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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Oxford Square Capital Corp.    OXSQ

OXFORD SQUARE CAPITAL CORP.

(OXSQ)
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OXFORD SQUARE CAPITAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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07/29/2020 | 09:00am EDT

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that
involve substantial risks and uncertainties. These forward-looking statements
are not historical facts, but rather are based on current expectations,
estimates and projections about Oxford Square Capital Corp., our current and
prospective portfolio investments, our industry, our beliefs, and our
assumptions. Words such as "anticipates," "expects," "intends," "plans," "will,"
"may," "continue," "believes," "seeks," "estimates," "would," "could," "should,"
"targets," "projects," and variations of these words and similar expressions are
intended to identify forward-looking statements. The forward-looking statements
contained in this Quarterly Report on Form 10-Q involve risks and uncertainties,
including statements as to:

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

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

• the impact of investments that we expect to make;

• our contractual arrangements and relationships with third parties;

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

• the impact of any protracted decline in the liquidity of credit markets on our business and the impact of the COVID-19 pandemic thereon;

• our future operating results and impacts of the COVID-19 pandemic thereon;

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

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

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

•    our expected financings and investments;

•    the adequacy of our cash resources and working capital;

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

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

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

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

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

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


                                       46

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

•    the risks, uncertainties and other factors we identify in Item 1A. - Risk
Factors contained in our Annual Report on Form 10-K for the year ended December
31, 2019, elsewhere in this Quarterly Report on Form 10-Q and in our other
filings with the SEC.

Although we believe that the assumptions on which these forward-looking
statements are based are reasonable, any of those assumptions could prove to be
inaccurate, and as a result, the forward-looking statements based on those
assumptions also could be inaccurate. Important assumptions include our ability
to originate new loans and investments, certain margins and levels of
profitability and the availability of additional capital. In light of these and
other uncertainties, the inclusion of a projection or forward-looking statement
in this Quarterly Report on Form 10-Q should not be regarded as a representation
by us that our plans and objectives will be achieved. These risks and
uncertainties include those described or identified in Item 1A. - Risk Factors
contained in our Annual Report on Form 10-K for the year ended December 31,
2019, and elsewhere in this Quarterly Report on Form 10-Q. You should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this Quarterly Report on Form 10-Q.

Except where the context requires otherwise, the terms "OXSQ," "Company," "we,"
"us" and "our" refer to Oxford Square Capital Corp. together with its subsidiary
Oxford Square Funding 2018, LLC ("OXSQ Funding"); "Oxford Square Management"
refers to Oxford Square Management, LLC; and "Oxford Funds" refers to Oxford
Funds, LLC.

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

OVERVIEW


Our investment objective is to maximize our portfolio's total return. Our
primary focus is to seek an attractive risk-adjusted total return by investing
primarily in corporate debt securities and in collateralized loan obligation
("CLO"), which are structured finance investments that own corporate debt
securities. CLO investments may also include warehouse facilities, which are
early-stage CLO vehicles intended to aggregate loans that may be used to form
the basis of a traditional CLO vehicle. We operate as a closed-end,
non-diversified management investment company and have elected to be regulated
as a business development company ("BDC") under the Investment Company Act of
1940, as amended (the "1940 Act"). We have elected to be treated for tax
purposes as a regulated investment company ("RIC"), under the Internal Revenue
Code of 1986, as amended (the "Code"), beginning with our 2003 taxable year.

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

We generally expect to invest between $5 million and $50 million in each of our
portfolio companies, although this investment size may vary proportionately as
the size of our capital base changes and market conditions warrant. We expect
that our investment portfolio will be diversified among a large number of
investments with few investments, if any, exceeding 5.0% of the total portfolio.
As of June 30, 2020, our debt investments had stated interest rates of between
3.93% and 10.81% and maturity dates of between 11 and 133 months. In addition,
our total portfolio had a weighted average annualized yield on debt investments
of approximately 8.12% as of June 30, 2020.

                                       47

The weighted average annualized yield of our debt investments is not the same as
a return on investment for our stockholders but, rather, relates to a portion of
our investment portfolio and is calculated before the payment of all of our fees
and expenses. The weighted average annualized yield was computed using the
effective interest rates as of June 30, 2020, including accretion of original
issue discount ("OID"). There can be no assurance that the weighted average
annualized yield will remain at its current level.

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

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

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

During the quarter ended June 30, 2020, the U.S. loan market strengthened versus
the quarter ended March 31, 2020. U.S. loan prices, as defined by the S&P / LSTA
Leveraged Loan Index, increased from 82.85% of par value as of March 31, 2020 to
a quarterly high of 91.24% of par value on June 10, 2020, before declining to
89.88% of par value on June 30, 2020. As of June 30, 2020, the Company's Board
of Directors approved the fair value of the Company's investment portfolio of
approximately $270.8 million in good faith in accordance with the Company's
valuation procedures. We believe that the COVID-19 pandemic represents an
extraordinary circumstance that materially impacts the fair value of the
Company's investments. As a result, the fair value of the Company's portfolio
investments may be further negatively impacted after June 30, 2020 by
circumstances and events that are not yet known.

CRITICAL ACCOUNTING POLICIES


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

Investment Valuation


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

ASC 820-10 clarified the definition of fair value and requires companies to
expand their disclosure about the use of fair value to measure assets and
liabilities in interim and annual periods subsequent to initial recognition. ASC
820-10 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC 820-10 also establishes a three-tier

                                       48

fair value hierarchy, which prioritizes the inputs used in measuring fair value.
These tiers include: Level 1, defined as observable inputs such as quoted prices
in active markets; Level 2, which includes inputs such as quoted prices for
similar securities in active markets and quoted prices for identical securities
in markets that are not active; and Level 3, defined as unobservable inputs for
which little or no market data exists, therefore requiring an entity to develop
its own assumptions. We consider the attributes of current market conditions on
an ongoing basis and have determined that due to the general illiquidity of the
market for our investment portfolio, whereby little or no market data exists,
all of our investments are based upon "Level 3" inputs as of June 30, 2020.

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

Syndicated Loans


In accordance with ASC 820-10, our valuation procedures specifically provide for
the review of indicative quotes supplied by the large agent banks that make a
market for each security. However, the marketplace from which we obtain
indicative bid quotes for purposes of determining the fair value of its
syndicated loan investments has shown attributes of illiquidity as described by
ASC-820-10. During such periods of illiquidity, when we believe that the
non-binding indicative bids received from agent banks for certain syndicated
investments that it owns may not be determinative of their fair value or when no
market indicative quote is available, we may engage third-party valuation firms
to provide assistance in valuing certain syndicated investments that we own. In
addition, Oxford Square Management prepares an analysis of each syndicated loan,
financial summary, covenant compliance review, recent trading activity in the
security, if known, and other business developments related to the portfolio
company. All available information, including non-binding indicative bids which
may not be determinative of fair value, is presented to the Valuation Committee
to consider in its determination of fair value. In some instances, there may be
limited trading activity in a security even though the market for the security
is considered not active. In such cases the Valuation Committee will consider
the number of trades, the size and timing of each trade, and other circumstances
around such trades, to the extent such information is available, in its
determination of fair value. The Valuation Committee will evaluate the impact of
such additional information, and factor it into its consideration of the fair
value that is indicated by the analysis provided by third-party valuation firms,
if any. All information is presented to the Board for its determination of fair
value of these investments.

Collateralized Loan Obligations - Debt and Equity


We have acquired a number of debt and equity positions in CLO investment
vehicles and CLO warehouse investments. These investments are special purpose
financing vehicles. In valuing such investments, we consider the indicative
prices provided by a recognized industry pricing service as a primary source,
and the implied yield of such prices, supplemented by actual trades executed in
the market at or around period-end, as well as the indicative prices provided by
the broker who arranges transactions in such investment vehicles. We also
consider those instances in which the record date for an equity distribution
payment falls on the last day of the period, and the likelihood that a
prospective purchaser would require a downward adjustment to the indicative
price representing substantially all of the pending distribution. Additional
factors include any available information on other relevant transactions
including firm bids and offers in the market and information resulting from
bids-wanted-in-competition. In addition, we consider the operating metrics of
the specific investment vehicle, including compliance with collateralization
tests, defaulted and restructured securities, and payment defaults, if any. In
periods of illiquidity and volatility, we may rely more heavily on other
metrics, including but not limited to, the collateral manager, time left in the
reinvestment period, expected cash flows and overcollateralization ratios,
instead of the Company's generated valuation yields. Oxford Square Management or
the Valuation Committee may request an additional analysis by a third-party firm
to assist in the valuation process of CLO investment vehicles. All information
is presented to our Board for its determination of fair value of these
investments.

                                       49

Bilateral Investments (Including Equity)

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

Investment Income

Interest Income

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

Generally, when interest and/or principal payments on a loan become past due, or
if we otherwise do not expect the borrower to be able to service its debt and
other obligations, we will place the loan on non-accrual status and will
generally cease recognizing interest income on that loan for financial reporting
purposes until all principal and interest have been brought current through
payment or due to restructuring such that the interest income is deemed to be
collectible. We generally restore non-accrual loans to accrual status when past
due principal and interest is paid and, in our judgment, is likely to remain
current. As of June 30, 2020 and December 31, 2019, we had two debt investments
that were on non-accrual status.

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

Payment-In-Kind


We have debt and preferred equity investments in our portfolio which contain a
contractual PIK provision. Certain PIK investments offer issuers the option at
each payment date of making payments in cash or additional securities. PIK
interest and preferred equity dividends are computed at the contractual rate and
are accrued into income and recorded as interest and dividend income,
respectively. The PIK amounts are added to the principal balance on the
capitalization date. Upon capitalization, the PIK component is subject to the
fair value estimates associated with their related investments. At the point we
believe the PIK is not fully expected to be realized, the PIK investment will be
placed on non-accrual status. When a PIK investment is placed on non-accrual
status, the accrued, uncapitalized interest or dividends are reversed from the
related receivable through interest or dividend income, respectively. PIK
investments on non-accrual status are restored to accrual status once it becomes
probable that PIK will be realized. For the quarter ended June 30, 2020, no PIK
preferred equity dividends were recognized as dividend income as they were not
expected to be fully realized.

Income from Securitization Vehicles and Investments

Income from investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective interest method in accordance with the provisions of ASC 325-40,


                                       50

based upon estimated cash flows, their expected timing and expected redemption,
including those CLO equity investments that have not made their inaugural
distribution for the relevant period end. We monitor the expected residual
payments, and effective yield is determined and updated periodically, as needed.
Accordingly, investment income recognized on CLO equity securities in the
consolidated statement of operations differs from both the tax-basis investment
income and from the cash distributions actually received by us during the
period.

Other Income


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

Recently Issued Accounting Standards

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

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY


The total fair value of our investment portfolio was approximately $270.8
million and $364.8 million as of June 30, 2020, and December 31, 2019,
respectively. The decrease in the value of investments during the six month
period ended June 30, 2020, was due primarily to net unrealized depreciation on
our investment portfolio of approximately $66.5 million (which incorporates
reductions to CLO equity cost value of $4.6 million), $28.7 million of debt
repayments, $20.5 million of sales of securities and realized losses of $3.0
million, which was partially offset by $28.7 million of investments acquired.

A reconciliation of the investment portfolio for the six months ended June 30, 2020 and the year ended December 31, 2019 follows:


                                                           June 30,       December 31,
($ in millions)                                              2020          

2019

Beginning investment portfolio                           $     364.8     $ 

445.0

Portfolio investments acquired                                  28.7       
     54.8
Debt repayments                                                (28.7 )          (43.9 )
Sales of securities                                            (20.5 )          (15.9 )
Reductions to CLO equity cost value(1)                          (4.6 )          (12.8 )
Non-cash interest income due to PIK                              0.1       

8.0

Accretion of discounts on investments(2)                         0.5       

0.8

Net change in unrealized appreciation/depreciation on
investments                                                    (66.5 )          (69.5 )
Net realized losses on investments                              (3.0 )     
     (1.7 )
Ending investment portfolio                              $     270.8$      364.8


____________

(1)   For the six months ended June 30, 2020, reduction to cost value on our CLO
equity investments represents the difference between distributions received, or
entitled to be received for the six months ended June 30, 2020, of approximately
$12.6 million and the effective yield interest income of approximately $8.0
million. For the year ended December 31, 2019, reduction to cost value on our
CLO equity investments represents the difference between distributions received,
or entitled to be received, for the year ended December 31, 2019, of
approximately $38.0 million and the effective yield interest income of
approximately $25.2 million.

(2) Includes rounding adjustment to reconcile ending investment portfolio as of June 30, 2020 and December 31, 2019.

During the six months ended June 30, 2020 we purchased approximately $28.7
million in portfolio investments, which includes additional investments of
approximately $10.8 million in existing portfolio companies. During the year
ended December 31, 2019, we purchased approximately $54.8 million in portfolio
investments, which includes additional investments of approximately $14.3
million in existing portfolio companies.

In certain instances, we receive investment proceeds based on the scheduled amortization of the outstanding loan balances and from the sales of portfolio investments. In addition, we receive repayments of some of our debt


                                       51

investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period.


For the six months ended June 30, 2020 and the year ended December 31, 2019, we
recognized proceeds from the sales of securities of approximately $20.5 million
and $15.9 million, respectively. Also, during the six months ended June 30, 2020
and the year ended December 31, 2019, we had debt repayments of approximately
$28.7 million and $43.9 million, respectively.

As of June 30, 2020, we had investments in debt securities of, or loans to, 20
portfolio companies, with a fair value of approximately $189.2 million, and
equity investments of approximately $81.6 million. Our debt and preferred equity
investments included approximately $0.1 million in capitalized PIK interest
during the six months ended June 30, 2020, which, as described in "- Overview"
section above, is added to the carrying value of our investments, reduced by
repayments of principal.

As of December 31, 2019, we had investments in debt securities of, or loans to,
21 portfolio companies, with a fair value of approximately $241.4 million, and
equity investments of approximately $123.4 million. For the year ended December
31, 2019, our debt and preferred stock investments included approximately $8.0
million in PIK interest/dividends, which, as described in "- Overview" above, is
added to the carrying value of our investments, reduced by repayments of
principal.

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

                                                                        Reductions
                                      Purchases of        Debt            to CLO           Sales of
Three Months Ended ($ in millions)    Investments      Repayments     Equity Cost(1)     Investments
June 30, 2020                        $         21.3   $       16.7   $            2.6   $          9.5
March 31, 2020                                  7.4           12.0                2.0             11.1
Total(2)                             $         28.7   $       28.7   $            4.6   $         20.5
December 31, 2019                    $          3.9   $       19.7   $            5.5   $            -
September 31, 2019                                -            0.2                3.2              4.9
June 30, 2019                                  46.4           23.5                2.6              7.4
March 31, 2019                                  4.4            0.4                1.4              3.6
Total(2)                             $         54.8   $       43.9   $           12.8   $         15.9


____________

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

(2) Totals may not sum due to rounding.

The following table shows the fair value of our portfolio of investments by asset class as of June 30, 2020 and December 31, 2019:


                                           June 30, 2020

December 31, 2019

                                 Investments at      Percentage of      Investments at       Percentage of
($ in millions)                    Fair Value       Total Portfolio       Fair Value        Total Portfolio
Senior Secured Notes            $          188.6            69.7 %     $          240.5             65.9 %
CLO Debt                                     0.6             0.2 %                  0.8              0.2 %
CLO Equity                                  81.0            29.9 %                120.6             33.1 %
Equity and Other Investments                 0.6             0.2 %         
        2.8              0.8 %
Total(1)                        $          270.8           100.0 %     $          364.8            100.0 %


____________

(1) Totals may not sum due to rounding.


Qualifying assets must represent at least 70.0% of the Company's total assets at
the time of acquisition of any additional non-qualifying assets. As of June 30,
2020, we held qualifying assets that represented 71.2% of our total assets. No
additional non-qualifying assets were acquired during the periods when
qualifying assets were less than 70.0% of the total assets.

                                       52

The following table shows our portfolio of investments by industry at fair value, as of June 30, 2020 and December 31, 2019:


                                          June 30, 2020

December 31, 2019

                                 Investments at     Percentage of     Investments at      Percentage of
                                   Fair Value        Fair Value         Fair Value         Fair Value
                                ($ in millions)                      ($ in millions)
Structured finance(1)           $           81.6          30.1 %     $     
    121.4           33.3 %
Healthcare                                  53.1          19.6 %                 59.6           16.3 %
Business services                           51.3          19.0 %                 59.3           16.3 %
Software                                    29.5          10.9 %                 40.2           11.0 %
Telecommunication services                  12.8           4.7 %           
     14.5            4.0 %
Logistics                                   12.4           4.6 %                 12.7            3.5 %
Utilities                                    6.7           2.5 %                 12.2            3.3 %
Diversified insurance                        6.5           2.4 %                  9.9            2.7 %
Education                                    5.8           2.1 %                  5.6            1.5 %
Aerospace and defense                        5.3           2.0 %                  5.4            1.5 %
IT consulting                                0.6           0.2 %                  2.8            0.8 %
Plastics Manufacturing                       5.2           1.9 %                    -              - %
Financial intermediaries                       -             - %           
     21.2            5.8 %
Total(2)                        $          270.8         100.0 %     $          364.8          100.0 %


____________

(1) Reflects our debt and equity investments in CLOs as of June 30, 2020, and December 31, 2019, respectively.

(2) Totals may not sum due to rounding.

PORTFOLIO GRADING

We have adopted a credit grading system to monitor the quality of our debt
investment portfolio. As of June 30, 2020 and December 31, 2019, our portfolio
had a weighted average grade of 2.3 and 2.2, respectively, based upon the fair
value of the debt investments in the portfolio. Equity securities and
investments in CLOs are not graded.

As of June 30, 2020 and December 31, 2019, our debt investment portfolio was
graded as follows:

                                                                        June 30, 2020
                                            Principal         Percentage of       Portfolio at        Percentage of
Grade        Summary Description              Value          Total Portfolio       Fair Value        Total Portfolio
                                         ($ in millions)                         ($ in millions)
  1     Company is ahead of
        expectations and/or
        outperforming financial
        covenant requirements of the
        specific tranche and such
        trend is expected to continue.   $              -               - %     $               -               - %
  2     Full repayment of the
        outstanding amount
        of OXSQ's cost basis and
        interest is expected for the
        specific tranche.                           173.5            71.8 %                 148.4            78.4 %
  3     Closer monitoring is required.
        Full repayment of the
        outstanding amount of OXSQ's
        cost basis and interest is
        expected for the specific
        tranche.                                     42.4            17.5 %                  35.3            18.7 %
  4     A loss of interest income has
        occurred or is expected to
        occur and, in most cases, the
        investment is placed on
        non-accrual status. Full
        repayment of the outstanding
        amount of OXSQ's cost basis is
        expected for the specific
        tranche.                                        -               - %                     -               - %
  5     Full repayment of the
        outstanding amount of OXSQ's
        cost basis is not expected for
        the specific tranche and the
        investment is
        placed on non-accrual status.                25.8            10.7 %                   5.4             2.9 %
        Total(1)                         $          241.7           100.0 %     $           189.2           100.0 %


                                       53

                                                                     December 31, 2019
                                                              Percentage of      Portfolio at       Percentage of
Grade        Summary Description          Principal Value    Debt Portfolio
      Fair Value       Debt Portfolio
                                          ($ in millions)                       ($ in millions)
  1     Company is ahead of
        expectations and/or
        outperforming financial
        covenant requirements of the
        specific tranche and such
        trend is expected to continue.   $               -           - %       $               -           - %
  2     Full repayment of the
        outstanding amount
        of OXSQ's cost basis and
        interest is expected for the
        specific tranche.                            206.6        75.3 %                   200.5        83.1 %
  3     Closer monitoring is required.
        Full repayment of the
        outstanding amount of OXSQ's
        cost basis and interest is
        expected for the specific
        tranche.                                      42.5        15.5 %                    35.1        14.5 %
  4     A loss of interest income has
        occurred or is expected to
        occur and, in most cases, the
        investment is placed on
        non-accrual status. Full
        repayment of the outstanding
        amount of OXSQ's cost basis is
        expected for the specific
        tranche.                                      10.2         3.7 %                     3.6         1.5 %
  5     Full repayment of the
        outstanding amount
        of OXSQ's cost basis is not
        expected for
        the specific tranche and the
        investment is
        placed on non-accrual status.                 15.0         5.5 %                     2.3         0.9 %
        Total(1)                         $           274.2       100.0 %       $           241.4       100.0 %


____________

(1) Totals may not sum due to rounding.

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

RESULTS OF OPERATIONS

Set forth below is a comparison of our results of operations for the three and six months ended June 30, 2020 to the three and six months ended June 30, 2019.


                                       54

Investment Income

Investment income for the three months ended June 30, 2020 and June 30, 2019 was
approximately $8.3 million and $20.9 million, respectively. Investment income
for the six months ended June 30, 2020 and June 30, 2019 was approximately $19.1
million and $35.1 million, respectively. The following tables set forth the
components of investment income for the three and six months ended June 30,
2020
and June 30, 2019:

                                          Three Months    Three Months     Six Months     Six Months
                                             Ended            Ended          Ended          Ended
                                            June 30,        June 30,        June 30,       June 30,
                                              2020            2019            2020           2019
Interest income
Stated interest income                   $    4,389,601$   6,975,915$  9,564,346$ 13,886,433
Original issue discount and market
discount income                                 297,399         224,410        583,106        359,410
Payment-in-kind interest income                  61,150          59,084        123,305        148,372
Discount income derived from
unscheduled remittances at par                  125,232         172,967        256,880        186,642
Total interest income                    $    4,873,382$   7,432,376$ 10,527,637$ 14,580,857
Income from securitization vehicles      $    3,217,953$   6,649,481   $
 7,977,023   $ 13,496,406
Dividend income - non-cash               $            -   $   6,335,886   $          -   $  6,335,886
Other income
Fee letters                              $      162,658$      99,328$    326,509$    201,130
Loan prepayment and bond call fees                    -         160,000    
   200,000        160,000
All other fees                                      628         235,830         48,140        363,736
Total other income                       $      163,286$     495,158$    574,649$    724,866
Total investment income                  $    8,254,621$  20,912,901$ 19,079,309$ 35,138,015
The decrease in total investment income for the three and six months ended June
30, 2020 was primarily due to the recognition of approximately $6.3 million of
cumulative preferred equity dividend income PIK in the three months ended June
30, 2019 and decreases in interest income for the three and six months ended
June 30, 2020.

The total principal value of income producing debt investments as of June 30,
2020 and June 30, 2019 was approximately $215.9 million and $294.5 million,
respectively. As of June 30, 2020, our debt investments had a range of stated
interest rates of 3.93% and 10.81% and maturity dates of between 11 and 133
months compared to a range of stated interest rates of 5.95% to 13.10% and
maturity dates between 23 and 145 months as of June 30, 2019. In addition, our
total debt portfolio had a weighted average yield on debt investments of
approximately 8.1% as of June 30, 2020, compared to approximately 10.0% as of
June 30, 2019.

Income from securitization vehicles for the three months ended June 30, 2020 and
June 30, 2019, was approximately $3.2 million and $6.6 million, respectively.
Income from securitization vehicles for the six months ended June 30, 2020 and
June 30, 2019, was approximately $8.0 million and $13.5 million, respectively.
The total principal outstanding on our investments in CLOs as of June 30, 2020,
and June 30, 2019, was approximately $303.4 million and $282.8 million,
respectively. The weighted average yield on CLO equity investments as of June
30, 2020, and June 30, 2019, was approximately 7.1% and 13.1%, respectively.

Operating Expenses


Total expenses for the three months ended June 30, 2020 and 2019, were
approximately $3.9 million and $8.1 million, respectively. Total expenses for
the six months ended June 30, 2020 and 2019, were approximately $8.4 million and
$14.0 million, respectively. These amounts consisted of base management fees,
interest expense, professional fees, compensation expense, general and
administrative expenses, and incentive fees.

Expenses before incentive fees for the three months ended June 30, 2020 were
approximately $3.9 million, which decreased by approximately $1.9 million from
the quarter ended June 30, 2019. Expenses before incentive fees for the six
months ended June 30, 2020, were approximately $8.4 million, which decreased by
approximately $2.1 million from the six months ended June 30, 2019. The decrease
in expenses before incentive fees for the three and six months ended June 30,
2020 is largely due to decreases in interest expense and base management fees.

                                       55

The base management fee for the three months ended June 30, 2020, was
approximately $1.0 million compared with $1.9 million for the three months ended
June 30, 2019. The base management fee for the six months ended June 30, 2020,
was approximately $2.2 million, compared with $3.5 million for the six months
ended June 30, 2019. The decrease for the three and six months ended June 30,
2020 was due largely to a decrease in the weighted average gross assets.

Interest expense for the three months ended June 30, 2020, was approximately
$1.9 million, which primarily relates to our 6.25% unsecured notes due 2026 (the
"6.25% Unsecured Notes") and 6.50% unsecured notes due 2024 (the "6.50%
Unsecured Notes"), compared to interest expense of approximately $2.8 million
for the three months ended June 30, 2019, which relates to our 6.25% Unsecured
Notes, 6.50% Unsecured Notes and the credit facility entered into between Oxford
Square Funding 2018, LLC, a special purpose vehicle and wholly-owned subsidiary
of OXSQ, and Citibank, N.A. (the "Credit Facility"). Interest expense for the
six months ended June 30, 2020, was approximately $4.1 million, compared to
interest expense of approximately $5.0 million for the six months ended June 30,
2019. The decrease for the three and six months ended June 30, 2020 was a result
of repayments of the Credit Facility over the respective periods.

Professional fees, consisting of legal, consulting, valuation, audit and tax
fees, were approximately $0.4 million for the three months ended June 30, 2020,
which is approximately equal to the amount for the three months ended June 30,
2019. Professional fees were approximately $0.9 million and $0.7 million for the
six months ended June 30, 2020 and 2019, respectively. The increase for the six
months ended June 30, 2020 was primarily due to higher audit and legal fees.

Compensation expense was approximately $0.2 million for the three months ended
June 30, 2020, which is approximately equal to the amount for the three months
ended June 30, 2019. Compensation expense for the six months ended June 30, 2020
was approximately $0.4 million, which is approximately equal to the amount for
the six months ended June 30, 2019. Compensation expense reflects the allocation
of compensation expenses for the services of our Chief Financial Officer,
accounting personnel, and other administrative support staff.

General and administrative expenses, consisting primarily of directors' fees,
insurance, listing fees, transfer agent and custodian fees, office supplies,
facilities costs and other expenses, were approximately $0.4 million and $0.6
million for the three months ended June 30, 2020 and 2019, respectively. General
and administrative expenses for the six months ended June 30, 2020 and 2019 were
approximately $0.8 million and $0.9 million, respectively. Office supplies,
facilities costs and other expenses are allocated to us under the terms of
the
Administration Agreement.

Incentive Fees
There was no net investment income incentive fee recorded for the three and six
months ended June 30, 2020 due to the Total Return Requirement as described in
"Note 7. Related Party Transactions" in the notes to our consolidated financial
statements. The net investment income incentive fee recorded for the three and
six months ended June 30, 2019 was approximately $2.4 million and $3.5 million,
respectively.

The net investment income incentive fee is calculated and payable quarterly in
arrears based on the amount by which (x) the "Pre-Incentive Fee Net Investment
Income" for the immediately preceding calendar quarter exceeds (y) the
"Preferred Return Amount" for calendar quarter (see "Note 7. Related Party
Transactions" in the notes to our consolidated financial statements). For this
purpose, "Pre-Incentive Fee Net Investment Income" means interest income,
dividend income and any other income accrued during the calendar quarter minus
our operating expenses for the quarter (including the base fee, expenses payable
under the Administration Agreement with Oxford Funds, and any interest expense
and dividends paid on any issued and outstanding preferred stock, but excluding
the incentive fee).

The capital gains incentive fee expense, as reported under GAAP, is calculated
on the basis of net realized and unrealized gains and losses at the end of each
period. The expense related to the hypothetical liquidation of the portfolio
(and assuming no other changes in realized or unrealized gains and losses) would
only become payable to our investment adviser in the event of a complete
liquidation of our portfolio as of period end and the termination of the
Investment Advisory Agreement on such date. For the three and six months ended
June 30, 2020, and June 30, 2019, no accrual was required as a result of the
impact of accumulated net unrealized depreciation and net realized losses on our
portfolio.

                                       56

The amount of the capital gains incentive fee which will actually be payable is
determined in accordance with the terms of the Investment Advisory Agreement and
is calculated as of the end of each calendar year (or upon termination of the
Investment Advisory Agreement). The terms of the Investment Advisory Agreement
state that the capital gains incentive fee calculation is based on net realized
gains, if any, offset by gross unrealized depreciation for the calendar year. No
effect is given to gross unrealized appreciation in this calculation. For the
three and six months ended June 30, 2020 and June 30, 2019, such an accrual was
not required under the terms of the Investment Advisory Agreement.

Realized and Unrealized Gains/Losses on Investments

For the three months ended June 30, 2020 we recognized net realized losses on
investments of approximately $2.8 million, which primarily reflects losses from
the sale of several senior secured note investments partially offset by the sale
of a CLO equity investment during the period.

For the three months ended June 30, 2020, our net change in unrealized
appreciation was approximately $19.0 million, composed of $24.4 million in gross
unrealized appreciation, $12.4 million in gross unrealized depreciation and
approximately $7.0 million relating to the reversal of prior period net
unrealized depreciation as investment gains and losses were realized. This
includes net unrealized appreciation of approximately $2.6 million as a result
of reductions to the cost value of our CLO equity investments under the
effective yield accounting methodology, whereby the cost value of the respective
investments are reduced by the excess of actual cash received and record date
distributions to be received over the calculated income using the effective
yield. The increase in net unrealized appreciation for the three months ended
June 30, 2020 was due primarily to net unrealized appreciation in our syndicated
loan investments, partially offset by the net unrealized depreciation in our CLO
equity investments.

The most significant components of the net change in unrealized appreciation and
depreciation during the three months ended June 30, 2020, were as follows (in
millions):

                                                        Net Change in
                                                          Unrealized
                                                         Appreciation
Portfolio Company                                       (Depreciation)

Shift4 Payments, LLC (f/k/a Lighthouse Network, LLC) $ 4.0 Quest Software, Inc.

                                              3.5
Healthport Technologies, LLC                                      2.2
Telos CLO 2013-4, Ltd.                                           (1.4 )
Telos CLO 2014-5, Ltd.                                           (3.7 )
Net all other                                                    14.4
Total                                                  $         19.0


For the six months ended June 30, 2020, we recognized net realized losses on
investments of approximately $3.0 million, which primarily reflects the losses
from the sale of several senior secured note investments partially offset by the
sale of a CLO equity investment during the period.

For the six months ended June 30, 2020, our net change in unrealized
depreciation was approximately $66.5 million, composed of $4.0 million in gross
unrealized appreciation, $71.6 million in gross unrealized depreciation and
approximately $1.1 million relating to the reversal of prior period net
unrealized depreciation as investment gains and losses were realized. This
includes net unrealized appreciation of approximately $4.6 million as a result
of reductions to the cost value of our CLO equity investments under the
effective yield accounting methodology, whereby the cost value of the respective
investments are reduced by the excess of actual cash received and record date
distributions to be received over the calculated income using the effective
yield.

                                       57

The most significant components of the net change in unrealized appreciation and
depreciation during the six months ended June 30, 2020 were as follows (in
millions):

                              Net Change in
                                Unrealized
                               Appreciation
Portfolio Company             (Depreciation)
Telos CLO 2014-5, Ltd.       $        (7.2 )
Sound Point CLO XVI, Ltd.             (6.4 )
Nassau 2019-I, Ltd.                   (5.1 )
Cedar Funding II CLO, Ltd.            (3.3 )
Vibrant CLO V, Ltd.                   (2.8 )
Net all other                        (41.7 )
Total                        $       (66.5 )

Net Increase in Net Assets Resulting from Net Investment Income

Net investment income for the three months ended June 30, 2020 and June 30, 2019
was approximately $4.3 million and $12.8 million, respectively. The net
investment income for the six months ended June 30, 2020 was approximately $10.7
million, compared to $21.1 million for the six months ended June 30, 2019. The
decrease in total investment income was partially offset by a decrease in total
expenses over the periods.

For the three and six months ended June 30, 2020, the net increase in net assets
resulting from net investment income per common share was $0.09 and $0.22 (basic
and diluted), respectively, compared to the net increase in net assets resulting
from net investment income per share of $0.27 and $0.44 (basic and diluted) for
the three and six months ended June 30, 2019, respectively. The per share
decrease is due to lower net investment income for the three and six months
ended June 30, 2020.

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


Net increase in net assets resulting from operations for the three months ended
June 30, 2020 was approximately $20.6 million compared with a net decrease in
net assets resulting from operations of approximately $7.5 million for the three
months ended June 30, 2019. For the six months ended June 30, 2020, the net
decrease in net assets resulting from operations was approximately $58.8 million
compared with a net increase in net assets resulting from operations of
approximately $5.2 million for the six months ended June 30, 2019.

For the three months ended June 30, 2020, the net increase in net assets
resulting from operations per common share was $0.41 (basic and diluted),
compared to a net decrease in net assets resulting from operations per share of
$0.16 (basic and diluted) for the three months ended June 30, 2019. For the six
months ended June 30, 2020 the net decrease in net assets resulting from
operations per common share was $1.19 (basic and diluted), compared to a net
increase in net assets resulting from operations per share of $0.11 (basic and
diluted) for the six months ended June 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES


As of June 30, 2020, cash equivalents and restricted cash were approximately
$20.1 million as compared to approximately $16.5 million as of December 31,
2019. For the six months ended June 30, 2020, net cash provided by operating
activities for the period, consisting primarily of the items described in "-
Results of Operations," was approximately $45.6 million, largely reflecting
proceeds from principal repayments and sales of investments of approximately
$49.2 million partially offset by purchases of investments of $20.0 million. For
the six months ended June 30, 2020, net cash used in financing activities was
approximately $42.0 million, reflecting the payment of distributions and the
repayment of the Credit Facility, which was partially offset by the issuance of
common stock.

                                       58

Contractual Obligations

A summary of our significant contractual payment obligations as of June 30,
2020, is as follows:

                                                         Payments Due by Period
Contractual obligations ($     Principal       Less than                                        More than
in millions)                     Amount         1 year         1 - 3 years      3 - 5 years      5 years
Long-term debt obligations:
6.50% Unsecured Notes         $       64.4   $           -    $            -    $       64.4   $         -
6.25% Unsecured Notes                 44.8               -                 -               -          44.8
                              $      109.2   $           -    $            -    $       64.4$      44.8

Refer to "Note 6. Borrowings" in the notes to our consolidated financial statements.

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any commitments to purchase additional
investments. On October 18, 2019, the Company entered into a $10 million
repurchase transaction facility (the "Repo Facility") with Nomura Securities
International, Inc. ("Nomura"). Pursuant to the Master Repurchase Agreement
("MRA") and a transaction facility confirmation, the Company may sell securities
to Nomura from time to time with a corresponding repurchase obligation at an
agreed-upon price 30 to 60 days after the sale date ("Reverse Repo"). The Repo
Facility has a funding cost of 1-month LIBOR plus 2.05% per annum for each
Reverse Repo transaction and is subject to a facility fee of 0.85% per annum on
the full $10 million facility amount. The Repo Facility expires on October 18,
2020, subject to optional termination or extension that is mutually agreed. The
Company accounts for these Reverse Repo transactions as secured financings for
financial reporting purposes in accordance with GAAP. As of June 30, 2020, there
was no outstanding principal, or securities sold under the Repo Facility. The
Company accrued approximately $21,000 in undrawn fees as of June 30, 2020, which
is classified as interest expense on the consolidated statement of operations.

Share Issuance Program


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

Borrowings

In accordance with the 1940 Act, with certain limited exceptions, as of June 30,
2020, we were only allowed to borrow amounts such that our asset coverage, as
defined in the 1940 Act, was at least 150%, immediately after such borrowing. As
of June 30, 2020 and December 31, 2019, our asset coverage for borrowed amounts
was 258.2% and 278.6%, respectively.

On April 6, 2018, the Board, including a "required majority" (as such term is
defined in Section 57(o) of the 1940 Act) of the Board, approved the modified
asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as
amended by the Small Business Credit Availability Act. As a result, the
Company's asset coverage requirements for senior securities was changed from
200% to 150%, effective as of April 6, 2019.

The weighted average stated interest rate and weighted average maturity on all
of the Company's debt outstanding as of June 30, 2020, were 6.4% and 4.6 years,
respectively, and as of December 31, 2019, were 5.94% and 4.2 years,
respectively.

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

                                       59

On June 21, 2018, OXSQ Funding, a special purpose vehicle and wholly-owned
subsidiary of OXSQ, entered into the Credit Facility with Citibank, N.A. Subject
to certain exceptions, pricing under the Credit Facility was based on the London
Interbank Offered Rate for an interest period equal to three months plus a
spread of 2.25% per annum payable quarterly on March 21, June 21, September 21
and December 21. Pursuant to the terms of the credit agreement governing the
Credit Facility, OXSQ Funding borrowed approximately $95.2 million. The Credit
Facility had a mandatory amortization schedule such that 15.0% of the principal
amount outstanding as of June 21, 2018 was due and payable on June 21, 2019. On
each payment date occurring thereafter, an additional 6.25% of the remaining
principal amount outstanding was due and payable. On October 12, 2018, OXSQ
Funding amended the Credit Facility with Citibank, N.A., and an additional
borrowing amount of approximately $37.3 million was made under the same terms as
the existing credit agreement. We made partial principal repayments under the
Credit Facility for the year ended December 31, 2019 and December 31, 2018 of
approximately $57.6 million and $46.8 million, respectively. We repaid the
remaining outstanding principal on March 24, 2020 of approximately $17.1
million.

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

Refer to "Note 6. Borrowings" in the notes to our consolidated financial statements.

Distributions


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

To the extent our taxable earnings fall below the total amount of our
distributions for that fiscal year, a portion of those distributions may be
deemed a return of capital to our stockholders. Thus, the source of a
distribution to our stockholders may be the original capital invested by the
stockholder rather than our taxable ordinary income or capital gains.
Stockholders should read any written disclosure accompanying a distribution
payment carefully and should not assume that the source of any distribution is
taxable ordinary income or capital gains. The final determination of the nature
of our distributions can only be made upon the filing of our tax return. We have
until October 15, 2021, to file our federal income tax return for the year ended
December 31, 2020.

For the quarter ended June 30, 2020, management estimated that a tax return of
capital occurred of approximately $0.03 per share. We may not be able to achieve
operating results that will allow us to make distributions at a specific level
or to increase the amount of these distributions from time to time. In addition,
we may be limited in our ability to make distributions due to the asset coverage
requirements applicable to us as a BDC under the 1940 Act. If we do not
distribute a certain percentage of our income annually, we will suffer adverse
tax consequences, including possible loss of favorable regulated investment
company tax treatment. We cannot assure stockholders that they will receive
any
distributions.

                                       60

The following table reflects the cash distributions, including distributions
reinvested, if any, per share that our Board has declared on our common stock
since the beginning of 2019:

                                                                                                             Distributions
                                                                                                               in excess
                                                                                                            of/(less than)
                                                                                            GAAP Net           GAAP Net
                                                                                           Investment         Investment
Date Declared(2)         Record Date          Payment Date       Total Distributions         Income             Income
Fiscal 2020
June 1, 2020          September 16, 2020   September 30, 2020   $       0.035            $     N/A        $          -
June 1, 2020           August 17, 2020      August 31, 2020             0.035                  N/A                   -
June 1, 2020            July 17, 2020        July 31, 2020              0.035                  N/A                   -
Total (Third
Quarter 2020)                                                           0.105                    -  (4)              -

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

October 25, 2019        March 17, 2020       March 31, 2020             0.067                  N/A                   -
October 25, 2019      February 14, 2020    February 28, 2020            0.067                  N/A                   -
October 25, 2019       January 17, 2020     January 31, 2020            0.067                  N/A                   -
Total (First
Quarter 2020)                                                           0.201                 0.13                0.07

Fiscal 2019(1)
July 25, 2019         December 18, 2019    December 31, 2019    $       0.067            $     N/A        $          -
July 25, 2019         November 15, 2019    November 29, 2019            0.067                  N/A                   -
July 25, 2019          October 21, 2019     October 31, 2019            0.067                  N/A                   -
Total (Fourth
Quarter 2019)                                                           0.201                 0.18                0.02

April 23, 2019        September 23, 2019   September 30, 2019           0.067                  N/A                   -
April 23, 2019         August 23, 2019      August 30, 2019             0.067                  N/A                   -
April 23, 2019          July 24, 2019        July 31, 2019              0.067                  N/A                   -
Total (Third
Quarter 2019)                                                           0.201                 0.19                0.01

February 22, 2019       June 21, 2019        June 28, 2019              0.067                  N/A                   -
February 22, 2019        May 24, 2019         May 31, 2019              0.067                  N/A                   -
February 22, 2019       April 23, 2019       April 30, 2019             0.067                  N/A                   -
Total (Second
Quarter 2019)                                                           0.201                 0.27               (0.07 )

February 22, 2019       March 15, 2019       March 29, 2019             0.200                 0.18                0.02
Total (First
Quarter 2019)                                                           0.200                 0.18                0.02
Total (2019)                                                    $       0.803  (1)       $    0.81  (3)   $      (0.01 )(3)


____________

(1)   The tax characterization of cash distributions for the year ended December
31, 2019 will not be known until the tax return for such year is finalized. For
the year ended December 31, 2019, the amounts and sources of distributions
reported are only estimates and are not being provided for U.S. tax reporting
purposes. The final determination of the source of all distributions in 2019
will be made after year-end and the amounts represented may be materially
different from the amounts disclosed in the final Form 1099-DIV notice. The
actual amounts and sources of the amounts for tax reporting purposes will depend
upon the Company's investment performance and may be subject to change based on
tax regulations.

(2) For the months ended April 30, 2019 through September 30, 2020, the Board declared monthly distributions in lieu of quarterly distributions.

(3)   Totals may not sum due to rounding.

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

                                       61

Related Parties


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

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

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

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

Oxford Square Management, Oxford Lane Management, LLC, Oxford Bridge Management,
LLC and Oxford Gate Management, LLC are subject to a written policy with respect
to the allocation of investment opportunities among the Company, Oxford Lane
Capital Corp., the Oxford Bridge Funds and the Oxford Gate Funds. Where
investments are suitable for more than one entity, the allocation policy
generally provides that, depending on size and subject to current and
anticipated cash availability, the absolute size of the investment as well as
its relative size compared to the total assets of each entity, current and
anticipated weighted average costs of capital, among other factors, an
investment amount will be determined by the adviser to each entity. If the
investment opportunity is sufficient for each entity to receive its investment
amount, then each entity receives the investment amount; otherwise, the
investment amount is reduced pro rata. On June 14, 2017, the Securities and
Exchange Commission issued an order permitting the Company and certain of its
affiliates to complete negotiated co-investment transactions in portfolio
companies, subject to certain conditions (the "Order"). Subject to satisfaction
of certain conditions to the Order, the Company and certain of its affiliates
are now permitted, together with any future BDCs, registered closed-end funds
and certain private funds, each of whose investment adviser is the Company's
investment adviser or an investment adviser controlling, controlled by, or under
common control with the Company's investment adviser, to co-invest in negotiated
investment opportunities where doing so would otherwise be prohibited under the
1940 Act, providing the Company's stockholders with access to a broader array of
investment opportunities. Pursuant to the Order, we are permitted to co-invest
in such investment opportunities with our affiliates if a "required majority"
(as defined in Section 57(o) of the 1940 Act) of our independent directors make
certain conclusions in connection with a co-investment transaction, including,
but not limited to, that (1) the terms of the potential co-investment
transaction, including the consideration to be paid, are reasonable and fair to
us and our stockholders and do not involve overreaching in respect of us or our
stockholders on the part of any person concerned, and (2) the potential
co-investment transaction is consistent with the interests of our stockholders
and is consistent with our then-current investment objective and strategies.

                                       62

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

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

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

RECENT DEVELOPMENTS

The following distributions payable to stockholders are shown below:

Per Share Distribution
   Amount Declared          Record Dates        Payable Dates      Date Declared
        $0.035             July 17, 2020        July 31, 2020      June 1, 2020
        $0.035            August 17, 2020      August 31, 2020     June 1, 2020
        $0.035           September 16, 2020   September 30, 2020   June 1, 2020

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 35,0 M - -
Net income 2020 -46,6 M - -
Net Debt 2020 - - -
P/E ratio 2020 -2,40x
Yield 2020 26,5%
Capitalization 114 M 114 M -
Capi. / Sales 2020 3,26x
Capi. / Sales 2021 3,43x
Nbr of Employees -
Free-Float 91,7%
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Managers
NameTitle
Jonathan H. Cohen Chief Executive Officer & Director
Saul B. Rosenthal President & Chief Operating Officer
Steven P. Novak Chairman
Bruce L. Rubin CFO, Secretary, Treasurer & CAO
Charles Morgan Royce Director
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