What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-05-10 compared with 2022-05-11 · 151 added, 191 removed, 363 unchanged (49% of the section changed)

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If we are participating in an investment with one or more co-investors, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone.

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Portfolio Activity

While the business environment remains competitive, we continue to see new investment opportunities consistent with our investment strategy of providing a combination of debt and equity in support of management and independent sponsor-led buyouts of Lower Middle Market companies in the U.S.

During the year ended March 31, 2022, we invested in two new portfolio companies, exited three portfolio companies, merged two existing portfolio companies into a new portfolio company and dissolved one portfolio company.

During the year ended March 31, 2023, we invested in one new portfolio company and exited two portfolio companies.

From our initial public offering in June 2005 through March 31, 2023, we invested in 56 companies, excluding investments in syndicated loans, for a total of approximately $1.6 billion, before giving effect to principal repayments and divestitures.

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Consistent with GAAP, we generally have not recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.

From inception through March 31, 2022 , we completed sales of 27 portfolio companies that we acquired under our buyout strategy (which excludes investments in syndicated loans).

From inception through March 31, 2023 , we exited our investments in 29 portfolio companies that we acquired under our buyout strategy (which excludes investments in syndicated loans).

In the aggregate, these sales have generated $260.2 million in net realized gains and $40.4 million in other income upon exit, for a total increase to our net assets of $300.7 million.

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We have successfully extended the Credit Facility’s revolving period multiple times, most recently to February 2024, and currently have a total commitment amount of $180.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders).

During the year ended March 31, 2023, we sold 386,482 shares of our common stock under our "at-the-market" program (the "Common Stock ATM Program") for gross proceeds of approximately $5.5 million.

During the year ended March 31, 2022, we issued our 2028 Notes for gross proceeds of $134.6 million.

During the year ended March 31, 2021, we issued our 2026 Notes for gross proceeds of $127.9 million, and sold 155,560 shares of our common stock under our at-the-market program (the “Common Stock ATM Program”) for gross proceeds of approximately $1.8 million, and 784,853 shares of our Series E Term Preferred Stock under our preferred stock at-the-market program (the “Series E ATM Program”) for gross proceeds of approximately $19.3 million.

Refer to “ Liquidity and Capital Resources.”

Although we have been able to access the capital markets historically, market conditions, including the impact of COVID-19, may continue to affect the trading price of our common stock and thus our ability to finance new investments through the issuance of common equity.

Although we have been able to access the capital markets historically, market conditions may continue to affect the trading price of our common stock and thus our ability to finance new investments through the issuance of common equity.

On March 31, 2023, the closing market price of our common stock was $ 13.25 per share, representing a 1.2 % premium to our NAV of $ 13.09 per share as of March 31, 2023.

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Our ability to seek external debt financing, to the extent that it is available under current market conditions, is further subject to the asset coverage limitations of the 1940 Act, which require us to have asset coverage (as defined in Sections 18 and 61 of the 1940 Act) of at least 150% on each of our senior securities representing indebtedness and our senior securities that are stock (such as our previously outstanding series of term preferred stock).

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On April 10, 2018, our Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act.

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During the fiscal year ended March 31, 2023, the following significant transactions occurred:

• In May 2021, we dissolved our investment in Channel Technologies Group, LLC (“CTG”) and recorded a realized loss of $1.8 million.

• In June 2021, we invested $10.0 million in a new portfolio company, Nocturne Villa Rentals, Inc.

(“Nocturne”), through a combination of secured first lien debt and preferred equity.

Nocturne, headquartered in Telluride, Colorado, is a luxury vacation rental manager.

• In June 2021, we invested an additional $6.5 million in J.R.

– Atlanta, LLC (“J.R.

Hobbs”) in the form of secured second lien debt.

In connection with the investment, our secured second lien debt was converted to secured first lien debt.

• In June 2021, we sold our investment in Head Country, Inc.

(“Head Country”), which resulted in success fee income of $2.0 million and a realized gain of $3.6 million.

In connection with the sale, we received net cash proceeds of $16.7 million, including the repayment of our debt investment of $9.1 million at par.

• In July 2021, we invested an additional $5.9 million in the form of secured first lien debt in Nocturne to fund an add-on acquisition.

• In July 2021, we invested $24.3 million in a new portfolio company, Utah Pacific Bridge & Steel, Ltd.

(“Utah Pacific”), through a combination of secured first lien debt and preferred equity.

Utah Pacific, headquartered in Lindon, Utah, is a manufacturer of large steel components used in bridge replacement, rehabilitation, and construction.

• In September 2021, one of our portfolio companies, D.P.M.S., Inc.

(“Danco”), merged with another of our portfolio companies, Galaxy Technologies, Inc.

(“Galaxy”), into a newly formed portfolio company, Galaxy Technologies Holdings, Inc.

(“Galaxy Technologies Holdings”).

Our debt investments in Danco, which totaled $12.3 million at principal and cost, and Galaxy, which totaled $13.0 million at principal and cost, were converted into two second lien term loans with an aggregate cost and principal of $25.3 million to Galaxy Technologies Holdings.

Our common equity investment in Danco, with a cost basis of $0.0 million, and our preferred and common equity investments in Galaxy, with an aggregate cost basis of $11.5 million, were converted into a common equity investment in Galaxy Technologies Holdings with a combined cost basis of $11.5 million.

• In October 2021, we invested an additional $10.5 million in Bassett Creek Services, Inc., in the form of secured first lien debt to fund an add-on acquisition.

• In December 2021, we invested an additional $19.0 million in the form of secured first lien debt in Nocturne to fund an add-on acquisition.

• In December 2021, we invested an additional $6.4 million in the form of secured first lien debt in Schylling, Inc.

to fund an add-on acquisition.

• In December 2021, we sold our investment in Pioneer Square Brands, Inc.

(“Pioneer”), which resulted in success fee income of $0.5 million and a realized gain of $21.9 million.

• In May 2022, we invested an additional $6.4 million in the form of secured first lien debt in Nocturne to fund an add-on acquisition.

• In June 2022, we exited our investment in Bassett Creek Services, Inc.

("Bassett Creek"), which resulted in success fee income of $3.0 million and a realized gain on preferred equity of $4.7 million.

In connection with the sale, we received net cash proceeds of $57.6 million, including the repayment of our debt investment of $48.0 million at par.

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• In December 2021, we sold our investment in SOG Specialty Knives & Tools, LLC (“SOG”), which resulted in success fee income of $2.9 million.

In connection with the sale, we received net cash proceeds of $23.3 million, including the repayment of our debt investment of $8.9 million at par, and retained a common stock investment in the intermediary entity, Gladstone SOG Investments, Inc., which maintains a cost basis of $0.6 million.

• In January 2022, we invested $5.0 million in SBS Industries Holdings, Inc.

("SBS"), through a combination of secured second lien debt and preferred equity to fund an add-on acquisition.

As part of the additional investment, SBS was renamed SFEG Holdings, Inc ("SFEG").

• In March 2022, we entered into a new $26.0 million secured first lien term loan with J.R.

Hobbs, replacing our previously outstanding first lien term loan with a total cost basis of $36.0 million, which resulted in a realized loss of $10.0 million.

The new term loan has a stated interest rate of LIBOR + 10.3% and matures October 1, 2024.

• In March 2022, we invested an additional $2.4 million in the form of secured first lien debt in J.R.

• In June 2022, we invested $21.0 million in a new portfolio company, Dema/Mai, in the form of preferred equity to acquire Mai Mechanical, LLC, a leading provider of plumbing and mechanical services focused on multi-family residential construction headquartered in Denver, Colorado, from J.R.

- Atlanta, LLC ("J.R.

Hobbs"), an existing portfolio company.

In July 2022, we invested an additional $39.1 million in the form of secured first lien debt in Dema/Mai to fund the acquisition of Dema Plumbing, a plumbing and mechanical systems installation and service provider to single-family residential homebuilders.

• In July 2022, we recapitalized our investment in Horizon and invested an additional $30.0 million in the form of secured first lien debt.

In connection with this investment, we received equity proceeds of $12.3 million, which were recognized as a $10.1 million return of preferred equity cost basis and a realized gain of $2.2 million, as well as dividend income of $3.1 million and success fee income of $1.7 million.

• In August 2022, in conjunction with a refinancing at Ginsey, our $13.3 million secured second lien debt investment was reduced to $12.2 million and converted to secured first lien debt.

The reduction in our cost basis was the result of a $5.1 million payment made by Ginsey to extinguish our secured borrowing liability, which was partially offset by an additional investment in Ginsey of $4.0 million.

• In October 2022, we invested an additional $8.4 million in the form of secured first lien debt in Nocturne to fund an add-on acquisition.

• In November 2022, our $1.5 million secured second lien debt investment in Country Club Enterprises, LLC ("CCE") was repaid at par.

In connection with the repayment, we received success fee income of $1.1 million and our $1.0 million guaranty was released.

• In December 2022, we recapitalized our investment in Old World and invested an additional $15.5 million in the form of secured first lien debt.

In connection with this investment, we received proceeds of $17.9 million, of which $13.4 million was recognized as a realized gain and $4.5 million was recognized as dividend income.

• In December 2022, we replaced our previously outstanding secured second lien term loan and secured second lien delayed draw term loan to The Mountain with a total aggregate cost basis of $13.2 million with a new $3.2 million secured second lien term loan, which resulted in a realized loss of $10.0 million.

• In February 2023, we replaced our two previously outstanding secured first lien revolving lines of credit to The Mountain with an aggregate cost basis of $4.3 million with a new secured first lien revolving line of credit with a $4.7 million commitment.

Recent Developments

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dollar LIBOR are currently anticipated to be phased out in June 2023.

LIBOR may transition to a new standard rate, SOFR, which will incorporate certain overnight repo market data collected from multiple data sets.

To attain an equivalent one-month rate, we currently intend to adjust the SOFR to minimize the difference between the interest that a borrower would be paying using LIBOR versus what it will be paying using SOFR.

We are currently monitoring the transition and cannot assure you whether SOFR will become a standard rate for variable rate debt.

We have amended all outstanding loan agreements with our portfolio companies to include fallback language providing a mechanism for the parties to negotiate a new reference interest rate in the event that LIBOR ceases to exist .

Assuming that SOFR replaces LIBOR and is appropriately adjusted to equate to one-month LIBOR, we expect that there should be minimal impact on our operations.

COVID-19 Impact

We continue to closely monitor and work with our portfolio companies to navigate the significant challenges created by the continuing COVID-19 pandemic, and remain focused on ensuring the safety of the Adviser’s and Administrator’s personnel and of the employees of our portfolio companies, while also managing our ongoing business activities.

While we are closely monitoring all of our portfolio companies, our portfolio continues to be diverse from a geographic and industry perspective.

Through proactive measures and continued diligence, the management teams of our portfolio companies have demonstrated their ability to respond effectively and efficiently to the challenges posed by COVID-19, including its variants, related orders imposed by state and local governments, including paused or reversed reopening orders, and operating challenges, including but not limited to, labor shortages, supply chain delays and increased material costs.

We believe we have sufficient levels of liquidity to support our existing portfolio companies, as necessary, and continue our buyout strategy by deploying capital in new investment opportunities.

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Subsequent to March 31, 2023, certain of our existing investments have been transitioned from LIBOR to SOFR.

Revolving Line of Credit

On April 10, 2023, we, through Business Investment, entered into Amendment No.

7 to the Fifth Amended and Restated Credit Agreement, originally entered into on April 30, 2013, with KeyBank National Association (“KeyBank”) as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto, to update the reference rate from LIBOR to Term SOFR plus an 11 basis point credit spread adjustment.

Impact of Inflation

We believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial.

We believe the effects of inflation, on our historical results of operations and financial condition have not been significant.

During the fiscal year ended March 31, 2023, general inflationary pressures and certain commodity price volatility have impacted our portfolio companies to varying degrees;

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Refer to “Risk Factors — Risks Related to the Economy — We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the U.S.”

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Director Activity

Terry Lee Brubaker resigned from our Board of Directors, effective April 14, 2023.

Brubaker's resignation was not a result of any disagreement with the Company on any matters relating to the Company's operations, policies, or practices.

RESULTS OF OPERATIONS

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Net realized loss on other — (1,998) 1,998 100.0 %

Net unrealized appreciation of investments 74,882 13,924 60,958 437.8 %

Net realized and unrealized gain, net of taxes on deemed distribution of long-term capital gains 87,326 24,516 62,810 256.2 %

Net unrealized (depreciation) appreciation of investments (12,235) 74,882 (87,117) (116.3) %

Net unrealized depreciation of other 29 — 29 NM

Net realized and unrealized (loss) gain, net of taxes on deemed distribution of long-term capital gains (1,453) 87,326 (88,779) (101.7) %

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 35,547 $ 102,316 $ (66,769) (65.3) %

WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING

Basic and diluted 33,311,785 33,205,023 106,762 0.3 %

BASIC AND DILUTED PER COMMON SHARE:

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Net increase in net assets resulting from operations $ 1.07 $ 3.08 $ (2.01) (65.3) %

NM = Not Meaningful

Investment Income

Total investment income increased by 12.4% for the year ended March 31, 2023, as compared to the prior year.

This increase was primarily due to an increase in interest income, as well as an increase in dividend and success fee income.

This increase was primarily due to an increase in dividend and success fee income, as well as an increase in interest income.

Interest income from our investments in debt securities increased 1.1% for the year ended March 31, 2023, as compared to the prior year .

Excluding the collection of $7.3 million of past due interest during the year ended March 31, 2022 from certain loans that were previously on non-accrual status, of which no such collection took place in the current fiscal year, interest income from our investments in debt securities would have increased 14.9% for the year ended March 31, 2023, as compared to the prior year.

Generally, the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period, multiplied by the weighted-average yield.

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The weighted-average principal balance of our interest-bearing investment portfolio during the year ended March 31, 2023 was $464.4 million, compared to $442.8 million during the prior year.

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The weighted-average yield may vary from period to period, based on the current stated interest rate on interest-bearing investments, coupled with any collection of past due interest during the period.

During the year ended March 31, 2022, we collected $7.3 million in past due interest from portfolio companies that were previously on non-accrual status, including $3.4 million from Horizon Facilities Services, Inc.

(“Horizon”), $2.8 million from B+T Group Acquisition, Inc.

During the year ended March 31, 2023, we had no collections of past due interest.

(“B+T”), $1.0 million from SOG Speciality Knives & Tools, LLC and $0.1 million from PSI Molded Plastics, Inc.

We had no collections of past due interest during the year ended March 31, 2021.

Excluding this collection of past due interest, the weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as other income, for the year ended March 31, 2022 would have been 11.8%.

As of March 31, 2023, our loans to Edge Adhesives Holdings, Inc.

("Edge"), J.R.

Hobbs, and The Mountain were on non-accrual status, with an aggregate debt cost basis of $66.9 million.

As of March 31, 2022, our loans to J.R.

Hobbs, The Mountain Corporation (“The Mountain”), and SFEG were on non-accrual status, with an aggregate debt cost basis of $77.2 million.

As of March 31, 2021, our loans to B+T, Horizon and The Mountain were on non-accrual status, with an aggregate debt cost basis of $61.1 million.

Hobbs, The Mountain, and SFEG Holdings, Inc.

("SFEG") were on non-accrual status, with an aggregate debt cost basis of $77.2 million.

Dividend and success fee income for the year ended March 31, 2023 increased 64.8% from the prior year.

During the year ended March 31, 2022, dividend and success fee income consisted of $10.3 million of success fee income and $2.6 million of dividend income.

During the year ended March 31, 2023, dividend and success fee income consisted of $10.9 million of dividend income and $10.4 million of success fee income.

During the year ended March 31, 2022, dividend and success fee income consisted of $10.3 million of success fee income and $2.6 million of dividend income.

As of March 31, 2023 and 2022, no single investment represented greater than 10% of our total investment portfolio at fair value.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 48.8% for the year ended March 31, 2022, as compared to the prior year, primarily due to an increase in the capital gains-based incentive fee, income-based incentive fee, interest and dividend expense, and base management fee, partially offset by an increase in credits to fees from Adviser.

In accordance with GAAP, we recorded a capital gains-based incentive fee of $18.3 million during the year ended March 31, 2022, compared to a capital gains-based incentive fee of $5.0 million during the year ended March 31, 2021.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, decreased 22.6% for the year ended March 31, 2023, as compared to the prior year, primarily due to a decrease in the capital gains-based incentive fee, partially offset by a decrease in credits to fees from Adviser, an increase in income-based incentive fee, base management fee, and interest and dividend expense.

In accordance with GAAP, we recorded a reversal of capital gains-based incentive fee of $0.3 million during the year ended March 31, 2023, compared to a capital gains-based incentive fee of $18.3 million during the year ended March 31, 2022.

The capital gains-based incentive fee is a result of the net impact of net realized gains (losses) and net unrealized appreciation (depreciation) on investments during the respective periods.

The income-based incentive fee increased during the year ended March 31, 2023, as compared to the prior year, as the increase in pre-incentive fee net investment income more than offset the increase in net assets, which drives the hurdle rate.

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The base management fee, loan servicing fee, incentive fee, and their related non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under “ Transactions with the Adviser ” in Note 4 – Related Party Transactions in the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:

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(C) The capital gains-based incentive fees are recorded in accordance with GAAP and do not necessarily reflect amounts contractually due under the terms of the Advisory Agreement.

Interest and dividend expense increased 17.3% during the year ended March 31, 2022, as compared to the prior year, primarily due to the issuance of the 2028 Notes in August 2021 as well as the 2026 Notes issued in March 2021, partially offset by a lower weighted-average balance outstanding on the Credit Facility and the redemption of the Series E Term Preferred Stock in the current year.

Interest and dividend expense increased 3.2% during the year ended March 31, 2023, as compared to the prior year, primarily due to the issuance of the 2028 Notes in August 2021 and an increase in LIBOR, partially offset by the redemption of our then outstanding 6.375% Series E Cumulative Term Preferred Stock ("Series E Term Preferred Stock") and a lower weighted-average balance outstanding on the Credit Facility during the year ended March 31, 2023.

The weighted-average balance outstanding on the Credit Facility during the year ended March 31, 2023 was $16.2 million, as compared to $18.1 million in the prior year.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the year ended March 31, 2023 was 17.3%, as compared to 12.5% in the prior year.

This increase in the effective interest rate on the Credit Facility was primarily a result of the increase in unused commitment fee on the undrawn portion of the Credit Facility.

Other expenses increased 7.8% during the year ended March 31, 2022, as compared to the prior year, primarily due to an increase in bad debt expense and tax expense, partially offset by a decrease in professional expenses and shareholder expenses.

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This increase in the effective interest rate on the Credit Facility was primarily a result of the increase in LIBOR as well as the unused commitment fee on the higher undrawn portion of the Credit Facility.

Other expenses increased 12.9% during the year ended March 31, 2023, as compared to the prior year, primarily due to an increase in tax expense and professional expenses, partially offset by a decrease in bad debt expense.

Realized and Unrealized Gain (Loss), net of Taxes

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Depreciation Net Gain

Nth Degree Investment Group, LLC $ — $ 14,732 $ — $ 14,732

Brunswick Bowling Products, Inc.

— 12,484 — 12,484

Bassett Creek Serivces, Inc.

— 17,994 — 17,994

Old World Christmas, Inc.

13,371 (3,852) — 9,519

B+T Group Acquisition, Inc.

— 16,885 — 16,885

Horizon Facilities Services, Inc.

2,218 4,618 — 6,836

Schylling, Inc.

— 9,883 — 9,883

SOG Specialty Knives & Tools, LLC — 8,197 — 8,197

Educators Resource, Inc.

Nocturne Luxury Villas, Inc.

— 6,040 — 6,040

ImageWorks Display and Marketing Group, Inc.

SFEG Holdings, Inc.

— 5,485 — 5,485

Mason West, LLC — 3,387 — 3,387

Counsel Press, Inc.

— 2,511 — 2,511

PSI Molded Plastics, Inc.

Utah Pacific Bridge & Steel, Ltd.

— 1,748 — 1,748

Nocturne Villa Rentals, Inc.

Dema/Mai Holdings, Inc.

— 1,321 — 1,321

Head Country, Inc.

Schylling, Inc.

— 1,102 — 1,102

Channel Technologies Group, LLC (1,841) — 1,841 —

The Maids International, LLC — (881) — (881)

The Mountain Corporation — (1,045) — (1,045)

Mason West, LLC — (2,221) — (2,221)

Pioneer Square Brands, Inc.

PSI Molded Plastics, Inc.

— (1,726) — (1,726)

Educators Resource, Inc.

— (1,807) — (1,807)

Galaxy Technologies Holdings, Inc.

— (3,481) — (3,481)

Ginsey Home Solutions, Inc.

— (4,787) — (4,787)

SFEG Holdings, Inc.

Edge Adhesives Holdings, Inc.

— (4,817) — (4,817)

Galaxy Technologies Holdings, Inc.

ImageWorks Display and Marketing Group, Inc.

— (5,479) — (5,479)

The Mountain Corporation (10,000) (5,590) 10,000 (5,590)

Bassett Creek Services, Inc.

5,188 — (12,250) (7,062)

B+T Group Acquisition, Inc.

— (13,480) — (13,480)

- Atlanta, LLC — (18,510) — (18,510)

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Total $ 10,753 $ (9,971) $ (2,264) $ (1,482)

(A) In January 2022, SBS Industries Holdings, Inc.

was renamed SFEG Holdings, Inc.

(B) In conjunction with the September 2021 merger of Danco and Galaxy into the newly formed Galaxy Technologies Holdings, total unrealized depreciation for the year ended March 31, 2022 includes the net unrealized appreciation (depreciation) for Danco and Galaxy prior to the merger.

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Year Ended March 31, 2022

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Depreciation Net Gain

Pioneer Square Brands, Inc.

Brunswick Bowling Products, Inc.

$ — $ 20,470 $ — $ 20,470

Bassett Creek Services, Inc.

— 17,994 — 17,994

Old World Christmas, Inc.

— 17,594 — 17,594

SOG Specialty Knives & Tools, LLC — 6,364 — 6,364

Educators Resource, Inc.

B+T Group Acquisition, Inc.

— 16,885 — 16,885

Frontier Packaging, Inc.

Horizon Facilities Services, Inc.

— 14,144 — 14,144

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— 9,883 — 9,883

Head Country, Inc.

— 2,974 — 2,974

Ginsey Home Solutions, Inc.

SOG Specialty Knives & Tools, LLC — 8,197 — 8,197

Educators Resource, Inc.

— 8,058 — 8,058

Diligent Delivery Systems — 1,877 — 1,877

ImageWorks Display and Marketing Group, Inc.

— 6,586 — 6,586

Horizon Facilities Services, Inc.

Cambridge Sound Management, Inc.

Alloy Die Casting Co.

Mason West, LLC — (1,432) — (1,432)

Galaxy Tool Holding Corporation — (1,528) — (1,528)

Counsel Press, Inc.

— 4,027 — 4,027

PSI Molded Plastics, Inc.

— 3,633 — 3,633

Nocturne Luxury Villas, Inc.

— 3,623 — 3,623

Head Country, Inc.

3,627 — (2,469) 1,158

Channel Technologies Group, LLC (1,841) — 1,841 —

The Maids International, LLC — (881) — (881)

The Mountain Corporation — (1,045) — (1,045)

Nth Degree Investment Group, LLC 113 (3,649) — (3,536)

D.P.M.S., Inc.

Mason West, LLC — (2,221) — (2,221)

Pioneer Square Brands, Inc.

21,939 (1,245) (25,425) (4,731)

SBS Industries Holdings, Inc.

Ginsey Home Solutions, Inc.

— (5,287) — (5,287)

Brunswick Bowling Products, Inc.

SFEG Holdings, Inc.

— (5,376) — (5,376)

Other, net (<$1.0 million, net ) 551 172 (11) 712

Galaxy Technologies Holdings, Inc.

— (9,587) — (9,587)

- Atlanta, LLC (10,000) (4,709) 800 (13,909)

Other, net (<$1.0 million, net ) 717 (661) 53 109

Total $ 14,442 $ 100,082 $ (25,200) $ 89,324

(A) In January 2022, SBS Industries Holdings, Inc.

was renamed SFEG Holdings, Inc.

Net Realized Gain (Loss) on Investments

During the year ended March 31, 2022, we recorded net realized gains on investments of $14.4 million, primarily due to a $21.9 million realized gain from the exit of Pioneer, a $3.6 million realized gain from the exit of Head Country and $0.7 million realized gains related to prior period exits, partially offset by a $10.0 million realized loss recognized on the restructuring of the first lien term loan to J.R.

Hobbs and a $1.8 million realized loss from the dissolution of CTG.

During the year ended March 31, 2021, we recorded net realized gains on investments of $11.4 million, primarily related to a $14.3 million realized gain from the exit of Frontier, a $3.5 million realized gain from the recapitalization of Old World, and gains from previous exits, partially offset by an $8.5 million realized loss related to the partial write-off of a debt investment in SBS Industries.

During the year ended March 31, 2023, we recorded net realized gains on investments of $10.8 million, primarily due to a $13.4 million realized gain from the recapitalization of Old World, $5.2 million of realized gains from the exit of Bassett Creek, and a $2.2 million realized gain from the recapitalization of Horizon.

These amounts were partially offset by the $10.0 million realized loss recognized in conjunction with the replacement of our existing investment in The Mountain.

During the year ended March 31, 2022, we recorded net realized gains on investments of $14.4 million, primarily due to a $21.9 million realized gain from the exit of Pioneer Square Brands, Inc., a $3.6 million realized gain from the exit of Head Country, Inc.

and $0.7 million in realized gains related to prior period exits, partially offset by a $10.0 million realized loss recognized on the restructuring of the first lien term loan to J.R.

Hobbs and a $1.8 million realized loss from the dissolution of Channel Technologies Group, LLC.

Net Realized Gain (Loss) on Other

During the year ended March 31, 2023, there were no realized gains or losses on other.

During the year ended March 31, 2022, we recorded a net realized loss on other of $2.0 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our then outstanding Series E Term Preferred Stock in August 2021.

Net Unrealized Appreciation (Depreciation) of Investments

Net unrealized depreciation of investments of $12.2 million for the year ended March 31, 2023 was primarily due to the net unrealized depreciation across our portfolio, as well as the reversal of unrealized appreciation of our investment in Bassett Creek upon its exit, partially offset by the reversal of unrealized depreciation of our investment in The Mountain upon the replacement of our existing investment.

The net depreciation was driven primarily by decreased performance of certain of our other portfolio companies and decreased comparable transaction multiples used to estimate the fair value of certain of our portfolio companies.

These decreases were partially offset by increased performance of certain of our portfolio companies, driven partially by the reversal of the impact of COVID-19 on certain of our portfolio companies and the markets in which they operate.

Net unrealized appreciation of investments of $74.9 million for the year ended March 31, 2022 was primarily due to increased performance of certain of our portfolio companies, driven partially by the reversal of the impact of COVID-19 on certain of our portfolio companies and the markets in which they operate, increased comparable multiples used to estimate the fair value of certain of our portfolio companies and the reversal of previously recorded unrealized depreciation of our investments in CTG upon its dissolution.

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In part, the performance of certain of our portfolio companies was driven by the impact COVID-19, and its variants, has had or is expected to have on our portfolio companies and the markets in which they operate, including government restrictions on the portfolio companies’ ability to operate under historical conditions, current and future shutdowns and reopening restrictions, operating challenges, including but not limited to, labor shortages, supply chain delays, increased material costs and demand for their products, and general economic outlook, or the reversal of such impact towards pre-COVID-19 levels.

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Net unrealized appreciation of investments of $13.9 million for the year ended March 31, 2021 was primarily due to increased performance of certain of our portfolio companies and an increase in comparable multiples used to estimate the fair value of a majority of our portfolio companies, partially offset by the reversal of previously recorded unrealized appreciation upon the exit of Frontier and a decrease in performance of certain of our other portfolio companies.

The decrease in the performance of a limited number of our portfolio companies was driven by the continued impact COVID-19, and its variants, has had or is expected to have on those portfolio companies and the markets in which they operate, including government restrictions on the portfolio companies’ ability to operate under historical conditions, shutdowns, demand for products, and general economic outlook.

Across our entire investment portfolio, we recorded $70.3 million of net unrealized appreciation on our equity investments and $4.6 million of net unrealized appreciation on our debt investments for the year ended March 31, 2022.

At March 31, 2022, the fair value of our investment portfolio was more than our cost basis by $45.1 million, compared to March 31, 2021, when the fair value of our investment portfolio was less than our cost basis by $29.7 million.

This resulted in net unrealized appreciation of $74.9 million for the year ended March 31, 2022.

Across our entire investment portfolio, we recorded $24.8 million of net unrealized depreciation on our debt investments and $12.6 million of net unrealized appreciation on our equity investments for the year ended March 31, 2023.

At March 31, 2023, the fair value of our investment portfolio was more than our cost basis by $32.9 million, compared to March 31, 2022, when the fair value of our investment portfolio was more than our cost basis by $45.1 million.

This resulted in net unrealized depreciation of $12.2 million for the year ended March 31, 2023.

Our entire portfolio was fair valued at 104.6% of cost as of March 31, 2023.

Net Realized Gain (Loss) on Other

During the year ended March 31, 2021, we recorded a net realized loss on other of $0.8 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our Series D Term Preferred Stock in March 2021.

The comparison of the fiscal year ended March 31, 2022 to the fiscal year ended March 31, 2021 can be found in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 located within Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein.

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

LIQUIDITY AND CAPITAL RESOURCES

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We may also use cash inflows from operating activities to repay outstanding borrowings under the Credit Facility.

Net cash used in operating activities for the year ended March 31, 2023 was $4.5 million, as compared to net cash provided by operating activities of $36.6 million for the year ended March 31, 2022.

This change was primarily due to an increase in purchases of investments, partially offset by decreases in net proceeds from the sale of investments and principal repayments of investments.

Purchases of investments totaled $133.8 million during the year ended March 31, 2023, compared to $92.7 million during the year ended March 31, 2022.

Net proceeds from the sale of investments and principal repayments of investments totaled $87.8 million during the year ended March 31, 2023, compared to $101.4 million during the year ended March 31, 2022.

Net cash provided by operating activities for the year ended March 31, 2022 was $36.6 million , as compared to net cash used in operating activities of $29.7 million for the year ended March 31, 2021.

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Repayments and net proceeds from the sale of investments totaled $101.4 million during the year ended March 31, 2022 , compared to $51.8 million during the year ended March 31, 2021.

Net cash used in operating activities for the year ended March 31, 2021 was $29.7 million , as compared to net cash provided by operating activities of $35.3 million for the year ended March 31, 2020.

This change was primarily due to decreases in principal repayments of investments and net proceeds from the sale of investments and a decline in Other liabilities, principally due to $13.3 million of tax payments made related to prior year deemed distributions, partially offset by a decline in purchases of investments, and an increase in Fees due to Adviser related to the prior year payment of $8.1 million of capital gains-based incentive fees that were contractually due period over period.

Purchases of investments totaled $95.3 million during the year ended March 31, 2021 , compared to $145.4 million during the year ended March 31, 2020.

Repayments and net proceeds from the sale of investments totaled $51.8 million during the year ended March 31, 2021 , compared to $169.9 million during the year ended March 31, 2020.

As of March 31, 2023, we had equity investments in, or loans to, 25 companies with an aggregate cost basis of $720.6 million.

As of March 31, 2021, we had equity investments in, or loans to, 28 companies with an aggregate cost basis of

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$663.6 million.

As of March 31, 2022, we had equity investments in, or loans to, 26 companies with an aggregate cost basis of $669.2 million.

The following table summarizes our total portfolio investment activity for the years ended March 31, 2023 and 2022:

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Disbursements to existing portfolio companies 73,706 58,538

Unscheduled principal repayments (51,398) (20,734)

Unscheduled principal repayments (A)

(57,398) (51,398)

Net proceeds from sales of investments (35,533) (49,419)

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Ending investment portfolio, at fair value $ 753,543 $ 714,396

(A) The year ended March 31, 2023 includes $5.1 million of non-cash principal repayments related to the August 2022 refinancing at Ginsey.

The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31, 2023:

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2024 $ 81,218

Thereafter 1,500

Total contractual repayments $ 555,597

Adjustments to cost basis of debt investments (12)

Investments in equity securities 165,033

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Financing Activities

Net cash used in financing activities for the year ended March 31, 2023 was $6.7 million, which consisted primarily of $47.1 million in distributions to common stockholders and $0.3 million of deferred financing and offering costs, partially offset by $35.2 million of net borrowings on our Credit Facility and $5.4 million of proceeds from the issuance of common stock under the Common Stock ATM Program, net of discounts, commissions, and offering costs.

Net cash used in financing activities for the year ended March 31, 2022 was $24.5 million, which consisted primarily of the redemption of our Series E Term Preferred Stock of $94.4 million, $38.9 million in distributions to common stockholders, $22.4 million of net repayments on our Credit Facility, and $3.4 million of deferred financing and offering costs, partially offset by $134.6 million in gross proceeds from the issuance of our 2028 Notes.

Net cash provided by financing activities for the year ended March 31, 2021 was $28.1 million, which consisted primarily of the $127.9 million in gross proceeds from the issuance of our 2026 Notes, $19.3 million of gross proceeds from the issuance of mandatorily redeemable preferred stock under the Series E ATM program, and $1.7 million of net proceeds from the issuance of common stock under the Common Stock ATM Program, partially offset by the redemption of our Series D Term Preferred Stock of $57.5 million, $30.9 million in distributions to common stockholders, $26.8 million of net repayments on our Credit Facility, and $5.7 million of deferred financing and offering costs.

Distributions and Dividends to Stockholders

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Additionally, the Credit Facility generally restricts the amount of distributions to stockholders that we can pay out to be no greater than the sum of certain amounts, including our net investment income, plus net capital gains, plus amounts elected by the Company to be considered as having been paid during the prior fiscal year in accordance with Section 855(a) of the Code.

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accordance with these requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.07 per common share for each of the six months from April 2021 through September 2021, monthly cash distributions of $0.075 per common share for each of the six months from October 2021 through March 2022, and supplemental distributions of $0.06, $0.03, $0.09, and $0.12 per common share in June 2021, September 2021, December 2021 and February 2022, respectively.

In accordance with these requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.075 per common share for each of the six months from April 2022 through September 2022, monthly cash distributions of $0.08 per common share for each of the six months from October 2022 through March 2023, and supplemental distributions of $0.12, $0.12, and $0.24 per common share in June 2022, December 2022 and March 2023, respectively.

See also “ Recent Developments - Distributions and Dividends ” for a discussion of cash distributions to common stockholders declared by our Board of Directors in April 2023.

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In addition, for each of the fiscal years ended March 31, 2023 and 2022, net capital gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $10.6 million and $15.7 million, respectively, of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year.

For the year ended March 31, 2023, we recorded $1.6 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and increased Overdistributed net investment income and Accumulated net realized gain in excess of distributions.

For the year ended March 31, 2022, we recorded $2.8 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and Underdistributed net investment income and increased Accumulated net realized gain in excess of distributions.

For the year ended March 31, 2021, we recorded $2.0 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of distributions and increased Underdistributed net investment income.

Preferred Stock Dividends

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Computershare purchases shares in the open market in connection with the obligations under the plan.

The Computershare dividend reinvestment plan is not open to holders of our preferred stock.

Registration Statement

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As of the date of this report, we have the ability to issue up to $294.5 million of the securities registered under the registration statement.

In December 2019, we entered into equity distribution agreements with Wedbush Securities, Inc., Cantor Fitzgerald & Co., and Ladenburg Thalmann & Co., Inc.

(each, a “Common Stock ATM Sales Agent”), under which we had the ability to issue and sell shares of our common stock, from time to time, through the Common Stock Sales Agents, up to an aggregate offering price of $35.0 million in the Common Stock ATM Program.

On August 11, 2021, we terminated the equity distribution agreements with each of the Common Stock ATM Sales Agents.

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We did not sell any shares of our common stock under the Common Stock ATM Program during the year ended March 31, 2022.

In August 2022, we entered into equity distribution agreements with Oppenheimer & Co.

and Virtu Americas LLC (each a “Sales Agent”), under which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of $50.0 million in our Common Stock ATM Program.

As of March 31, 2023, we had remaining capacity to sell up to an additional $44.5 million of common stock under the Common Stock ATM Program.

During the year ended March 31, 2023, we sold 386,482 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of $14.21 per share and raised approximately $5.5 million of gross proceeds.

The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $14.01 and resulted in total net proceeds of approximately $5.4 million.

These sales were above our then current estimated NAV per share.

These sales were above our then current NAV per share.

In December 2019, we entered into equity distribution agreements with Wedbush Securities, Inc., Cantor Fitzgerald & Co., and Ladenburg Thalmann & Co., Inc.

(each, a “2019 Sales Agent”), under which we had the ability to issue and sell shares of our common stock, from time to time, through the 2019 Sales Agents, up to an aggregate offering price of $35.0 million in an at-the-market program (the "2019 Common Stock ATM Program").

On August 11, 2021, we terminated the equity distribution agreements with each of the 2019 Sales Agents.

We did not sell any shares of our common stock under the 2019 Common Stock ATM Program during the year ended March 31, 2022.

We anticipate issuing equity securities to obtain additional capital in the future.

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Prior to actual redemption in August 2021, the Series E Term Preferred Stock provided for a fixed dividend equal to 6.375% per year, payable monthly.

In May 2020, we entered into sales agreements with Wedbush Securities, Inc.

and Virtu Americas LLC (each a “Series E ATM Sales Agent”), under which we had the ability to issue and sell shares of our Series E Term Preferred Stock, from time to time, through the Series E ATM Sales Agents, up to $50.0 million aggregate liquidation preference in the Series E ATM Program.

On August 10, 2021, we terminated our sales agreements with each of the Series E ATM Sales Agents.

We did not sell any shares of our Series E Term Preferred Stock under the Series E ATM Program during the year ended March 31, 2022.

During the year ended March 31, 2021, we sold 784,853 shares of our Series E Term Preferred Stock under the Series E ATM Program with an aggregate liquidation preference of $19.6 million.

The weighted-average gross price per share net of discounts was $24.56 and resulted in gross proceeds of approximately $19.3 million.

After deducting commissions and offering costs borne by us, net proceeds totaled approximately $19.1 million.

In March 2021, we used a portion of the proceeds from the issuance of our 2026 Notes, to voluntarily redeem all outstanding shares of our Series D Term Preferred Stock, which had a liquidation preference of $25.00 per share.

In connection with the voluntary redemption, we incurred a loss on extinguishment of debt of $0.8 million, which was recorded in Realized loss on other in our accompanying Consolidated Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of redemption.

Prior to redemption in March 2021, the Series D Term Preferred Stock provided for a fixed dividend equal to 6.25% per year, payable monthly.

In August 2021, we used a portion of the proceeds from the issuance of our 2028 Notes to voluntarily redeem all outstanding shares of our Series E Term Preferred Stock, which had a liquidation preference of $25.00 per share.

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On March 8, 2021, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No.

6 to the Fifth Amended and Restated Credit Agreement, originally entered into on April 30, 2013, with KeyBank National Association (“KeyBank”) as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto.

The revolving period was extended to February 29, 2024, and if not renewed or extended by such date, all principal and interest will be due and payable on February 28, 2026 (two years after the revolving period end date).

As of March 31, 2022, the Credit Facility provided a one-year extension option that may be

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exercised on or before the second anniversary of March 8, 2021, subject to approval by all lenders.

Additionally, as part of this amendment, the COVID-19 Relief Period (described below) was extended to September 30, 2021.

We incurred fees of approximately $1.0 million in connection with this amendment.

6 to the Credit Facility, to extend the revolving period to February 29, 2024, and if not renewed or extended by such date, all principal and interest will be due and payable on February 28, 2026.

On August 10, 2020, we, through Business Investment, entered into Amendment No.

5 to the Credit Facility.

Among other things, Amendment No.

5 amended the Credit Facility to (i) add LIBOR replacement language;

5 to the Credit Facility to, among other things, (i) add LIBOR replacement language;

(ii) implement a 0.50% LIBOR floor;

(iii) reduce the facility size from $200.0 million to $180.0 million, which may be expanded to $300.0 million through additional commitments;

and (iv) provide certain other changes to existing terms and covenants.In addition, Amendment No.

5 provided for certain temporary changes during the COVID-19 Relief Period (initially August 10, 2020 until March 31, 2021) including:

(i) amending the definition of “Effective Advance Rate,” provided that during such period the overall effective advance rate does not exceed 55%;

and (ii) removing or changing certain “Excess Concentration Limits” (as defined in the Credit Facility).

and (iv) provide certain other changes to existing terms and covenants.

Advances under the Credit Facility generally bear interest at 30-day LIBOR, subject to a floor of 0.50%, plus 2.85% per annum until February 29, 2024, with the margin then increasing to 3.10% for the period from February 29, 2024 to February 28, 2025, and increasing further to 3.35% thereafter.

The Credit Facility has an unused commitment fee on the daily unused commitment amount of 0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the average unused commitment amount for the period is greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment amount.

Subsequent to March 31, 2023, on April 10, 2023, we, through Business Investment, entered into Amendment No.

7 to the Credit Facility to update the reference rate from LIBOR to Term SOFR plus an 11 basis point credit spread adjustment.

Interest is payable monthly during the term of the Credit Facility.

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The Credit Facility also requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base.

Additionally, the Credit Facility contains a performance guarantee that requires the Company to maintain (i) a minimum net worth of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $286.3 million as of March 31, 2022, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act);

Additionally, the Credit Facility contains a performance guaranty that requires the Company to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of the greater of $ 210.0 million or $ 210.0 million plus 50 % of all equity and subordinated debt raised minus 50 % of any equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $ 289.0 million as of March 31, 2023, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150 % (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act);

and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.

As of March 31, 2022, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $701.2 million, asset coverage on our senior securities representing indebtedness of 252.9%, calculated in accordance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC.

As of March 31, 2023, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $ 696.7 million, asset coverage on our senior securities representing indebtedness of 244.7 %, calculated in compliance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC.

As of March 31, 2023, we had availability, after adjustments for various constraints based on collateral quality, of $ 144.8 million under the Credit Facility and were in compliance with all covenants under the Credit Facility.

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The 2026 Notes are traded under the ticker symbol “GAINN” on Nasdaq.

The 2026 Notes will mature on May 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option

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on or after May 1, 2023.

The 2026 Notes will mature on May 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after May 1, 2023.

The 2026 Notes bear interest at a rate of 5.00% per year (which equates to $6.4 million per year), payable quarterly in arrears.

The indenture relating to the 2026 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 2026 Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.

as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.

The 2026 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities .

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CONTRACTUAL OBLIGATIONS

We have line of credit and delayed draw term loan commitments to certain of our portfolio companies that have not been fully drawn.

Since these line of credit and delayed draw term loan commitments have expiration dates and we expect many will never be fully drawn, the total line of credit and delayed draw term loan commitment amounts do not necessarily represent future cash requirements.

We estimate the fair value of the combined unused line of credit and delayed draw term loan commitments as of March 31, 2022 to be immaterial.

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In February 2022, we extended a guaranty on behalf of one of our portfolio companies, J.R.

Hobbs, whereby we have guaranteed 50% of their obligations with another lender, with a maximum amount of $9.3 million.

In addition, as of March 31, 2022, we also have a guaranty on behalf of our portfolio company Country Club Enterprises, LLC, whereby we have guaranteed $1.0 million of obligations.

As of March 31, 2022, we have not been required to make payments on these or any previous guaranties, and we consider the credit risks to be remote and the fair value of these guaranties to be immaterial.

The following table shows our contractual obligations as of March 31, 2022, at cost/liquidation preference:

We have line of credit commitments to certain of our portfolio companies that have not been fully drawn.

Since these line of credit commitments have expiration dates and we expect many will never be fully drawn, the total line of credit commitment amounts do not necessarily represent future cash requirements.

We estimate the fair value of the combined unused line of credit commitments as of March 31, 2023 to be insignificant.

In conjunction with the term loan repayment by CCE in November 2022, our previously outstanding $1.0 million guaranty was released and terminated.

We were not required to make any payments on this guaranty, or any guaranties that existed in previous periods.

The following table shows our contractual obligations as of March 31, 2023, at cost:

Payments Due by Period

Contractual Obligations(A) Total Less than

Contractual Obligations (A)

Total Less than

1 Year 1-3 Years 3-5 Years More than

Credit Facility (B)

$ 35,200 $ — $ 35,200 $ — $ —

Notes payable 262,488 — — 127,938 134,550

Secured borrowing 5,096 — 5,096 — —

Interest payments on obligations (C)

68,657 17,187 33,992 13,652 3,826

Total $ 366,345 $ 17,187 $ 69,192 $ 141,590 $ 138,376

(A) Excludes unused line of credit and delayed draw term loan commitments and guaranties to our portfolio companies in the aggregate principal amount of $14.5 million.

(A) Excludes unused line of credit commitments to our portfolio companies in the aggregate principal amount of $2.2 million.

(B) Principal balance of borrowings outstanding under the Credit Facility, based on the maturity date following the current contractual revolving period end date.

The amount of interest payments calculated for purposes of this table was based upon rates and outstanding balances as of March 31, 2023.

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While the Adviser seeks to mirror the NRSRO systems, we cannot provide any assurance that the Adviser’s risk rating system will provide the same risk rating as an NRSRO for these securities.

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Adviser’s risk rating system is used to estimate the probability of default on debt securities and the expected loss, if there is a default.

The Adviser’s risk rating system is used to estimate the probability of default on debt securities and the expected loss, if there is a default.

The Adviser’s risk rating system uses a scale of 0 to >10, with >10 being the lowest probability of default.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis