Press Release

Stellus Capital Investment Corporation Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2021

March 1, 2022 at 5:31 PM EST

HOUSTON, March 1, 2022 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus" or "the Company") today announced financial results for its fourth fiscal quarter and year ended December 31, 2021.

In describing the Company's 2021 activities, Robert T. Ladd, Chairman and Chief Executive Officer, stated, "I am pleased to report positive results in a number of areas throughout 2021. We raised our regular dividend from $0.25 per quarter to $0.28 per quarter and declared $0.09 of additional dividends all of which we covered with realized earnings. We also generated $20.8 million of realized gains after taxes from our equity portfolio. We finished 2021 with a record level of originations and we are continuing to see many quality investment opportunities. During the year we invested $395 million and since year end, we have invested an additional $42 million."

FINANCIAL HIGHLIGHTS
($ in millions, except data relating to per share amounts and shares outstanding)

	Q4-21		YTD-21		Q4-20		YTD-20
	Amount	Per Share	Amount	Per Share	Amount	Per Share	Amount	Per Share

Net investment income	$5.12	$0.26	$19.78	$1.01	$4.99	$0.26	$21.99	$1.13

Core net investment income⁽¹⁾	6.53	0.33	23.75	1.22	5.43	0.28	22.40	1.15

Net realized gain (loss) on investments	17.11	0.88	23.71	1.22	(7.69)	(0.40)	(10.13)	(0.52)

Loss on debt extinguishment	-	-	(0.54)	(0.03)	-	-	-	-

Provision for taxes on realized gain
on investments in taxable subsidiaries	(2.28)	(0.12)	(2.96)	(0.15)	-	-	-	-


Total realized income⁽²⁾	$19.95	$1.02	$40.53	$2.08	$(2.70)	$(0.14)	$11.86	$0.61

Distributions⁽³⁾	(1.18)	(0.06)	(22.22)	(1.14)	-	-	(22.40)	(1.15)

Net unrealized appreciation
(depreciation) on investments	(10.80)	(0.55)	(6.93)	(0.36)	19.61	1.01	8.56	0.44

Benefit (provision) for taxes on unrealized
depreciation (appreciation) on investments	1.10	0.06	0.51	0.03	(0.10)	(0.01)	(0.22)	(0.01)

Net increase in net assets resulting
from operations	$10.25	$0.53	$33.57	$1.72	$16.81	$0.86	$20.20	$1.04

Weighted average shares outstanding	19,500,866		19,489,750		19,486,003		19,471,500


(1)	Core net investment income, as presented, excludes the impact of capital gains incentive fees and income taxes, the majority of which are excise taxes. The Company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is not a U.S. generally accepted accounting principles ("U.S. GAAP") measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S GAAP. A reconciliation of net investment income in accordance with U.S GAAP to core net investment income is presented in the table below the financial statements.
(2)	Total realized income is the sum of net investment income and net realized gains on investments; both U.S GAAP measures.
(3)	In 2021, fourth quarter dividends were declared in the third quarter.


PORTFOLIO ACTIVITY
($ in millions, except data relating to per share amounts and number of portfolio companies)

	As of	As of
	12/31/2021	12/31/2020
Investments at fair value	$772.9	$653.4
Total assets	$821.3	$674.9
Net assets	$285.1	$273.4
Shares outstanding	19,517,595	19,486,003
Net asset value per share	$14.61	$14.03



	Q4-21	YTD-21	Q4-20	YTD-20

New investments	$144.0	$387.3	$64.8	$152.0
Repayments of investments	(164.0)	(287.6)	(46.4)	(128.8)
Net activity	$(20.0)	$99.7	$18.4	$23.2


			As of	As of
			12/31/2021	12/31/2020

Number of portfolio company investments			73	66
Number of debt investments			55	51

Weighted average yield of debt and other income producing investments (1)
Cash			7.4%	7.8%
PIK			0.2%	0.0%
Fee amortization			0.4%	0.5%
Total			8.0%	8.3%

Weighted average yield on total investments (2)
Cash			6.9%	7.4%
PIK			0.2%	0.0%
Fee amortization			0.4%	0.5%
Total			7.5%	7.9%

(1)

The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt and other income producing investments, including cash, PIK interest, and the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company's investments for a given period will generally be higher than what investors of our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expense or any sales load that may be paid by investors.

(2)

The dollar weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company's total investments, including non-income producing loans and equity.

Results of Operations

Investment income for the year ended December 31, 2021 and 2020 totaled $63.7 million and $56.7 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the year ended December 31, 2021 and 2020, totaled $43.9 million and $34.7 million, respectively. For the same respective periods, base management fees totaled $13.2 million and $11.1 million, income incentive fees totaled $3.0 million and $2.5 million, capital gains incentive fees totaled $2.9 million and $(0.4) million, fees and expenses related to our borrowings totaled $18.7 million and $16.0 million (including interest and amortization of deferred financing costs), administrative expenses totaled $1.8 million and $1.8 million, income tax totaled $1.1 million and $0.8 million, and other expenses totaled $3.2 million and $2.9 million, respectively.

For the year ended December 31, 2021 and 2020, net investment income was $19.8 million and $22.0 million, or $1.01 and $1.13 per common share based on weighted average common shares outstanding of 19,489,750 and 19,471,500, respectively.

The capital gains incentive fee of $2.9 million and $(0.4) million for the year ended December 31, 2021 and 2020, respectively, was accrued for GAAP purposes due to the increase in realized and unrealized gains over the years. There can be no assurance that unrealized appreciation or depreciation will be realized in the future. Accordingly, such fees, as calculated and accrued, would not necessarily be payable under the investment advisory agreement, and may never be paid based upon the computation of incentive fees in subsequent periods. The income tax expense accrual of $1.1 million and $0.8 million for the year ended December 31, 2021 and 2020, respectively, was accrued based on estimates of undistributed taxable income, which was generated largely from capital gains. Excluding these accruals, net investment income for the year ended December 31, 2021 would be $ 23.75 million, or $ 1.22 per share; and for the year ended December 31, 2020, net investment income would have been $ 22.40 million, or $ 1.15 per share.

The Company's investment portfolio had a net change in unrealized (depreciation) appreciation for the year ended December 31, 2021 and 2020, of $(6.9) million and $8.6 million, respectively. For the year ended December 31, 2021 and 2020, the Company had realized gains (losses) of $23.7 million and $(10.1) million, respectively.

For the year ended December 31, 2021 and 2020, net increase in net assets resulting from operations totaled $33.6 million and $20.2 million, or $1.72 per common share and $1.04 per common share, based on weighted average common shares outstanding of 19,489,750 and 19,471,500, respectively.

Liquidity and Capital Resources

As of December 31, 2021 and 2020, our credit facility provided for borrowings in an aggregate amount up to $250.0 and $230.0 million, respectively, on a committed basis. As of December 31, 2021 and 2020, our credit facility had an accordion feature which allowed for potential future expansion of the facility size to $280.0 for both years. As of December 31, 2021 and December 31, 2020, we had $177.3 million and $174.0 million in outstanding borrowings under the credit facility, respectively.

For the for the year ended December 31, 2021, our operating activities used cash of $76.1 million primarily in connection with the purchase of portfolio investments, offset by sales and repayments of portfolio investments, For the same period, our financing activities provided cash of $101.8 million, primarily from proceeds from the issuance of notes payable, SBA-guaranteed debentures, net borrowings on our credit facility and proceeds from the issuance of common stock.

For the year ended December 31, 2020, our operating activities used cash of $3.5 million, primarily in connection with the purchase of portfolio investments, offset by sales and repayments of portfolio investments. For the same period, our financing activities provided cash of $5.8 million, primarily from proceeds from the issuance of common stock, proceeds from SBA-guaranteed debentures and net borrowings on our credit facility.

Distributions

During the three and twelve months ended December 31, 2021, we declared aggregate distributions of $0.06 per share and $1.14, respectively ($1.2 million and $22.2 million, respectively). Our fourth quarter regular dividend of an aggregate of $0.28 per share was declared in the third quarter in order to maintain our qualification for taxation as a regulated investment company ("RIC") and to eliminate our liability for corporate-level U.S. federal income tax. Additionally, in the fourth quarter, we declared a $0.06 supplemental dividend to be paid in the first quarter of 2022. During the three and twelve months ended December 31, 2020, we declared aggregate distributions of $0.00 and $1.15 per share, respectively ($0 million and $22.4 million, respectively). Tax characteristics of all distributions are reported to stockholders on Form 1099-DIV. Approximately $1.0 million of the dividends declared in 2021 are expected to be characterized as long-term capital gains.

Recent Portfolio Activity

For the quarter ended December 31, 2021, we funded $144.0 million in 9 new and 13 existing portfolio companies and received $164.0 million from 13 repayments, paydowns and amounts received from equity investments. The new investment transactions and repayments that occurred during the quarter are summarized as follows:

On October 12, 2021, we invested $0.1 million in the equity of Venbrook Holdings, LLC, an existing portfolio company.

On October 28, 2021, we invested $5.0 million in the first lien term loan of Nutritional Medicinals, LLC, an existing portfolio company.

On October 29, 2021, we invested $13.0 million in the first lien term loan and committed $2.9 million in the unfunded delayed draw term loan and $0.1 million in the unfunded revolver of SIB Holdings, LLC a provider of fixed cost reduction services. Additionally, we invested $0.5 million in the equity of the company.

On November 1, 2021, we invested $8.5 million in the first lien term loan and committed $2.5 million in the unfunded delayed draw term loan of Infolinks Media Buyco, LLC an advertising placement partner for small to mid-sized publishers. Additionally, we invested $0.4 million in the equity of the company.

On November 1, 2021, we invested $1.1 million in the first lien term loan of Integrated Oncology Network, LLC, an existing portfolio company.

On November 1, 2021, we received full repayment on the first lien term loan and delayed draw term loan of Adams Publishing Group, LLC for total proceeds of $4.3 million.

On November 3, 2021, we received full repayment on the first lien term loan of Premiere Digital Services, Inc. for total proceeds of $12.4 million. We also received $0.4 million in full realization on the preferred equity of the company, resulting in a $0.1 million gain. On the same day, we invested $14.4 million in the first lien term loan and $0.6 million in the unfunded revolver of the company.

On November 9, 2021, we invested $7.6 million in the first lien term loan and committed $0.1 million in the unfunded revolver of Ledge Lounger, Inc. a provider of premium in-pool and backyard furniture. Additionally, we invested $0.4 million in the equity of the company.

On November 10, 2021, we received full repayment on the first lien term loan of TechInsights, Inc. for total proceeds of $21.5 million.

On November 18, 2021, we committed $2.0 million in the unfunded revolver of CompleteCase, LLC, an existing portfolio company.

On November 19, 2021, we received full repayment on the first lien term loan of BW DME Acquisition, LLC for total proceeds of $16.7 million. We also received full repayment on the unsecured term loan of BW DME Holdings, LLC for total proceeds of $0.4 million and $7.9 million in full realization on the equity of the company, resulting in a $6.0 million gain.

On November 22, 2021, we invested $6.9 million in the first lien term loan and committed $0.5 million in the unfunded revolver of Madison Logic, Inc., an existing portfolio company. On the same day, we received $0.7 million in realization on the preferred equity of the company, resulting in a $0.2 million gain.

On November 23, 2021, we invested $15.0 million in the first lien term loan and committed $3.5 million in the unfunded revolver of ArborWorks Acquisition LLC a professional tree care firm. Additionally, we invested $0.1 million in the equity of the company.

On November 23, 2021, we received full repayment on the first lien term loan and revolver of Lynx FBO Operating, LLC for total proceeds of $14.2 million. We also received $1.8 million in full realization on the equity of the company, resulting in a $1.2 million gain.

On November 24, 2021, we invested $0.6 million in the first lien term loan and committed $0.2 million in the unfunded delayed draw term loan of Grupo HIMA San Pablo, Inc., an existing portfolio company.

On November 30, 2021, we invested $1.0 million in the first lien term loan of Munch's Supply LLC, an existing portfolio company.

On December 1, 2021, we received full repayment on the unsecured term loan Time Manufacturing Acquisitions, LLC for total proceeds of $13.6 million. We also received $2.7 million in full realization on the equity of the company, resulting in a $2.1 million gain.

On December 13, 2021, we received full repayment on the first lien term loan and delayed draw term loan of Convergence Technologies, Inc. for total proceeds of $17.2 million. We also received $2.2 million in full realization on the equity of the company, resulting in a $1.6 million gain.

On December 15, 2021, we received full repayment on the first lien last out term loan and last out delayed draw term loan of FB Topco, Inc. for total proceeds of $21.5 million.

On December 17, 2021, we invested $13.4 million in the first lien term loan and committed $2.9 million in the unfunded delayed draw term loan and $0.1 million in the unfunded revolver of HV Watterson Holdings, LLC a provider of emergency & disaster response, facility management, and environmental services to corporate clients. Additionally, we invested $1.1 million in the equity of the company.

On December 22, 2021, we invested $16 million in the first lien term loan and committed $0.1 million in the unfunded revolver of U.S. Expediters, LLC, a reseller of CPAP machines and accessories. Additionally, we invested $1.4 million in the equity of the company.

On December 27, 2021, we received $0.6 million in full realization on the equity of Wise Parent Company, LLC, resulting in a $0.6 million gain.

On December 28, 2021, we invested $10.6 million in first lien term loan and committed $0.1 million in the unfunded revolver of Trade Education Acquisition, L.L.C., an online education platform for retail investors. Additionally, we invested $0.7 million in the equity of the company.

On December 28, 2021, we invested $0.1 million in the equity of Xanitos, Inc., an existing portfolio company.

On December 30, 2021, we invested $16.7 million in the first lien term loan and committed $0.1 million in the unfunded revolver of Peltram Plumbing Holdings, LLC, a provider of plumbing solutions. Additionally, we invested $0.5 million in the equity of the company.

On December 31, 2021, we received full repayment on the first lien term loans and delayed draw term loan of Munch's Supply LLC for total proceeds of $15.4 million. In addition, we received $3.0 million in full realization on the equity of the company, resulting in a $2.5 million gain.

Events Subsequent to December 31, 2021

On February 1, 2022, we invested $6.2 million in the first lien term loan and committed $0.1 million in the unfunded revolver of BLP Buyer, Inc., a distributor of lifting solutions. Additionally, we invested $0.8 million in the equity of the company.

On February 7, 2022, we invested $5.4 million in the first lien term loan and committed $0.1 million in the unfunded revolver and $0.1 million in the unfunded delayed draw term loan of Service Minds Company, LLC, a provider of residential electrical services.

On February 10, 2022, we invested $1.0 million in the first lien term loan of NuSource Financial, LLC, an existing portfolio company.

On February 15, 2022, we invested £10.0 million pounds sterling ($13.5 million dollars) in the first lien term loan and committed $0.1 million in the unfunded delayed draw term loan and $0.1 million in the unfunded revolver of a provider of Oracle-focused IT services. Additionally, we invested $0.8 million in the equity of the company.

On February 24, 2022, we invested $13.5 million in the first lien term loan and committed $0.1 million in the unfunded revolver of BDS Solutions, a leading provider of outsourced marketing services.

Credit Facility

The outstanding balance under the credit facility as of March 1, 2022 was $202.3 million.

SBA-guaranteed Debentures

The outstanding balance of SBA-guaranteed Debentures as of March 1, 2022 was $260.0 million.

Dividend Declared

On January 13, 2022, the Company's Board declared a monthly dividend of $0.0933 per share for each of January, February, and March, totaling $0.28 per share in the aggregate for the first quarter of 2022.


Declared	Ex-Dividend Date	Record Date	Payment Date	Amount per Share
1/13/2022	1/27/2022	1/28/2022	2/15/2022	$	0.0933
1/13/2022	2/24/2022	2/25/2022	3/15/2022	$	0.0933
1/13/2022	3/30/2022	3/31/2022	4/15/2022	$	0.0933

Please refer to the website for regarding the U.S. federal income tax characteristics of our 2021 dividends. The information is posted on the website under "Tax Information" (https://www.stelluscapital.com/public-investors/tax-information/).

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on Wednesday, March 2, 2022 at 9:00 AM, Central Standard Time. The conference call will be led by Robert T. Ladd, Chief Executive Officer, and W. Todd Huskinson, Chief Financial Officer, Chief Compliance Officer, Treasurer, and Secretary.

For those wishing to participate by telephone, please dial 888-394-8218 (domestic). Use passcode 9879227. Starting approximately twenty-four hours after the conclusion of the call, a replay will be available through Thursday, March 11, 2022 by dialing (888) 203-1112 and entering passcode 9879227. The replay will also be available on the Company's website.

For those wishing to participate via Live Webcast, connect via the Public Company (SCIC) section of our website at www.stelluscapital.com, under the Events tab. A replay of the conference will be available on our website for approximately 90 days.

Contacts
Stellus Capital Investment Corporation
W. Todd Huskinson, (713) 292-5414
Chief Financial Officer
thuskinson@stelluscapital.com


PART I — FINANCIAL INFORMATION

STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

			December 31,		December 31,
			2021		2020
ASSETS
	Non-controlled, non-affiliated investments, at fair value
		(amortized cost of $785,005,957 and $658,628,966, respectively)	$	772,873,326	$	653,424,495
	Cash and cash equivalents			44,174,856		18,477,602
	Receivable for sales and repayments of investments			536,105		215,929
	Interest receivable			2,944,599		2,189,448
	Other receivables			54,752		25,495
	Deferred tax asset			151,278		—
	Deferred offering costs			14,888		90,000
	Prepaid expenses			512,214		487,188
		Total Assets	$	821,262,018	$	674,910,157
LIABILITIES
	Notes payable		$	98,102,973	$	48,307,518
	Credit Facility payable			175,451,116		171,728,405
	SBA-guaranteed debentures			244,615,903		173,167,496
	Dividends payable			1,171,059		—
	Management fees payable			3,454,225		2,825,322
	Income incentive fees payable			1,749,130		681,660
	Capital gains incentive fees payable			3,388,151		521,021
	Interest payable			3,693,662		2,144,085
	Unearned revenue			529,726		523,424
	Administrative services payable			386,368		391,491
	Deferred tax liability			—		359,590
	Income tax payable			3,269,514		724,765
	Other accrued expenses and liabilities			338,958		174,731
		Total Liabilities	$	536,150,785	$	401,549,508
		Commitments and contingencies (Note 7)
		Net Assets	$	285,111,233	$	273,360,649
NET ASSETS
	Common stock, par value $0.001 per share (100,000,000 shares
		authorized; 19,517,595 and 19,486,003 issued and outstanding,
		respectively)	$	19,518	$	19,486
	Paid-in capital			274,559,121		276,026,667
	Accumulated undistributed surplus (deficit)			10,532,594		(2,685,504)
		Net Assets	$	285,111,233	$	273,360,649
		Total Liabilities and Net Assets	$	821,262,018	$	674,910,157
		Net Asset Value Per Share	$	14.61	$	14.03

STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

				For the		For the		For the
				year		year		year
				ended		ended		ended
				December 31,		December 31,		December 31,
				2021		2020		2019
INVESTMENT INCOME
	Interest income			$	61,536,686	$	55,350,781	$	56,895,990
	Other income				2,142,308		1,307,533		2,015,899
		Total Investment Income		$	63,678,994	$	56,658,314	$	58,911,889
OPERATING EXPENSES
	Management fees			$	13,169,606	$	11,084,450	$	9,703,706
	Valuation fees				313,437		290,445		265,103
	Administrative services expenses				1,798,966		1,781,603		1,691,764
	Income incentive fees				3,043,470		2,527,813		5,809,672
	Capital gains incentive fees				2,867,131		(359,892)		799,876
	Professional fees				1,082,917		950,716		1,040,011
	Directors' fees				315,000		394,816		383,000
	Insurance expense				482,140		384,774		352,382
	Interest expense and other fees				18,721,058		15,950,087		14,976,024
	Income tax expense				1,102,374		771,134		903,905
	Other general and administrative expenses				1,006,428		890,465		547,637
		Total Operating Expenses		$	43,902,527	$	34,666,411	$	36,473,080
		Net Investment Income		$	19,776,467	$	21,991,903	$	22,438,809
	Net realized gain (loss) on non-controlled, non-affiliated
		investments		$	23,710,167	$	(10,129,859)	$	19,565,903
	Loss on debt extinguishment			$	(539,250)	$	—	$	—
	Net change in unrealized (depreciation) appreciation
		on non-controlled, non-affiliated investments		$	(6,928,160)	$	8,555,274	$	(15,501,951)
	Net change in unrealized appreciation
		on non-controlled, affiliated investments		$	-	$	-	$	2,185
	Benefit (provision) for taxes on net unrealized depreciation
		(appreciation) on investments		$	510,868	$	(224,877)	$	(66,760)
	Provision for taxes on realized gain on investments			$	(2,957,220)	$	—	$	—
		Net Increase in Net Assets
			Resulting from Operations	$	33,572,872	$	20,192,441	$	26,436,001
		Net Investment Income Per Share—basic and diluted		$	1.01	$	1.13	$	1.23
		Net Increase in Net Assets Resulting
			from Operations Per Share—basic and diluted	$	1.72	$	1.04	$	1.45
		Weighted Average Shares of Common Stock
			Outstanding—basic and diluted		19,489,750		19,471,500		18,275,696
		Distributions Per Share—basic and diluted		$	1.14	$	1.15	$	1.36




STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS


		Common Stock						Accumulated
		Number		Par		Paid-in		undistributed
		of shares		value		capital		surplus (deficit)		Net Assets
Balances at December 31, 2018		15,953,810	$	15,954	$	228,160,491	$	(3,331,438)	$	224,845,007
Net investment income		-		-		-		22,438,809		22,438,809
Net realized gain on non-controlled,
	non-affiliated investments	-		-		-		19,565,903		19,565,903
Net change in unrealized depreciation on
	non-controlled, non-affiliated investments	-		-		-		(15,501,951)		(15,501,951)
Net change in unrealized appreciation on
	non-controlled, affiliated investments	-		-		-		2,185		2,185
Provision for taxes on unrealized appreciation
	on investments	-		-		-		(66,760)		(66,760)
Return of capital and other tax related adjustments						(366,375)		366,375		-
Distributions from net investment income		-		-		-		(10,000,000)		(10,000,000)
Distributions from net realized capital gains		-		-		-		(15,038,173)		(15,038,173)
Issuance of common stock, net of offering costs		3,177,936		3,178		44,322,975		-		44,326,153
Balances at December 31, 2019		19,131,746	$	19,132	$	272,117,091	$	(1,565,050)	$	270,571,173
Net investment income		-		-		-		21,991,903		21,991,903
Net realized loss on non-controlled,
	non-affiliated investments	-		-		-		(10,129,859)		(10,129,859)
Net change in unrealized appreciation on
	non-controlled, non-affiliated investments	-		-		-		8,555,274		8,555,274
Provision for taxes on unrealized appreciation
	on investments	-		-		-		(224,877)		(224,877)
Return of capital and other tax related adjustments						(1,090,064)		1,090,064		-
Distributions from net investment income		-		-		-		(22,402,959)		(22,402,959)
Issuance of common stock, net of offering costs		354,257		354		4,999,640		-		4,999,994
Balances at December 31, 2020		19,486,003	$	19,486	$	276,026,667	$	(2,685,504)	$	273,360,649
Net investment income		-		-		-		19,776,467		19,776,467
Net realized gain on non-controlled,
	non-affiliated investments	-		-		-		23,710,167		23,710,167
Loss on debt extinguishment								(539,250)		(539,250)
Net change in unrealized depreciation on
	non-controlled, non-affiliated investments	-		-		-		(6,928,160)		(6,928,160)
Benefit for taxes on unrealized depreciation
	on investments	-		-		-		510,868		510,868
Provision for taxes on realized gain on investments								(2,957,220)		(2,957,220)
Return of capital and other tax related adjustments						(1,861,213)		1,861,213		-
Distributions from net investment income		-		-		-		(21,201,567)		(21,201,567)
Distributions from net realized capital gains		-		-		-		(1,014,420)		(1,014,420)
Issuance of common stock, net of offering costs		31,592		32		393,667		-		393,699
Balances at December 31, 2021		19,517,595	$	19,518	$	274,559,121	$	10,532,594	$	285,111,233




STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

			For the year		For the year		For the year
			ended		ended		ended
			December 31,		December 31,		December 31,
			2021		2020		2019
Cash flows from operating activities
Net increase in net assets resulting from operations			$	33,572,872	$	20,192,441	$	26,438,186
	Adjustments to reconcile net increase in net assets
		from operations to net cash used in operating activities:
		Purchases of investments		(387,281,160)		(152,007,165)		(246,438,384)
		Proceeds from sales and repayments of investments		287,639,512		128,627,422		128,206,318
		Net change in unrealized depreciation (appreciation) on investments		6,928,160		(8,555,274)		15,499,766
		Increase in investments due to PIK		(939,030)		(664,992)		(415,933)
		Amortization of premium and accretion of discount, net		(2,412,991)		(2,098,788)		(1,774,469)
		Deferred tax (benefit) provision		(510,868)		224,877		66,760
		Amortization of loan structure fees		518,930		647,872		519,995
		Amortization of deferred financing costs		444,153		333,316		332,407
		Amortization of loan fees on SBA-guaranteed debentures		1,088,132		701,068		623,900
		Net realized (gain) loss on investments		(23,703,499)		10,129,859		(19,565,903)
		Loss on debt extinguishment		539,250		-		-
	Changes in other assets and liabilities
		(Increase) decrease in interest receivable		(755,151)		725,262		873,974
		(Increase) decrease in other receivables		(29,257)		—		59,751
		Increase in prepaid expenses		(25,026)		(118,967)		(23,600)
		Increase in management fees payable		628,903		129,542		511,805
		Increase (decrease) in income incentive fees payable		1,067,470		(936,849)		(318,029)
		Increase (decrease) in capital gains incentive fees payable		2,867,130		(359,892)		799,875
		(Decrease) increase in administrative services payable		(5,123)		(21,787)		21,087
		Increase (decrease) in interest payable		1,549,577		(178,229)		458,748
		Increase (decrease) in unearned revenue		6,302		(36,344)		149,175
		Increase (decrease) in income tax payable		2,544,749		(192,235)		600,908
		Increase (decrease) in other accrued expenses and liabilities		164,227		(28,730)		87,559
Net Cash Used In Operating Activities			$	(76,102,738)	$	(3,487,593)	$	(93,286,104)
		Cash flows from Financing Activities
		Proceeds from the issuance of common stock	$	449,515	$	4,794,994	$	45,862,239
		Sales load for commons stock issued		(2,489)		(18,169)		(1,015,127)
		Offering costs paid for common stock issued		(53,327)		(95,681)		(503,042)
		Stockholder distributions paid		(21,044,928)		(24,341,646)		(24,678,113)
		Repayment of notes payable		(48,875,000)		-		-
		Proceeds from issuance of notes payable		100,000,000		-		-
		Financing costs paid on notes payable		(2,237,835)		-		-
		Proceeds from SBA-guaranteed debentures		73,500,000		15,500,000		11,000,000
		Financing costs paid on SBA-guaranteed debentures		(3,139,725)		(577,425)		(467,850)
		Financing costs paid on Credit facility		(136,219)		(1,880,099)		(246,589)
		Borrowings under Credit Facility		268,700,000		120,950,000		245,750,000
		Repayments of Credit Facility		(265,360,000)		(108,500,000)		(183,750,000)
		Partial share redemption		-		(94)		755
Net Cash Provided by Financing Activities			$	101,799,992	$	5,831,880	$	91,952,273
Net Increase (Decrease) in Cash and Cash Equivalents			$	25,697,254	$	2,344,287	$	(1,333,831)
	Cash and Cash Equivalents balance at beginning of period			18,477,602		16,133,315		17,467,146
Cash and Cash Equivalents Balance at End of Period			$	44,174,856	$	18,477,602	$	16,133,315
Supplemental and Non-Cash Activities
	Cash paid for interest expense		$	15,099,656	$	14,441,061	$	13,035,976
	Income and excise tax paid			1,445,000		940,000		280,000
	Shares issued pursuant to Dividend Reinvestment Plan			-		228,943		-
	Increase (decrease) in dividends payable			1,171,059		(2,167,630)		360,060
	(Decrease) increase in deferred offering costs			(75,112)		90,000		(18,673)
	Gain on conversion of equity investment			6,668		-		-


Reconciliation of Core Net Investment Income
(Unaudited)

		Year	Quarter
		ended	ended
		December 31, 2021	December 31, 2021
Net investment income		$19,776,467	$5,116,721
	Capital gains incentive fee	$2,867,131	$1,026,559
	Income tax expense	$1,102,374	$383,505
Core net investment income⁽¹⁾		$23,745,972	$6,526,785

Per share amounts:
Net investment income per share		$1.01	$0.26
Core net investment income per share⁽¹⁾		$1.22	$0.33

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SOURCE Stellus Capital Investment Corporation