Press Release

Stellus Capital Investment Corporation Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2023

March 4, 2024 at 5:31 PM EST

HOUSTON, March 4, 2024 /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, 2023.

Robert T. Ladd, Chief Executive Officer of Stellus, stated, "I am pleased to report solid operating results for the quarter ended December 31, 2023, in which U.S. GAAP net investment income of $0.49 per share and core net investment income of $0.50 per share covered the regular dividend declared of $0.40 per share. Our loan portfolio is yielding 11.9%, as of December 31, 2023. We have concluded over eleven years of operations, during which our investors have received a total of $246 million in distributions, equivalent to $15.08 per share."

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

	Three Months Ended		Three Months Ended		Year Ended		Year Ended
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
	Amount	Per Share	Amount	Per Share	Amount	Per Share	Amount	Per Share
Net investment income	$11.91	$0.49	$9.71	$0.50	$42.21	$1.92	$28.59	$1.46
Core net investment income⁽¹⁾	12.16	0.50	8.66	0.44	42.97	1.95	26.93	1.38
Net realized (loss) gain on investments	(30.54)	(1.26)	(1.00)	(0.06)	(30.21)	(1.38)	3.66	0.19
Net realized loss on foreign currency translation	(0.04)	—	—	—	(0.11)	—	(0.01)	—
Provision for taxes on realized gain on investments in taxable subsidiaries	2.99	0.12	—	—	2.99	0.14	—	—
Total realized income⁽²⁾	($15.68)	($0.65)	$8.71	$0.44	$14.88	$0.68	$32.24	$1.65
Distributions	(9.65)	(0.40)	(6.67)	(0.34)	(35.53)	(1.61)	(25.42)	(1.30)
Net unrealized change in appreciation (depreciation) on investments	27.13	1.13	(4.73)	(0.24)	2.79	0.13	(17.55)	(0.90)
Net unrealized change in appreciation (depreciation) on foreign currency translation	0.01	—	0.06	—	(0.01)	—	0.01	—
Benefit (provision) for taxes on unrealized depreciation (appreciation) on investments in taxable subsidiaries	0.02	—	(0.06)	—	(0.13)	(0.01)	(0.21)	(0.01)
Net increase in net assets resulting from operations	$11.48	$0.48	$3.98	$0.20	$17.53	$0.80	$14.49	$0.74
Weighted average shares outstanding		24,125,642		19,604,040		22,004,648		19,552,931


(1)	Core net investment income, as presented, excludes the impact of capital gains incentive fees (reversal) 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. 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, 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
	December 31, 2023	December 31, 2022
Investments at fair value	$874.5	$844.7
Total assets	$908.1	$898.2
Net assets	$319.9	$275.8
Shares outstanding	24,125,642	19,666,769
Net asset value per share	$13.26	$14.02


	Three Months Ended	Three Months Ended	Year Ended	Year Ended
	December 31, 2023	December 31, 2022	December 31, 2023	December 31, 2022
New investments	$44.2	$30.1	$183.9	$211.0
Repayments of investments	(55.2)	(53.2)	(134.2)	(127.5)
Net activity	($11.0)	($23.1)	$49.7	$83.5

	As of	As of
	December 31, 2023	December 31, 2022
Number of portfolio company investments	93	85
Number of debt investments	81	73

Weighted average yield of debt and other income producing investments ⁽³⁾
Cash	11.0 %	10.3 %
Payment-in-kind ("PIK")	0.5 %	0.4 %
Fee amortization	0.4 %	0.4 %
Total	11.9 %	11.1 %

Weighted average yield on total investments ⁽⁴⁾
Cash	10.3 %	9.7 %
Payment-in-kind ("PIK")	0.5 %	0.3 %
Fee amortization	0.3 %	0.4 %
Total	11.1 %	10.4 %


(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 in the Company's common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expenses 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 years ended December 31, 2023 and 2022 totaled $105.8 million and $75.1 million, respectively, most of which was interest income from portfolio investments.

Gross operating expenses for the years ended December 31, 2023 and 2022, totaled $63.9 million and $46.5 million, respectively. The increase was driven primarily by increased interest expense and income incentive fees. For the same respective periods, base management fees totaled $15.5 million and $14.8 million, income incentive fees totaled $10.2 million and $3.8 million, capital gains incentive fee reversals totaled ($0.6) million and ($2.8) million, fees and expenses related to our borrowings totaled $32.0 million and $24.5 million (including interest and amortization of deferred financing costs), administrative expenses totaled $1.9 million and $1.8 million, income tax totaled $1.3 million and $1.2 million and other expenses totaled $3.6 million and $3.2 million. For the year ended December 31, 2023, the Company waived income incentive fees totaling $0.3 million for net operating expenses of $63.7 million. No such income incentive fees were waived for the year ended December 31, 2022.

Net investment income was $42.2 million and $28.6 million, or $1.92 and $1.46 per common share based on weighted average common shares outstanding of 22,004,648 and 19,552,931 for the years ended December 31, 2023 and 2022, respectively. Core net investment income, which is a non-U.S. GAAP measure that excludes the capital gains incentive fee (reversal) and income tax expense accruals, for the years ended December 31, 2023 and 2022 was $43.0 million and $26.9 million, or $1.95 and $1.38 per share, respectively.

For the years ended December 31, 2023 and 2022, the Company's investment portfolio had a net change in unrealized appreciation (depreciation) of $2.8 million and ($17.5) million, respectively, and the Company had net realized (losses) gains of ($30.2) million and $3.7 million, respectively. The full realizations for the year ended December 31, 2023 had previously been reflected as unrealized depreciation which were reversed during the year then ended and included in the $2.8 million of unrealized appreciation as of December 31, 2023.

Net increase in net assets resulting from operations totaled $17.5 million and $14.5 million, or $0.80 and $0.74 per common share, based on weighted average common shares outstanding of 22,004,648 and 19,552,931 for the years ended December 31, 2023 and 2022, respectively.

Liquidity and Capital Resources

On November 21, 2023, the Company entered into the Fourth Amendment to Amended and Restated Senior Secured Revolving Credit Agreement (the "Fourth Amendment Agreement") by and among the Company, as the borrower, Zions Bancorporation, N.A. dba Amegy Bank ("Amegy Bank"), as the administrative agent, and the lenders that are party thereto from time to time (collectively, the "Lenders"). The Fourth Amendment Agreement, among other things, (i) decreases the maximum commitment under the Company's credit agreement with the Lenders (the "Credit Facility") from $265.0 million to $260.0 million, (ii) increases the maximum accordion limit from $315.0 million to $350.0 million, (iii) authorizes the replacement of Canadian Dollar Offered Rate with a Canadian Overnight Repo Rate Average benchmark rate to be agreed for advances in Canadian Dollars, (iv) extends the Commitment Termination Date (as defined in the Fourth Amendment Agreement) to November 21, 2027 and Final Maturity Date (as defined in the Fourth Amendment Agreement) to November 21, 2028, and (v) reduces the Company's interest coverage ratio requirement from 2.00:1.00 to 1.75:1.00.

As of December 31, 2023 and December 31, 2022, the Company had $160.1 million and $199.2 million in outstanding borrowings under the Credit Facility, respectively.

The Company issued 4,458,873 shares during the year ended December 31, 2023 under the At-the-Market Program ("ATM Program"), for gross proceeds of $62.9 million. The average per share gross offering price of shares issued under the ATM Program during the year ended December 31, 2023 was $14.10. For the year ended December 31, 2023, net proceeds of $62.2 million, or $14.00 per share, exceeded net asset value per share, excluding the impact of offering expenses.

Distributions

During the three months ended December 31, 2023 and 2022, the Company declared aggregate distributions of $0.40 and $0.34 per share, respectively ($9.6 million and $6.7 million in the aggregate, respectively). During the years ended December 31, 2023 and 2022, the Company declared aggregate distributions of $1.60 and $1.30 per share, respectively ($35.5 million and $25.4 million in the aggregate, respectively). Tax characteristics of all distributions are reported to stockholders on Form 1099-DIV. Approximately $0.4 million of the dividends declared in 2023 are expected to be characterized as long-term capital gains. None of these dividends are expected to include a return of capital.

Recent Portfolio Activity

The Company invested in the following portfolio companies during the three months ended December 31, 2023:

Activity Type	Date	Company Name	Company Description	Investment Amount		Instrument Type
Add-On Investment	October 3, 2023	EH Real Estate Services, LLC*	Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyers and sellers	$	2,281,116	Revolver Commitment
				$	3	Equity
Add-On Investment	October 11, 2023	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	539,718	Senior Secured – First Lien
				$	13,398	Equity
Add-On Investment	October 16, 2023	Equine Network, LLC*	Provider of content, information, tech-enabled services, and hosts competitions for the U.S. equine industry	$	955,516	Senior Secured – First Lien
Add-On Investment	October 26, 2023	Elliott Aviation, LLC*	Provider of maintenance, repair, and overhaul and fixed-base operator services to the business aviation sector.	$	56,148	Senior Secured – First Lien
				$	1,489	Equity
Add-On Investment	October 31, 2023	2X LLC*	Provider of outsourced digital B2B marketing-as-a-service	$	1,448,388	Senior Secured – First Lien
Add-On Investment	November 1, 2023	Advanced Barrier Extrusions, LLC*	Manufacturer of high barrier forming web films	$	10,584	Equity
Restructured Investment	November 6, 2023	ArborWorks, LLC*	A professional tree care firm	$	3,461,538	Senior Secured – First Lien
				$	2,309,486	Revolver Commitment
				$	3,610,847	Equity
Add-On Investment	November 15, 2023	Monitorus Holding, LLC*	Provider of media monitoring and evaluation services	$	5,532	Unsecured Convertible Bond
Add-On Investment	December 5, 2023	Amika OpCo LLC*	Branded haircare platform	$	9,705,893	Senior Secured – First Lien
New Investment	December 7, 2023	evolv Consulting, LLC	Digital transformation consulting firm	$	10,000,000	Senior Secured – First Lien
				$	1,363,636	Revolver Commitment
				$	473,485	Equity
New Investment	December 12, 2023	AdCellerant LLC	Provider of outsourced digital marketing software and services	$	10,000,000	Senior Secured – First Lien
				$	875,995	Revolver Commitment
				$	728,710	Equity
Add-On Investment	December 13, 2023	Unicat Catalyst Holdings, LLC*	Manufacturer and distributor of catalysts and other industrial products	$	21,103	Equity
Add-On Investment	December 20, 2023	Advanced Barrier Extrusions, LLC*	Manufacturer of high barrier forming web films	$	68,034	Equity
Add-On Investment	December 20, 2023	Tower Arch Infolinks Media, LP**	Advertising placement partner for small to mid-sized publishers	$	1,226	Equity
New Investment	December 21, 2023	Michelli, LLC	Provider of test and measurement services and equipment	$	5,000,000	Senior Secured – First Lien
				$	3,888,228	Delayed Draw Term Loan Commitment
				$	1,296,076	Revolver Commitment
				$	509,215	Equity
Add-On Investment	December 22, 2023	Anne Lewis Strategies, LLC*	Provider of tech-enabled donor targeting and strategic digital fundraising services for non-profit and political organizations.	$	492,905	Equity

*Existing portfolio company

The Company realized investments in the following portfolio companies during the three months ended December 31, 2023:


Activity Type	Date	Company Name	Company Description	Proceeds Received		Realized Gain/(Loss)		Instrument Type
Full Repayment	October 24, 2023	Interstate Waste Services, Inc.*	Provider of non-hazardous waste management, collection, and recycling services	$	368,448	$	(577,677)	Equity
Restructured Investment	November 6, 2023	ArborWorks, LLC*	A professional tree care firm	$	—	$	(9,080,023)	Senior Secured – First Lien
				$	—	$	(2,119,291)	Funded Revolver
				$	—	$	(130,900)	Equity
Full Repayment	November 21, 2023	SIB Holdings, LLC*	Provider of fixed cost reduction services	$	12,545,260	$	—	Senior Secured – First Lien
				$	2,249,126	$	—	Senior Secured – First Lien
				$	843,422	$	—	Senior Secured – First Lien
				$	461,200	$	(38,800)	Equity
Full Realization	November 29, 2023	U.S. Auto Sales, Inc. et al*	Integrated used car retailer and subprime auto finance company	$	—	$	(985,000)	Equity
Full Repayment	November 30, 2023	Archer Systems, LLC*	Provider of mass tort settlement administrative solutions	$	3,788,754	$	—	Senior Secured – First Lien
Full Repayment	December 21, 2023	Kelleyamerit Holdings, Inc.*	Nation-wide provider of fleet maintenance and repair services	$	9,750,000	$	—	Senior Secured – First Lien
				$	1,500,000	$	—	Senior Secured – First Lien
Full Realization	December 21, 2023	International Designs Holdings LLC*	Distributor of design-oriented surfaces, appliances and architectural specialty products	$	569,427	$	369,427	Equity
Full Repayment	December 22, 2023	BLP Buyer, Inc.*	Distributor of lifting solutions	$	6,116,486	$	—	Senior Secured – First Lien
				$	1,725,633	$	—	Senior Secured – First Lien
Full Realization	December 31, 2023	Protect America, Inc.*	Provider of residential security monitoring and home automation systems	$	—	$	(17,979,749)	Senior Secured – Second Lien

Events Subsequent to December 31, 2023

The Company's management has evaluated subsequent events through March 4, 2024. There have been no subsequent events that require recognition or disclosure except for the following described below.

Investment Portfolio

The Company invested in the following portfolio companies subsequent to December 31, 2023:

Activity Type	Date	Company Name	Company Description	Investment Amount		Instrument Type
Add-On Investment	January 5, 2024	Whisps Holdings LP*	Manufacturer of cheese-based snacks	$	75,192	Equity
Add-On Investment	January 8, 2024	EH Real Estate Services, LLC*	Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyers and sellers	$	475,233	Senior Secured – First Lien
Add-On Investment	January 9, 2024	Morgan Electrical Group Intermediate Holdings, Inc.*	Provider of commercial electrical services	$	23,531	Equity
Add-On Investment	January 12, 2024	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	50,914	Equity
Add-On Investment	January 31, 2024	Impact Home Services LLC*	Residential garage door, electrical, and plumbing services provider	$	22,331	Equity
Add-On Investment	February 7, 2024	Unicat Catalyst Holdings, LLC*	Manufacturer and distributor of catalysts and other industrial products	$	7,032	Equity
Add-On Investment	February 28, 2024	Monitorus Holding, LLC*	Provider of media monitoring and evaluation services	$	13,290	Equity

*Existing portfolio company

The Company realized investments in the following portfolio company subsequent to December 31, 2023:

Activity Type	Date	Company Name	Company Description	Proceeds Received		Instrument Type
Full Repayment	January 8, 2024	Peltram Plumbing Holdings, LLC*	Provider of plumbing solutions.	$	16,160,003	Senior Secured – First Lien

*Existing portfolio company

Credit Facility

The outstanding balance under the Credit Facility as of March 4, 2024 was $148.5 million.

Distributions Declared

On January 13, 2024, our Board of Directors declared a regular monthly distribution for each of January, February, and March 2024, as follows:

	Ex-Dividend	Record	Payment	Amount per
Declared	Date	Date	Date	Share
1/13/2024	1/30/2024	1/31/2024	2/15/2024	$	0.1333
1/13/2024	2/28/2024	2/29/2024	3/15/2024	$	0.1333
1/13/2024	3/28/2024	3/29/2024	4/15/2024	$	0.1333

Conference Call Information

Stellus Capital Investment Corporation will host a conference call to discuss these results on Tuesday, March 5, 2024 at 12:00 PM, Central 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 183087. Starting approximately two hours after the conclusion of the call, a replay will be available through Tuesday, March 19, 2024 by dialing (877) 481-4010 and entering passcode 50028. The replay will also be available on the Company's website.

For those wishing to participate via Live Webcast, connect via the Public (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 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

	December 31, 2023		December 31, 2022
ASSETS
Control investments at fair value (amortized cost of $17,285,138 and $0, respectively)	$	6,175,994	$	—
Non-controlled, non-affiliated investments, at fair value (amortized cost of $884,858,412 and $875,823,177, respectively)		868,284,689		844,733,638
Cash and cash equivalents		26,125,741		48,043,329
Receivable for sales and repayments of investments		371,877		718,794
Interest receivable		4,882,338		3,984,409
Income tax receivable		1,588,708		—
Other receivables		42,995		34,245
Deferred offering costs		7,312		1,100
Prepaid expenses		606,674		667,267
Total Assets	$	908,086,328	$	898,182,782
LIABILITIES
2026 Notes payable	$	98,996,412	$	98,549,692
Credit Facility payable		156,564,776		197,685,281
SBA-guaranteed debentures		320,273,358		307,895,195
Management fees payable		2,918,536		7,150,407
Income incentive fees payable		2,885,180		2,464,408
Capital gains incentive fees payable		—		569,528
Interest payable		5,241,164		4,640,841
Related party payable		—		1,060,321
Unearned revenue		397,725		320,675
Administrative services payable		402,151		356,919
Income tax payable		—		1,175,373
Deferred tax liability		188,893		61,936
Other accrued expenses and liabilities		278,345		475,593
Total Liabilities	$	588,146,540	$	622,406,169
Commitments and contingencies (Note 7)
Net Assets	$	319,939,788	$	275,776,613
NET ASSETS
Common stock, par value $0.001 per share (100,000,000 shares authorized; 24,125,642 and 19,666,769 issued and outstanding, respectively)	$	24,125	$	19,667
Paid-in capital		335,918,984		275,114,720
Total distributable (loss) earnings		(16,003,321)		642,226
Net Assets	$	319,939,788	$	275,776,613
Total Liabilities and Net Assets	$	908,086,328	$	898,182,782
Net Asset Value Per Share	$	13.26	$	14.02

STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

	For the years ended
	December 31, 2023		December 31, 2022		December 31, 2021
INVESTMENT INCOME
Interest income	$	102,016,788	$	72,964,999	$	61,536,686
From control investments:
Interest income	$	37,897	$	—	$	—
From non-controlled, non-affiliated investments
Interest income		101,978,891		72,964,999		61,536,686
Other income		3,830,780		2,147,577		2,142,308
Total Investment Income	$	105,847,568	$	75,112,576	$	63,678,994
OPERATING EXPENSES
Management fees	$	15,452,347	$	14,848,174	$	13,169,606
Valuation fees		373,628		351,752		313,437
Administrative services expenses		1,908,191		1,810,576		1,798,966
Income incentive fees		10,189,888		3,782,151		3,043,470
Capital gains incentive (reversal) fee		(569,528)		(2,818,623)		2,867,131
Professional fees		1,455,372		1,103,693		1,082,917
Directors' fees		406,000		329,000		315,000
Insurance expense		492,596		503,907		482,140
Interest expense and other fees		32,011,317		24,469,285		18,721,058
Income tax expense		1,333,452		1,161,668		1,102,374
Other general and administrative expenses		891,170		984,309		1,006,428
Total Operating Expenses	$	63,944,433	$	46,525,892	$	43,902,527
Income incentive fee waiver		(307,442)		—		—
Total Operating Expenses, net of fee waivers	$	63,636,991	$	46,525,892	$	43,902,527
Net Investment Income	$	42,210,577	$	28,586,684	$	19,776,467
Net realized loss on non-controlled, non-affiliated investments	$	(30,211,467)	$	3,660,595	$	23,710,167
Net realized loss on foreign currency translation		(112,481)		(6,091)		—
Loss on debt extinguishment		—		—		(539,250)
Net change in unrealized depreciation on control investments		(430,577)		—		—
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments		3,222,729		(17,542,230)		(6,928,160)
Net change in unrealized (depreciation) appreciation on foreign currency translation		(6,504)		6,040		—
(Provision) benefit for taxes on net unrealized (appreciation) depreciation on investments		(126,957)		(213,214)		510,868
Benefit (provision) for taxes on net realized loss (gain) on investments		2,987,847		—		(2,957,220)
Net Increase in Net Assets Resulting from Operations	$	17,533,167		14,491,784		33,572,872
Net Investment Income Per Share—basic and diluted	$	1.92	$	1.46	$	1.01
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted	$	0.80	$	0.74	$	1.72
Weighted Average Shares of Common Stock Outstanding—basic and diluted		22,004,648		19,552,931		19,489,750
Distributions Per Share—basic and diluted	$	1.61	$	1.30	$	1.14

STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

	Common Stock					Total
	Number	Par		Paid-in		distributable
	of shares	value		capital		(loss) earnings		Net Assets
Balances as of 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 investments	—		—		—		23,710,167		23,710,167
Loss on debt extinguishment	—		—		—		(539,250)		(539,250)
Net change in unrealized depreciation on 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⁽¹⁾	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
Net investment income	—		—		—		28,586,684		28,586,684
Net realized gain on investments	—		—		—		3,660,595		3,660,595
Net realized loss on foreign currency translation	—		—		—		(6,091)		(6,091)
Net change in unrealized depreciation on investments	—		—		—		(17,542,230)		(17,542,230)
Net change in unrealized appreciation on foreign currency translations	—		—		—		6,040		6,040
Provision for taxes on unrealized appreciation on investments	—		—		—		(213,214)		(213,214)
Return of capital and other tax related adjustments	—		—		(1,040,884)		1,040,884		—
Distributions from net investment income	—		—		—		(21,633,343)		(21,633,343)
Distributions from net realized capital gains	—		—		—		(3,789,693)		(3,789,693)
Issuance of common stock, net of offering costs⁽¹⁾	149,174		149		1,596,483		—		1,596,632
Balances at December 31, 2022	19,666,769	$	19,667	$	275,114,720	$	642,226	$	275,776,613
Net investment income	—		—		—		42,210,577		42,210,577
Net realized loss on investments	—		—		—		(30,211,467)		(30,211,467)
Net realized loss on foreign currency translation	—		—		—		(112,481)		(112,481)
Net change in unrealized appreciation on investments	—		—		—		2,792,152		2,792,152
Net change in unrealized depreciation on foreign currency translations	—		—		—		(6,504)		(6,504)
Provision for taxes on unrealized appreciation on investments	—		—		—		(126,957)		(126,957)
Benefit for taxes on realized loss on investments	—		—		—		2,987,847		2,987,847
Return of capital and other tax related adjustments	—		—		(1,348,766)		1,348,766		—
Distributions from net investment income	—		—		—		(35,080,734)		(35,080,734)
Distributions from net realized capital gains	—		—		—		(446,746)		(446,746)
Issuance of common stock, net of offering costs⁽¹⁾	4,458,873		4,458		62,153,030		—		62,157,488
Balances at December 31, 2023	24,125,642	$	24,125	$	335,918,984	$	(16,003,321)	$	319,939,788


(1)	See Note 4 to the Consolidated Financial Statements on Form 10-Q filed with the Securities and Exchange Commission on March 4, 2024 for more information on offering costs.

STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended
	December 31, 2023		December 31, 2022		December 31, 2021
Cash flows from operating activities
Net increase in net assets resulting from operations	$	17,533,167	$	14,491,784	$	33,572,872
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases of investments		(183,858,762)		(211,010,869)		(387,281,160)
Proceeds from sales and repayments of investments		134,223,224		127,548,194		287,639,512
Net change in unrealized (appreciation) depreciation on investments		(2,792,152)		17,542,230		6,928,160
Net change in unrealized depreciation (appreciation) on foreign currency translations		6,360		(5,897)		—
Increase in investments due to PIK		(3,799,843)		(1,357,177)		(939,030)
Amortization of premium and accretion of discount, net		(2,749,543)		(2,519,462)		(2,412,991)
Deferred tax provision (benefit)		126,957		213,214		(510,868)
Amortization of loan structure fees		657,323		567,375		518,930
Amortization of deferred financing costs		446,720		446,719		444,153
Amortization of loan fees on SBA-guaranteed debentures		1,255,753		1,227,952		1,088,132
Net realized loss (gain) on investments		30,211,467		(3,660,595)		(23,703,499)
Loss on debt extinguishment		—		—		539,250
Changes in other assets and liabilities
Increase in interest receivable		(897,929)		(1,039,810)		(755,151)
Increase in income tax receivable		(1,588,708)		—		—
(Increase) decrease in other receivables		(8,750)		20,507		(29,257)
Decrease (increase) in prepaid expenses		60,593		(155,053)		(25,026)
(Decrease) increase in management fees payable		(4,231,871)		3,696,182		628,903
Increase in income incentive fees payable		420,772		715,278		1,067,470
(Decrease) increase in capital gains incentive fees payable		(569,528)		(2,818,623)		2,867,130
Increase (decrease) in administrative services payable		45,232		(29,449)		(5,123)
Increase in interest payable		600,323		947,179		1,549,577
(Decrease) increase in related party payable		(1,060,321)		1,060,321		—
Increase (decrease) in unearned revenue		77,050		(209,051)		6,302
(Decrease) increase in income tax payable		(1,175,373)		(2,094,141)		2,544,749
(Decrease) increase in other accrued expenses and liabilities		(197,248)		136,635		164,227
Net Cash Used in Operating Activities	$	(17,265,087)	$	(56,286,557)	$	(76,102,738)
Cash flows from Financing Activities
Proceeds from the issuance of common stock	$	63,348,436	$	2,158,540	$	449,515
Sales load for common stock issued		(943,248)		(31,066)		(2,489)
Offering costs paid for common stock issued		(253,913)		(517,054)		(53,327)
Stockholder distributions paid		(35,527,480)		(26,594,095)		(21,044,928)
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		11,400,000		63,600,000		73,500,000
Financing costs paid on SBA-guaranteed debentures		(277,590)		(1,548,660)		(3,139,725)
Financing costs paid on Credit facility		(2,663,106)		(193,635)		(136,219)
Borrowings under Credit Facility		108,400,000		149,888,800		268,700,000
Repayments of Credit Facility		(148,135,600)		(126,607,800)		(265,360,000)
Partial share redemption		—		—		—
Net Cash (Used) Provided by Financing Activities	$	(4,652,501)	$	60,155,030	$	101,799,992
Net (Decrease) Increase in Cash and Cash Equivalents	$	(21,917,588)	$	3,868,473	$	25,697,254
Cash and Cash Equivalents Balance at Beginning of Period		48,043,329		44,174,856		18,477,602
Cash and Cash Equivalents Balance at End of Period	$	26,125,741	$	48,043,329	$	44,174,856
Supplemental and Non-Cash Activities
Cash paid for interest expense	$	29,051,198	$	21,280,060	$	15,099,656
Income and excise tax paid		2,508,825		3,255,809		1,445,000
(Decrease) increase in distributions payable		—		(1,171,059)		1,171,059
Increase (decrease) in deferred offering costs		6,212		(13,788)		(75,112)
Gain on conversion of equity investment		—		—		6,668
Exchange of investments		3,610,846		—		—

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

	Three Months Ended	Three Months Ended	Year Ended	Year Ended
	December 31, 2023	December 31, 2022	December 31, 2023	December 31, 2022
Net investment income	$11,908,914	$9,708,610	$42,210,577	$28,586,684
Capital gains incentive reversal	—	(1,146,074)	(569,528)	(2,818,623)
Income tax expense	251,395	94,900	1,333,452	1,161,668
Core net investment income	$12,160,309	$8,657,436	$42,974,501	$26,929,729

Per share amounts:

Net investment income per share	$0.49	$0.50	$1.92	$1.46
Core net investment income per share	$0.50	$0.44	$1.95	$1.38

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

	Three Months Ended	Three Months Ended	Year Ended	Year Ended
	December 31, 2023	December 31, 2022	December 31, 2023	December 31, 2022
Net investment income	$11,908,914	$9,708,610	$42,210,577	$28,586,684
Net realized loss on investments	(30,536,249)	(998,222)	(30,211,467)	3,660,595
Net realized loss on foreign currency translation	(39,699)	1,935	(112,481)	(6,091)
Benefit for taxes on realized loss on investments	2,987,847	—	2,987,847	—
Total Realized Net Investment Income	($15,679,187)	$8,712,323	$14,874,476	$32,241,188

Per share amounts:
Net investment income per share	$0.49	$0.50	$1.92	$1.46
Realized net investment income per share	($0.65)	$0.44	$0.68	$1.65

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SOURCE Stellus Capital Investment Corporation