Audax Credit BDC Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Audax Credit BDC Inc.	tm2014680d1_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - Audax Credit BDC Inc.	tm2014680d1_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Audax Credit BDC Inc.	tm2014680d1_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Audax Credit BDC Inc.	tm2014680d1_ex31-1.htm
EX-10.1 - EXHIBIT 10.1 - Audax Credit BDC Inc.	tm2014680d1_ex10-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 814-01154

AUDAX CREDIT BDC INC.

(Exact name of registrant as specified in its charter)

DELAWARE		47-3039124
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS		02199
(Address of principal executive office)		(Zip Code)

(617) 859-1500

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12 b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x	Smaller reporting company	¨

Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The registrant had 37,793,520 shares of common stock, par value $0.001 per share, outstanding as of June 18, 2020.

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Statements of Assets and Liabilities as of March 31, 2020 (unaudited) and December 31, 2019	2
	Statements of Operations for the three months ended March 31, 2020 (unaudited) and 2019 (unaudited)	3
	Statements of Changes in Net Assets for the three months ended March 31, 2020 (unaudited) and 2019 (unaudited)	4
	Statements of Cash Flows for the three months ended March 31, 2020 (unaudited) and 2019 (unaudited)	5
	Schedules of Investments as of March 31, 2020 (unaudited) and December 31, 2019	6
	Notes to Financial Statements (unaudited)	16

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Overview	36
	Results of Operations	38
	Financial Condition, Liquidity and Capital Resources	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	47

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	50

SIGNATURES		51

Audax Credit BDC Inc.

Statements of Assets and Liabilities

March 31, 2020 and December 31, 2019

(Expressed in U.S. Dollars)

	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Investments, at fair value
Non-Control/Non-Affiliate investments (Cost of $343,249,842 and $332,722,006, respectively)	$	325,865,214		$	330,874,911
Cash and cash equivalents		23,294,471			5,506,217
Interest receivable		898,785			942,329
Receivable from investments sold		-			1,993,379
Receivable from bank loan repayment		4,984,417			80,161
Other assets		147,795			-

Total assets	$	355,190,682		$	339,396,997

Liabilities
Accrued expenses and other liabilities	$	415,912		$	297,938
Fee due to administrator^(a)		66,250			66,250
Fees due to investment advisor, net of waivers^(a)		670,135			688,136
Payable for investments purchased		18,869,115			6,945,000

Total liabilities	$	20,021,412		$	7,997,324
Commitments and contingencies^(b)

Net Assets
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 36,698,229 and 35,109,246 shares issued and outstanding, respectively	$	36,698		$	35,110
Capital in excess of par value		349,093,820			334,095,408
Total distributable earnings		(13,961,248	)		(2,730,845	)
Total Net Assets	$	335,169,270		$	331,399,673

Net Asset Value per Share of Common Stock at End of Period	$	9.13		$	9.44

Shares Outstanding		36,698,229			35,109,246

^(a)	Refer to Note 4-Related Party Transactions for additional information.
^(b)	Refer to Note 8-Commitments and Contingencies for additional information.
^(c)	As of December 31, 2017, components of total distributable earnings were comprised of accumulated net appreciation
	on investments of $160,604 and accumulated distributions in excess of net investment income of $253,938.

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Statements of Operations

(Expressed in U.S. Dollars)

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Investment Income
Interest income
Non-Control/Non-Affiliate	$	5,202,708		$	4,870,004
Other		28,670			50,720
Total interest income		5,231,378			4,920,724
Other income
Non-Control/Non-Affiliate		14,740			17,810
Total income		5,246,118			4,938,534

Expenses
Base management fee^(a)	$	880,852		$	738,654
Incentive fee^(a)		661,359			612,128
Administrative fee^(a)		66,250			66,250
Directors' fees		52,500			52,500
Professional fees		97,942			154,681
Other expenses		48,385			104,601

Expenses before waivers from investment adviser and administrator		1,807,288			1,728,814
Base management fee waivers^(a)		(308,298	)		(258,529	)
Incentive fee waivers^(a)		(563,778	)		(489,291	)
Total expenses, net of waivers		935,212			980,994
Net Investment Income		4,310,906			3,957,540

Realized and Unrealized (Loss) Gain on Investments
Net realized (loss) gain on investments		(3,776	)		27,919
Net change in unrealized depreciation on investments		(15,537,533	)		(343,522	)
Net realized and unrealized loss on investments		(15,541,309	)		(315,603	)

Net Decrease in Net Assets Resulting from Operations	$	(11,230,403	)	$	3,641,937

Basic and Diluted per Share of Common Stock:
Net investment income	$	0.12		$	0.13
Net decrease in net assets resulting from operations	$	(0.31	)	$	0.12

Weighted average shares of common stock outstanding basic
diluted		36,541,077			30,148,907

^(a) Refer to Note 4-Related Party Transactions for additional information

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Statements of Changes in Net Assets

(Expressed in U.S. Dollars)

(unaudited)

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Operations
Net investment income	$	4,310,906		$	3,957,540
Net realized (loss) gain on investments		(3,776	)		27,919
Net change in unrealized depreciation on investments		(15,537,533	)		(343,522	)
Net (decrease) increase in net assets resulting from operations		(11,230,403	)		3,641,937

Capital Share Transactions:
Issuance of common stock		15,000,000			20,000,000
Net increase in net assets from capital share transactions		15,000,000			20,000,000

Net Increase in Net Assets		3,769,597			23,641,937

Net Assets, Beginning of Period		331,399,673			267,423,235

Net Assets, End of Period	$	335,169,270		$	291,065,172

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Statements of Cash Flows

(Expressed in U.S. Dollars)

(unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2020			March 31, 2019
Cash flows from operating activities:
Net (decrease) increase in net assets resulting from operations	$	(11,230,403	)	$	3,641,937
Adjustments to reconcile net (decrease) increase in net assets from
operations to net cash provided by (used in) operating activities:
Net realized loss (gain) on investments		3,776			(27,919	)
Net change in unrealized depreciation on investments		15,537,533			343,522
Accretion of original issue discount interest and payment-in-kind interest		(93,473	)		(62,751	)
Decrease in receivable from investments sold		1,993,379			-
Decrease (increase) in interest receivable		43,544			(66,050	)
Increase in receivable from bank loan repayment		(4,904,256	)		(9,660	)
Increase in other assets		(147,795	)		(135,000	)
Increase in accrued expenses and other liabilities		117,974			131,552
(Decrease) increase in fees due to investment advisor(a)		(18,001	)		67,048
Increase in payable for investments purchased		11,924,115			995,087
Investment activity:
Investments purchased		(34,327,808	)		(45,273,530	)
Proceeds from investments sold		5,743,556			-
Repayment of bank loans		18,146,113			11,648,671
Total investment activity		(10,438,139	)		(33,624,859	)

Net cash provided by (used in) operating activities		2,788,254			(28,747,093	)

Cash flows from financing activities:
Issuance of shares of common stock		15,000,000			20,000,000

Net cash provided by financing activities		15,000,000			20,000,000

Net decrease in cash and cash equivalents		17,788,254			(8,747,093	)

Cash and cash equivalents:
Cash and cash equivalents, beginning of period		5,506,217			17,715,145

Cash and cash equivalents, end of period	$	23,294,471		$	8,968,052

Supplemental non-cash information
Payment-in-kind ("PIK") interest income	$	-		$	32,822

^(a) Refer to Note 4-Related Party Transactions for additional information

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost		Value
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (97.0%)^(g)(h):

Healthcare & Pharmaceuticals

Radiology Partners, Senior Secured Term B Loan (First Lien), 6.20% (Libor + 4.75%), maturity 7/9/25	$	4,215,792	$	4,342,655	$	4,066,004
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/1/24		3,949,239		3,933,261		3,837,673
Advarra, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26		3,929,554		3,890,897		3,760,582
Young, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 11/7/24		3,824,327		3,814,380		3,688,448
Specialty Care, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 9/1/23		3,334,426		3,337,779		3,201,049
Zest Dental, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/14/25		3,324,731		3,345,661		3,032,155
Veritext, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/1/25		3,177,508		3,163,144		2,977,166
Confluent Health, Senior Secured Initial Term Loan, 6.45% (Libor + 5.00%), maturity 6/24/26		2,977,500		2,950,902		2,871,709
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/18/23		2,899,394		2,880,320		2,789,333
Waystar, Senior Secured Term Loan B, 5.45% (Libor + 4.00%), maturity 10/22/26		2,500,000		2,488,844		2,411,175
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.20% (Libor + 2.75%), maturity 12/27/24		2,443,750		2,448,739		2,374,714
PharMedQuest, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 10/31/24		2,493,750		2,460,203		2,363,751
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 9/23/24		2,439,891		2,421,247		2,347,272
Premise Health, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/10/25		2,323,888		2,331,548		2,252,591
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/1/24		2,316,088		2,305,879		2,250,658
MedRisk, Senior Secured Initial Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 12/29/25(i)		2,100,000		2,075,814		2,100,000
Zelis RedCard, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 9/30/26		1,995,000		1,977,754		1,924,118
Press Ganey, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/24/26		1,990,000		1,983,068		1,919,295
CareCentrix, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 4/3/25		1,900,000		1,892,744		1,846,325
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 12/22/25		1,975,000		1,959,003		1,818,975
Alpaca, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 4/19/24		1,669,921		1,647,042		1,606,530
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.70% (Libor + 5.25%), maturity 3/3/22(i)		1,569,378		1,545,837		1,545,837
Upstream Rehabilitation, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 11/20/26(i)		1,500,000		1,497,678		1,507,500
CPS, Unitranche, 6.95% (Libor + 5.50%), maturity 2/28/25		1,488,777		1,469,751		1,439,498
Stepping Stones, Unitranche, 7.20% (Libor + 5.75%), maturity 12/12/24		1,480,325		1,473,482		1,424,132
Athena, Senior Secured Term B Loan (First Lien), 5.95% (Libor + 4.50%), maturity 2/11/26(i)		994,981		985,502		980,056
Ensemble, Senior Secured Closing Date Term Loan, 5.20% (Libor + 3.75%), maturity 8/3/26(i)		995,000		990,380		970,125
Dermatologists of Central States, Senior Secured Term Loan, 7.95% (Libor + 6.50%), maturity 4/20/22		974,827		974,827		967,516
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/30/23		982,143		987,442		949,634
Alcami, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/14/25		985,000		981,058		942,645
Veritext, Senior Secured Initial Term Loan (Second Lien), 8.45% (Libor + 7.00%), maturity 7/31/26		1,000,000		995,741		936,950
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.95% (Libor + 5.50%), maturity 5/9/25		985,000		973,442		902,024
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 5/10/23		919,633		924,176		884,724
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 9.70% (Libor + 8.25%), maturity 9/1/24		850,000		843,619		825,988
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 2/6/25		438,887		437,920		436,692
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26		380,952		373,333		364,571
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 7/22/20		377,202		377,022		358,440
Alpaca, Senior Secured Revolver, 5.95% (Libor + 4.50%), maturity 4/19/24		258,852		254,969		249,026


High Tech Industries
Qlik, Senior Secured 2019 Incremental Term Loan, 5.70% (Libor + 4.25%), maturity 4/26/24	3,970,000	3,945,860	3,692,100
Masergy, Senior Secured Initial Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 12/16/24(i)	3,428,571	3,420,539	3,428,571
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 2/12/25(i)	3,442,462	3,454,895	3,339,188
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 7.70% (Libor + 6.25%), maturity 8/16/24	3,413,025	3,389,664	3,277,596
Jaggaer, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/14/26	3,146,440	3,141,918	3,052,110
Infogroup, Senior Secured Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 4/3/23	2,912,431	2,889,605	2,803,914
McAfee, Senior Secured Term B USD Loan, 5.20% (Libor + 3.75%), maturity 9/30/24(i)	2,857,180	2,867,708	2,732,104
Idera, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/28/24	2,639,307	2,637,390	2,560,180
ECi Software Solutions, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 9/27/24	2,457,278	2,446,283	2,365,720
EverCommerce, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 8/23/25	2,431,370	2,386,387	2,352,569
Intermedia , Senior Secured New Term Loan (First Lien), 7.45% (Libor + 6.00%), maturity 7/21/25	1,975,000	1,960,535	1,970,063
QuickBase, Senior Secured Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 4/2/26	1,985,000	1,976,321	1,911,039
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/5/27(i)(q)	2,000,000	1,878,750	1,900,000
Flexera Software, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 2/26/25	1,960,000	1,965,675	1,896,476
Corsair, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/28/24	1,977,384	1,963,954	1,861,925
GlobalLogic, Senior Secured Initial Term Loan, 4.20% (Libor + 2.75%), maturity 8/1/25	1,728,438	1,720,243	1,676,619
Bomgar, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 4/18/25	1,719,375	1,729,039	1,646,972
Liaison, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 12/20/26	1,496,250	1,492,500	1,447,757
OEConnection, Senior Secured Initial Term Loan, 5.45% (Libor + 4.00%), maturity 9/25/26	1,492,500	1,485,199	1,405,935
Navex Global, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 9/5/25	1,477,500	1,463,903	1,429,614
Compusearch Software Systems, Senior Secured Term Loan C, 5.70% (Libor + 4.25%), maturity 5/8/23	1,429,387	1,428,902	1,379,602
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 5/4/26(i)	1,077,917	1,079,712	1,013,242
Insurity, Senior Secured Closing Date Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/31/26	997,500	992,880	965,171

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost		Value
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS^(h) (Continued):

High Tech Industries (continued)
LANDesk, Senior Secured Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 1/20/24	$	976,252	$	967,968	$	936,323
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 12/2/22		832,133		828,548		799,114
Sparta, Senior Secured New Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/21/24		794,008		794,411		749,020
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 11.70% (Libor + 10.25%), maturity 1/20/22		1,000,000		995,949		650,000
Idera, Senior Secured Loan (Second Lien), 10.45% (Libor + 9.00%), maturity 6/28/27		500,000		505,000		485,010
HelpSystems, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/19/26		500,000		498,750		496,250
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26(i)		500,000		471,250		495,000
McAfee, Senior Secured Initial Loan (Second Lien), 9.95% (Libor + 8.50%), maturity 9/29/25(i)		500,000		492,500		492,500
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 12/15/23		483,658		482,237		465,763
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 5.20% (Libor + 3.75%), maturity 2/9/23		402,181		401,518		388,173

Services: Business
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 10/11/25	3,950,000	3,945,880	3,821,981
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 9/23/25	3,980,000	3,943,810	3,562,100
Fleetwash, Senior Secured Incremental Term Loan, 6.20% (Libor + 4.75%), maturity 10/1/24	2,955,169	2,931,780	2,933,005
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 5.20% (Libor + 3.75%), maturity 2/2/26	2,975,050	2,966,038	2,895,765
Addison, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 4/15/26	2,977,500	2,925,889	2,782,742
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/31/24(i)	2,749,451	2,740,030	2,721,956
Duff & Phelps, Senior Secured Term Loan, 5.20% (Libor + 3.75%), maturity 5/15/27(i)	2,500,000	2,475,000	2,484,375
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 2/9/26(i)	2,475,000	2,478,286	2,406,938
HireRight, Senior Secured Initial Term Loan (Second Lien), 8.70% (Libor + 7.25%), maturity 7/10/26	2,500,000	2,480,208	2,336,475
Allied Universal, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 7/10/26	2,484,804	2,465,749	2,322,273
Vistage, Senior Secured Term B Loan (First Lien), 5.45% (Libor + 4.00%), maturity 2/10/25	2,458,728	2,453,168	2,315,261
Newport Group, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/12/25	2,464,975	2,452,564	2,282,715
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 6/19/24	2,388,079	2,388,079	2,237,511
Eliassen Group, Senior Secured Initial Term B Loan, 5.95% (Libor + 4.50%), maturity 11/5/24	1,491,247	1,485,110	1,439,307
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.95% (Libor + 4.50%), maturity 3/27/24	1,470,641	1,466,226	1,419,419
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 9.00%), maturity 2/2/26	1,268,869	1,268,869	1,268,869
First Advantage, Senior Secured Term Facility (First Lien), 4.95% (Libor + 3.50%), maturity 1/31/27(i)	1,000,000	995,000	995,000
WCG, Senior Secured Term Loan, 5.45% (Libor + 4.00%), maturity 1/8/27(i)	1,000,000	990,000	995,000
Diversified, Senior Secured Initial Term Loan, 6.20% (Libor + 4.75%), maturity 12/23/23	990,019	983,903	953,131
Franklin Energy, Senior Secured Term B Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/14/26	995,000	992,622	913,410
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/3/26	497,494	493,659	497,200

Chemicals, Plastics & Rubber
Plaskolite, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/15/25	3,950,000	3,889,059		3,610,300
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 5/30/24	3,418,856	3,406,134		3,146,886
DuBois Chemicals, Senior Secured Term Loan (Second Lien), 9.95% (Libor + 8.50%), maturity 9/30/27	3,000,000	2,963,450		2,810,910
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 10/4/21	2,803,961	2,799,472		2,571,457
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 1/31/25	2,675,400	2,684,261		2,462,572
Unifrax, Senior Secured USD Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 12/12/25	2,469,987	2,449,064		2,057,500
Boyd Corp, Senior Secured Initial Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 9/6/26	2,000,000	2,002,152		1,873,940
Q Holding, Senior Secured Term B Loan (2019), 6.45% (Libor + 5.00%), maturity 12/29/23	1,990,000	1,980,976		1,840,750
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 5.95% (Libor + 4.50%), maturity 9/30/26	1,813,558	1,770,824		1,699,249
Zep, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 8/12/24	1,951,222	1,949,345		1,580,490
Spartech, Senior Secured Term Loan, 6.45% (Libor + 5.00%), maturity 10/17/25	997,500	983,035		936,982
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/31/25	980,000	976,253		899,728
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 10/28/24(i)	984,887	968,736		925,793

Services: Consumer
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 6/3/24	5,410,358	5,394,083		4,663,728
A Place For Mom, Senior Secured Term Loan, 5.20% (Libor + 3.75%), maturity 8/10/24	2,659,325	2,658,718		2,538,990
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 12/18/25	2,468,750	2,362,772		2,396,934
Weld North, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 2/15/25	2,457,406	2,436,216		2,336,993
Smart Start, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 2/21/22	2,411,410	2,411,410		2,286,017
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/14/26	2,084,750	2,080,140		2,029,191
Valet Living, Senior Secured Initial Term Loan, 5.20% (Libor + 3.75%), maturity 9/28/25	1,978,696	1,974,504		1,865,911
LegalShield, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/1/25	1,940,510	1,928,009		1,944,236
Ned Stevens, Senior Secured Term A Loan, 7.20% (Libor + 5.75%), maturity 9/30/25	1,580,980	1,553,332		1,531,132
Spring Education, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/30/25	985,000	983,031		956,346
LegalShield, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 5/1/26	500,000	500,000		499,705
StubHub, Senior Secured USD Term B Loan, 4.95% (Libor + 3.50%), maturity 2/12/27	498,750	496,250		472,715
Ned Stevens, Senior Secured Revolver, 6.20% (Libor + 4.75%), maturity 9/30/25	-	(2,614	)	-

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost		Value
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS^(h)(Continued):
Aerospace & Defense
CPI International, Senior Secured TL, 6.20% (Libor + 4.75%), maturity 7/26/24	$	3,855,880	$	3,817,321	$	3,667,597
StandardAero, Senior Secured 2020 Term B-1 Loan, 4.95% (Libor + 3.50%), maturity 4/6/26		3,559,038		3,547,949		3,310,689
Whitcraft, Unitranche, 7.45% (Libor + 6.00%), maturity 4/3/23⁽ⁱ⁾		1,997,493		1,987,493		1,987,506
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 9.20% (Libor + 7.75%), maturity 4/30/26⁽ⁱ⁾		2,000,000		2,009,421		1,980,000
StandardAero, Senior Secured 2020 Term B-2 Loan, 4.95% (Libor + 3.50%), maturity 4/6/26		1,913,462		1,907,499		1,779,940
Tronair, Senior Secured Initial Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 9/8/23		1,452,374		1,446,531		1,333,962
Amentum, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 1/29/27⁽ⁱ⁾		1,000,000		967,500		990,000
API Technologies, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 5/9/26		997,487		967,487		927,883
Eton, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 5/1/25		498,731		498,731		472,797
Eton, Senior Secured Initial Term Loan (Second Lien), 9.45% (Libor + 8.00%), maturity 5/1/26		500,000		495,000		466,285
Novaria Group, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 1/27/27		500,000		495,000		466,285
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 4/30/25		497,481		495,126		463,936

Banking, Finance, Insurance & Real Estate
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 4/30/23⁽ⁱ⁾		2,500,000		2,506,250		2,531,250
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.20% (Libor + 5.75%), maturity 10/31/22		1,980,672		1,947,667		1,939,712
Kestra Financial, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 6/3/26		1,990,000		1,972,030		1,852,153
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 9/6/24		1,466,250		1,463,785		1,456,177
Advisor Group, Senior Secured Initial Term B Loan, 6.45% (Libor + 5.00%), maturity 7/31/26		1,496,250		1,482,294		1,390,016
AmeriLife, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 3/18/27		1,329,545		1,326,222		1,319,574
Aperio, Senior Secured Loan, 6.45% (Libor + 5.00%), maturity 10/25/24		933,889		929,820		871,374
Sedgwick Claims, Senior Secured Initial Term Loan, 4.70% (Libor + 3.25%), maturity 12/31/25		498,737		498,112		473,801

Capital Equipment
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/30/24		2,437,500		2,437,500		2,286,375
BAS, Senior Secured Repricing Term Loan, 5.20% (Libor + 3.75%), maturity 5/21/24		1,964,586		1,966,296		1,836,731
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 12/1/25⁽ⁱ⁾		1,500,000		1,477,500		1,477,500
Edward Don, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 7/2/25		1,475,025		1,469,390		1,361,699
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 11/4/26		1,000,000		995,442		957,000
Duravant, Senior Secured Incremental Amendment No. 2 Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/19/24⁽ⁱ⁾		498,737		498,737		498,737
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 12/2/24		492,443		495,992		467,220
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 7.95% (Libor + 6.50%), maturity 10/1/26		500,000		503,750		465,110
TriMark, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 8/28/24		489,951		491,337		453,459

Construction & Building
PlayPower, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 5/8/26		1,929,861		1,929,861		1,775,472
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/30/24		1,824,977		1,810,785		1,709,949
PlayCore, Senior Secured Initial Term Loan (Second Lien), 9.20% (Libor + 7.75%), maturity 9/29/25		1,500,000		1,467,188		1,400,310
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.45% (Libor + 3.00%), maturity 6/3/24		1,471,052		1,459,806		1,368,402
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 9/30/24		974,414		972,639		909,654
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 7/29/22		626,806		621,609		588,953
Hoffman Southwest, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 8/14/23		527,876		524,122		492,108
Acuren, Senior Secured Initial Term Loan, 5.70% (Libor + 4.25%), maturity 1/23/27		500,000		497,500		467,295
DiversiTech Corporation, Senior Secured Initial Term Loan (Second Lien), 8.95% (Libor + 7.50%), maturity 6/2/25		500,000		488,750		466,285

Containers, Packaging & Glass
ProAmpac, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 11/20/23		2,992,801		3,008,486		2,837,176
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/18/26		1,990,000		1,980,702		1,878,660
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/31/26⁽ⁱ⁾		997,500		995,208		988,772
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 3/26/26		995,000		990,861		932,285
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.45% (Libor + 6.00%), maturity 11/12/21⁽ⁱ⁾		487,587		487,085		482,712
Berlin Packaging, Senior Secured Initial Term Loan (First Lien), 3.00% (Libor + 3.00%), maturity 11/7/25⁽ⁱ⁾		498,731		476,288		481,275
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 11/30/23⁽ⁱ⁾		493,627		493,627		464,009

Consumer Goods: Non-durable
Manna Pro, Senior Secured Term Loan, 7.45% (Libor + 6.00%), maturity 12/8/23		3,430,000		3,392,420		3,285,940
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.95% (Libor + 4.50%), maturity 10/26/23		2,221,890		2,208,700		1,981,926
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 9/11/23		1,906,766		1,896,071		1,757,638
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 12/16/24		984,902		990,954		929,964

Automotive
Mavis, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 3/20/25		3,927,708		3,913,101		3,428,889
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 9.70% (Libor + 8.25%), maturity 4/21/25		1,800,000		1,798,564		1,708,200
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 2/3/25		985,000		961,944		920,896
IXS, Senior Secured Initial Term Loan, 6.45% (Libor + 5.00%), maturity 3/15/27		500,000		495,000		474,500
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 8.20% (Libor + 6.75%), maturity 2/2/26		500,000		488,750		466,285

Transportation: Cargo
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 10/12/24		3,615,344		3,611,340		3,358,654
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.20% (Libor + 3.75%), maturity 10/7/24		2,460,182		2,453,888		2,285,509
Capstone Logistics, Senior Secured Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 10/7/21		1,161,707		1,161,868		1,144,282

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost		Value
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS^(h)(Continued):
Wholesale
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.45% (Libor + 3.00%), maturity 3/20/25	$	3,925,708	$	3,926,133	$	3,548,840
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 8/19/22		1,910,184		1,890,605		1,661,860
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.45% (Libor + 5.00%), maturity 6/15/23		1,451,146		1,449,084		1,378,429

Forest Products & Paper
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 11/21/23		2,919,733		2,908,514		2,636,519
Loparex, Senior Secured Initial Term Loan (First Lien), 5.95% (Libor + 4.50%), maturity 7/31/26		1,492,500		1,478,641		1,402,950
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.95% (Libor + 9.50%), maturity 11/21/24		1,250,000		1,250,000		1,181,775

Media: Advertising, Printing & Publishing
Ansira, Unitranche, 7.20% (Libor + 5.75%), maturity 12/20/22		1,900,675		1,889,359		1,615,575
Northstar, Senior Secured Term Loan, 7.70% (Libor + 6.25%), maturity 6/7/22		1,445,268		1,445,268		1,391,417
Vestcom International, Senior Secured L/C Collaterilized, 5.45% (Libor + 4.00%), maturity 12/19/23		783,878		786,538		732,605
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.20% (Libor + 4.75%), maturity 6/21/22		1,455,000		1,448,210		727,500

Beverage, Food & Tobacco
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.45% (Libor + 5.00%), maturity 11/20/25		1,975,000		1,958,320		1,892,050
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.20% (Libor + 3.75%), maturity 8/25/25		1,970,000		1,962,468		1,876,721

Consumer Goods: Durable
Strategic Partners, Senior Secured Initial Term Loan, 5.20% (Libor + 3.75%), maturity 6/30/23		2,303,551		2,300,565		2,211,409

Retail
Grocery Outlet, Senior Secured 2020 Term Loan (First Lien), 4.20% (Libor + 2.75%), maturity 10/22/25		1,269,483		1,267,102		1,206,009

Hotel, Gaming & Leisure
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.45% (Libor + 5.00%), maturity 10/21/23		1,119,231		1,111,339		1,039,765

Metals & Mining
Dynatect, Senior Secured Term B Loan, 5.95% (Libor + 4.50%), maturity 9/30/22		995,159		990,249		925,717

Health Care Equipment & Services
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/31/26		584,789		579,029		562,590

Total Bank Loans			$	342,129,261	$	325,175,888

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par	Cost		Value
EQUITY AND PREFERRED SHARES: NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)^(g)(h):

Services: Business
DBi Services, Class A-1 Preferred Units (800.53 units)^(k)		$	800,535	$	400,267
DBi Services, Class B Common Shares (169,362.31 shares)^(l)(m)			-		-

Services: Consumer
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $261,438)^{(f)(j)(m)(n)(o)}			261,438		241,379

Healthcare & Pharmaceuticals
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $57,552)^{(f)(j)(m)(o)(p)}			58,608		47,680
Total Equity and Preferred Shares		$	1,120,581	$	689,326


Total Portfolio Investments^(r)		$	343,249,842	$	325,865,214

(a)

All companies are located in the United States of America, unless otherwise noted.

(b)

Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower. Due dates represent the contractual maturity date.

(c)

All loans are income-producing, unless otherwise noted.

(d)

All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.

(e)

All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.

(f)

Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(g)

Percentages are calculated using fair value of investments over net assets.

(h)

As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).

(i)

Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(j)

Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P., 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.

(k)

Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

(l)

Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.

(m)

Investment is non-income producing.

(n)

Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.

(o)

Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.

(p)

Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.

(q)

The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.

(r)

At March 31, 2020, the cost of investments for income tax purposes was $343,249,842 the gross unrealized depreciation for federal tax purposes was $17,605,839, the gross unrealized appreciation for federal income tax purposes was $221,211, and the net unrealized depreciation was $17,384,628.

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost			Value
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (99.6%)^(g)(h):

Healthcare & Pharmaceuticals
Radiology Partners, Senior Secured Term B Loan (First Lien), 6.66% (Libor + 4.75%), maturity 7/9/25⁽ⁱ⁾	$	5,187,469	$	5,149,488		$	5,211,316
Pathway, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/20/24		4,956,161		4,911,269			4,943,769
Tecomet, Senior Secured 2017 Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 5/1/24		3,959,391		3,942,690			3,949,491
Advarra, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/9/26^(j)		3,939,427		3,899,562			3,909,879
Young, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/7/24		3,834,156		3,823,748			3,805,398
Specialty Care, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 9/1/23		3,342,954		3,346,536			3,334,596
Zest Dental, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 3/14/25⁽ⁱ⁾		3,333,213		3,356,177			3,199,884
Veritext, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 8/1/25		3,187,891		3,173,500			3,171,951
Confluent Health, Senior Secured Initial Term Loan, 6.91% (Libor + 5.00%), maturity 6/24/26		2,985,000		2,957,225			2,962,613
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/18/23		2,906,775		2,886,868			2,874,073
PharMedQuest, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 10/31/24		2,500,000		2,463,488			2,481,250
Waystar, Senior Secured Term Loan B, 5.91% (Libor + 4.00%), maturity 10/22/26		2,500,000		2,487,836			2,481,250
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.66% (Libor + 2.75%), maturity 12/27/24		2,450,000		2,455,219			2,450,000
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 9/23/24		2,446,014		2,426,873			2,421,554
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/1/24		2,316,088		2,305,375			2,316,088
MedRisk, Senior Secured Initial Loan (Second Lien), 8.66% (Libor + 6.75%), maturity 12/29/25		2,100,000		2,074,832			2,100,000
Zelis RedCard, Senior Secured Initial Term Loan, 6.66% (Libor + 4.75%), maturity 9/30/26⁽ⁱ⁾		2,000,000		1,980,688			2,014,889
Press Ganey, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 7/24/26⁽ⁱ⁾		1,995,000		1,987,841			2,011,774
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/22/25		1,980,000		1,962,728			1,957,725
CareCentrix, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 4/3/25		1,912,500		1,904,900			1,912,500
Premise Health, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 7/10/25		1,829,786		1,838,127			1,825,212
Alpaca, Senior Secured Term Loan, 6.16% (Libor + 4.25%), maturity 4/19/24^(j)		1,674,127		1,650,502			1,669,942
CPS, Unitranche, 7.16% (Libor + 5.25%), maturity 2/28/25		1,492,500		1,472,625			1,488,769
Stepping Stones, Unitranche, 7.41% (Libor + 5.50%), maturity 12/12/24		1,484,409		1,477,320			1,467,709
Ensemble, Senior Secured Closing Date Term Loan, 5.66% (Libor + 3.75%), maturity 8/3/26⁽ⁱ⁾		997,500		992,719			1,006,949
Veritext, Senior Secured Initial Term Loan (Second Lien), 8.91% (Libor + 7.00%), maturity 7/31/26		1,000,000		995,613			995,000
Upstream Rehabilitation, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 11/20/26		1,000,000		995,045			992,500
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 6/30/23⁽ⁱ⁾		984,694		990,391			978,540
Alcami, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/14/25		987,500		983,389			972,688
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 7.41% (Libor + 5.50%), maturity 5/9/25		987,500		975,453			960,344
Dermatologists of Central States, Senior Secured Term Loan, 8.41% (Libor + 6.50%), maturity 4/20/22		977,310		970,785			960,207
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/10/23⁽ⁱ⁾		922,022		926,900			920,657
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 9/1/24		850,000		843,325			850,000
Athena, Senior Secured Term B Loan (First Lien), 6.41% (Libor + 4.50%), maturity 2/11/26⁽ⁱ⁾		497,494		495,129			500,973
RMP & MedA/Rx, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 3/2/22		441,647		440,553			441,647
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 7/22/20		378,724		375,038			375,883
Alpaca, Senior Secured Revolver, 6.16% (Libor + 4.25%), maturity 4/19/24^(j)		134,215		130,332			133,879
Advarra, Senior Secured Initial Revolving Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/9/26^(j)		-		(7,619	)		-

High Tech Industries
Qlik, Senior Secured 2019 Incremental Term Loan, 6.16% (Libor + 4.25%), maturity 4/26/24		3,980,000		3,954,501			3,950,150
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 2/12/25⁽ⁱ⁾		3,451,222		3,464,246			3,477,852
Masergy, Senior Secured Initial Loan (Second Lien), 9.41% (Libor + 7.50%), maturity 12/16/24		3,428,571		3,420,116			3,411,429
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 8/16/24		3,421,688		3,397,118			3,387,471
Sparta, Senior Secured New Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/21/24		3,421,250		3,423,008			3,344,272
Jaggaer, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/14/26⁽ⁱ⁾		3,154,345		3,150,077			3,166,174
Infogroup, Senior Secured Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 4/3/23		2,919,937		2,895,405			2,890,738
McAfee, Senior Secured Term B USD Loan, 5.66% (Libor + 3.75%), maturity 9/30/24⁽ⁱ⁾		2,864,431		2,875,358			2,883,023
eResearch (ERT), Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 5/2/23⁽ⁱ⁾		2,538,022		2,538,022			2,538,022
ECi Software Solutions, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 9/27/24⁽ⁱ⁾		2,463,579		2,451,402			2,468,662
EverCommerce, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 8/23/25		2,184,679		2,142,420			2,179,217
Idera, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/28/24		2,146,089		2,145,337			2,146,089
Intermedia , Senior Secured New Term Loan (First Lien), 7.91% (Libor + 6.00%), maturity 7/21/25⁽ⁱ⁾		1,980,000		1,963,699			1,985,107
Flexera Software, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 2/26/25⁽ⁱ⁾		1,965,000		1,970,591			1,973,626
QuickBase, Senior Secured Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 4/2/26		1,990,000		1,981,139			1,970,100
GlobalLogic, Senior Secured Initial Term Loan, 5.16% (Libor + 3.25%), maturity 8/1/25⁽ⁱ⁾		1,728,438		1,719,948			1,728,438
Bomgar, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 4/18/25		1,723,750		1,733,891			1,702,203
Liaison, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 12/20/26⁽ⁱ⁾		1,500,000		1,496,250			1,496,250
OEConnection, Senior Secured Initial Term Loan, 5.91% (Libor + 4.00%), maturity 9/25/26		1,496,250		1,488,267			1,485,028
Navex Global, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 9/5/25⁽ⁱ⁾		1,481,250		1,467,074			1,484,310
Compusearch Software Systems, Senior Secured Term Loan C, 6.16% (Libor + 4.25%), maturity 5/8/23		1,432,979		1,432,391			1,425,814
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 5/4/26⁽ⁱ⁾		1,080,625		1,082,379			1,089,829
Insurity, Senior Secured Closing Date Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26		1,000,000		995,219			997,500
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 12.16% (Libor + 10.25%), maturity 1/20/22		1,000,000		995,441			988,750
LANDesk, Senior Secured Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 1/20/24⁽ⁱ⁾		978,627		969,988			981,924
Corsair, Senior Secured Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/28/24		982,444		978,622			967,707
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 12/2/22		834,254		830,477			825,912
HelpSystems, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/19/26⁽ⁱ⁾		500,000		498,750			498,750
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 12/15/23		484,908		483,405			482,484
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 5.66% (Libor + 3.75%), maturity 2/9/23⁽ⁱ⁾		404,507		403,788			401,013

The accompanying notes are an integral part of these financial statements.

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2020

(Expressed in U.S. Dollars)

(unaudited)

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost			Value
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS^(h)(Continued):

Services: Business
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 9/23/25	$	3,990,000	$	3,950,952		$	3,970,050
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/11/25		3,960,000		3,955,758			3,950,100
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 5.66% (Libor + 3.75%), maturity 2/2/26		2,982,525		2,973,315			2,975,069
Addison, Senior Secured Initial Term Loan, 6.91% (Libor + 5.00%), maturity 4/15/26		2,985,000		2,931,090			2,962,613
Fleetwash, Senior Secured Incremental Term Loan, 6.66% (Libor + 4.75%), maturity 10/1/24		2,962,613		2,938,051			2,947,799
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 6/19/24⁽ⁱ⁾		2,894,218		2,894,218			2,883,365
Allied Universal, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/10/26⁽ⁱ⁾		2,613,149		2,591,810			2,635,788
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 2/9/26⁽ⁱ⁾		2,481,250		2,484,662			2,497,618
HireRight, Senior Secured Initial Term Loan (Second Lien), 9.16% (Libor + 7.25%), maturity 7/10/26		2,500,000		2,479,365			2,481,250
Newport Group, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/12/25		2,471,231		2,458,304			2,452,697
First Advantage, Senior Secured Term Loan (First Lien), 7.16% (Libor + 5.25%), maturity 6/30/22		2,000,000		1,996,094			1,990,000
Vistage, Senior Secured Term B Loan (First Lien), 5.91% (Libor + 4.00%), maturity 2/10/25		1,965,000		1,961,739			1,960,088
Service Logic, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 12/31/24		2,339,998		2,333,703			2,316,598
Eliassen Group, Senior Secured Initial Term B Loan, 6.41% (Libor + 4.50%), maturity 11/5/24		1,493,123		1,486,683			1,489,390
OSG Billing Services, Senior Secured Term B Loan (First Lien), 6.41% (Libor + 4.50%), maturity 3/27/24		1,474,855		1,470,192			1,467,481
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 8.00%), maturity 2/2/26		1,268,869		1,268,869			1,268,869
Diversified, Senior Secured Initial Term Loan, 6.66% (Libor + 4.75%), maturity 12/23/23		992,500		986,007			990,019
WCG, Senior Secured Term Loan, 5.91% (Libor + 4.00%), maturity 1/8/27⁽ⁱ⁾		1,000,000		990,000			990,000
Franklin Energy, Senior Secured Term B Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/14/26		997,500		995,123			987,525
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 6/3/26⁽ⁱ⁾		498,747		494,694			498,747

Chemicals, Plastics & Rubber
Plaskolite, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 12/15/25		3,960,000		3,896,852			3,920,400
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/30/24		3,427,599		3,413,966			3,341,909
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 10/4/21		2,811,462		2,806,249			2,741,176
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 1/31/25		2,682,225		2,691,463			2,615,169
Unifrax, Senior Secured USD Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 12/12/25⁽ⁱ⁾		2,476,241		2,454,997			2,286,895
Q Holding, Senior Secured Term B Loan (2019), 6.91% (Libor + 5.00%), maturity 12/29/23		1,995,000		1,985,388			1,985,025
Boyd Corp, Senior Secured Initial Loan (Second Lien), 8.66% (Libor + 6.75%), maturity 9/6/26		2,000,000		2,002,217			1,985,000
DuBois Chemicals 2019, Senior Secured Term Loan (Second Lien), 10.41% (Libor + 8.50%), maturity 9/30/27		2,000,000		1,950,862			1,985,000
Borchers, Senior Secured Term Loan, 6.41% (Libor + 4.50%), maturity 11/1/24		1,910,136		1,905,332			1,900,585
Zep, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 8/12/24		1,956,225		1,954,251			1,584,542
DuBois Chemicals 2019, Senior Secured Term Loan B (First Lien), 6.41% (Libor + 4.50%), maturity 9/30/26		1,560,865		1,516,107			1,549,159
Spartech, Senior Secured Term Loan, 6.91% (Libor + 5.00%), maturity 10/17/25		1,000,000		985,134			992,500
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/28/24		987,406		970,460			967,657
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 3/31/25⁽ⁱ⁾		982,500		978,584			892,145

Services: Consumer
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 6/3/24		5,424,266		5,407,341			5,370,023
A Place For Mom, Senior Secured Term Loan, 5.66% (Libor + 3.75%), maturity 8/10/24		2,666,144		2,665,484			2,599,490
Weld North, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 2/15/25		2,463,674		2,441,530			2,463,674
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 12/18/25		2,475,000		2,365,058			2,462,625
Smart Start, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 2/21/22		2,417,625		2,417,625			2,399,493
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 5/14/26⁽ⁱ⁾		1,990,000		1,985,439			2,002,726
SMG, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 1/23/25⁽ⁱ⁾		1,976,118		1,963,737			1,976,118
Valet Living, Senior Secured Initial Term Loan, 5.91% (Libor + 4.00%), maturity 9/28/25		1,983,718		1,979,195			1,973,800
LegalShield, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 5/1/25		1,940,510		1,927,273			1,935,659
Ned Stevens, Senior Secured Term A Loan, 7.66% (Libor + 5.75%), maturity 9/30/25^(j)		1,603,824		1,572,794			1,591,795
Spring Education, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 7/30/25		987,500		985,450			982,563
Ned Stevens, Senior Secured Revolver, 6.66% (Libor + 4.75%), maturity 9/30/25^(j)		-		(2,614	)		-

Aerospace & Defense
CPI International, Senior Secured TL, 6.66% (Libor + 4.75%), maturity 7/26/24		4,000,000		3,960,000			3,970,000
StandardAero, Senior Secured Initial Term B-1 Loan, 5.91% (Libor + 4.00%), maturity 4/6/26⁽ⁱ⁾		3,567,981		3,556,378			3,599,650
StandardAero, Senior Secured Initial Term B-2 Loan, 5.91% (Libor + 4.00%), maturity 4/6/26⁽ⁱ⁾		1,918,269		1,912,031			1,935,296
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 9.66% (Libor + 7.75%), maturity 4/30/26		1,500,000		1,514,877			1,485,000
Tronair, Senior Secured Initial Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 9/8/23		1,459,899		1,453,639			1,427,051
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 4/30/25⁽ⁱ⁾		497,481		495,124			494,358

Banking, Finance, Insurance & Real Estate
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 9.41% (Libor + 7.50%), maturity 4/30/23		2,000,000		2,000,000			1,995,000
Kestra Financial, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 6/3/26		1,995,000		1,976,368			1,990,013
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.66% (Libor + 5.75%), maturity 10/31/22		1,989,457		1,951,565			1,939,721
Advisor Group, Senior Secured Initial Term B Loan, 6.91% (Libor + 5.00%), maturity 7/31/26⁽ⁱ⁾		1,490,625		1,465,245			1,478,349
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 9/6/24		1,470,000		1,467,280			1,458,975
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/12/26		978,070		973,369			970,735
Aperio, Senior Secured Loan, 6.91% (Libor + 5.00%), maturity 10/25/24		933,889		929,619			933,889

Consumer Goods: Non-durable
Manna Pro, Senior Secured Term Loan, 7.91% (Libor + 6.00%), maturity 12/8/23		3,438,750		3,399,412			3,412,959
Augusta Sportswear Group, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 10/26/23		2,228,517		2,214,540			2,211,804
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 9/11/23		1,906,766		1,895,349			1,873,398
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/16/24⁽ⁱ⁾		987,418		993,636			973,861

The accompanying notes are an integral part of these financial statements.

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost		Value

BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS^(h)(Continued):

Containers, Packaging & Glass
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23⁽ⁱ⁾	$	3,000,535	$	3,017,391	$	2,972,870
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26		1,995,000		1,985,448		1,995,000
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26⁽ⁱ⁾		997,500		993,032		1,003,416
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26		1,000,000		997,605		995,000
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23⁽ⁱ⁾		494,901		494,901		491,978
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20		488,837		488,275		483,338

Capital Equipment
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24		2,443,750		2,443,750		2,419,313
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24		1,969,661		1,971,159		1,959,812
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25		1,478,769		1,472,799		1,452,890
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26		1,000,000		995,111		992,500
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24		493,703		497,366		490,000
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24⁽ⁱ⁾		491,207		492,665		406,376

Wholesale
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25		3,935,671		3,936,089		3,906,153
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22		1,915,184		1,893,658		1,891,245
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23		1,454,906		1,452,426		1,422,170

Transportation: Cargo
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24		3,615,344		3,611,340		3,588,229
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24⁽ⁱ⁾		2,466,458		2,459,768		2,460,292
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21		1,161,707		1,161,868		1,144,282

Construction & Building
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26		1,934,722		1,934,722		1,920,212
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24		1,496,238		1,480,815		1,488,757
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24		1,474,832		1,462,983		1,460,084
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24⁽ⁱ⁾		976,912		975,059		964,701
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22⁽ⁱ⁾		628,442		623,246		630,799
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23		527,876		523,556		525,237

Automotive
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25⁽ⁱ⁾		3,592,566		3,578,510		3,516,090
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25		1,800,000		1,798,507		1,795,500
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25		987,500		963,545		982,563

Media: Advertising, Printing & Publishing
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22		1,905,523		1,893,460		1,872,177
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22		1,449,510		1,449,510		1,438,639
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22		1,458,750		1,451,152		1,035,712
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23		783,878		786,703		777,999

Forest Products & Paper
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23		2,927,277		2,915,319		2,898,005
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26		1,496,250		1,481,906		1,481,288

Beverage, Food & Tobacco
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25		1,980,000		1,962,677		1,960,200
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25		1,975,000		1,966,820		1,970,063

Hotel, Gaming & Leisure
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21		2,396,566		2,384,489		2,384,584
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23		1,119,231		1,110,756		1,119,231

Consumer Goods: Durable
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23		2,309,428		2,306,211		2,309,428

Retail
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25⁽ⁱ⁾		1,269,483		1,266,905		1,286,070

Metals & Mining
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22		997,579		990,633		987,604

Health Care Equipment & Services
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26⁽ⁱ⁾		525,311		519,256		526,851

*Total Bank Loans*			$	331,601,425	$	330,155,654

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par		Cost		Value

BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS^(h)(Continued):

Containers, Packaging & Glass
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 11/20/23⁽ⁱ⁾	$	3,000,535	$	3,017,391	$	2,972,870
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/18/26		1,995,000		1,985,448		1,995,000
Tank Holding, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 3/26/26⁽ⁱ⁾		997,500		993,032		1,003,416
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 7/31/26		1,000,000		997,605		995,000
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 11/30/23⁽ⁱ⁾		494,901		494,901		491,978
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.16% (Libor + 4.25%), maturity 5/12/20		488,837		488,275		483,338

Capital Equipment
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24		2,443,750		2,443,750		2,419,313
BAS, Senior Secured Repricing Term Loan, 5.66% (Libor + 3.75%), maturity 5/21/24		1,969,661		1,971,159		1,959,812
Edward Don, Senior Secured Initial Term Loan, 6.16% (Libor + 4.25%), maturity 7/2/25		1,478,769		1,472,799		1,452,890
Cole-Parmer, Senior Secured Closing Date Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 11/4/26		1,000,000		995,111		992,500
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 12/2/24		493,703		497,366		490,000
TriMark, Senior Secured Initial Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 8/28/24⁽ⁱ⁾		491,207		492,665		406,376

Wholesale
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 3/20/25		3,935,671		3,936,089		3,906,153
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 8/19/22		1,915,184		1,893,658		1,891,245
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.91% (Libor + 5.00%), maturity 6/15/23		1,454,906		1,452,426		1,422,170

Transportation: Cargo
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 10/12/24		3,615,344		3,611,340		3,588,229
Transplace, Senior Secured Closing Date Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 10/7/24⁽ⁱ⁾		2,466,458		2,459,768		2,460,292
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 10/7/21		1,161,707		1,161,868		1,144,282

Construction & Building
PlayPower, Senior Secured Initial Term Loan, 7.41% (Libor + 5.50%), maturity 5/8/26		1,934,722		1,934,722		1,920,212
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.66% (Libor + 4.75%), maturity 11/30/24		1,496,238		1,480,815		1,488,757
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 4.91% (Libor + 3.00%), maturity 6/3/24		1,474,832		1,462,983		1,460,084
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 9/30/24⁽ⁱ⁾		976,912		975,059		964,701
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 7/29/22⁽ⁱ⁾		628,442		623,246		630,799
Hoffman Southwest, Senior Secured Initial Term Loan, 6.41% (Libor + 4.50%), maturity 8/14/23		527,876		523,556		525,237

Automotive
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.16% (Libor + 3.25%), maturity 3/20/25⁽ⁱ⁾		3,592,566		3,578,510		3,516,090
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.16% (Libor + 8.25%), maturity 4/21/25		1,800,000		1,798,507		1,795,500
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 5.66% (Libor + 3.75%), maturity 2/3/25		987,500		963,545		982,563

Media: Advertising, Printing & Publishing
Ansira, Unitranche, 7.66% (Libor + 5.75%), maturity 12/20/22		1,905,523		1,893,460		1,872,177
Northstar, Senior Secured Term Loan, 8.16% (Libor + 6.25%), maturity 6/7/22		1,449,510		1,449,510		1,438,639
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.66% (Libor + 4.75%), maturity 6/21/22		1,458,750		1,451,152		1,035,712
Vestcom International, Senior Secured L/C Collaterilized, 5.91% (Libor + 4.00%), maturity 12/19/23		783,878		786,703		777,999

Forest Products & Paper
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.91% (Libor + 4.00%), maturity 11/21/23		2,927,277		2,915,319		2,898,005
Loparex, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 7/31/26		1,496,250		1,481,906		1,481,288

Beverage, Food & Tobacco
Sovos Brands, Senior Secured Initial Term Loan (2018), 6.91% (Libor + 5.00%), maturity 11/20/25		1,980,000		1,962,677		1,960,200
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 5.66% (Libor + 3.75%), maturity 8/25/25		1,975,000		1,966,820		1,970,063

Hotel, Gaming & Leisure
On Location, Senior Secured Second Amendment Term Loan, 6.91% (Libor + 5.00%), maturity 9/29/21		2,396,566		2,384,489		2,384,584
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.91% (Libor + 5.00%), maturity 10/21/23		1,119,231		1,110,756		1,119,231

Consumer Goods: Durable
Strategic Partners, Senior Secured Initial Term Loan, 5.66% (Libor + 3.75%), maturity 6/30/23		2,309,428		2,306,211		2,309,428

Retail
Grocery Outlet, Senior Secured 2019 Term Loan (First Lien), 5.41% (Libor + 3.50%), maturity 10/22/25⁽ⁱ⁾		1,269,483		1,266,905		1,286,070

Metals & Mining
Dynatect, Senior Secured Term B Loan, 6.41% (Libor + 4.50%), maturity 9/30/22		997,579		990,633		987,604

Health Care Equipment & Services
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 6.16% (Libor + 4.25%), maturity 8/31/26⁽ⁱ⁾		525,311		519,256		526,851

*Total Bank Loans*			$	331,601,425	$	330,155,654

Portfolio Investments ^{(a) (b) (c) (d) (e) (f)}	Par	Cost		Value
EQUITY AND PREFERRED SHARES: NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)^(g)(h):

Services: Business
DBi Services, Class A-1 Preferred Units (800.53 units)^(k)		$	800,535	$	400,267
DBi Services, Class B Common Shares (169,362.31 shares)^(l)(m)			-		-

Services: Consumer
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $261,438)^{(f)(j)(m)(n)(o)}			261,438		261,438

Healthcare & Pharmaceuticals
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $57,552)^{(f)(i)(j)(m)(o)(p)}			58,608		57,552

Total Equity and Preferred Shares		$	1,120,581	$	719,257

Total Portfolio Investments^(q)		$	332,722,006	$	330,874,911

(a)

All companies are located in the United States of America, unless otherwise noted.

(b)

(c)

All loans are income-producing, unless otherwise noted.

(d)

All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.

(e)

All investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.

(f)

(g)

Percentages are calculated using fair value of investments over net assets.

(h)

(i)

Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.

(j)

Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P.," 'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.

(k)

Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.

(l)

Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.

(m)

Investment is non-income producing.

(n)

Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.

(o)

Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.

(p)

Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.

(q)

At December 31, 2019, the cost of investments for income tax purposes was $332,722,006 the gross unrealized depreciation for federal tax purposes was 2,951,506, the gross unrealized appreciation for federal income tax purposes was $1,104,411, and the net unrealized depreciation was $1,847,095.

Audax Credit BDC Inc.

Notes to Financial Statements

March 31, 2020

(unaudited)

Note 1. Organization

Audax Credit BDC Inc. (the “Company”) is a Delaware corporation that was formed on January 29, 2015. The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, effective with the Company’s taxable year ended December 31, 2015, the Company has elected to be treated for federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

The Company commenced business operations on July 8, 2015, the date on which the Company made its first investment. The Company has been formed for the purpose of investing primarily in the debt of leveraged, non-investment grade middle market companies, with the principal objective of generating income and capital appreciation. The Company’s investment strategy is to invest primarily in first lien senior secured loans and selectively in second lien loans to middle market companies. During the period prior to July 8, 2015, the Company was a development stage company, as defined in Paragraph 915-10-05, Development Stage Entity, of the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification, as amended (“ASC”). During this time, the Company was devoting substantially all of its efforts to establishing its business and its planned principal operations had not commenced. All losses incurred during the period prior to July 8, 2015 have been considered a part of the Company’s development stage activities.

Audax Management Company (NY), LLC (the “Adviser”) is the investment adviser of the Company. The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

Note 2. Significant Accounting Policies

Basis of Presentation

As an investment company, the accompanying financial statements of the Company are prepared in accordance with the investment company accounting and reporting guidance of ASC Topic 946, “Financial Services – Investment Companies,” as amended (“ASC Topic 946”), which incorporates the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X, as well as generally accepted accounting principles in the United States of America (“GAAP”).

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management of the Company, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair presentation of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for future periods. The accounting records of the Company are maintained in U.S. dollars.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

Cash and Cash Equivalents

Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with maturities of three months or less and money market mutual funds to be cash equivalents. No cash equivalent balances were held at March 31, 2020 and December 31, 2019. At such dates, cash was not subject to any restrictions on withdrawal.

Expenses

The Company is responsible for investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. Such fees and expenses, including expenses initially incurred by the Adviser, may be reimbursed by the Company.

Investment Valuation Policy

The Company conducts the valuation of the Company’s investments, pursuant to which the Company’s net asset value is determined, at all times consistent with GAAP and the 1940 Act. The Company’s Board of Directors, with the assistance of the Company’s Audit Committee, determines the fair value of the Company’s investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC Topic 820, “Fair Value Measurement,” (“ASC 820”). The Company’s valuation procedures are set forth in more detail below.

ASC 820 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.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

The three-level hierarchy for fair value measurement is defined as follows:

Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position, and a sale could reasonably be expected to impact the quoted price.

Level 2 — Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient in accordance with GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows: (i) each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of the Company’s valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by the Company; (ii) preliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Adviser’s valuation team; (iii) the Company’s Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides the Company’s Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and (iv) the Company’s Board of Directors discusses the valuation recommendations of the Company’s Audit Committee and determines the fair value of the investments in the Company’s portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with the Company’s valuation policy.

The Company’s Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

the nature and realizable value of any collateral;

call features, put features and other relevant terms of debt;

the portfolio company’s ability to make payments;

the portfolio company’s actual and expected earnings and discounted cash flow;

prevailing interest rates for like securities and expected volatility in future interest rates;

the markets in which the portfolio company does business and recent economic and/or market events; and

comparisons to publicly traded securities.

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

private placements and restricted securities that do not have an active trading market;

securities whose trading has been suspended or for which market quotes are no longer available;

debt securities that have recently gone into default and for which there is no current market;

securities whose prices are stale; and

securities affected by significant events.

The Company’s Board of Directors is responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.

Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the

Company’s financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s financial statements.

Security transactions are recorded on the trade date (the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined).

Realized gains and losses on investments are determined based on the identified cost method.

Refer to Note 3 — Investments for additional information regarding fair value measurements and the Company’s application of ASC 820.

Interest Income Recognition

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible.

The Company currently holds loans in the portfolio that contain OID and expects to hold loans in the future that contain payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.

As of March 31, 2020, the Company held 179 investments in loans with OID. The Company accrued OID income of $93,473 for the three months ended March 31, 2020. The unamortized balance of OID on debt investments as of March 31, 2020, totaled $1,797,901. As of December 31, 2019, the Company held 162 investments in loans with OID. The Company accrued OID income of $62,751 for the three months ended March 31, 2019. The unamortized balance of OID investments as of December 31, 2019, totaled $1,733,632.

As of March 31, 2020, the Company held one investment which had a PIK interest component. The Company did not record any PIK interest income for three months ended March 31, 2020. As of March 31, 2019, the Company held one investment which had a PIK interest component. The Company recorded $32,822 of PIK interest income for three months ended March 31, 2019.

As of March 31, 2020 and December 31, 2019, the Company held $23,294,471 and $5,506,217 cash and cash equivalents, respectively. For the three months ended March 31, 2020 and 2019, the Company earned $28,670 and $50,720, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.

Other Income Recognition

The Company generally records prepayment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment.

Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.

Prepayment fees and dividend income are both accrued in other income in the accompanying statements of operations.

For the three months ended March 31, 2020 and 2019, the Company accrued $14,740 and $17,810 of other income, respectively, related to amendment fees.

New Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13") which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 would be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of ASU 2018-13 did not have a material impact on the Company’s disclosures.

Note 3. Investments

Fair Value

In accordance with ASC 820, the fair value of the Company’s investments is determined to be the price that would be received for an investment in a current sale, assuming an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date as described in Note–2 – Significant Accounting Policies.

As of March 31, 2020, $282,476,467 of the Company’s investments were valued using unobservable inputs, and $43,388,747 were valued using observable inputs. During the three months ended March 31, 2020, $65,946,077 transferred into Level 3 due to a decrease in observable prices in the market and $20,650,498 out of Level 3 due to price transparency.

As of December 31, 2019, $249,452,590 of the Company’s investments were valued using unobservable inputs, and $81,422,321 were valued using observable inputs. During the three months ended March 31, 2019, $46,005,506 and $22,977,630 of investments transferred into and out of Level 3, respectively.

The following table presents the Company’s investments carried at fair value as of March 31, 2020 and December 31, 2019, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

	Assets at Fair Value as of March 31, 2020
	Level 1		Level 2		Level 3		Total
First lien debt	$	-	$	31,378,926	$	263,945,044	$	295,323,970
Second lien debt		-		12,009,821		17,842,097		29,851,918
Equity and Preferred Shares		-		-		689,326		689,326
Total	$	-	$	43,388,747	$	282,476,467	$	325,865,214

	Assets at Fair Value as of December 31, 2019
	Level 1		Level 2		Level 3		Total
First lien debt	$	-	$	81,422,321	$	227,392,535	$	308,814,856
Second lien debt		-		-		21,340,798		21,340,798
Equity and Preferred Shares		-		-		719,257		719,257
Total	$	-	$	81,422,321	$	249,452,590	$	330,874,911

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of March 31, 2020. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

As of March 31, 2020

Fair

Valuation

Unobservable

Weighted

Value

Technique

Inputs ⁽¹⁾

Range ⁽²⁾

Average ⁽³⁾

First lien debt

176,718,387

Matrix Pricing

Senior Leverage

2.47x - 7.02x

4.84

Total Leverage

3.10x - 9.80x

6.01

Interest Coverage

1.14x - 5.09x

2.23

Debt Service Coverage

0.93x - 4.44x

1.85

TEV Coverage

1.27x - 5.70x

2.51

Liquidity

5.75% - 587.90%

145.94

Spread Comparison

275bps - 625bps

423

bps

83,303,092

Discounted Cash Flow

Market Yield

4.43% - 11.89%

8.00

Second lien debt

15,923,228

Matrix Pricing

Senior Leverage

4.89x - 7.11x

6.11

Total Leverage

4.89x - 7.11x

6.11

Interest Coverage

1.38x - 3.06x

2.09

Debt Service Coverage

1.20x - 2.55x

1.77

TEV Coverage

1.07x - 2.44x

1.79

Liquidity

79.62% - 307.12%

131.34

Spread Comparison

650bps - 950bps

782

bps

Total

275,944,707

(1)	For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility. The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.



(2)	Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.

(3)	Inputs are weighted based on the fair value of the investments included in the range.

The table above does not include $6,531,760 of debt, equity and preferred shares which management values using other unobservable inputs, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, as well as other qualitative information, including company specific information.

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2019. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

As of December 31, 2019

Fair

Valuation

Unobservable

Weighted

Value

Technique

Inputs ⁽¹⁾

Range ⁽²⁾

Average ⁽³⁾

First lien debt

224,772,281

Matrix Pricing

Senior Leverage

2.33x - 7.55x

4.89

Total Leverage

3.10x - 9.79x

6.07

Interest Coverage

1.14x - 4.80x

2.10

Debt Service Coverage

0.93x - 3.68x

1.76

TEV Coverage

1.27x - 5.70x

2.42

Liquidity

5.75% - 587.90%

141.43

Spread Comparison

275bps - 650bps

435

bps

Second lien debt

20,071,929

Matrix Pricing

Senior Leverage

4.60x - 7.06x

5.87

Total Leverage

4.60x - 7.06x

5.88

Interest Coverage

1.54x - 3.21x

2.17

Debt Service Coverage

1.38x - 2.86x

1.89

TEV Coverage

1.52x - 2.44x

1.98

Liquidity

52.00% - 347.60%

149.91

Spread Comparison

675bps - 1025bps

764

bps

Total

244,844,210

(1)

For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility. The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

(2)

Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.

(3)

Inputs are weighted based on the fair value of the investments included in the range.

The table above does not include $4,608,380 of debt, equity and preferred shares which management values using other unobservable inputs, such as EBITDA and EBITDA multiples, as well as other qualitative information, including company specific information.

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rates, leverage, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase or decrease in market yields, discount rates or leverage or a decrease in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding decrease or increase, respectively, in the fair value of certain of the Company’s investments.

The following tables provide the changes in fair value, broken out by security type, during the three months ended March 31, 2020 and 2019 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

Three Months Ended March 31, 2020	First lien debt			Second lien debt			Equity and Preferred Shares			Total
Fair Value as of December 31, 2019	$	227,392,535		$	21,340,798		$	719,257		$	249,452,590
Transfers into Level 3		65,946,077			-			-			65,946,077
Transfers out of Level 3		(11,659,069	)		(8,991,429	)		-			(20,650,498	)
Total gains:
Net realized (loss) gain^(a)		(53,247	)		-			-			(53,247	)
Net unrealized (depreciation) appreciation^(b)		(13,839,089	)		(1,220,061	)		(29,931	)		(15,089,081	)
New investments, repayments and settlements:^(c)
Purchases		11,440,787			6,708,438			-			18,149,225
Settlements/repayments		(9,624,849	)		-			-			(9,624,849	)
Net amortization of premiums, PIK, discounts and fees		85,455			4,351			-			89,806
Sales		(5,743,556	)		-			-			(5,743,556	)
Fair Value as of March 31, 2020	$	263,945,044		$	17,842,097		$	689,326		$	282,476,467

(a)

Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2020.

(b)

Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2020.

(c)

Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

Three Months Ended March 31, 2019	First lien debt			Second lien debt			Equity and Preferred Shares			Total
Fair Value as of December 31, 2018	$	124,975,467		$	17,044,607		$	-		$	142,020,074
Transfers into Level 3		41,904,236			4,101,270			-			46,005,506
Transfers out of Level 3		(21,885,880	)		(1,091,750	)		-			(22,977,630	)
Total gains:
Net realized gain^(a)		20,496			-			-			20,496
Net unrealized appreciation (depreciation)^(b)		246,724			7,725			(400,268	)		(145,819	)
New investments, repayments and settlements:^(c)
Purchases		8,653,557			1,209,731			800,535			10,663,823
Settlements/repayments		(9,257,506	)		-			-			(9,257,506	)
Net amortization of premiums, PIK, discounts and fees		56,942			2,397			-			59,339
Sales		-			-			-			-
Fair Value as of March 31, 2019	$	144,714,036		$	21,273,980		$	400,267		$	166,388,283

(a)

Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2019.

(b)

Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2019.

(c)

The change in unrealized value attributable to investments still held at March 31, 2020 and 2019 was $(1,046,694) and $(324,446), respectively.

Investment Activities

The Company held a total of 196 investments with an aggregate fair value of $325,865,214 as of March 31, 2020. During the three months ended March 31, 2020, the Company invested in 28 new investments for a combined $25,224,701 and in existing investments for a combined $9,103,107. The Company also received $18,146,113 in repayments from investments and $5,743,556 from investments sold during the three months ended March 31, 2020.

The Company held a total of 176 investments with an aggregate fair value of $330,874,911 as of December 31, 2019. During the three months ended March 31, 2019, the Company invested in 14 new investments for a combined $29,730,870 and in existing investments for a combined $15,542,660. The Company also received $11,648,671 in repayments from investments during the three months ended March 31, 2019.

Investment Concentrations

As of March 31, 2020, the Company’s investment portfolio consisted of investments in 172 companies located in 34 states across 22 different industries, with an aggregate fair value of $325,865,214. The five largest investments at fair value as of March 31, 2020 totaled $20,149,968, or 6.18% of the Company’s total investment portfolio as of such date. As of March 31, 2020, the Company’s average investment by obligor was $1,751,725 at cost.

As of December 31, 2019, the Company’s investment portfolio consisted of investments in 164 companies located in 33 states across 22 different industries, with an aggregate fair value of $330,874,911. The five largest investments at fair value as of December 31, 2019 totaled $21,465,158, or 7.16% of the Company’s total investment portfolio as of such date. As of December 31, 2019, the Company’s average investment by obligor was $2,028,793 at cost.

The following table outlines the Company’s investments by security type as of March 31, 2020 and December 31, 2019:

	March 31, 2020										December 31, 2019
	Cost		Percentage of Total Investments			Fair Value		Percentage of Total Investments			Cost		Percentage of Total Investments			Fair Value		Percentage of Total Investments
First lien debt	$	311,100,247		90.63	%	$	295,323,970		90.63	%	$	310,257,401		93.25	%	$	308,814,856		93.33	%
Second lien debt		31,029,014		9.04	%		29,851,918		9.17	%		21,344,024		6.41	%		21,340,798		6.46	%
Total Debt Investments		342,129,261		99.67	%		325,175,888		99.80	%		331,601,425		99.66	%		330,155,654		99.79	%
Equity and Preferred Shares		1,120,581		0.33	%		689,326		0.20	%		1,120,581		0.34	%		719,257.00		0.21	%
Total Equity Investments		1,120,581		0.33	%		689,326		0.20	%		1,120,581		0.34	%		719,257		0.21	%
Total Investments	$	343,249,842		100.00	%	$	325,865,214		100.00	%	$	332,722,006		100.00	%	$	330,874,911		100.00	%

Investments at fair value consisted of the following industry classifications as of March 31, 2020 and December 31, 2019:

	March 31, 2020					December 31, 2019
Industry	Fair Value		Percentage of Total Investments			Fair Value		Percentage of Total Investments
Healthcare & Pharmaceuticals	$	71,172,561		21.84	%	$	76,108,451		23.00	%
High Tech Industries		56,065,620		17.21			58,327,844		17.63
Services: Business		44,226,079		13.57			44,376,771		13.41
Chemicals, Plastics & Rubber		26,416,557		8.11			28,747,162		8.69
Services: Consumer		23,521,898		7.22			25,757,966		7.78
Aerospace & Defense		17,846,880		5.48			12,911,355		3.90
Banking, Finance, Insurance & Real Estate		11,834,057		3.63			10,766,682		3.25
Capital Equipment		9,803,831		3.01			7,720,891		2.33
Construction & Building		9,178,428		2.82			6,989,790		2.11
Consumer Goods: Non-durable		7,955,468		2.44			8,472,022		2.56
Containers, Packaging & Glass		8,064,889		2.47			7,941,602		2.40
Automotive		6,998,770		2.15			6,294,153		1.90
Wholesale		6,589,129		2.02			7,219,568		2.18
Transportation: Cargo		6,788,445		2.08			7,192,803		2.17
Forest Products & Paper		5,221,244		1.60			4,379,293		1.32
Media: Advertising, Printing & Publishing		4,467,097		1.37			5,124,527		1.55
Beverage, Food & Tobacco		3,768,771		1.16			3,930,263		1.19
Consumer Goods: Durable		2,211,409		0.68			2,309,428		0.70
Retail		1,206,009		0.37			1,286,070		0.39
Hotel, Gaming & Leisure		1,039,765		0.32			3,503,815		1.06
Metals & Mining		925,717		0.28			987,604		0.31
Health Care Equipment & Services		562,590		0.17			526,851		0.17
	$	325,865,214		100.00	%	$	330,874,911		100.00	%

Investments at fair value were included in the following geographic regions of the United States as of March 31, 2020 and December 31, 2019:

	March 31, 2020					December 31, 2019
			Percentage of Total					Percentage of Total
Geographic Region		Fair Value		Investments			Fair Value		Investments
Northeast	$	83,401,228		25.59	%	$	87,146,010		26.34	%
Midwest		67,487,094		20.71			68,357,102		20.66
West		51,633,872		15.85			52,320,288		15.81
Southwest		39,143,872		12.01			42,469,487		12.84
Southeast		36,169,835		11.10			35,674,150		10.78
East		39,446,104		12.11			39,053,575		11.80
Northwest		3,968,605		1.22			4,083,800		1.23
South		2,714,604		0.83			1,770,499		0.54
Other ^(a)		1,900,000		0.58			-		-
Total Investments	$	325,865,214		100.00	%	$	330,874,911		100.00	%

(a) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.

The geographic region indicates the location of the headquarters of the Company’s portfolio companies. A portfolio company may have a number of other business locations in other geographic regions.

Investment Principal Repayments

The following table summarizes the contractual principal repayments and maturity of the Company’s investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31, 2020:

For the Fiscal Years Ending December 31:	Amount
2020	$	2,641,641
2021		10,234,648
2022		24,729,641
2023		45,545,325
2024		80,048,648
Thereafter		180,727,259
Total contractual repayments		343,927,162
Adjustments to cost basis on debt investments^(a)		(1,797,901	)
Total Cost Basis of Debt Investments Held at March 31, 2020:	$	342,129,261

(a) Adjustment to cost basis related to unamortized balance of OID investments.

COVID-19 Developments

In addition, during the three months ended March 31, 2020 and subsequent to March 31, 2020, the COVID-19 pandemic has had a significant impact on the U.S economy. To the extent the Company's portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on the Company's future net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.

Note 4. Related Party Transactions

Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser. In accordance with the Investment Advisory Agreement, the Company pays the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee (the “Incentive Fee”). The services the Adviser provides to the Company, subject to the overall supervision of the Company’s Board of Directors, include managing the day-to-day operations of, and providing investment services to, the Company. The Company also entered into a management fee waiver agreement with the Adviser (the “Waiver Agreement”), which the Company or the Adviser may terminate upon 60 days’ prior written notice.

Management Fee

The base management fee is calculated at an annual rate of 1.0% of the Company’s average gross assets including cash and any temporary investments in cash-equivalents, including U.S. government securities and other high-quality investment grade debt investments that mature in 12 months or less from the date of investment, payable quarterly in arrears on a calendar quarter basis.

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the base management fee to the extent necessary so that the base management fee payable under the Investment Advisory Agreement equals, and is calculated in the same manner as if, the base management fee otherwise payable by the Company were calculated at an annual rate equal to 0.65% (instead of an annual rate of 1.00%).

For the three months ended March 31, 2020, the Company recorded base management fees of $880,852 and waivers to the base management fees of $308,298, as set forth within the accompanying statements of operations. For the three months ended March 31, 2019, the Company recorded base management fees of $738,654 and waivers to the base management fees of $258,529, as set forth within the accompanying statements of operations.

Incentive Fee

The Incentive Fee has two parts, as follows: one is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).

The Company determines pre-incentive fee net investment income in accordance with GAAP, including, in the case of investments with a deferred interest feature, such as debt instruments with PIK interest, OID securities and accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.0% per quarter (4.0% annualized). The Company determines its average gross assets during each fiscal quarter and calculates the base management fee payable with respect to such amount at the end of each fiscal quarter. As a result, a portion of the Company’s net investment income is included in its gross assets for the period between the date on which such income is earned and the date on which such income is distributed. Therefore, the Company’s net investment income used to calculate part of the Incentive Fee is also included in the amount of the Company’s gross assets used to calculate the 1.0% annual base management fee. The Company pays its Adviser an Incentive Fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

no amount is paid on the income-portion of the Incentive Fee in any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the hurdle of 1.0% (4.0% annualized);

100% of the Company’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.1765 % in any calendar quarter (4.706% annualized). The Company refers to this portion of its pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.1765%) as the “catch-up” provision. The catch-up is meant to provide the Adviser with 15.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if net investment income exceeds 1.1765% in any calendar quarter (4.706% annualized); and

15.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.1765% in any calendar quarter (4.706% annualized) is payable to the Adviser.

Pursuant to the Waiver Agreement, the Adviser has agreed to waive its right to receive the Incentive Fee on pre-incentive fee net investment income to the extent necessary so that such Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on pre-incentive fee net investment income, if such Incentive Fee (i) were calculated based upon the Adviser receiving 10.0% (instead of 15.0%) of the applicable pre-incentive fee net investment income and (ii) did not include any “catch-up” feature in favor of the Adviser.

The second part of the Incentive Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 15.0% of the Company’s realized capital gains, if any, on a cumulative basis from June 16, 2015, the effective date of our registration statement on Form 10 (file no. 000-55426), through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain Incentive Fees with respect to each of the investments in the Company’s portfolio.

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the Incentive Fee on capital gains to the extent necessary so that such portion of the Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on capital gains, if such portion of the Incentive Fee were calculated based upon the Adviser receiving 10.0% (instead of 15.0%).

In addition, pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive both components of the Incentive Fee to the extent necessary so that it does not receive Incentive Fees which are attributable to income and gains of the Company that exceed an annualized rate of 12.0% in any calendar quarter.

The waivers from the Adviser will remain effective until terminated earlier by either party upon 60 days’ prior written notice.

For the three months ended March 31, 2020, the Company recorded incentive fees related to net investment income of $661,359. Offsetting the incentive fees were waivers of the incentive fees of $563,778 for the three months ended March 31, 2020, as set forth within the accompanying statements of operations. For the three months ended March 31, 2019, the Company recorded incentive fees related to net investment income of $612,128. Offsetting the incentive fees were waivers of the incentive fess of $489,291 for the three months ended March 31, 2019, as set forth within the accompanying statements of operations.

Administrative Fee

The Company has also entered into an administration agreement (the “Administration Agreement”) with Audax Management Company, LLC (the “Administrator”) under which the Administrator provides administrative services to the Company. Under the Administration Agreement, the Administrator performs, or oversees the performance of administrative services necessary for the operation of the Company, which include being responsible for the financial records which the Company is required to maintain and prepare reports filed with the SEC. In addition, the Administrator assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimburses the Administrator for its allocable portion of the costs and expenses incurred by the Administrator for overhead in performance by the Administrator of its duties under the Administration Agreement, including the cost of facilities, office equipment and the Company’s allocable portion of cost of compensation and related expenses of its Chief Financial Officer and Chief Compliance Officer and their respective staffs, as well as any costs and expenses incurred by the Administrator relating to any administrative or operating services provided by the Administrator to the Company. Such costs are reflected as an administrative fee in the accompanying statements of operations.

The Company has also entered into a fee waiver agreement with the Administrator, pursuant to which the Administrator may waive, in whole or in part, its entitlement to receive reimbursements from the Company.

The Company accrued administrative fees of $66,250, for each of the three months ended March 31, 2020 and 2019, as set forth within the accompanying statements of operations.

Related Party Fees

Fees due to related parties as of March 31, 2020 and December 31, 2019 on the Company’s accompanying statements of assets and liabilities were as follows:

	March 31, 2020		December 31, 2019
Net base management fee due to Adviser	$	572,554	$	569,600
Net incentive fee due to Adviser		97,581		118,536
Total fees due to Adviser, net of waivers		670,135		688,136
Fee due to Administrator, net of waivers		66,250		66,250
Total Related Party Fees Due	$	736,385	$	754,386

(a) Expenses paid on behalf of the Company by the Adviser

Note 5. Net (Decrease) Increase in Net Assets Resulting from Operations Per Share of Common Stock:

The following table sets forth the computation of basic and diluted net (decrease) increase in net assets resulting from operations per weighted average share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Numerator for basic and diluted net (decrease) increase in net assets resulting from operations per common share	$	(11,230,403	)	$	3,641,937
Denominator for basic and diluted weighted average common shares		36,541,077			30,148,907
Basic and diluted net (decrease) increase in net assets resulting from operations per common share	$	(0.31	)	$	0.12

Note 6. Income Tax

The Company has elected to be regulated as a BDC under the 1940 Act, as well as elected to be treated as a RIC under Subchapter M of the Code. As a RIC, the Company generally is not subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes as dividends for U.S. federal income tax purposes to its stockholders. To qualify to be treated as a RIC, the Company is required to meet certain source of income and asset diversification requirements, and to timely distribute dividends out of assets legally available for distributions to its stockholders of an amount generally equal to at least 90% of the sum of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any (i.e., “investment company taxable income,” determined without regard to any deduction for dividends paid), for each taxable year. The amount to be paid out as distributions to the Company’s stockholders is determined by the Company’s Board of Directors and is based on management’s estimate of the fiscal year earnings. Based on that estimate, the Company intends to make the requisite distributions to its stockholders, which will generally relieve the Company from corporate-level U.S. federal income taxes. Although the Company currently intends to distribute its net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, recognized in respect of each taxable year as dividends out of the Company’s assets legally available for distribution, the Company in the future may decide to retain for investment and be subject to entity-level income tax on such net capital gains. Additionally, depending on the level of taxable income earned in a taxable year, the Company may choose to carry forward taxable income in excess of current year distributions into the next taxable year and incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company will accrue an excise tax, if any, on estimated excess taxable income as such excess taxable income is earned.

The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2019 of $17,084,202, or $0.52 per share. The tax character of the distributions declared and paid represented $16,941,968 from ordinary income and $142,234 from tax return of capital. The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2018 of $13,002,172, or $0.52 per share. The tax character of the distributions declared and paid represented $12,537,786 from ordinary income, $450,049 capital gains, and $14,337 from tax return of capital.

The determination of the tax attributes of the Company’s distributions is made annually at the end of the Company’s taxable year, based upon the Company’s taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full taxable year. The actual tax characteristics of distributions to stockholders will be reported to the Company’s stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

As of December 31, 2019, the components of accumulated net unrealized appreciation on investments and net investment losses and losses on a tax basis as detailed below differ from the amounts reflected in the Company’s statements of assets and liabilities by temporary book/tax differences primarily arising from amortization of organizational expenditures.

	As of December 31, 2019
Other temporary book/tax differences	$	(213,307	)
Net tax basis unrealized depreciation		(1,847,095	)
Accumulated net realized loss		(670,443	)
Components of tax distributable deficit at period end	$	(2,730,845	)

Certain losses incurred by the Company after October 31 of a taxable year are deemed to arise on the first business day of the Company’s next taxable year. The Company did not incur such losses after October 31 of the Company’s taxable year ended December 31, 2019.

Capital losses are generally eligible to be carried forward indefinitely, and retain their status as short-term or long-term in the manner originally incurred by the Company. The Company did not maintain any capital losses as of December 31, 2019. The Company has evaluated tax positions it has taken, expects to take, or that are otherwise relevant to the Company for purposes of determining whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority in accordance with ASC Topic 740, “Income Taxes,” as modified by ASC Topic 946. The Company has analyzed such tax positions and has concluded that no unrecognized tax benefits should be recorded for uncertain tax positions for taxable years that may be open. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Company’s U.S. federal tax returns for fiscal years 2017, 2018 and 2019 remain subject to examination by the Internal Revenue Service. The Company records tax positions that are not deemed to meet a more-likely-than-not threshold as tax expenses as well as any applicable penalties or interest associated with such positions. During each of the three months ended March 31, 2020 and 2019, no tax expense or any related interest or penalties were incurred.

Note 7. Equity

On June 23, 2015, an investor made a $140,000,000 capital commitment to the Company. On December 2, 2016, the same investor made an additional capital commitment of $50,000,000. On December 7, 2017, the same investor made an additional capital commitment of $100,000,000. On March 22, 2019, the same investor made an additional capital commitment of $40,000,000. On September 23, 2019, the same investor made an additional capital commitment of $30,000,000. On March 20, 2020, the same investor made an additional capital commitment of $11,200,000. As of March 31, 2020, $21,200,000 of total capital commitments remained unfunded by the Company’s investors.

The number of shares of Common Stock issued and outstanding as of March 31, 2020 and December 31, 2019, were 36,698,229 and 35,109,246, respectively.

The following table details the activity of Stockholders’ Equity for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020	Common Stock		Capital in Excess of Par Value		Total Distributable (Loss) Earnings			Total Stockholders' Equity
Balance as of December 31, 2019	$	35,110	$	334,095,408	$	(2,730,845	)	$	331,399,673
Net investment income		-		-		4,310,906			4,310,906
Net realized losses from investment transactions		-		-		(3,776	)		(3,776	)
Net change in unrealized depreciation on investments		-		-		(15,537,533	)		(15,537,533	)
Issuance of shares		1,588		14,998,412		-			15,000,000
Balance as of March 31, 2020	$	36,698	$	349,093,820	$	(13,961,248	)	$	335,169,270

Three Months Ended March 31, 2019	Common Stock		Capital in Excess of Par Value		Total Distributable (Loss) Earnings			Total Stockholders' Equity
Balance as of December 31, 2018	$	28,270	$	269,246,005	$	(1,851,040	)	$	267,423,235
Net investment income		-		-		3,957,540			3,957,540
Net realized gains from investment transactions		-		-		27,919			27,919
Net change in unrealized depreciation on investments		-		-		(343,522	)		(343,522	)
Issuance of shares		2,114		19,997,886		-			20,000,000
Balance as of March 31, 2019	$	30,384	$	289,243,891	$	1,790,897		$	291,065,172

Note 8. Commitments and Contingencies

The Company may enter into certain credit agreements that include loan commitments where all or a portion of such commitment may be unfunded. The Company is generally obligated to fund the unfunded loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the accompanying schedule of investments. Unfunded loan commitments and funded portions of credit agreements are fair valued and unrealized appreciation or depreciation, if any, have been included in the accompanying statements of assets and liabilities and statements of operations.

The following table summarizes the Company’s significant contractual payment obligations as of March 31, 2020 and December 31, 2019:

Investment	Industry	March 31, 2020		December 31, 2019
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26	Healthcare & Pharmaceuticals	$	761,905	$	761,905
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 12/31/24(i)	Services: Business		720,000		136,667
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 7/18/26	Containers, Packaging & Glass		437,500		437,500
Advarra, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 7/9/26	Healthcare & Pharmaceuticals		288,796		288,796
EverCommerce, Senior Secured Initial Term Loan, 6.95% (Libor + 5.50%), maturity 8/23/25	High Tech Industries		211,983		464,713
Premise Health, Senior Secured Initial Term Loan (First Lien), 4.95% (Libor + 3.50%), maturity 7/10/25	Healthcare & Pharmaceuticals		187,237		147,052
AmeriLife, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 3/18/27	Banking, Finance, Insurance & Real Estate		170,455		-
OEConnection, Senior Secured Initial Term Loan, 5.45% (Libor + 4.00%), maturity 9/25/26	High Tech Industries		142,180		142,180
Ned Stevens, Senior Secured Revolver, 6.20% (Libor + 4.75%), maturity 9/30/25	Services: Consumer		130,719		130,719
Worley Claims Services, Senior Secured Initial Term Loan (First Lien), 5.45% (Libor + 4.00%), maturity 6/3/26	Services: Business		50,125		50,125
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 5.70% (Libor + 4.25%), maturity 8/31/26	Health Care Equipment & Services		37,278		98,225
Stepping Stones, Unitranche, 7.20% (Libor + 5.75%), maturity 12/12/24	Healthcare & Pharmaceuticals		9,519		9,519
Mavis, Senior Secured Closing Date Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 3/20/25	Automotive		-		345,141
Tangent, Senior Secured Closing Date Term Loan (First Lien), 6.20% (Libor + 4.75%), maturity 11/30/24	Construction & Building		-		333,333
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 5.95% (Libor + 4.50%), maturity 9/30/26	Chemicals, Plastics & Rubber		-		252,692
Alpaca, Senior Secured Term Loan, 5.95% (Libor + 4.50%), maturity 4/19/24	Healthcare & Pharmaceuticals		-		124,637
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 4.70% (Libor + 3.25%), maturity 5/14/26	Services: Consumer		-		100,000
Ansira, Unitranche, 7.20% (Libor + 5.75%), maturity 12/20/22	Media: Advertising, Printing & Publishing		-		38,214
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.41% (Libor + 4.50%), maturity 6/12/26	Banking, Finance, Insurance & Real Estate		-		17,544

		$	3,147,697	$	3,878,962

Unfunded commitments represent all amounts unfunded as of March 31, 2020 and December 31, 2019. These amounts may or may not be funded to the borrowing party now or in the future.

Note 9. Financial Highlights

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Per Share Data:
Net asset value, beginning of period	$	9.44		$	9.46
Net investment income^(a)		0.12			0.13
Net realized (loss) gain on investments and change in unrealized depreciation on investments^(a)(b)		(0.43	)		(0.01	)
Net (decrease) increase in net assets resulting from operations	$	(0.31	)	$	0.12
Net asset value at end of period	$	9.13		$	9.58
Total return^(c)(g)		(3.28	)%		1.27	%
Shares of common stock outstanding at end of period		36,698,229			30,383,814

Statement of Assets and Liabilities Data:
Net assets at end of period	$	335,169,270		$	291,065,172
Average net assets^(d)		344,131,639			290,011,675

Ratio/Supplemental Data:
Ratio of gross expenses to average net assets-annualized^(e)		2.11	%		2.42	%
Ratio of net expenses to average net assets- annualized^(f)		1.09	%		1.37	%
Ratio of net investment income to average net assets- annualized		5.04	%		5.53	%
Portfolio turnover^(g)		1.75	%		3.98	%

(a)	Based on weighted average basic per share of Common Stock data.
(b)	The per share amount varies from the net realized and unrealized gain (loss) for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(c)	Total return is based on the change in net asset value during the respective periods. Total return also takes into account dividends and distributions, if any, reinvested in accordance with the Company's dividend reinvestment plan.
(d)	Average net assets are computed using the average balance of net assets at the end of each month of the reporting period.
(e)	Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(f)	Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(g)	Not annualized.

Note 10. Indemnification

In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown. The Company does not consider it necessary to record a liability in this regard.

Note 11. Subsequent Events

On March 18, 2020, the Company delivered a capital drawdown notice to an investor relating to the sale of 1,095,290 shares of the Common Stock for an aggregate offering price of $10 million. The sale closed on April 3, 2020.

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

COVID-19

The Company is continuing to assess what additional adverse financial and operational consequences may result from the COVID-19 pandemic and the associated economic turbulence. The potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the spread of COVID-19 or reduce its impact, all of which are beyond our control. As such, the Company cannot predict the extent to which its financial condition and results of operations will be affected, and the magnitude of such consequences remains uncertain as of the filing of this quarterly report.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this quarterly report on Form 10-Q, except where the context suggests otherwise, the terms “we,” us,” our” and the “Company” refer to Audax Credit BDC Inc. The information contained in this section should be read in the conjunction with the financial statements and notes to the financial statements appearing elsewhere in this report.

This report and other statements contain forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, 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. 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:

our future operating results;

our business prospects and the prospects of our portfolio companies;

our ability to continue to effectively manage our business due to COVID-19 and similar pandemics;

the ability of our portfolio companies to achieve their objectives;

the timing of cash flows, if any, from the operations of our portfolio companies;

the ability of our Adviser to locate suitable investments for us and to monitor and administer our investments;

changes in the general economy;

risk associated with possible disruptions in our operations or the economy generally;

the effect of investments that we expect to make;

our contractual arrangements and relationships with third parties;

actual and potential conflicts of interest with Adviser and its affiliates;

the dependence of our future success on the general economy and its effect on the industries in which we invest;

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;

the adequacy of our financing sources and working capital;

the ability of our Adviser and its affiliates to attract and retain highly talented professionals;

our ability to qualify and maintain our qualification as a BDC and as a RIC; and

the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K (file no. 814-01154) (the “Annual Report”).

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. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report 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 the section entitled “Item 1A. Risk Factors” of this Report and our Annual Report. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. The forward-looking statements and projections contained in this report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

OVERVIEW

Audax Credit BDC Inc. is a Delaware corporation that was formed on January 29, 2015. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code.

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in senior secured debt of privately owned U.S. middle- market companies. We intend to invest at least 80% of our net assets plus the amount of any borrowings in “credit instruments,” which we define as any fixed income instruments.

Although we have no present intention of doing so, we may decide to incur leverage. If we do incur leverage, however, we anticipate that it will be used in limited circumstances and on a short-term basis for purposes such as funding distributions. As a BDC, we are limited in our use of leverage under the 1940 Act. Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act, which was signed into law on March 23, 2018, provides that a BDC's required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. In addition, as a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of Common Stock over the next year following the calendar quarter in which the approval was obtained. In determining whether to use leverage, we will analyze the maturity, covenants and interest rate structure of the proposed borrowings, as well as the risks of such borrowings within the context of our investment outlook and the impact of leverage on our investment portfolio. The amount of any leverage that we will employ as a BDC will be subject to oversight by our Board of Directors.

We generate revenue in the form of interest on the debt securities that we hold in our portfolio companies. The senior debt we invest in generally has stated terms of three to ten years. Our senior debt investments generally bear interest at a floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions, although we do not expect to do so. OID as well as market discount and premium are accreted and amortized in determining our interest income. We record any prepayment premiums on loans and debt securities as income.

COVID-19

The market disruptions caused by the COVID-19 pandemic have continued to adversely affect the business operations of some, if not all, of our portfolio companies and have affected, and may continue to affect, our operations and the operations of our Adviser. While we are closely monitoring this situation, we cannot predict the impact of COVID-19 on our future financial condition, with any level of certainty. However, we expect that the COVID-19 pandemic will have a material adverse impact on our future net asset value, net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies. For more information, see “Recent Developments—COVID-19 Developments” below.

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

Portfolio Composition

The fair value of our investments, comprised of syndicated loans and equity, as of March 31, 2020, was approximately $325,865,214 and held in 172 portfolio companies as of March 31, 2020. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2019, was approximately $330,874,911 and held in 164 portfolio companies as of December 31, 2019.

During the three months ended March 31, 2020, we invested in 28 new syndicated investments for a combined $25,224,701 and in existing investments for a combined $9,103,107. We also received $18,146,113 in repayments from investments and $5,743,556 from investments sold during the three months ended March 31, 2020. During the three months ended March 31, 2019, we invested in 14 new investments for a combined $29,730,870 and in existing investments for a combined $15,542,660. We also received $11,648,671 in repayments from investments during the three months ended March 31, 2019.

In addition, for the three months ended March 31, 2020, we had a change in unrealized depreciation of approximately $15,537,533 and realized losses of $3,776. For the three months ended March 31, 2019, we had a change in unrealized depreciation of approximately $343,522 and realized gains of $27,919.

Our investment activity for the three months ended March 31, 2020 and 2019, is presented below:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Beginning investment portfolio, at fair value	$	330,874,911		$	264,662,881
Investments in new portfolio investments		25,224,701			29,730,870
Investments in existing portfolio investments		9,103,107			15,542,660
Principal repayments		(18,146,113	)		(11,648,671	)
Proceeds from investments sold		(5,743,556	)		-
Change in premiums, discounts and amortization		93,473			62,751
Net change in unrealized depreciation on investments		(15,537,533	)		(343,522	)
Realized (loss) gain on investments		(3,776	)		27,919
Ending portfolio investment activity, at fair value	$	325,865,214		$	298,034,888
Number of portfolio investments		196			153
Average investment amount, at cost	$	1,751,275		$	1,960,757
Percentage of investments at floating rates		99.40	%		100.00	%

As of March 31, 2019 and December 31, 2019, our entire portfolio consisted of non-controlled/non-affiliated investments.

RECENT DEVELOPMENTS

Subsequent to March 31, 2020 and through June 18, 2020, we invested $206,025 at cost in two portfolio companies.

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

COVID-19 Developments

As the COVID-19 outbreak continues to evolve, we cannot reasonably predict its full impact on our business operations, including its duration in the United States and worldwide and the magnitude of the economic impact of the outbreak, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. As such, the extent to which COVID-19 and/or other health pandemics may continue to negatively affect our operating results and financial condition and the operating results and financial condition of our portfolio companies, or the duration of any potential business or supply-chain disruption for us, our Adviser and/or our portfolio companies, is uncertain.

We will continue to monitor the rapidly evolving developments relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health officials and may take additional actions based on their recommendations. In these circumstances, there may be developments beyond our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will have a material adverse impact on our future net asset value, net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies, and that such adverse effects will continue for the duration of the pandemic and potentially for some time thereafter.

RESULTS OF OPERATIONS

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and/or losses and net change in unrealized appreciation and depreciation. This “Results of Operations” section should be read in conjunction with the “COVID-19 Developments” section above.

Revenue

Total investment income for the three months ended March 31, 2020 and 2019 is presented in the table below.

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Total interest income from non-controlled/non-affiliated investments	$	5,202,708	$	4,870,004
Total other interest income		28,670		50,720
Total other income		14,740		17,810
Total investment income	$	5,246,118	$	4,938,534

Total investment income for the three months ended March 31, 2020 increased to $5,246,118 from $4,938,534 for the three months ended March 31, 2019, and was driven by our interest income from our increasing investment balance. As of March 31, 2020 and 2019, the size of our debt portfolio was $342,129,261 and $299,195,293 at amortized cost, respectively, with total debt principal amount outstanding of $343,927,162 and $300,491,292, respectively.

Expenses

Total expenses net of waivers for the three months ended March 31, 2020 and 2019, were as follows:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019

Base management fee^(a)	$	880,852		$	738,654
Incentive fee^(a)		661,359			612,128
Administrative fee^(a)		66,250			66,250
Directors' fees		52,500			52,500
Professional fees		97,942			154,681
Other expenses		48,385			104,601
Total expenses		1,807,288			1,728,814
Base management fee waivers^(a)		(308,298	)		(258,529	)
Incentive fee waivers^(a)		(563,778	)		(489,291	)
Total expenses, net of waivers	$	935,212		$	980,994

(a) Refer to Note 4-Related Party Transactions within the financial statements for a description of the relevant fees.

The increase in base management fees before waivers for the three months ended March 31, 2020 in comparison to the three months ended March 31, 2019 was driven by our increasing invested balance. For the three months ended March 31, 2020 and 2019, we accrued gross base management fees before waivers of $880,852 and $738,654, respectively. Offsetting those fees, we recognized base management fee waivers of $308,298 and $258,529 for three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020 and 2019, we accrued incentive fees related to net investment income before waivers of $661,359 and $612,128, respectively. Offsetting those fees, we recognized incentive fee waivers of $563,778 and $489,291, respectively. Additionally, we accrued $66,250 of administrative fees for each of the three months ended March 31, 2020 and 2019. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

During the three months ended March 31, 2020 and 2019, we incurred professional fees of $97,942 and $154,681, respectively, related to audit fees, tax fees, and legal fees. The decrease in professional fees was driven by a decrease in legal expenses during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. We also incurred expenses related to fees paid to our independent directors of $52,500 for each of the three months ended March 31, 2020 and 2019.

Realized and Unrealized Gains and Losses

We recognized $(3,776) and $27,919 in net realized (losses) gains for the three months ended March 31, 2020 and 2019, respectively.

Net change in unrealized depreciation on investments for the three months ended March 31, 2020 and 2019 was as follows:

Type	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
First Lien Debt	$	(14,333,735	)	$	54,772
Second Lien Debt		(1,173,867	)		1,974
Equity and Preferred Shares		(29,931	)		(400,268	)
Net change in unrealized depreciation on investments	$	(15,537,533	)	$	(343,522	)

Net change in unrealized depreciation on investments during the three months ended March 31, 2020 was primarily due to the change in the results and financial position of the portfolio companies Net change in unrealized depreciation on investments during the three months ended March 31, 2019 was primarily due to a decrease in performance of our portfolio companies.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We generate cash primarily from the net proceeds of any offering of shares of our common stock (“Shares”), from cash flows from interest and fees earned from our investments, and from principal repayments and proceeds from sales of our investments. Our primary use of cash is investments in portfolio companies, payments of our expenses and cash distributions to our stockholders. As of March 31, 2020 and December 31, 2019, we had cash of $23,294,471 and $5,506,217, respectively. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2020 was $2,788,254. The primary operating activities during this period were investments in portfolio companies. This was offset by repayments of bank loans and sales of investments. Net cash used in operating activities for the three months ended March 31, 2019 was $28,747,093. The primary operating activity during this period was investment in portfolio companies. This was partially offset by repayments of bank loans.

As of March 31, 2020 and December 31, 2019, we had twelve and eighteen investments with unfunded commitments of $3,147,697 and $3,878,962, respectively. We believe that, as of March 31, 2020 and December 31, 2019, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

The following table summarizes our total portfolio activity during the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019

Beginning investment portfolio	$	330,874,911		$	264,662,881
Investments in new portfolio investments		25,224,701			29,730,870
Investments in existing portfolio investments		9,103,107			15,542,660
Principal repayments		(18,146,113	)		(11,648,671	)
Proceeds from sales of investments		(5,743,556	)		-
Net change in unrealized depreciation on investments		(15,537,533	)		(343,522	)
Net realized (loss) gain on investments		(3,776	)		27,919
Net change in premiums, discounts and amortization		93,473			62,751
Investment Portfolio, at Fair Value	$	325,865,214		$	298,034,888

Financing Activities

Net cash provided by our financing activities for the three months ended March 31, 2020 was $15,000,000 from issuances of 1,588,983 shares of Common Stock to our stockholders in connection with our capital calls during the period. Net cash provided by our financing activities for the three months ended March 31, 2019 was $20,000,000 from issuances of 2,114,165 shares of Common Stock to our stockholders in connection with our capital calls during the period.

Equity Activity

The number of shares of Common Stock issued and outstanding as of March 31, 2020 and December 31, 2019, were 36,698,229 and 35,109,246, respectively.

Distributions to Stockholders – Common Stock Distributions

We have elected to be treated as a RIC for U.S. federal income tax purposes. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on ordinary income or capital gains that we timely distribute as dividends for U.S. federal income tax purposes to our stockholders. To qualify to be taxed as a RIC and thus avoid corporate-level income tax on the income that we distribute as dividends to our stockholders, we are required to distribute dividends to our stockholders each taxable year generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to the deduction for any dividends paid. To avoid a 4% excise tax on undistributed earnings, we are required to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections) for such calendar year, (ii) 98.2% of our capital gain net income, adjusted for certain ordinary losses, for the one-year period ending October 31 of that calendar year and (iii) any income or capital gains recognized, but not distributed, in preceding calendar years and on which we incurred no federal income tax. We intend to make distributions to stockholders on an annual basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our Board of Directors and will largely be driven by portfolio specific events and tax considerations.

We may fund our cash distributions from any sources of funds available, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Adviser. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from an offering. As a result, a portion of the distributions may represent a return of capital for U.S. federal income tax purposes. Thus the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act. We did not declare or pay distributions for the three months ended March 31, 2020 and 2019.

The determination of the tax attributes of our distributions is made annually at the end of our taxable year, based upon our taxable income for the full taxable year and distributions paid for the full taxable year. Therefore,estimates made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. The actual tax characteristics of distributions to stockholders will be reported to stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

Related Party Fees

For the three months ended March 31, 2020 and 2019, we recorded base management fees of $880,852 and $738,654, respectively. Offsetting these fees were waivers to the base management fees of $308,298 and $258,529, respectively, as set forth within the accompanying statements of operations.

For the three months ended March 31, 2020 and 2019, we recorded incentive fees of $661,359 and $612,128, respectively. Offsetting these waivers to the incentive fees of $563,778 and $489,291, respectively, as set forth within the accompanying statements of operations.

For each of the three months ended March 31, 2020 and 2019, we recorded administrative fees of $62,500, respectively, as set forth within the accompanying statements of operations.

Fees due to related parties as of March 31, 2020 and December 31, 2019 on our accompanying statements of assets and liabilities were as follows:

	March 31, 2020		December 31, 2019
Net base management fee due to Adviser	$	572,554	$	569,600
Net incentive fee due to Adviser		97,581		118,536
Total fees due to Adviser, net of waivers		670,135		688,136
Fee due to Administrator, net of waivers		66,250		66,250
Total Related Party Fees Due	$	736,385	$	754,386

(a) Expenses paid on behalf of the Company by the Adviser

Tender Offers

We do not currently intend to list shares of our Common Stock on any securities exchange, and we do not expect a public market for them to develop in the foreseeable future. Therefore, stockholders should not expect to be able to sell their shares of our Common Stock promptly or at a desired price. To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct an annual tender offer. Our tenders for the shares of Common Stock, if any, would be conducted on such terms as may be determined by our Board of Directors and in accordance with the requirements of applicable law, including Section 23(c) of the 1940 Act and Regulation M under the Exchange Act. We have not commenced any tender offers, and we do not currently intend to conduct any tender offers.

CRITICAL ACCOUNTING POLICIES

This discussion of our operations is based upon our financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our financial statements.

Valuation of Investments

We conduct the valuation of our investments, pursuant to which our net asset value is determined, at all times consistent with GAAP and the 1940 Act. Our Board of Directors, with the assistance of our Audit Committee,determines the fair value of our investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC 820. Our valuation procedures are set forth in more detail below.

The three-level hierarchy for fair value measurement is defined as follows:

Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We do not adjust the quoted price for these instruments, even in situations where we hold a large position, and a sale could reasonably be expected to impact the quoted price.

Level 3 — Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

Pursuant to the framework set forth above, we value securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. We may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the our Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. The process used to determine the applicable value is as follows: (i) each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs. Additionally, as a part of our valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by us; (ii) preliminary valuation conclusions are documented and discussed with our senior management and members of the Adviser’s valuation team; (iii) the Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides our Board of Directors with recommendations with respect to the fair value of the investments in our portfolio; and (iv) Our Board of Directors discusses the valuation recommendations of the our Audit Committee and determines the fair value of the investments in our portfolio in good faith based on the input of the Adviser, the independent valuation firm (to the extent applicable) and in accordance with our valuation policy.

Our Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

the nature and realizable value of any collateral;

call features, put features and other relevant terms of debt;

the portfolio company’s ability to make payments;

the portfolio company’s actual and expected earnings and discounted cash flow;

prevailing interest rates for like securities and expected volatility in future interest rates;

the markets in which the portfolio company does business and recent economic and/or market events; and

comparisons to publicly traded securities.

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

private placements and restricted securities that do not have an active trading market;

securities whose trading has been suspended or for which market quotes are no longer available;

debt securities that have recently gone into default and for which there is no current market;

securities whose prices are stale; and

securities affected by significant events.

Our Board of Directors is responsible for the determination, in good faith, of the fair value of our portfolio investments.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

Refer to Note 3 — Investments in the notes to our accompanying financial statements included elsewhere in this quarterly report for additional information regarding fair value measurements and our application of ASC 820.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OID, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

PIK Interest

We may have investments in our portfolio that contain a PIK interest provision. Any PIK interest will be added to the principal balance of such investments and is recorded as income if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends, even if we have not collected any cash.

U.S. Income Taxes

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to incur any corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. To qualify and maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements as well as distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any distributions paid.

Depending on the level of taxable income earned in a taxable year, we may choose to retain taxable income in excess of current year distributions into the next taxable year. We would then incur a 4% excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we will accrue an excise tax, if any, on estimated excess taxable income as taxable income is earned. We did not accrue any excise tax for the fiscal years ended December 31, 2019, 2018, and 2017.

Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Permanent differences may also result from differences in classification in certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current fiscal year. All penalties and interest associated with any income taxes accrued are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax law, regulations and interpretations thereof. Our accounting policy on income taxes is critical because if we are unable to qualify, or once qualified, maintain our tax status as a RIC, we would be required to record a provision for corporate-level U.S. federal income taxes, as well as any related state or local taxes which may be significant to our financial results.

COMMITMENTS AND CONTINGENCIES

From time to time, we, or the Adviser, may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we nor the Adviser is currently subject to any material legal proceedings.

Unfunded commitments to provide funds to portfolio companies are not reflected in our accompanying statements of assets and liabilities. Our unfunded commitments may be significant from time to time. These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. We use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments. As of March 31, 2020, we had twelve investments with unfunded commitments of $3,147,697. As of December 31, 2019, we had eighteen investments with unfunded commitments of $3,878,962. We believe that, as of March 31, 2020 and December 31, 2019, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

ITEM

3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates based on LIBOR or an equivalent risk-free index rate. Interest rate fluctuations may have a substantial negative impact on our investments, the value of our Common Stock and our rate of return on invested capital. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. As of March 31, 2020 and December 31, 2019, all of our investments included variable rates with a minimum guaranteed rate, or floor, and bore interest at the minimum guaranteed rate.

In addition, the COVID-19 pandemic has resulted in a decrease in LIBOR and a general reduction of certain interest rates by the U.S. Federal Reserve and other central banks. A continued decline in interest rates, including LIBOR, could result in a reduction of our gross investment income.

Change in interest rates	Increase (decrease) in investment income
Down 300 basis points		(1,309,014	)
Down 200 basis points		(1,309,014	)
Down 100 basis points		(1,309,014	)
Up 100 basis points		3,415,433
Up 200 basis points		6,786,705
Up 300 basis points		10,187,418

Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not reflect potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect our net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2020, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that there was a material weakness in our internal controls over financial reporting specifically related to valuations in the context of an unprecedented and severe market dislocation, as described below. Our management has designed additional procedures, including via the use of independent valuation experts where applicable, to help us better achieve our disclosure objectives in future periods. We also note that, in the evaluation of our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2020. Based on the assessment, management concluded that the Company did not maintain effective controls over the application of fair value accounting with respect to the validation of fair value methodologies for certain of the Company’s investments. Specifically, the controls were not sufficiently designed to ensure the appropriateness of the fair value determinations reached for certain Level 3 debt holdings in the context of the current period of extreme market dislocation and volatility caused by the COVID-19 pandemic. As a result, our disclosure controls and procedures were ineffective in providing reasonable assurance that material valuation information about us was recorded and timely communicated to our management.

As described below, this deficiency in internal control over financial reporting did not result in a misstatement due to the proactive steps taken by our management. However, in the absence of such steps, it could have resulted in a misstatement to the valuations of one or more of our investments. In turn, such a misstatement could have resulted in a material misstatement to our interim financial statements as of March 31, 2020 that would not have been prevented or detected. Accordingly, management has determined that this control deficiency constituted a “material weakness” (which is generally defined as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not have been prevented or detected on a timely basis”).

This material weakness was brought to the attention of management prior to the issuance of any financial statements covering the period during which the material weakness existed (i.e., the period covered by this Quarterly Report on Form 10-Q). Based on a number of factors, including the timely discovery and expected short duration of the material weakness as being directly tied to the current period of extreme market dislocation and volatility caused by COVID-19, and our performance of the remedial procedures performed, our management has concluded that the financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP. Further, based upon our investigation and analysis of the identified weakness, our management has concluded that such material weakness did not affect any financial statements issued for any period prior to the reporting period covered by this Quarterly Report on Form 10-Q.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Remediation Plan

Management plans to implement steps to remediate the material weakness described above related to our valuation process. For example, during periods determined by management, such as a period of severe market dislocation and volatility, management would determine whether to utilize one or more independent valuation experts as part of its valuation process for Level 3 debt holdings. Management also plans to undertake additional review procedures, which may include designating a member of the Valuation Committee to monitor and report to the Valuation Committee to ensure that, particularly during any period of market dislocation and volatility, fair values for all Level 3 debt holdings are validated through one or more other valuation techniques or processes that are acceptable under ASC 820 (which may include the use of independent valuation experts).

Changes in Internal Control Over Financial Reporting

Except as specified above, there have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II–OTHER INFORMATION

ITEM

1. LEGAL PROCEEDINGS

We are not currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us.

From time to time, we, our Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

ITEM

1A. RISK FACTORS

In addition to the risks discussed below, important risk factors that could cause results or events to differ from current expectations are described in Part I, Item 1A “Risk Factors” of the Company’s Annual Report for the year ended December 31, 2019 filed with the SEC on March 17, 2020.

Legislation passed in 2018 allows us to incur additional leverage and would require us to offer liquidity to our stockholders.

Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act, which was signed into law on March 23, 2018, provides that a BDC’s required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage permits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. As a result, if we receive the relevant approval and we comply with the applicable disclosure requirements, we would be able to incur additional leverage, which may increase the risk of investing in us. In addition, since our base management fee is payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expenses may increase if we incur additional leverage.

We have not commenced any tender offers, and we do not currently intend to conduct any tender offers. As a non-traded BDC, however, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their Shares over the next year following the calendar quarter in which the approval was obtained. The timing and method for such offers has not been determined at this time.

Global capital markets could enter a period of severe disruption and instability due to future recessions, political instability, geopolitical turmoil and foreign hostilities, disease pandemics and other serious health events. These market disruptions have historically had and could again have a materially adverse effect on debt and equity capital markets in the United States, which could have a materially adverse impact on our business and financial condition.

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets and valuation impacts. Such disruptions are adversely affecting our business, and future market disruptions and/or illiquidity could continue to impact us negatively. These events have limited, and could continue to limit, our investment opportunities, may limit our ability to grow and could negatively impact our operating results and the fair values of our investments.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Please refer to “Item 1. Financial Statements—Notes to Consolidated Financial Statements—Note 11. Subsequent Events” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” in this quarterly report and our current reports on Form 8-K filed on January 10, 2020 and April 3, 2020 for issuances of our Common Stock during the quarter ended March 31, 2020 and during the period subsequent to March 31, 2020 and through June 18, 2020. Such issuances were made pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder.

ITEM

3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM

4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM

5. OTHER INFORMATION

Due to the outbreak of the COVID-19 pandemic, and the resulting local, state and federal government responses, the Company availed itself of an extension to file its Quarterly Report originally due on May 15, 2020 by filing a Current Report on Form 8-K with the SEC. In taking such action, the Company relied on the order issued by the SEC on March 25, 2020 (which extended and superseded a prior order issued on March 4, 2020), pursuant to Section 36 of the Exchange Act (Release No. 34-88465) (the “COVID-19 Filing Extension Order”), regarding exemptions granted to certain public companies. The COVID-19 Filing Extension Order allows a registrant up to an additional 45 days after the original due date to file certain required reports with the SEC, if the registrant’s ability to file such reports timely was affected due to COVID-19.

Due to the unprecedented conditions surrounding the spread of COVID-19 throughout the United States, and the significant market disruptions that have resulted from such spread, the Company undertook additional review of the fair value of its portfolio with the assistance of third-party independent valuation firms. Given the time taken for this additional review of the Company’s portfolio investments, the Company’s preparation of the Quarterly Report originally due on May 15, 2020 was disrupted. As such, the Company relied on the COVID-19 Filing Extension Order and made use of the 45-day grace period provided by the COVID-19 Filing Extension Order to delay the filing of that Quarterly Report.

ITEM

6. EXHIBITS

3.1

Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

3.2

Form of Bylaws (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).

10.1*

Subscription Agreement, dated as of March 20, 2020, by and between the Company and Mercer Audax Credit Feeder Fund LP.

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32.1*

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

32.2*

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).

99.1

Code of Ethics (Incorporated by reference to Exhibit 99.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form 10, File No. 000-55426, filed on June 5, 2015).

________________________________

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Audax Credit BDC Inc.

Date: June 18, 2020	By:	/s/ Michael P. McGonigle
		Michael P. McGonigle
		Chief Executive Officer

Date: June 18, 2020	By:	/s/ Richard T. Joseph
		Richard T. Joseph
		Chief Financial Officer

Attached files

Audax Credit BDC Inc. Reports

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