X1 Capital Navigates BDC Launch Amidst 'Blind Pool' Risks

TL;DR

**X1 Capital is a high-risk 'blind pool' BDC with no track record, making it a speculative bet on unproven management in a competitive market.**

AI Summary

X1 Capital Inc., formed on July 25, 2023, is a Maryland-based closed-end management investment company operating as an internally managed Business Development Company (BDC) and electing Regulated Investment Company (RIC) tax treatment. The company primarily invests in private U.S. companies, focusing on four strategies: bridge loans for government-guaranteed loans, acquiring BDC-qualified loans for resale, bridge financing for federal and state tax credits/receivables, and providing debt or equity for growth/acquisitions. For the fiscal year ended June 30, 2025, X1 Capital did not directly incur any expenses, with Alternative Risk Strategies LLC initially covering costs, reimbursed by Growth Lending LLC from November 1, 2024. On August 21, 2025, shareholders approved X1 Capital directly paying its expenses and entering an Administration Agreement with Growth Lending LLC. The company has a limited operating history and no prior experience managing a BDC or RIC, posing significant risks to achieving its investment objectives and generating sufficient revenue for distributions.

Why It Matters

X1 Capital's emergence as a BDC, focusing on niche private U.S. company financing, presents a new, albeit high-risk, investment avenue. Its 'blind pool' nature means investors are relying entirely on management's unproven ability to identify and execute investments, which could lead to substantial capital loss. The company's internal management structure, with a lean executive team and reliance on Growth Lending LLC for administrative services, introduces operational dependencies. Competitively, X1 Capital faces larger, more established BDCs and private funds with greater resources, potentially limiting its access to attractive deals and impacting its ability to generate competitive returns for investors.

Risk Assessment

Risk Level: high — X1 Capital Inc. is a high-risk investment due to its limited operating history since formation on July 25, 2023, and no prior experience managing a BDC or RIC. The company's 'blind pool' offering means investors cannot evaluate specific investments, and its portfolio will consist primarily of unrated 'junk bonds / high yield bonds,' indicating a higher risk of default.

Analyst Insight

Investors should approach X1 Capital with extreme caution, recognizing the significant risks associated with its limited operating history and 'blind pool' nature. Await a proven track record of investment performance and transparent financial reporting before considering any investment.

Key Numbers

• 2023-07-25 — Formation Date (Indicates limited operating history)
• 240 — Shares of Common Stock Outstanding (As of September 1, 2025, indicating a very closely held company)
• $1.235 billion — Annual Gross Revenue Threshold (For ceasing to be an 'emerging growth company')
• $700.0 million — Market Value Threshold (For becoming a 'large accelerated filer')
• $1.0 billion — Non-convertible Debt Threshold (For ceasing to be an 'emerging growth company' over three years)
• 70% — Minimum Investment in Qualifying Assets (BDC regulatory requirement under the 1940 Act)
• 3 — Board Members (As of September 11, 2025)
• 2025-08-21 — Shareholder Approval Date (For direct expense payment and Administration Agreement)
• 2024-11-01 — Expense Reimbursement Start Date (Growth Lending LLC began reimbursing Alternative Risk Strategies LLC)
• 1 — Senior Executive (James Hickey serves as CEO, CFO, and CCO)

Key Players & Entities

• X1 Capital Inc. (company) — Registrant and BDC
• James Hickey (person) — CEO, CFO, CCO, former Board Member
• Edd Hatfield (person) — Board Member, co-CEO at Operations.Finance
• Ladislas Mysyrowicz (person) — Board Member, CEO of Growth Lending
• Professor Steven Kelts (person) — Board Member, Professor at Princeton University
• Growth Lending LLC (company) — Reimbursed expenses, provides administrative services
• Alternative Risk Strategies LLC (company) — Paid for all expenses for fiscal year 2025
• SEC (regulator) — Regulates BDCs
• Maryland (regulator) — State of incorporation
• USDA One RD program (regulator) — Government-guaranteed loan program

FAQ

Risk Factors

• Limited Operating History [high — operational]: X1 Capital Inc. was formed on July 25, 2023, and has a limited operating history as a BDC. This lack of experience exposes the company to business risks and uncertainties common to recently formed entities, increasing the potential for investment value decline.
• No Prior BDC/RIC Management Experience [high — operational]: The company has no prior experience managing a Business Development Company (BDC) or a Regulated Investment Company (RIC). This inexperience may impede successful business operations and the achievement of investment objectives, posing greater risk compared to established companies.
• BDC and RIC Regulatory Constraints [high — regulatory]: As a BDC and RIC, X1 Capital must adhere to numerous constraints under the 1940 Act and the Code, including investing at least 70% of assets in qualifying U.S. private companies. Failure to comply could result in unexpected taxes and penalties, hindering investment opportunities.
• Inability to Generate Sufficient Revenue [medium — financial]: There is a risk that X1 Capital may be unable to generate sufficient revenue from its operations to make or sustain distributions to its stockholders. This is particularly concerning given its limited operating history and lack of prior BDC/RIC management experience.
• Investment in Non-Rated/Junk Bonds [medium — market]: The company anticipates most debt investments will not be rated, and if rated, would be classified as 'junk bonds / high yield bonds.' This indicates a higher risk profile for its investment portfolio compared to investment-grade securities.

Industry Context

X1 Capital Inc. operates as a Business Development Company (BDC) focused on private U.S. companies, a sector characterized by higher risk and potential for significant returns. The BDC landscape is competitive, with companies often specializing in specific investment strategies like venture debt, growth equity, or distressed debt. Regulatory requirements under the 1940 Act significantly shape BDC operations, mandating specific asset allocations and investment limitations.

Regulatory Implications

As a BDC and a Regulated Investment Company (RIC), X1 Capital Inc. faces stringent regulatory oversight. Compliance with the Investment Company Act of 1940 and the Internal Revenue Code is critical, particularly regarding asset diversification (minimum 70% in qualifying assets) and income requirements. Failure to meet these could lead to loss of BDC or RIC status, resulting in unexpected tax liabilities and operational challenges.

What Investors Should Do

1. Monitor expense management closely.
2. Assess management's experience and execution.
3. Understand the investment strategy and risk profile.

Key Dates

• 2023-07-25: Company Formation — Marks the beginning of X1 Capital Inc.'s existence, indicating a very limited operating history.
• 2024-11-01: Expense Reimbursement Start Date — Growth Lending LLC began reimbursing Alternative Risk Strategies LLC for expenses, indicating a shift in initial cost management.
• 2025-08-21: Shareholder Approval Date — Shareholders approved X1 Capital directly paying its expenses and entering an Administration Agreement with Growth Lending LLC, signifying a move towards direct operational cost management.

Glossary

Business Development Company (BDC)

A type of closed-end investment company that invests in small and medium-sized U.S. businesses, often providing capital and expertise. (X1 Capital Inc. has elected to be regulated as a BDC, which subjects it to specific regulatory requirements under the 1940 Act.)

Regulated Investment Company (RIC)

A type of investment company that meets specific tax requirements under the Internal Revenue Code, allowing it to pass income and capital gains to shareholders without being taxed at the corporate level. (X1 Capital Inc. has elected RIC tax treatment, which requires adherence to income, diversification, and other rules.)

Investment Company Act of 1940 (1940 Act)

A U.S. federal law that regulates investment companies, including mutual funds, closed-end funds, and BDCs. (X1 Capital Inc. is subject to the regulatory requirements of the 1940 Act due to its BDC status.)

Emerging Growth Company (EGC)

A company with total annual gross revenues of less than $1.235 billion during its first fiscal year that began after December 8, 2011, which is eligible for reduced reporting requirements under the JOBS Act. (X1 Capital Inc. is an EGC and benefits from reduced public company reporting requirements.)

Qualifying Assets

Assets that meet specific criteria under the 1940 Act for BDCs, typically investments in eligible private or thinly traded U.S. companies. (BDCs are required to invest at least 70% of their total assets in qualifying assets.)

Year-Over-Year Comparison

As X1 Capital Inc. was formed on July 25, 2023, there is no prior fiscal year filing to compare against. This 10-K represents the company's initial disclosure of its business operations, investment strategies, and risk factors, highlighting its status as an 'emerging growth company' with a limited operating history and no prior experience managing a BDC or RIC.

Key Financial Figures

• $0.01 — istrant had 240 shares of common stock, $0.01 par value per share, outstanding. 2
• $1.235 billion — h we have total annual gross revenue of $1.235 billion or more, (ii) December 31 of the fiscal
• $700.0 m — on stock held by non-affiliates exceeds $700.0 million, measured as of the last business
• $1.0 billion — date on which we have issued more than $1.0 billion in non-convertible debt during the prec

Filing Documents

• xcap_10k_v1_sep_2025.htm (10-K) — 361KB
• ex31.htm (EX-31) — 8KB
• ex32.htm (EX-32) — 3KB
• 0001999538-25-000012.txt ( ) — 372KB

Risk Factors 9

Item 1A. Risk Factors 9

Unresolved Staff Comments 32

Item 1B. Unresolved Staff Comments 32

Cybersecurity 32

Item 1C. Cybersecurity 32

Properties 33

Item 2. Properties 33

Legal Proceedings 33

Item 3. Legal Proceedings 33

Mine Safety Disclosures 33

Item 4. Mine Safety Disclosures 33

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34

Selected Consolidated Financial Data 35

Item 6. Selected Consolidated Financial Data 35

Management's Discussion and Analysis of Financial Condition and Results of Operations 36

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 36 Overview 36

Quantitative and Qualitative Disclosures About Market Risk 40

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 40

Consolidated Financial Statements and Supplementary Data 42

Item 8. Consolidated Financial Statements and Supplementary Data 42

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53

Controls and Procedures 53

Item 9A. Controls and Procedures 53

Other Information 54

Item 9B. Other Information 54

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 54

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 54

Directors, Executive Officers and Corporate Governance 55

Item 10. Directors, Executive Officers and Corporate Governance 55

Executive Compensation 57

Item 11. Executive Compensation 57

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 58

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 58

Certain Relationships and Related Transactions, and Director Independence 58

Item 13. Certain Relationships and Related Transactions, and Director Independence 58

Principal Accountant Fees and Services 58

Item 14. Principal Accountant Fees and Services 58

Exhibits, Financial Statement Schedules 59

Item 15. Exhibits, Financial Statement Schedules 59

Form 10-K Summary 59

Item 16. Form 10-K Summary 59 SIGNATURES 60 3

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This Annual Report contains 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 opinions, and our assumptions. Words such as "anticipates," "expects," "intends," "plans," "will," "may," "continue," "believes," "seeks," "estimates," "would," "could," "should," "targets," "projects," "outlook," "potential," "predicts" 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 without limitation: An economic downturn could impair our portfolio companies' ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies Such an economic downturn could disproportionately impact the companies that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies A contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities Interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy To the extent we invest in foreign companies or invest in companies that have significant foreign exposure, factors such a

Business

Item 1. Business X1 Capital Inc. ("X1" or "X1 Capital" or the "Company") formed on July 25, 2023 as a corporation under the laws of the State of Maryland. The Company is structured as a closed-end management investment company. The Company has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). For tax purposes, the Company has elected to be treated as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Company is internally managed. We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). We will remain an emerging growth company until the last day of our fiscal year following the fifth anniversary of a future IPO, or until the earliest of (i) the last day of the first fiscal year in which we have total annual gross revenue of $1.235 billion or more, (ii) December 31 of the fiscal year in which we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the "Exchange Act"), (which would occur if the market value of our common stock held by non-affiliates exceeds $700.0 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period. For so long as we remain an emerging growth company under the JOBS Act, we will be subject to reduced public company reporting requirements. The Company primarily invests in private US companies. The Company focuses on four strategies. First, the Company provides bridge loans to private companies that have been conditionally approved for government-guaranteed loans by an approve

Risk Factors

Item 1A. Risk Factors An investment in our securities involves certain risks relating to our structure and investment objective. The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the price of our common stock could decline, and you may lose all or part of your investment. Risks Related to Our Business and Structure We have limited operating history as a BDC. The Company was formed on July 25, 2023 and has limited operating history as a BDC. As a result, we are subject to many of the business risks and uncertainties associated with recently formed businesses, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially. As a BDC, we will be subject to the regulatory requirements of the SEC, in addition to the specific regulatory requirements applicable to BDCs under the 1940 Act and RICs under the Code. From time to time, the Company may pursue investment opportunities in which it has more limited experience. We may also be unable to replicate the historical performance of employees of X1 Capital. In addition, we may be unable to generate sufficient revenue from our operations to make or sustain distributions to our stockholders. We have no prior experience managing a BDC or a RIC. We have no experience managing a BDC or a RIC. Therefore, we may not be able to successfully operate our business or achieve our investment objective. As a result, an investment in shares of our common stock may entail more risk than shares of common stock of a comparable company with a substantial operating history. The 1940 Act and the Code impose numerous constraints on the operations of BDC

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