staff, is provided by Oxford Funds, for which the company reimburses an allocable portion of expenses.

Talent Management: Not applicable for direct employees. Talent acquisition and retention strategies are managed by Oxford Funds and Oxford Square Management for their respective personnel who provide services to the company.

Diversity & Development: Not explicitly stated for OXFORD SQUARE CAPITAL CORP.

Business Cyclicality & Seasonality

Demand Patterns: The company's business and operations are significantly affected by general economic conditions and credit market conditions. Periods of economic slowdown or disruption in capital markets can negatively impact its ability to pursue new business opportunities and the valuations of its investments. Economic Sensitivity: The company's ability to secure additional financing and satisfy financial obligations is dependent on its future operating performance, which is subject to prevailing economic conditions, interest rate levels, and credit availability. Industry Cycles: Not explicitly stated.

Planning & Forecasting: Not explicitly stated.

Regulatory Environment & Compliance

Regulatory Framework: OXFORD SQUARE CAPITAL CORP. is regulated as a BDC under the 1940 Act and has elected to be treated as a RIC under the Code. Key regulatory requirements include maintaining at least 70% of total assets in "qualifying assets" and an asset coverage ratio of at least 150% for senior securities. As a RIC, it must meet annual income source, asset diversification, and distribution requirements (at least 90% of investment company taxable income). Industry-Specific Regulations: The company is subject to federal, state, and local laws and regulations affecting its operations, including loan originations, interest rates, fees, disclosures, and collection procedures. International Compliance: Investments in foreign CLO vehicles are subject to international regulatory regimes, including the EU Securitization Regulation, UK Securitization Regulation, and the Japanese Financial Services Agency's risk retention rules, which may impact liquidity and pricing of CLO securities. Legal Proceedings: The company is not currently subject to any pending material legal proceedings.

Tax Strategy & Considerations

Tax Profile: OXFORD SQUARE CAPITAL CORP. intends to qualify annually as a RIC, which generally exempts it from U.S. federal income tax on income and gains timely distributed to stockholders. The company is subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income if it does not meet the Excise Tax Avoidance Requirement. For the year ended December 31, 2025, approximately $354,957 in excise tax was incurred. Geographic Tax Planning: Not explicitly detailed beyond RIC status. Tax Reform Impact: Not explicitly detailed. Capital Loss Carryforward: As of December 31, 2025, the company had $7,656,301 of short-term capital losses and $241,556,934 of long-term capital losses available to be carried forward indefinitely for U.S. federal income tax purposes. PFIC/CFC Considerations: Investments in CLOs treated as Passive Foreign Investment Companies ("PFIC") or Controlled Foreign Corporations ("CFC") may require income recognition for tax purposes prior to receiving cash distributions, potentially creating challenges in meeting distribution requirements.

Insurance & Risk Transfer

Risk Management Framework: The company's risk management framework includes maintaining insurance coverage such as a fidelity bond, directors and officers/errors and omissions liability insurance, and other insurance premiums. Risk Transfer Mechanisms: While not historically engaged in, the company may in the future choose to hedge against interest rate fluctuations using standard hedging instruments like futures, forward contracts, options, and interest rate swaps, caps, collars, and floors. However, the company has limited experience in such transactions.