Press Release

Stellus Capital Investment Corporation Reports Results for its Third Fiscal Quarter Ended September 30, 2022

November 3, 2022 at 5:56 PM EDT

HOUSTON, Nov. 3, 2022 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus" or the "Company") today announced financial results for its third fiscal quarter ended September 30, 2022.

Robert T. Ladd, Chief Executive Officer of Stellus, stated, "I am pleased to report strong results for the third quarter, in which we more than covered our regular dividend with GAAP and Core net investment income, grew our portfolio to $872 million at fair value and maintained asset quality. Our portfolio company performance remains stable. We are benefitting from the rising interest rate environment as our loan portfolio's yield has now risen 140 basis points from the end of the second quarter. In October, in addition to our regular dividend of $0.28 per quarter in the aggregate, our Board of Directors declared an additional dividend of $0.06 in the aggregate for the fourth quarter. These dividends total $0.34 per share in the aggregate, payable in monthly increments, for the fourth quarter."


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

	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
	Amount	Per Share	Amount	Per Share
Net investment income	$7.19	$0.37	$18.88	$0.97
Core net investment income ⁽¹⁾	6.90	0.35	18.27	0.94
Net realized gains on investments	1.55	0.08	4.66	0.24
Net realized loss on foreign currency	-	-	(0.01)	-
Total realized income ⁽²⁾	8.74	0.45	23.53	1.20
Distributions	(6.64)	(0.34)	(18.75)	(0.96)
Net unrealized depreciation on investments	(4.80)	(0.25)	(12.81)	(0.66)
Net unrealized depreciation on foreign currency translation	(0.02)	-	(0.05)	-
Provision for taxes on unrealized appreciation on investments in taxable subsidiaries	0.03	-	(0.15)	(0.01)
Net increase in net assets resulting from operations	$3.96	0.20	$10.51	0.54
Weighted average shares outstanding		19,545,935		19,535,708


		(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 a non-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, net realized gains (losses) on investments, net realized gains (losses) on foreign currency, and loss on debt extinguishment; all U.S. GAAP measures.


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

	As of	As of
	September 30,	December 31,
	2022	2021
Investments at fair value	$871.70	$772.9
Total assets	$889.10	$821.3
Net assets	$277.20	$285.1
Shares outstanding	19,545,935	19,517,595
Net asset value per share	$14.18	$14.61

	Three Months Ended	Nine Months Ended
	September 30,	September 30,
	2022	2022
New investments	$56.9	$181.0
Repayments of investments	(34.2)	(74.4)
Net activity	$22.7	$106.6

	As of	As of
	September 30,	December 31,
	2022	2021
Number of portfolio company investments	89	73
Number of debt investments	74	58

Weight average yield of debt and other income producing investments ⁽³⁾
Cash	9.2 %	7.4 %
Payment-in-kind ("PIK")	0.1 %	0.2 %
Fee amortization	0.5 %	0.4 %
Total	9.8 %	8.0 %

Weighted average yield on total investments ⁽⁴⁾
Cash	8.7 %	6.9 %
Payment-in-kind ("PIK")	0.1 %	0.2 %
Fee amortization	0.4 %	0.4 %
Total	9.2 %	7.5 %


		(3)	The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as 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.
		(4)	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 three months ended September 30, 2022 and 2021 totaled $20.1 million and $17.0 million, respectively, most of which was interest income from portfolio investments.

Operating expenses for the three months ended September 30, 2022 and 2021, totaled $13.0 million and $13.0 million, respectively. For the same respective periods, base management fees totaled $3.8 million and $3.5 million, income incentive fees totaled $1.6 and $1.5 million, capital gains incentive (reversal) fees totaled ($0.6) million and $1.7 million, fees and expenses related to our borrowings totaled $6.4 million and $4.9 million (including interest and amortization of deferred financing costs), administrative expenses totaled $0.4 million for both periods, income tax totaled $0.4 million and $0.2 million and other expenses totaled $1.0 million and $0.8 million.

Net investment income was $7.2 million and $4.1 million, or $0.37 and $0.21 per common share based on weighted average common shares outstanding of 19,545,935 and 19,486,003 for the three months ended September 30, 2022 and 2021, respectively.

The capital gains incentive fee had a reversal of ($0.6) million for the three months ended September 30, 2022 due to the increase in unrealized losses, net of realized gains over the quarter. 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 $0.4 million for the three months ended September 30, 2022 was accrued based on estimates of undistributed taxable income, which was generated largely from net income. Core net investment income, which is a non-U.S. GAAP measure that excludes the capital gains incentive fee and income tax expense accruals, for the three months ended September 30, 2022 was $6.9 million, or $0.35 per share; and for the three months ended September 30, 2021 was $6.0 million, or $0.31 per share.

For the three months ended September 30, 2022 and 2021, the Company's investment portfolio had a net change in unrealized (depreciation) appreciation of ($4.8) million and $2.1 million, respectively and the Company had realized gains of $1.6 million and $7.9 million, respectively.

Net increase in net assets resulting from operations totaled $4.0 million and $12.8 million, or $0.20 and $0.66 per common share, based on weighted average common shares outstanding of 19,545,935 and 19,486,003 for the three months ended September 30, 2022 and 2021.

Liquidity and Capital Resources

As of September 30, 2022, our amended and restated senior secured revolving credit agreement with certain bank lenders and Zions Bancorporation, N.A. dba Amegy Bank, as administrative agent (as amended from time to time, the "Credit Facility") provided for borrowings in an aggregate amount of up to $265.0 million on a committed basis. As of September 30, 2022 and 2021, the Credit Facility had an accordion feature which allowed for potential future expansion of the facility size to $280.0 million. As of September 30, 2022 and December 31, 2021, we had $199.0 million and $177.3 million, respectively, in outstanding borrowings under the Credit Facility, respectively.

Distributions

During the three months ended September 30, 2022 and 2021, we declared aggregate distributions of $0.34 per share and $0.58 per share ($6.6 million and $11.3 million, respectively) for each quarter. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year. None of these dividends are expected to include a return of capital.

Recent Portfolio Activity

New and Add-on Investments


Activity Type	Date	Company Name	Company Description	Investment Amount	Instrument Type
New Investment	July 1, 2022	Heat Makes Sense Shared Services, LLC	Branded haircare platform	$100,000	First lien term loan
				$100,000	Revolver commitment
				$100,000	Equity investment
New Investment	July 5, 2022	Baker Manufacturing Company, LLC	Manufacturer of water well equipment, specialized	$13,863,087	Last out term loan
			filtration pumps, and custom castings	$743,770	Equity investment
Add-On Investment	July 15, 2022	Exacta Land Surveyors, LLC	Existing portfolio company	$1,000,000	First lien term loan
				$53,107	Equity investment
Add-On Investment	July 20, 2022	SIB Holdings, LLC	Existing portfolio company	$2,321,678	First lien term loan
Add-On Investment	July 28, 2022	USASF Blocker IV LLC	Existing portfolio company	$100,000	Equity investment
New Investment	July 29, 2022	Curion Holdings, LLC	Provider of product testing and consumer insights	$13,060,001	First lien term loan
				$100,000	Revolver commitment
				$100,000	Delayed draw term loan commitment
				$739,999	Equity investment
Add-On Investment	August 2, 2022	Inoapps Holdings, LLC	Existing portfolio company	$43,956	Equity investment
Add-On Investment	August 5, 2022	Credit Connection, LLC	Existing portfolio company	$54,384	Equity investment
Add-On Investment	August 8, 2022	International Designs Holdings LLC	Existing portfolio company	$100,000	Equity investment
New Investment	August 11, 2022	Archer Systems, LLC	Provider of mass tort settlement administrative	$1,000,000	First lien term loan
			solutions	$100,000	Revolver commitment
				$100,000	Equity investment
New Investment	August 26, 2022	Heartland Business Systems, LLC	End-to-end IT solutions provider	$10,000,000	First lien term loan
				$100,000	Delayed draw term loan commitment
				$286,065	Equity investment
New Investment	August 31, 2022	Pearl Media Holdings, LLC	Provider of street-level, out-of-home advertising	$10,000,000	First lien term loan
				$100,000	Revolver commitment
				$100,000	Delayed draw term loan commitment
Add-On Investment	September 1, 2022	Sapphire Aggregator S.a r.l.	Existing portfolio company	$100,000	Equity investment
New Investment	September 2, 2022	MacKenzie-Childs Acquisition, Inc.	Lifestyle home décor brand	$100,000	First lien term loan
				$100,000	Revolver commitment
				$100,000	Equity investment
Add-On Investment	September 28, 2022	HV GS Acquisition, LP	Existing portfolio company	$89,439	Equity investment
Add-On Investment	September 30, 2022	Tower Arch Infolinks Media, LP	Existing portfolio company	$1,093	Equity investment

Full Repayments and Realizations


Activity Type	Date	Company Name	Company Description	Proceeds Received	Realized Gain	Instrument Type
Full Repayment	July 15, 2022	ASC Communications, LLC	Existing portfolio company	$8,250,000		First lien term loan
Full Realization				$1,750,487	$1,750,487	Equity investment
Full Repayment	July 15, 2022	International Designs Group LLC	Existing portfolio company	$99,750		First lien term loan
				$20,000		Revolver
Full Repayment	August 18, 2022	TAC LifePort Purchaser, LLC	Existing portfolio company	$9,543,742		First lien term loan
Full Realization	September 16, 2022	PCS Software Holdings, LLC	Existing portfolio company	$437,920	$49,608	Equity investment

Events Subsequent to September 30, 2022


Activity Type	Date	Company Name	Company Description	Investment Amount	Instrument Type
New Investment	October 12, 2022	NINJIO, LLC	Cybersecurity awareness and training platform	$5,000,000	First lien term loan
				$100,000	Revolver commitment
				$100,000	Delayed draw term loan commitment
				$313,253	Equity investment


Activity Type	Date	Company Name	Company Description	Proceeds Received	Realized Gain	Instrument Type
Full Realization	October 17, 2022	EC Defense Holdings, LLC	Existing portfolio company	$1,159,638	$950,000	Equity investment

Credit Facility

The outstanding balance under the credit facility as of November 3, 2022 was $206.8 million.

SBA-guaranteed Debentures

On August 12, 2022, the Company contributed $9.5 million in capital to its SBIC II subsidiary. To date, the Company has contributed all of its $87.5 million regulatory capital commitment. The total balance of SBA-guaranteed debentures outstanding as of November 3, 2022 was $306.0 million.

Distributions Declared

On October 4, 2022, our board of directors declared a regular monthly distribution for each of October, November, and December 2022 as follows:


	Ex-Dividend	Record	Payment	Amount per
Declared	Date	Date	Date	Share
10/04/2022	10/28/2022	10/31/2022	11/15/2022	$	0.0933
10/04/2022	11/29/2022	11/30/2022	12/15/2022	$	0.0933
10/04/2022	12/15/2022	12/16/2022	12/29/2022	$	0.0933

On October 4, 2022, our board of directors declared an additional monthly distribution for each of October, November, and December 2022 as follows:


	Ex-Dividend	Record	Payment	Amount per
Declared	Date	Date	Date	Share
10/04/2022	10/28/2022	10/31/2022	11/15/2022	$	0.02
10/04/2022	11/29/2022	11/30/2022	12/15/2022	$	0.02
10/04/2022	12/15/2022	12/16/2022	12/29/2022	$	0.02

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on Friday, November 4, 2022 at 10:00 AM, Central Daylight 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) 506-0062. Use passcode 225613. Starting approximately two hours after the conclusion of the call, a replay will be available through Saturday, November 12, 2022 by dialing (877) 481-4010 and entering passcode 46954. 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.

About Stellus Capital Investment Corporation

The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans, second lien loans and unsecured debt financing, with corresponding equity co-investments. The Company's investment activities are managed by its investment adviser, Stellus Capital Management. To learn more about Stellus Capital Investment Corporation, visit www.stelluscapital.com under the "Public (SCIC)" tab.

Forward-Looking Statements

Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release, including statements about COVID-19 and its impacts, may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Contacts

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


STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

	September 30,
	2022		December 31,
	(unaudited)		2021
ASSETS
Non-controlled, non-affiliated investments, at fair value (amortized cost of $899,059,872 and $785,005,957, respectively)	$	871,733,280	$	772,873,326
Cash and cash equivalents		12,419,743		44,174,856
Receivable for sales and repayments of investments		562,133		536,105
Interest receivable		3,852,386		2,944,599
Other receivables		60,495		54,752
Deferred tax asset		—		151,278
Related party receivable		19,034		—
Deferred offering costs		241,997		14,888
Prepaid expenses		219,079		512,214
Total Assets	$	889,108,147	$	821,262,018
LIABILITIES
Notes payable	$	98,437,095	$	98,102,973
Credit Facility payable		197,371,231		175,451,116
SBA-guaranteed debentures		300,157,597		244,615,903
Dividends payable		2,214,557		1,171,059
Management fees payable		7,032,721		3,454,225
Income incentive fees payable		1,909,651		1,749,130
Capital gains incentive fees payable		1,715,602		3,388,151
Interest payable		885,348		3,693,662
Unearned revenue		344,555		529,726
Administrative services payable		376,887		386,368
Income tax payable		1,086,338		3,269,514
Other accrued expenses and liabilities		398,581		338,958
Total Liabilities	$	611,930,163	$	536,150,785
Commitments and contingencies (Note 7)
Net Assets	$	277,177,984	$	285,111,233
NET ASSETS
Common stock, par value $0.001 per share (100,000,000 shares authorized; 19,545,935 and 19,517,595 issued and outstanding, respectively)	$	19,546	$	19,518
Paid-in capital		274,864,296		274,559,121
Accumulated undistributed surplus		2,294,142		10,532,594
Net Assets	$	277,177,984	$	285,111,233
Total Liabilities and Net Assets	$	889,108,147	$	821,262,018
Net Asset Value Per Share	$	14.18	$	14.61


STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	For the three months ended		For the three months ended		For the nine months ended		For the nine months ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
INVESTMENT INCOME
Interest income	$	19,617,468	$	16,460,579	$	50,392,437	$	44,819,754
Other income		524,799		568,764		1,353,279		1,301,827
Total Investment Income	$	20,142,267	$	17,029,343	$	51,745,716	$	46,121,581
OPERATING EXPENSES
Management fees	$	3,827,669	$	3,473,041	$	11,025,435	$	9,715,381
Valuation fees		145,865		141,012		315,482		289,447
Administrative services expenses		447,381		437,804		1,388,602		1,354,295
Income incentive fees		1,635,641		1,451,752		1,635,641		1,507,651
Capital gains incentive (reversal) fees		(646,757)		1,742,904		(1,672,549)		1,840,572
Professional fees		315,809		267,332		845,275		772,509
Directors' fees		83,500		74,500		254,500		240,500
Insurance expense		127,274		120,119		377,671		356,439
Interest expense and other fees		6,448,280		4,854,388		16,864,255		13,869,834
Income tax expense		361,115		192,612		1,066,768		718,869
Other general and administrative expenses		207,170		209,779		766,562		796,338
Total Operating Expenses	$	12,952,947	$	12,965,243	$	32,867,642	$	31,461,835
Net Investment Income	$	7,189,320	$	4,064,100	$	18,878,074	$	14,659,746
Net realized gain on non-controlled, non-affiliated investments	$	1,553,450	$	7,921,322	$	4,658,817	$	6,601,885
Net realized loss on foreign currency translation		(676)		—		(8,026)		—
Loss on debt extinguishment		—		—		—		(539,250)
Net change in unrealized (depreciation) appreciation on non-controlled, non-affiliated investments		(4,798,980)		2,080,603		(12,810,173)		3,868,463
Net change in unrealized depreciation on foreign currency translations		(18,120)		—		(53,874)		—
Benefit (provision) for taxes on net unrealized depreciation (appreciation) on investments		30,535		(606,377)		(151,278)		(586,460)
Provision for taxes on realized gain on investments		—		(681,027)		—		(681,027)
Net Increase in Net Assets Resulting from Operations		3,955,529		12,778,621		10,513,540		23,323,357
Net Investment Income Per Share—basic and diluted	$	0.37	$	0.21	$	0.97	$	0.75
Net Increase in Net Assets Resulting from Operations Per Share—basic and diluted	$	0.20	$	0.66	$	0.54	$	1.20
Weighted Average Shares of Common Stock Outstanding —basic and diluted		19,545,935		19,486,003		19,535,708		19,486,003
Distributions Per Share—basic and diluted	$	0.34	$	0.58	$	0.96	$	1.08


STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

	Common Stock					Accumulated
	Number	Par		Paid-in		undistributed
	of shares	value		capital		surplus (deficit)		Net Assets
Balances at December 31, 2020	19,486,003	$	19,486	$	276,026,667	$	(2,685,504)	$	273,360,649
Net investment income	—		—		—		5,060,631		5,060,631
Net realized gain on non-controlled, non-affiliated investments	—		—		—		462,228		462,228
Loss on debt extinguishment							(539,250)		(539,250)
Net change in unrealized appreciation on non-controlled, non-affiliated investments	—		—		—		121,983		121,983
Provision for taxes on unrealized appreciation on investments	—		—		—		(167,804)		(167,804)
Distributions from net investment income	—		—		—		(4,869,552)		(4,869,552)
Balances at March 31, 2021	19,486,003	$	19,486	$	276,026,667	$	(2,617,268)	$	273,428,885
Net investment income	—		—		—		5,535,015		5,535,015
Net realized loss on non-controlled, non-affiliated investments	—		—		—		(1,781,665)		(1,781,665)
Net change in unrealized appreciation on non-controlled, non-affiliated investments	—		—		—		1,665,877		1,665,877
Benefit for taxes on unrealized depreciation on investments	—		—		—		187,721		187,721
Distributions from net investment income	—		—		—		(4,869,552)		(4,869,552)
Balances at June 30, 2021	19,486,003	$	19,486	$	276,026,667	$	(1,879,872)	$	274,166,281
Net investment income	—		—		—		4,064,100		4,064,100
Net realized loss on non-controlled, non-affiliated investments	—		—		—		7,921,322		7,921,322
Net change in unrealized appreciation on non-controlled, non-affiliated investments	—		—		—		2,080,603		2,080,603
Provision for taxes on unrealized appreciation on investments	—		—		—		(606,377)		(606,377)
Provision for taxes on realized gain on investments	—		—		—		(681,027)		(681,027)
Distributions from net investment income	—		—		—		(11,299,933)		(11,299,933)
Balances at September 30, 2021	19,486,003	$	19,486	$	276,026,667	$	(401,184)	$	275,644,969

Balances at December 31, 2021	19,517,595	$	19,518	$	274,559,121	$	10,532,594	$	285,111,233
Net investment income	—		—		—		5,514,183		5,514,183
Net realized gain on non-controlled, non-affiliated investments	—		—		—		3,458,090		3,458,090
Net realized loss on foreign currency translation	—		—		—		(7,350)		(7,350)
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(3,721,602)		(3,721,602)
Provision for taxes on unrealized appreciation on investments	—		—		—		(21,157)		(21,157)
Distributions from net investment income	—		—		—		(5,464,666)		(5,464,666)
Issuance of common stock, net of offering costs	14,924		15		167,655		—		167,670
Balances at March 31, 2022	19,532,519	$	19,533	$	274,726,776	$	10,290,092	$	285,036,401
Net investment income	—		—		—		6,174,571		6,174,571
Net realized loss on non-controlled, non-affiliated investments	—		—		—		(352,723)		(352,723)
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(4,289,591)		(4,289,591)
Net change in unrealized depreciation on foreign currency translations	—		—		—		(35,754)		(35,754)
Provision for taxes on unrealized appreciation on investments	—		—		—		(160,656)		(160,656)
Distributions from net investment income	—		—		—		(6,643,663)		(6,643,663)
Issuance of common stock, net of offering costs	13,416		13		137,520		—		137,533
Balances at June 30, 2022	19,545,935	$	19,546	$	274,864,296	$	4,982,276	$	279,866,118
Net investment income	—		—		—		7,189,320		7,189,320
Net realized gain on non-controlled, non-affiliated investments	—		—		—		1,553,450		1,553,450
Net realized loss on foreign currency translation	—		—		—		(676)		(676)
Net change in unrealized depreciation on non-controlled, non-affiliated investments	—		—		—		(4,798,980)		(4,798,980)
Net change in unrealized depreciation on foreign currency translations	—		—		—		(18,120)		(18,120)
Benefit for taxes on unrealized depreciation on investments	—		—		—		30,535		30,535
Distributions from net investment income	—		—		—		(6,643,663)		(6,643,663)
Balances at September 30, 2022	19,545,935	$	19,546	$	274,864,296	$	2,294,142	$	277,177,984


STELLUS CAPITAL INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	For the		For the
	nine months ended		nine months ended
	September 30,		September 30,
	2022		2021
Cash flows from operating activities
Net increase in net assets resulting from operations	$	10,513,540	$	23,323,357
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(180,956,810)		(243,298,147)
Proceeds from sales and repayments of investments		74,385,466		123,617,259
Net change in unrealized depreciation (appreciation) on investments		12,810,173		(3,868,463)
Net change in unrealized depreciation on foreign currency translations		28,405		—
Increase in investments due to PIK		(1,010,061)		(607,393)
Amortization of premium and accretion of discount, net		(1,839,720)		(1,747,423)
Deferred tax provision		151,278		586,460
Amortization of loan structure fees		420,356		390,298
Amortization of deferred financing costs		334,122		346,123
Amortization of loan fees on SBA-guaranteed debentures		905,294		801,259
Net realized gain on investments		(4,658,817)		(6,595,217)
Loss on debt extinguishment		—		539,250
Changes in other assets and liabilities
Increase in interest receivable		(907,787)		(614,133)
Increase in other receivables		(5,743)		(110,000)
Increase in related party receivable		(19,034)		—
Increase in prepaid expenses		293,135		300,867
Increase in management fees payable		3,578,496		2,426,198
Increase in income incentive fees payable		160,521		948,489
(Decrease) increase in capital gains incentive fees payable		(1,672,549)		1,840,572
(Decrease) increase in administrative services payable		(9,481)		371,745
Decrease in interest payable		(2,808,314)		(1,406,381)
Decrease (increase) in unearned revenue		(185,171)		7,847
(Decrease) increase in income tax payable		(2,183,176)		511,851
Increase in other accrued expenses and liabilities		59,623		140,302
Net Cash Used In Operating Activities	$	(92,616,254)	$	(102,095,280)
Cash flows from Financing Activities
Proceeds from the issuance of common stock	$	420,004	$	—
Sales load for commons stock issued		(5,957)		—
Offering costs paid for common stock issued		(335,953)		—
Stockholder distributions paid		(17,708,494)		(13,636,301)
Repayment of Notes		—		(48,875,000)
Proceeds from issuance of Notes		—		100,000,000
Financing costs paid on Notes		—		(2,237,835)
Proceeds from SBA-guaranteed debentures		56,000,000		73,500,000
Financing costs paid on SBA-guaranteed debentures		(1,363,600)		(3,139,725)
Financing costs paid on Credit facility		(193,659)		(39,843)
Borrowings under Credit Facility		121,608,702		191,200,000
Repayments of Credit Facility		(97,559,902)		(175,400,000)
Net Cash Provided by Financing Activities	$	60,861,141	$	121,371,296
Net (Decrease) Increase in Cash and Cash Equivalents	$	(31,755,113)	$	19,276,016
Cash and Cash Equivalents balance at beginning of period		44,174,856		18,477,602
Cash and Cash Equivalents Balance at End of Period	$	12,419,743	$	37,753,618
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	18,012,797	$	13,733,216
Income and excise tax paid		3,249,944		870,000
Increase in dividends payable		1,043,498		7,402,736
Increase (decrease) in deferred offering costs		227,109		(90,000)
Gain on conversion of equity investment		—		6,668


Reconciliation of Core Net Investment Income⁽¹⁾
(Unaudited)

	Quarter	Quarter
	ended	ended
	September 30, 2022	September 30, 2021
Net investment income	$7,189,320	$4,064,100
Capital gains incentive fee	(646,757)	1,742,904
Income tax expense	361,115	192,612
Core net investment income	$6,903,678	$5,999,616

Per share amounts:
Net investment income per share	$0.37	$0.21
Core net investment income per share	$0.35	$0.31


Reconciliation of Realized Net Investment Income⁽²⁾
(Unaudited)

	Quarter	Quarter
	ended	ended
	September 30, 2022	September 30, 2021
Net investment income	$7,189,320	$4,064,100
Net realized gain on investments	1,553,450	7,921,322
Net realized gain on foreign currency translation	(676)	—
Provision for taxes on realized gain on investments	—	(681,027)
Total Realized Net Investment Income	$8,742,094	$11,304,395

Per share amounts:
Net investment income per share	$0.37	$0.21
Realized net investment income per share	$0.45	$0.58

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SOURCE Stellus Capital Investment Corporation