What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-05-08 compared with 2023-05-10 · 169 added, 179 removed, 335 unchanged (51% of the section changed)

4 unchanged sentences

We were incorporated under the General Corporation Law of the State of Delaware on February 18, 2005.

On June 22, 2005, we completed our initial public offering and commenced operations.

We operate as an externally managed, closed-end, non-diversified management investment company and have elected to be treated as a BDC under the 1940 Act.

7 unchanged sentences

To achieve our objectives, our investment strategy is to invest in several categories of debt and equity securities, with individual investments generally totaling up to $75 million, although investment size may vary, depending upon our total assets or available capital at the time of investment.

We expect that our investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost.

As of March 31, 2023, our investment portfolio was comprised of 77.1% in debt securities and 22.9% in equity securities, at cost.

We expect that our investment portfolio over time will consist of approximately 75% in debt investments and 25% in equity investments, at cost.

As of March 31, 2024, our investment portfolio was comprised of 77.0% in debt investments and 23.0% in equity investments, at cost.

We focus on investing in Lower Middle Market businesses in the U.S.

2 unchanged sentences

We anticipate that liquidity in our equity position will be achieved through a merger or acquisition of the portfolio company, a public offering of the portfolio company’s stock or, to a lesser extent, by exercising our right to require the portfolio company to repurchase our warrants, though there can be no assurance that we will always have these rights.

We invest in portfolio companies that need funds for management buyouts and/or growth capital to finance acquisitions, recapitalize or, to a lesser extent, refinance their existing debt facilities.

We invest in portfolio companies that seek funds for management buyouts and/or growth capital to finance acquisitions, recapitalize or, to a lesser extent, refinance their existing debt facilities.

We seek to avoid investing in high-risk, early-stage enterprises.

Our targeted portfolio companies are generally considered too small for the larger capital marketplace.

We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity, and have opportunistically made several co-investments with Gladstone Capital pursuant to the Co-Investment Order.

1 unchanged sentence

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.

Portfolio Activity

Portfolio and Investment 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, 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.

During the year ended March 31, 2024, we invested in two new portfolio companies and exited three portfolio companies.

From our initial public offering in June 2005 through March 31, 2024, we have invested in 58 companies, excluding investments in syndicated loans, for a total of approximately $1.7 billion, before giving effect to principal repayments and divestitures.

The majority of the debt securities in our portfolio have a success fee component, which enhances the yield on our debt investments.

8 unchanged sentences

The successful exits, in part, enabled us to increase the monthly distribution by 100.0% from March 2011 through March 31, 2024 and allowed us to declare and pay 22 supplemental distributions to common stockholders through March 31, 2024 .

Capital Raising Efforts

Capital Raising

We have been able to meet our capital needs through extensions of and increases to the Credit Facility and by accessing the capital markets in the form of public offerings of unsecured notes, as well as common and preferred stock.

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.

We have successfully extended the Credit Facility’s revolving period multiple times, most recently to October 2026, and currently have a total commitment amount of $200.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders).

During the year ended March 31, 2024, we issued the 8.00% 2028 Notes for gross proceeds of $74.8 million and sold 3,097,162 shares of our common stock under our "at-the-market" program (the "Common Stock ATM Program") for gross proceeds of approximately $44.5 million.

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

Refer to “ Liquidity and Capital Resources.”

3 unchanged sentences

Regulatory Compliance

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).

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.

4 unchanged sentences

During the fiscal year ended March 31, 2024, the following significant transactions occurred:

• 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.

• 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.

• In May 2023, we invested $15.3 million in a new portfolio company, Home Concepts Acquisition, Inc.

("Home Concepts"), in the form of $12.0 million of secured first lien debt and $3.3 million of preferred equity.

Home Concepts, headquartered in Santa Barbara, California, is a leading home improvement advertising publication focusing on connecting homeowners to high-quality residential repair and remodeling businesses.

• In June 2023, we recapitalized our existing investment in Old World and invested an additional $2.5 million in the form of secured first lien debt.

In connection with this investment, we received proceeds of $2.2 million, of which $1.9 million was recognized as dividend income and $0.3 million was recognized as a realized gain.

• In June 2023, we invested an additional $30.0 million in the form of $25.0 million of secured second lien debt and $5.0 million of common equity in Nth Degree Investment Group, LLC to fund an add-on acquisition.

• In June 2023, we received a $1.5 million escrow settlement in connection with our December 2021 exit of SOG Specialty Knives & Tools, LLC, of which $0.6 million was recognized as a return of cost basis and $0.9 million as a realized gain.

As a result of the escrow release, there are no remaining assets held by Gladstone SOG Investments, Inc.

• In August 2023, we invested an additional $18.7 million in the form of secured first lien debt in Nocturne to fund an add-on acquisition.

• In September 2023, we invested $46.0 million in a new portfolio company, The E3 Company, LLC ("E3"), in the form of $34.8 million of secured first lien debt and $11.2 million of preferred equity.

E3, headquartered in Kilgore, Texas, is a market leader in advanced pressure management solutions for oil and gas well completions.

• In October 2023, we invested an additional $64.7 million in the form of $39.0 million of secured second lien debt and $25.7 million of common equity in SFEG to fund an add-on acquisition.

In connection with the investment, our existing preferred equity, with a cost basis of $4.8 million, was converted to common equity.

• In October 2023, we exited our investment in Counsel Press, Inc.

("Counsel Press"), which resulted in success fee income of $1.4 million, a realized gain of $43.5 million and the repayment of our debt investment of $27.5 million at par.

• In March 2024, we recognized a $14.7 million realized loss on our preferred and common equity investments and the related first and second lien debt investments in The Mountain Corporation (“The Mountain”) upon the liquidation and dissolution of The Mountain.

Recent Developments

Distributions and Dividends

In April 2023, our Board of Directors declared the following monthly and supplemental cash distributions to common stockholders:

In April 2024, our Board of Directors declared the following monthly cash distributions to common stockholders:

Record Date Payment Date Distribution per Common Share

1 unchanged sentence

May 17, 2024 May 31, 2024 0.080

June 5, 2023 June 15, 2023 0.120 (A)

June 19, 2024 June 28, 2024 0.080

Total for the Quarter:

(A) Represents a supplemental distribution to common stockholders.

LIBOR Transition

In general, our investments in debt securities have a term of five years, accrue interest at variable rates (based on the one-month LIBOR) and, to a lesser extent, at fixed rates.

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

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.

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 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;

During the year ended March 31, 2024, general inflationary pressures and certain commodity price volatility have impacted certain of our portfolio companies to varying degrees;

however, the broad based impact of these pricing changes have largely been mitigated by price adjustments without adverse sales implications, and thus, have not materially impacted our portfolio companies’ ability to service their indebtedness, including our loans.

Notwithstanding the results to date, we do expect that the cumulative effect of these inflationary pressures may impact the profit margins or sales of certain portfolio companies and their ability to service their debts.

We continue to monitor the current inflationary environment to anticipate any impact on our portfolio companies including their availability to pay interest on our loans.

Notwithstanding the results to date, we expect that the cumulative effect of these inflationary pressures may impact the profit margins or sales of certain portfolio companies and their ability to service their debts.

We continue to monitor the current inflationary environment to anticipate any impact on our portfolio companies, including their ability to pay interest on our loans.

We cannot assure you that our results of operations and financial condition or that of our portfolio companies will not be materially impacted by inflation in the future.

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.”

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

10 unchanged sentences

Administration fee 1,789 1,811 (22) (1.2) %

Interest and dividend expense 15,877 15,384 493 3.2 %

Interest expense 24,121 15,877 8,244 51.9 %

Amortization of deferred financing costs and discounts 2,305 1,802 503 27.9 %

6 unchanged sentences

Net realized gain on investments 30,256 10,753 19,503 181.4 %

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

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 unrealized appreciation (depreciation) of investments 33,301 (12,235) 45,536 NM

Net unrealized (appreciation) depreciation of other (29) 29 (58) NM

Net realized and unrealized gain (loss), net of taxes on deemed distribution of long-term capital gains 63,528 (1,453) 64,981 NM

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 85,305 $ 35,547 $ 49,758 140.0 %

6 unchanged sentences

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 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.

Total investment income increased $5.8 million, or 7.1%, for the year ended March 31, 2024, as compared to the prior year.

This increase was primarily due to an increase in interest income, partially offset by a decrease in dividend and success fee income.

Interest income from our investments in debt securities increased $21.5 million, or 35.7%, for the year ended March 31, 2024, as compared to the prior year .

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

The weighted-average principal balance of our interest-bearing investment portfolio during the year ended March 31, 2024 was $560.8 million, compared to $464.4 million during the prior year.

This increase was primarily due to the origination of $60.7 million of new debt investments, $118.3 million of follow-on debt investments to existing portfolio companies, and $14.9 million of loans placed back on accrual status, partially offset by the pay-off, restructuring, or write-off of $108.8 million of debt investments and $73.4 million of existing loans placed on non-accrual status after March 31, 2021, and their respective impact on the weighted-average principal balance when considering the timing of new investments, pay-offs, restructurings, write-offs, and accrual status changes, as applicable.

This increase was primarily due to $158.8 million of follow-on debt investments to existing portfolio companies, the origination of $85.8 million of new debt investments, and $14.9 million of loans placed back on accrual status, partially offset by the pay-off, restructuring, or write-off of $37.4 million of debt investments and $9.2 million of existing loans placed on non-accrual status after March 31, 2022, and their respective impact on the weighted-average principal balance when considering the timing of new investments, pay-offs, restructurings, write-offs, and accrual status changes, as applicable.

The weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as other income, was 14.4% and 13.0% for the years ended March 31, 2024 and 2023, respectively.

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, 2023, we had no collections of past due interest.

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, $2.8 million from B+T Group Acquisition, Inc.

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

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%.

During the years ended March 31, 2024 and 2023, we had no collections of past due interest.

As of March 31, 2024, our loans to Edge Adhesives Holdings, Inc.

("Edge"), J.R.

("Edge") and J.R.

- Atlanta, LLC ("J.R.

Hobbs") were on non-accrual status, with an aggregate debt cost basis of $59.1 million.

As of March 31, 2023, our loans to 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, 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, 2023, dividend and success fee income consisted of $10.9 million of dividend income and $10.4 million of success fee income.

Dividend and success fee income for the year ended March 31, 2024 decreased $15.8 million, or 74.1%, as compared to the prior year.

During the year ended March 31, 2024, dividend and success fee income consisted of $3.6 million of success fee income and $1.9 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, 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.

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.

As of March 31, 2024, SFEG represented 10.1% of the total investment portfolio at fair value.

As of March 31, 2023, 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 $21.0 million, or 47.1%, for the year ended March 31, 2024, as compared to the prior year, primarily due to increases in the capital gains-based incentive fee, interest expense and base management fee, partially offset by an increase in credits to fees from Adviser, and a decrease in income-based incentive fee.

In accordance with GAAP, we recorded a capital gains-based incentive fee of $12.7 million during the year ended March 31, 2024, compared to reversal of capital gains-based incentive fee of $0.3 million during the year ended March 31, 2023.

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.

The income-based incentive fee for the year ended March 31, 2024 decreased $0.8 million, or 9.2%, as compared to the prior year, due to the increase in net assets, which increases the pre-incentive fee net investment income required to meet the hurdle rate, and the decrease in pre-incentive fee net investment income.

Base management fee for the year ended March 31, 2024 increased $2.7 million, or 18.3%, as compared to the prior year, primarily due to the increase in the average total assets subject to the base management fee as a result of a net increase in additional investments at cost and an increase in the fair value of investments.

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:

22 unchanged sentences

(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 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.

Interest expense increased $8.2 million, or 51.9%, during the year ended March 31, 2024, as compared to the prior year, primarily due to the issuance of the 8.00% 2028 Notes in May 2023 and increased borrowings on the Credit Facility, partially offset by a decrease in the effective interest rate.

The weighted-average balance outstanding on the Credit Facility during the year ended March 31, 2024 was $61.0 million, as compared to $16.2 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, 2024 was 10.1%, as compared to 17.3% in the prior year.

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

This decrease in the effective interest rate on the Credit Facility was primarily a result of a decrease in unused commitment fees, partially offset by an increase in interest rates on the drawn portion of the Credit Facility.

Other expenses decreased $0.8 million, or 15.9%, during the year ended March 31, 2024, as compared to the prior year, primarily due to a decrease in professional expenses and bad debt expense.

Realized and Unrealized Gain (Loss)

The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the years ended March 31, 2024 and 2023 were as follows:

6 unchanged sentences

Nth Degree Investment Group, LLC $ — $ 31,199 $ — $ 31,199

Brunswick Bowling Products, Inc.

— 12,484 — 12,484

Old World Christmas, Inc.

Counsel Press, Inc.

43,459 22,676 (43,566) 22,569

Horizon Facilities Services, Inc.

Brunswick Bowling Products, Inc.

— 14,789 — 14,789

Nocturne Luxury Villas, Inc.

Educators Resource, Inc.

— 12,193 — 12,193

Mason West, LLC — 8,819 — 8,819

SFEG Holdings, Inc.

— 7,812 — 7,812

Mason West, LLC — 3,387 — 3,387

Counsel Press, Inc.

Galaxy Technologies Holdings, Inc.

— 6,849 — 6,849

The E3 Company, LLC — 5,189 — 5,189

Utah Pacific Bridge & Steel, Ltd.

— 4,539 — 4,539

Dema/Mai Holdings, Inc.

Ginsey Home Solutions, Inc.

— 2,415 — 2,415

Schylling, Inc.

The Maids International, LLC — 2,226 — 2,226

Gladstone SOG Investments, Inc.

882 — (93) 789

PSI Molded Plastics, Inc.

The Mountain Corporation (14,650) — 14,650 —

Diligent Delivery Systems — (1,207) — (1,207)

Edge Adhesives Holdings, Inc.

— (1,350) — (1,350)

Educators Resource, Inc.

Home Concepts Acquisition, Inc.

— (2,037) — (2,037)

Galaxy Technologies Holdings, Inc.

Old World Christmas, Inc.

273 (3,352) — (3,079)

Ginsey Home Solutions, Inc.

Nocturne Luxury Villas, Inc.

— (3,998) — (3,998)

Edge Adhesives Holdings, Inc.

PSI Molded Plastics, Inc.

— (4,529) — (4,529)

ImageWorks Display and Marketing Group, Inc.

Schylling, Inc.

— (7,553) — (7,553)

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

Bassett Creek Services, Inc.

ImageWorks Display and Marketing Group, Inc.

— (8,319) — (8,319)

1 unchanged sentence

— (10,921) — (10,921)

- Atlanta, LLC — (18,510) — (18,510)

Horizon Facilities Services, Inc.

— (12,344) — (12,344)

Other, net (<$1.0 million, net ) 292 (786) — (494)

6 unchanged sentences

Depreciation Net Gain

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

Brunswick Bowling Products, Inc.

— 12,484 — 12,484

Bassett Creek Services, 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 Luxury Villas, 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)

1 unchanged sentence

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.

Net Realized Gain (Loss) on Investments

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.

During the year ended March 31, 2024, we recorded net realized gains on investments of $30.3 million, primarily due to a $43.5 million realized gain from the exit of Counsel Press, $1.2 million of realized gains related to certain prior period exits and $0.3 million of realized gain from the recapitalization of Old World.

These amounts were partially offset by the $14.7 million realized loss recognized from the dissolution and liquidation of The Mountain.

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 Services, Inc., and a $2.2 million realized gain from the recapitalization of Horizon Facilities Services, Inc.

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.

Net unrealized appreciation of investments of $33.3 million for the year ended March 31, 2024 was primarily due to the net unrealized appreciation across our portfolio, as well as the reversal of unrealized depreciation of our investment in The Mountain upon its exit.

These amounts were partially offset by the reversal of unrealized appreciation of our investment in Counsel Press upon its exit.

The net appreciation was driven primarily by increased performance of certain of our portfolio companies, partially offset by decreased comparable transaction multiples used to estimate the fair value of certain of our portfolio companies.

Net unrealized appreciation 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.

These amounts were partially offset by the reversal of previously recorded unrealized appreciation of our investment in Pioneer and Head Country upon exit and the decreased performance of certain of our portfolio companies.

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.

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.

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.

Across our entire investment portfolio, we recorded $35.8 million of net unrealized appreciation on our equity investments and $2.5 million of net unrealized depreciation on our debt investments for the year ended March 31, 2024.

As of March 31, 2024, the fair value of our investment portfolio was more than our cost basis by $66.2 million, compared to March 31, 2023, when the fair value of our investment portfolio was more than our cost basis by $32.9 million.

This resulted in net unrealized appreciation of $33.3 million for the year ended March 31, 2024.

Our entire portfolio was fair valued at 107.8% of cost as of March 31, 2024.

4 unchanged sentences

Cash inflows from operating activities are primarily generated from cash collections of interest and other income from our portfolio companies, as well as from cash proceeds received from repayments of debt investments and from sales of equity investments.

These cash collections are principally used to fund new investments, pay distributions to our common stockholders, make interest payments on our Credit Facility, 2026 Notes and 2028 Notes, pay management and incentive fees to the Adviser and other operating expenses.

These cash collections are principally used to fund new investments, pay distributions to our common stockholders, make interest payments on our Credit Facility, 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes, pay management and incentive fees to the Adviser and other operating expenses.

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.

Net cash used in operating activities for the year ended March 31, 2024 was $69.9 million, as compared to net cash used in operating activities of $4.5 million for the year ended March 31, 2023.

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

Purchases of investments totaled $183.9 million during the year ended March 31, 2024, compared to $133.8 million during the year ended March 31, 2023.

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.

This change was primarily due to increases in principal repayments of investments and net proceeds from the sale of investments and a decline in purchase of new investments.

Net proceeds from the sale and recapitalization of investments and principal repayments of investments totaled $80.2 million during the year ended March 31, 2024, compared to $87.8 million during the year ended March 31, 2023.

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.

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.

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.

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

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

As of March 31, 2024, we had equity investments in and/or loans to 24 companies with an aggregate cost basis of $854.3 million.

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

The following table summarizes our total portfolio investment activity for the years ended March 31, 2024 and 2023:

15 unchanged sentences

2025 $ 72,770

Thereafter 25,000

Total contractual repayments $ 658,383

2 unchanged sentences

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, 2024 was $69.9 million, which consisted primarily of $74.8 million of gross proceeds from the issuance of the 8.00% 2028 Notes, $43.9 million of proceeds from the issuance of common stock under the Common Stock ATM Program, net of expenses and shelf offering registration costs, and $31.8 million of net borrowings on our Credit Facility, partially offset by $76.1 million in distributions to common stockholders and $4.5 million of deferred financing and offering costs.

Distributions and Dividends to Stockholders

2 unchanged sentences

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.

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.

In accordance with these requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.08 per common share for each of the twelve months from April 2023 through March 2024, and supplemental distributions of $0.12 per common share in June, September, and November 2023 and $0.88 per common share in December 2023.

See also “ Recent Developments - Distributions and Dividends ” for a discussion of cash distributions to common stockholders declared by our Board of Directors in April 2024.

1 unchanged sentence

In addition, for each of the fiscal years ended March 31, 2024 and 2023, net capital gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $1.4 million and $10.6 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, 2024, we recorded $0.8 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which increased Overdistributed net investment income and decreased Accumulated net realized gain in excess of distributions and Capital in excess of par value.

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.

Preferred Stock Dividends

12 unchanged sentences

Registration Statement

On February 28, 2024, we filed a registration statement on Form N-2 (File No.

333-277452), which the SEC declared effective on April 18, 2024.

The registration statement permits us to issue, through one or more transactions, up to an aggregate of $450.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities.

As of the date of this report, we have the ability to issue up to $450.0 million of securities under the registration statement.

On September 3, 2021, we filed a registration statement on Form N-2 (File No.

333-259302), which the SEC declared effective on October 15, 2021.

The registration statement permits us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities.

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.

The registration statement permited us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities.

As of March 31, 2024, we had the ability to issue up to $175.3 million of the securities registered under the registration statement.

This registration statement was terminated on April 18, 2024.

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.

In August 2023, we entered into an equity distribution agreement with B.

Riley Securities, Inc.

and entered into amendments to the agreements with Oppenheimer & Co.

and Virtu Americas LLC in order to add B.

Riley Securities, Inc.

as a Sales Agent for the Common Stock ATM Program.

As of March 31, 2024, we had no remaining capacity under the Common Stock ATM Program.

During the year ended March 31, 2024, we sold 3,097,162 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of $14.37 per share and raised approximately $44.5 million of gross proceeds.

1 unchanged sentence

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.

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 NAV per share.

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

3 unchanged sentences

On March 31, 2024, the closing market price of our common stock was $14.23 per share, representing a 6.0% premium to our NAV of $13.43 per share as of March 31, 2024.

Term Preferred Stock

In August 2018, we completed a public offering of 2,990,000 shares of our Series E Term Preferred Stock at a public offering price of $25.00 per share.

Gross proceeds totaled $74.8 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $72.1 million.

Total underwriting discounts and offering costs related to this offering were $2.7 million, which have been recorded as discounts to the liquidation value on our accompanying Consolidated Statements of Assets and Liabilities and were amortized over the period ending August 31, 2025, the mandatory redemption date, prior to redemption in August 2021.

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 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.

In connection with the voluntary redemption, we incurred a loss on extinguishment of debt of $2.0 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.

Revolving Line of Credit

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

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 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.

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.

On February 5, 2024, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No.

9 to the Credit Facility with KeyBank National Association ("KeyBank"), as administrative agent, joint lead arranger and lender, Fifth Third Bank as managing agent, joint lead arranger and lender, the Adviser, as servicer, and certain other lenders party thereto.

The Credit Facility was amended to increase the size from $135.0 million to $200.0 million and update certain existing terms.

The Credit Facility continues to include customary terms, covenants, events of default and constraints on borrowing availability based on collateral tests for a credit facility of its size and nature.

Previously, on October 30, 2023, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No.

8 to the Credit Facility with KeyBank, as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto.

Among other things, the revolving period was extended to October 30, 2026, and if not renewed or extended by such date, all principal and interest will be due and payable by October 30, 2028 (two years after the revolving period end date).

Advances under the Credit Facility generally bear interest at 30-day Term SOFR, subject to a floor of 0.35%, plus 3.15% per annum until October 30, 2026, with the margin then increasing to 3.40% for the period from October 30, 2026 to October 30, 2027, and increasing further to 3.65% thereafter with a SOFR credit spread adjustment of 10 basis points.

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

total commitment amount, and 1.00% per annum if the daily unused commitment amount is greater than 65% of the total commitment amount.

The size of the Credit Facility was reduced from $180.0 million to $135.0 million.

Previously, on April 10, 2023, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No.

7 to the Credit Facility with KeyBank as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto.

The reference rate was updated from LIBOR to Term SOFR plus an 11 basis point credit spread adjustment.

At March 31, 2024, we had $67.0 million of borrowings outstanding on the Credit Facility and as of the date of this report, we had $65.1 million outstanding under the Credit Facility.

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

14 unchanged sentences

The 5.00% 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 on or after May 1, 2023.

The 5.00% 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.

The 5.00% 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.

The indenture relating to the 5.00% 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 5.00% 2026

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

The 5.00% 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 .

3 unchanged sentences

The 4.875% 2028 Notes are traded under the ticker symbol “GAINZ” on Nasdaq.

The 2028 Notes will mature on November 1, 2028 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 November 1, 2023.

The 4.875% 2028 Notes will mature on November 1, 2028 and may be redeemed in whole or in part at any time or from time to time at the Company’s option.

The 4.875% 2028 Notes bear interest at a rate of 4.875% per year (which equates to $6.6 million per year), payable quarterly in arrears.

2 unchanged sentences

Total underwriting discounts, commissions, and offering costs related to this offering were $3.3 million , which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending November 1, 2028, the maturity date.

8.00% Notes due 2028

In May 2023, we completed a public offering of the 8.00% 2028 Notes with an aggregate principal amount of $74.8 million, which resulted in net proceeds of approximately $72.3 million after deducting underwriting discounts, commissions and offering costs borne by us.

The 8.00% 2028 Notes are traded under the ticker symbol “GAINL” on Nasdaq.

The 8.00% 2028 Notes will mature on August 1, 2028 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 August 1, 2025.

The 8.00% 2028 Notes bear interest at a rate of 8.00% per year (which equates to $6.0 million per year), payable quarterly in arrears.

The indenture relating to the 8.00% 2028 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 8.00% 2028 Notes and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.

The 8.00% 2028 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities .

Total underwriting discounts, commissions, and offering costs related to this offering were $2.5 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending August 1, 2028, the maturity date.

OFF-BALANCE SHEET ARRANGEMENTS

7 unchanged sentences

We estimate the fair value of the combined unused line of credit commitments as of March 31, 2024 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, 2024, at cost:

11 unchanged sentences

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

(C) Includes interest payments due on the Credit Facility, 5.00% 2026 Notes, 4.875% 2028 Notes, and 8.00% 2028 Notes, as applicable.

The amount of interest payments calculated for purposes of this table was based upon rates and outstanding balances as of March 31, 2024.

40 unchanged sentences

Under the RIC Modernization Act, we are permitted to carryforward any capital losses that we may incur for an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses.

Our capital loss carryforward balance was $0 as of both March 31, 2023 and 2022 .

Our capital loss carryforward balance was $0 as of March 31, 2024 and 2023 .

Recent Accounting Pronouncements

1 unchanged sentence

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