What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-12 compared with 2024-11-07 · 217 added, 186 removed, 426 unchanged (49% of the section changed)

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(2) risks associated with negotiation and consummation of pending and future transactions;

(3) the loss of one or more of our executive officers, in particular David Gladstone, David Dullum, or Terry Lee Brubaker;

(3) the loss of one or more of our executive officers, in particular David Gladstone or David D ullum;

( 4) changes in our investment objectives and strategy;

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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 September 30, 2024, our investment portfolio was comprised of 77.4% in debt investments and 22.6% in equity investments, at cost.

As of December 31, 2024, our investment portfolio was comprised of 76.3% in debt investments and 23.7% in equity investments, at cost.

We focus on investing in lower middle market private businesses (which we generally define as companies with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $4 million to $15 million) (“Lower Middle Market”) in the U.S.

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We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity.

In July 2012, the SEC granted us an exemptive order (the “Co-Investment Order”) that expanded our ability to co-invest, under certain circumstances, with certain of our affiliates, including Gladstone Capital and any future BDC or closed-end management investment company that is advised (or sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing, subject to the conditions in the Co-Investment Order.

In July 2012, the SEC granted us an exemptive order (the “Co-Investment Order”) that expanded our ability to co-invest, under certain circumstances, with certain of our affiliates, including Gladstone Capital Corporation and Gladstone Alternative Income Fund ("Gladstone Alternative") and any future BDC or closed-end management investment company that is advised (or sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing, subject to the conditions in the Co-Investment Order.

We believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies.

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We have also entered into an administration agreement with Gladstone Administration, LLC, an affiliate of ours and the Adviser, whereby we pay separately for administrative services.

Our shares of common stock, our 5.00% Notes due 2026 (“5.00% 2026 Notes”), our 4.875% Notes due 2028 ("4.875% 2028 Notes") and our 8.00% Notes due 2028 (“8.00% 2028 Notes”) are traded on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbols “GAIN,” “GAINN,” "GAINZ" and “GAINL,” respectively.

Our shares of common stock, our 5.00% Notes due 2026 (“5.00% 2026 Notes”), our 4.875% Notes due 2028 ("4.875% 2028 Notes"), our 8.00% Notes due 2028 (“8.00% 2028 Notes”) and our 7.875% Notes due 2030 (“7.875% 2030 Notes”) are traded on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbols “GAIN,” “GAINN,” “GAINZ,” “GAINL,” and “GAINI,” respectively.

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 six months ended September 30, 2024, we exited two portfolio companies.

From our initial public offering in June 2005 through September 30, 2024, we have invested in 58 companies, excluding investments in syndicated loans, for a total of approximately $1.8 billion, before giving effect to principal repayments and divestitures.

During the nine months ended December 31, 2024, we invested in four new portfolio companies and exited two portfolio companies.

From our initial public offering in June 2005 through December 31, 2024, we have invested in 62 companies, excluding investments in syndicated loans, for a total of approximately $2.0 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.

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Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections.

As a result, as of September 30, 2024, we had unrecognized, contractual success fees of $50.2 million, or $1.37 per common share.

As a result, as of December 31, 2024, we had unrecognized, contractual success fees of $52.8 million, or $1.43 per common share.

Consistent with accounting principles generally accepted in the U.S.

(“GAAP”), we have not recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.

From inception through September 30, 2024, we exited our investments of 32 portfolio companies that we acquired under our buyout strategy (which excludes investments in syndicated loans).

From inception through December 31, 2024, we exited our investments of 32 portfolio companies that we acquired under our buyout strategy (which excludes investments in syndicated loans).

In the aggregate, these sales have generated $332.5 million in net realized gains and $42.0 million in other income upon exit, for a total increase to our net assets of $374.5 million.

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The 32 liquidity events have offset any realized losses since inception, which were primarily incurred during the 2008-2009 recession in connection with the sale of performing syndicated loans at a realized loss to pay off a former lender.

The successful exits, in part, enabled us to increase the monthly distribution run rate by 100.0% from March 2011 through September 30, 2024, and allowed us to declare 23 and pay 22 supplemental distributions to common stockholders from March 2012 through September 30, 2024.

The successful exits, in part, enabled us to increase the monthly distribution run rate by 100.0% from March 2011 through December 31, 2024, and allowed us to declare and pay 23 supplemental distributions to common stockholders from March 2012 through December 31, 2024.

Capital Raising

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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 $250.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders).

During the nine months ended December 31, 2024, we issued our 7.875% 2030 Notes for gross proceeds of $126.5 million and sold 148,714 shares of our common stock under our common stock "at-the-market" program ("2024 Common Stock ATM Program") for gross proceeds of approximately $2.0 million.

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 common stock "at-the-market" program ("2022 Common Stock ATM Program") for gross proceeds of approximately $44.5 million.

Refer to “ Liquidity and Capital Resources — Revolving Line of Credit ” for further discussion of the Credit Facility and to “ Liquidity and Capital Resources — Equity — Common Stock ” further discussion of our common stock.

In May 2024, we entered into equity distribution agreements with Oppenheimer & Co., B.

Riley Securities, Inc.

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 $75.0 million in what is commonly referred to as an "at-the-market" program (the "2024 Common Stock ATM Program").

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 September 30, 2024, the closing market price of our common stock was $ 14.45 per share, representing a 15.7 % premium to our net asset value (“NAV”) of $ 12.49 per share as of September 30, 2024.

On December 31, 2024, the closing market price of our common stock was $ 13.25 per share, representing a 0.4 % discount to our net asset value (“NAV”) of $ 13.30 per share as of December 31, 2024.

When our common stock trades below NAV, our ability to issue additional equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our common stock at an issuance price below the then-current NAV per share without stockholder approval, other than through sales to our then-existing stockholders pursuant to a rights offering.

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As a result, our asset coverage requirements for senior securities changed from 200% to 150%, effective as of April 10, 2019, one year after the date of the Board of Directors’ approval.

As of September 30, 2024, our asset coverage ratio on our senior securities representing indebtedness was 229.3%.

As of December 31, 2024, our asset coverage ratio on our senior securities representing indebtedness was 185.9%.

Investment Highlights

Investment Activity

During the six months ended September 30, 2024, the following significant transactions occurred:

During the nine months ended December 31, 2024, the following significant transactions occurred:

• In May 2024, our remaining shares in Funko Acquisition Holdings, LLC ("Funko") were sold, representing an exit of our investment in Funko, and resulting in a return of our equity cost basis of $21 thousand and a realized gain of $2 thousand.

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• In September 2024, we exited our investment in Nth Degree Investment Group, LLC ("Nth Degree"), which resulted in success fee income of $0.1 million, a realized gain on our preferred equity of $42.3 million, and the repayment of our debt investment of $25.0 million.

• In November 2024, we invested $27.2 million in a new portfolio company, Pyrotek Special Effects, Inc.

("Pyrotek"), in the form of $20.1 million of secured first lien debt and $7.1 million of preferred equity.

Pyrotek, headquartered in Ontario, Canada, is a leading provider of special effects services and solutions for the live entertainment industry.

• In December 2024, we invested $5.0 million in Gladstone Alternative, one of our affiliated funds, through common equity.

Gladstone Alternative is a registered, non-diversified, closed-end management investment company that operates as an interval fund.

• In December 2024, we invested $71.3 million in a new portfolio company, Nielsen-Kellerman, Inc.

("Nielsen-Kellerman"), in the form of $49.1 million of secured first lien debt and $22.2 million of preferred equity.

Nielsen-Kellerman, headquartered in Boothwyn, Pennsylvania, designs, manufactures, and distributes a wide range of rugged, waterproof environmental measurement and sports performance instruments.

• In December 2024, we invested $78.7 million in a new portfolio company, Ricardo Defense, Inc.

("Ricardo"), in the form of $61.3 million of secured first lien debt and $17.4 million of preferred equity.

Ricardo, headquartered in Troy, Michigan, with operations in California, Texas and Alabama and overseas, develops engineering and product solutions for U.S.

Army vehicle and logistics programs.

Distributions and Dividends

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

• In January 2025, our Board of Directors declared the following monthly cash distributions to common stockholders:

Payment Date Distribution per Common Share

October 22, 2024 October 31, 2024 $ 0.08

November 20, 2024 November 29, 2024 0.08

December 20, 2024 December 31, 2024 0.08

Total for the Quarter:

• On October 15, 2024, we also paid to common stockholders the following supplemental distribution previously declared by our Board of Directors on September 17, 2024:

Record Date Payment Date Distribution per Common Share

October 4, 2024 October 15, 2024 $ 0.70

January 24, 2025 January 31, 2025 $ 0.08

February 19, 2025 February 28, 2025 0.08

March 19, 2025 March 31, 2025 0.08

Total for the Quarter:

Investment Advisory Agreement

On January 24, 2025, the Company entered into a new investment advisory and management agreement (the “New Advisory Agreement”) with the Adviser.

The New Advisory Agreement, which was approved by the Company’s stockholders at a stockholders’ meeting on January 4, 2024, was entered into as a result of a change of control of the Adviser pursuant to the previously disclosed voting trust agreement, among David Gladstone, Lorna Gladstone, Laura Gladstone, Kent Gladstone and Jessica Martin, each as a trustee and collectively, as the board of trustees of the voting trust, the Adviser and certain stockholders of the Adviser.

There are no changes to the terms, including the fee structure and services to be provided, of the prior Advisory Agreement in the New Advisory Agreement, other than the date and term of the New Advisory Agreement as compared to the prior Advisory Agreement.

The New Advisory Agreement and the Advisory Agreement are collectively referred to herein as the Advisory Agreement.

Revolving Line of Credit

On February 10, 2025, we, through our wholly-owned subsidiary Gladstone Business Investment, LLC (“Business Investment”), entered into Amendment No.

10 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 $200.0 million to $250.0 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.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023

For the Three Months Ended September 30,

Comparison of the Three Months Ended December 31, 2024 to the Three Months Ended December 31, 2023

For the Three Months Ended December 31,

2024 2023 $ Change % Change

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Interest income $ 20,528 $ 21,699 $ (1,171) (5.4) %

Dividend and success fee income 1,569 — 1,569 NM

Dividend and success fee income 843 1,382 (539) (39.0) %

Total investment income 21,371 23,081 (1,710) (7.4) %

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Total expenses, net of credits to fees 20,210 13,337 6,873 51.5 %

NET INVESTMENT INCOME (LOSS) 7,291 (1,730) 9,021 NM

NET INVESTMENT INCOME 1,161 9,744 (8,583) (88.1) %

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized gain 42,303 289 42,014 NM

Net unrealized (depreciation) appreciation (34,112) 48,797 (82,909) NM

Net realized and unrealized gain 8,191 49,086 (40,895) (83.3) %

Net realized gain — 43,461 (43,461) (100.0) %

Net unrealized appreciation (depreciation) 37,329 (46,626) 83,955 NM

Net realized and unrealized gain (loss) 37,329 (3,165) 40,494 NM

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,490 $ 6,579 $ 31,911 485.0 %

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BASIC AND DILUTED PER COMMON SHARE:

Net investment income (loss) $ 0.20 $ (0.05) $ 0.25 NM

Net investment income $ 0.03 $ 0.28 $ (0.25) (89.3) %

Net increase in net assets resulting from operations $ 1.05 $ 0.19 $ 0.86 452.6 %

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Investment Income

Total investment income increased $2.3 million, or 11.3%, for the three months ended September 30, 2024, as compared to the prior year period, primarily due to an increase in dividend and success fee income and an increase in interest income.

Interest income from our investments in debt securities increased $0.7 million, or 3.5%, for the three months ended September 30, 2024, as compared to the prior year period.

Total investment income decreased $1.7 million, or 7.4%, for the three months ended December 31, 2024, as compared to the prior year period, primarily due to a decrease in interest income, and dividend and success fee income.

Interest income from our investments in debt securities decreased $1.2 million, or 5.4%, for the three months ended December 31, 2024, as compared to the prior year period.

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 three months ended September 30, 2024 was $572.8 million, compared to $543.8 million for the prior year period.

This increase was primarily due to the $84.2 million of follow-on debt investments in existing portfolio companies and the origination of $34.8 million of new debt investments after June 30, 2023, partially offset by $56.0 million of pay-offs, restructurings, or write-offs of debt investments and $30.8 million of loans placed on non-accrual status after June 30, 2023, and their respective impact on the weighted-average principal balance when considering 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 dividend and success fee income, was 14.5% for the three months ended September 30, 2024, compared to 14.6% for the prior year period.

The weighted-average principal balance of our interest-bearing investment portfolio during the three months ended December 31, 2024 was $579.7 million, compared to $594.3 million for the prior year period.

This decrease was primarily due to $61.5 million of pay-offs, restructurings, or write-offs of debt investments and $30.8 million of loans placed on non-accrual status after September 30, 2023, partially offset by $68.0 million of follow-on debt investments in existing portfolio companies and the origination of $20.5 million of new debt investments after September 30, 2023, and their respective impact on the weighted-average principal balance when considering 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 dividend and success fee income, was 14.0% for the three months ended December 31, 2024, compared to 14.4% for the prior year period.

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.

As of September 30, 2024, our loans to B+T Group Acquisition, Inc.

As of December 31, 2024, our loans to B+T Group Acquisition, Inc.

("B+T"), Diligent Delivery Systems ("Diligent"), Edge Adhesives Holdings, Inc.

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Hobbs") were on non-accrual status, with an aggregate debt cost basis of $90.0 million.

As of September 30, 2023, our loans to Edge, J.R.

As of December 31, 2023, our loans to Edge, J.R.

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

As of September 30, 2024, Nocturne represented 11.6% and SFEG Holdings, Inc.("SFEG") 10.8% of the total investment portfolio at fair value.

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

Dividend and success fee income for the three months ended September 30, 2024 increased $1.6 million, from the prior year period.

During the three months ended September 30, 2024, dividend and success fee income consisted of $1.4 million of dividend income and $0.2 million of success fee income.

During the three months ended September 30, 2023, there was no dividend or success fee income.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, decreased $6.7 million, or 30.6%, during the three months ended September 30, 2024, as compared to the prior year period, primarily due to a decrease in incentive fees, partially offset by a decrease in fee credits from the Adviser and an increase in other expense, interest expense, and administration fee expense.

In accordance with GAAP, during the three months ended September 30, 2024, we recorded a $1.6 million capital gains-based incentive fee compared to $9.8 million during the three months ended September 30, 2023.

As of December 31, 2024, Nocturne represented 10.9% of the total investment portfolio at fair value.

As of March 31, 2024, SFEG Holdings, Inc.

("SFEG") represented 10.1% of the total investment portfolio at fair value.

Dividend and success fee income for the three months ended December 31, 2024 decreased $0.5 million from the prior year period.

During the three months ended December 31, 2024, dividend and success fee income consisted of $0.8 million of success fee income.

During the three months ended December 31, 2023, dividend and success fee income consisted of $1.4 million of success fee income.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased $6.9 million, or 51.5%, during the three months ended December 31, 2024, as compared to the prior year period, primarily due to an increase in incentive fees and base management fee, partially offset by an increase in fee credits from the Adviser.

In accordance with GAAP, during the three months ended December 31, 2024, we recorded a $7.5 million capital gains-based incentive fee compared to a $0.6 million reversal during the three months ended December 31, 2023.

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

The income-based incentive fee decreased by $1.1 million, for the three months ended September 30, 2024, as compared to the prior year period, primarily due to an increase in net assets, which drives the hurdle rate and a decrease in pre-incentive fee net investment income.

The income-based incentive fee decreased by $0.4 million, for the three months ended December 31, 2024, as compared to the prior year period, primarily due to a decrease in pre-incentive fee net investment income, partially offset by a decrease in net assets, which drives the hurdle rate.

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:

Three Months Ended September 30,

Three Months Ended December 31,

Average total assets subject to base management fee (A)

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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 expense increased $0.3 million, or 4.8%, during the three months ended September 30, 2024, as compared to the prior year period, primarily due to increased borrowings on the Credit Facility and an increase in the effective interest rate.

The weighted-average balance outstanding under the Credit Facility during the three months ended September 30, 2024 was $60.8 million, compared to $50.4 million in the prior year period.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the three months ended September 30, 2024 was 11.0%, as compared to 10.9% in the prior year period.

The increase in the effective interest rate on the Credit Facility was primarily a result of higher interest rates during the three months ended September 30, 2024.

Other expenses increased $0.5 million, or 43.5%, during the three months ended September 30, 2024, as compared to the prior year period, due to an increase in bad debt expense, professional fees and tax expense.

Interest expense decreased $0.1 million, or 2.1%, during the three months ended December 31, 2024, as compared to the prior year period, primarily due to decreased borrowings on the Credit Facility, partially offset by an increase in the effective interest rate.

The weighted-average balance outstanding under the Credit Facility during the three months ended December 31, 2024 was $41.9 million, compared to $77.4 million in the prior year period.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the three months ended December 31, 2024 was 11.8%, as compared to 9.2% in the prior year period.

The increase in the effective interest rate on the Credit Facility was primarily a result of an increase in unused commitment fees on the undrawn portion of the Credit Facility, partially offset by lower interest rates on the drawn portion of the Credit Facility during the three months ended December 31, 2024.

Realized and Unrealized Gain (Loss)

The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the three months ended September 30, 2024 and 2023 were as follows:

Three Months Ended September 30, 2024

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

Three Months Ended December 31, 2024

Portfolio Company Realized Gain (Loss) Unrealized Appreciation (Depreciation) Reversal of Unrealized (Appreciation) Depreciation Net Gain (Loss)

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$ — $ 13,680 $ — $ 13,680

Nth Degree Investment Group, LLC 42,284 — (38,028) 4,256

ImageWorks Display and Marketing Group, Inc.

The E3 Company, LLC — 11,895 — 11,895

SFEG Holdings, Inc.

— 8,445 — 8,445

Old World Christmas, Inc.

Schylling, Inc.

— 4,773 — 4,773

Galaxy Technologies Holding, Inc.

ImageWorks Display and Marketing Group, Inc.

— 3,269 — 3,269

Schylling, Inc.

UPB Acquisition, Inc.

— 2,063 — 2,063

The E3 Company, LLC — 2,561 — 2,561

The Maids International, LLC — 1,434 — 1,434

- Atlanta, LLC — 1,635 — 1,635

Phoenix Doors Systems, Inc.

— 1,095 — 1,095

Edge Adhesives Holdings, Inc.

Brunswick Bowling Products, Inc.

— 1,488 — 1,488

UPB Acquisition, Inc.

Old World Christmas, Inc.

— 1,350 — 1,350

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— 1,189 — 1,189

Brunswick Bowling Products, Inc.

The Maids International, LLC — 1,101 — 1,101

Mason West, LLC — (1,671) — (1,671)

Horizon Facilities Services, Inc.

— (1,725) — (1,725)

B+T Group Acquisition, Inc — (2,839) — (2,839)

Horizon Facilities Service, Inc.

Galaxy Technologies Holdings, Inc.

— (2,051) — (2,051)

PSI Molded Plastics, Inc.

— (2,707) — (2,707)

Educators Resource, Inc.

— (6,008) — (6,008)

Other, net (<$1.0 million, net) — 603 — 603

Total $ — $ 37,329 $ — $ 37,329

Three Months Ended September 30, 2023

Three Months Ended December 31, 2023

Portfolio Company Realized Gain (Loss) Unrealized Appreciation (Depreciation) Reversal of Unrealized (Appreciation) Depreciation Net Gain (Loss)

Counsel Press, Inc.

Dema/Mai Holdings, Inc.

$ — $ 5,655 $ — $ 5,655

Nth Degree Investment Group, LLC — 3,274 — 3,274

Educators Resources, Inc.

— 2,229 — 2,229

Mason West, LLC — 8,745 — 8,745

Brunswick Bowling Products, Inc.

— 1,319 — 1,319

Nth Degree Investment Group, LLC — 5,626 — 5,626

SFEG Holdings, Inc.

ImageWorks Display and Marketing Group, Inc.

— 1,205 — 1,205

The Maids International, LLC — 1,801 — 1,801

Utah Pacific Bridge & Steel, Ltd.

Counsel Press, Inc.

43,459 — (43,566) (107)

Dema/Mai Holdings, Inc.

Horizon Facilities Service, Inc.

— (1,204) — (1,204)

ImageWorks Display and Marketing Group, Inc.

Home Concepts Acquisition, Inc.

— (1,565) — (1,565)

Schylling, Inc.

Nocturne Villas Rentals, Inc.

— (2,420) — (2,420)

Mason West, LLC — (2,484) — (2,484)

PSI Molded Plastics, Inc.

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Net Realized Gain (Loss)

During the three months ended September 30, 2024, we recorded net realized gains on investments of $42.3 million, primarily due to the realized gain from the exit of Nth Degree Investment Group, Inc.

During the three months ended September 30, 2023, we recorded net realized gains on investments of $0.3 million related to a recapitalization of Old World Christmas, Inc.

("Old World").

During the three months ended December 31, 2024, we did not record any net realized gains or losses on investments.

During the three months ended December 31, 2023, we recorded net realized gains on investments of $43.5 million, due to a $43.5 million realized gain from the exit of Counsel Press, Inc.

("Counsel Press").

Net Unrealized Appreciation (Depreciation)

Net unrealized depreciation of investments of $34.1 million for the three months ended September 30, 2024 was primarily due to the reversal of unrealized appreciation of Nth Degree upon exit, and a decrease in the performance of certain of our portfolio companies.

These decreases were partially offset by an increase in transaction multiples used to estimate the fair value of certain of our portfolio companies and increased performance of certain of our other portfolio companies.

Net unrealized appreciation of investments of $48.7 million for the three months ended September 30, 2023 was primarily due to increased performance of certain of our portfolio companies and an increase in transaction multiples used to estimate the fair value of certain of our portfolio companies, in addition to increased fair value as a result of expected payoff amounts for certain investments.

Net unrealized appreciation of investments of $37.3 million for the three months ended December 31, 2024 was primarily due to an increase in the performance of certain of our portfolio companies and an increase in transaction multiples used to estimate the fair value of certain of our portfolio companies, in addition to increased performance of certain of our other portfolio companies.

These increases were partially offset by decreased performance of certain of our other portfolio companies.

Across our entire investment portfolio, we recorded net unrealized depreciation of $19.4 million on our equity positions and net unrealized depreciation of $14.7 million on our debt positions for the three months ended September 30, 2024 .

As of September 30, 2024 , the fair value of our investment portfolio was more than the cost basis by $13.2 million, as compared to June 30, 2024, when the fair value of our investment portfolio was more than the cost basis by $47.3 million, representing net unrealized depreciation of $34.1 million for the three months ended September 30, 2024 .

Our entire portfolio had a fair value of 101.6% of cost as of September 30, 2024 .

Comparison of the Six Months Ended September 30, 2024 to the Six Months Ended September 30, 2023

For the Six Months Ended September 30,

Net unrealized depreciation of investments of $46.5 million for the three months ended December 31, 2023 was primarily due to the reversal of unrealized appreciation of Counsel Press upon exit, a decrease in transaction multiples used to estimate the fair value of certain of our portfolio companies and a decrease in performance of certain of our portfolio companies.

These decreases were partially offset by increased performance of certain of our other portfolio companies.

Across our entire investment portfolio, we recorded net unrealized appreciation of $39.5 million on our equity positions and net unrealized depreciation of $2.2 million on our debt positions for the three months ended December 31, 2024 .

As of December 31, 2024 , the fair value of our investment portfolio was more than the cost basis by $50.5 million, as compared to September 30, 2024, when the fair value of our investment portfolio was more than the cost basis by $13.2 million, representing net unrealized appreciation of $37.3 million for the three months ended December 31, 2024 .

Our entire portfolio had a fair value of 104.9% of cost as of December 31, 2024 .

Comparison of the Nine Months Ended December 31, 2024 to the Nine Months Ended December 31, 2023

For the Nine Months Ended December 31,

2024 2023 $ Change % Change

5 unchanged sentences

Loan servicing fee 6,821 6,829 (8) (0.1) %

Incentive fee (1,556) 13,734 (15,290) NM

Incentive fee 7,797 15,401 (7,604) (49.4) %

Administration fee 1,478 1,306 172 13.2 %

7 unchanged sentences

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized gain 42,305 1,444 40,861 NM

Net realized gain 42,305 44,905 (2,600) (5.8) %

Net unrealized (depreciation) appreciation (15,725) 1,362 (17,087) NM

Net realized and unrealized (loss) gain (10,749) 49,432 (60,181) NM

Net realized and unrealized gain (loss) 26,580 46,267 (19,687) (42.6) %

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 47,446 $ 62,721 $ (15,275) (24.4) %

6 unchanged sentences

Investment Income

Total investment income increased $4.2 million, or 10.3%, for the six months ended September 30, 2024, as compared to the prior year period, primarily due to an increase in interest income, and dividend and success fee income.

Interest income from our investments in debt securities increased $3.0 million, or 7.6%, for the six months ended September 30, 2024, as compared to the prior year period.

Total investment income increased $2.5 million, or 3.9%, for the nine months ended December 31, 2024, as compared to the prior year period, primarily due to an increase in interest income, and dividend and success fee income.

Interest income from our investments in debt securities increased $1.8 million, or 2.9%, for the nine months ended December 31, 2024, as compared to the prior year period.

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.

The weighted-average principal balance of our interest-bearing investment portfolio during the six months ended September 30, 2024 was $578.1 million, compared to $519.7 million for the prior year period.

The weighted-average principal balance of our interest-bearing investment portfolio during the nine months ended December 31, 2024 was $576.1 million, compared to $544.6 million for the prior year period.

This increase was primarily due to $116.4 million of follow-on debt investments in existing portfolio companies, the origination of $67.3 million of new debt investments, partially offset by $61.5 million of pay-offs, restructurings, or write-offs of debt investments and $30.8 million of loans placed on non-accrual status after March 31, 2023, and their respective impact on the weighted-average principal balance when considering 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 dividend and success fee income, was 14.4% for the six months ended September 30, 2024, compared to 14.6% for the prior year period.

The weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as dividend and success fee income, was 14.3% for the nine months ended December 31, 2024, compared to 14.5% for the prior year period.

During the six months ended September 30, 2024 and 2023, we had no collections of past due interest.

As of September 30, 2024, our loans to B+T, Diligent, Edge, and J.R.

During the nine months ended December 31, 2024 and 2023, we had no collections of past due interest.

As of December 31, 2024, our loans to B+T, Diligent, Edge, and J.R.

Hobbs were on non-accrual status, with an aggregate debt cost basis of $90.0 million.

As of September 30, 2023, our loans to Edge, J.R.

As of December 31, 2023, our loans to Edge, J.R.

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

As of September 30, 2024, Nocturne represented 11.6%, and SFEG represented 10.8% of the total investment portfolio at fair value.

As of December 31, 2024, Nocturne represented 10.9% of the total investment portfolio at fair value.

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

Dividend and success fee income for the six months ended September 30, 2024 increased $1.2 million, or 63.7% from the prior year period.

During the six months ended September 30, 2024, dividend and success fee income consisted of $1.7 million of success fee income and $1.4 million of dividend income.

During the six months ended September 30, 2023, dividend and success fee income consisted of $1.9 million of dividend income.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, decreased $8.8 million, or 26.1%, during the six months ended September 30, 2024, as compared to the prior year period, primarily due to a decrease in incentive fees, partially offset by a decrease in fee credits from the Adviser and an increase in interest expense, other expense, and base management fee.

In accordance with GAAP, we recorded a $2.2 million reversal of previously accrued capital gains-based incentive fee during the six months ended September 30, 2024, compared to a $9.9 million capital gains-based incentive fee recorded during the six months ended September 30, 2023.

Dividend and success fee income for the nine months ended December 31, 2024 increased $0.7 million, or 20.6% from the prior year period.

During the nine months ended December 31, 2024, dividend and success fee income consisted of $2.5 million of success fee income and $1.4 million of dividend income.

During the nine months ended December 31, 2023, dividend and success fee income consisted of $1.9 million of dividend income and $1.4 million of success fee income.

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, decreased $2.0 million, or 4.1%, during the nine months ended December 31, 2024, as compared to the prior year period, primarily due to a decrease in incentive fees, partially offset by an increase in interest expense, other expense and base management fee and a decrease in fee credits from the Adviser.

In accordance with GAAP, we recorded a $5.3 million capital gains-based incentive fee during the nine months ended December 31, 2024, compared to a $9.3 million capital gains-based incentive fee recorded during the nine months ended December 31, 2023.

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

The income-based incentive fee decreased by $3.3 million for the six months ended September 30, 2024, as compared to the prior year period, primarily due to an increase in net assets, which drives the hurdle rate, and a decrease in pre-incentive fee net investment income.

The income-based incentive fee decreased by $3.7 million for the nine months ended December 31, 2024, as compared to the prior year period, primarily due to a decrease in pre-incentive fee net investment income and an increase in net assets, which drives the hurdle rate.

Six Months Ended September 30,

Nine Months Ended December 31,

Average total assets subject to base management fee (A)

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Incentive fee – capital gains-based (C)

(2,150) 9,874

Total incentive fee (B)

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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 expense increased $1.8 million, or 16.3%, during the six months ended September 30, 2024, as compared to the prior year period, primarily due to interest expense related to the 8.00% 2028 Notes issued 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 six months ended September 30, 2024 was $62.8 million as compared to $47.0 million in the prior year period.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the six months ended September 30, 2024 was 10.9%, as compared to 11.0% in the prior year period.

The decrease in the effective interest rate on the Credit Facility was primarily a result of a decrease in unused commitment fees on the undrawn portion of the Credit Facility, partially offset by higher interest rates on the drawn portion of the Credit Facility during the six months ended September 30, 2024.

Other expenses increased $1.5 million, or 69.5%, during the six months ended September 30, 2024, as compared to the prior year period, due to an increase in bad debt expense and professional fees.

Interest expense increased $1.7 million, or 9.5%, during the nine months ended December 31, 2024, as compared to the prior year period, primarily due to interest expense related to the 8.00% 2028 Notes issued in May 2023 and an increase in the effective interest rate, partially offset by decreased borrowings on the Credit Facility.

The weighted-average balance outstanding on the Credit Facility during the nine months ended December 31, 2024 was $55.8 million as compared to $57.1 million in the prior year period.

The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the nine months ended December 31, 2024 was 11.1%, as compared to 10.2% in the prior year period.

The increase in the effective interest rate on the Credit Facility was primarily a result of an increase in unused commitment fees on the undrawn portion of the Credit Facility during the nine months ended December 31, 2024.

Other expenses increased $1.5 million, or 44.7%, during the nine months ended December 31, 2024, as compared to the prior year period, due to an increase in bad debt expense and professional fees.

Realized and Unrealized Gain (Loss)

The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the six months ended September 30, 2024 and 2023 were as follows:

Six Months Ended September 30, 2024

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

Nine Months Ended December 31, 2024

Portfolio Company Realized Gain (Loss) Unrealized Appreciation (Depreciation) Reversal of Unrealized (Appreciation) Depreciation Net Gain (Loss)

The E3 Company, LLC $ — $ 5,208 $ — $ 5,208

Nocturne Luxury Villas, Inc.

$ — $ 18,668 $ — $ 18,668

Old World Christmas, Inc.

The E3 Company, LLC — 17,103 — 17,103

SFEG Holdings, Inc.

— 8,139 — 8,139

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— 7,804 — 7,804

Old World Christmas, Inc.

— 6,084 — 6,084

UPB Acquisition, Inc.

Galaxy Technologies Holdings, Inc.

— 5,049 — 5,049

ImageWorks Display and Marketing Group, Inc.

— 3,932 — 3,932

Ginsey Home Solutions, Inc.

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- Atlanta, LLC — 2,984 — 2,984

The Maids International, LLC — 2,352 — 2,352

Dema/Mai Holdings, Inc.

— 1,272 — 1,272

The Maids International, LLC — 1,251 — 1,251

Diligent Delivery Systems — (986) — (986)

1 unchanged sentence

— (1,238) — (1,238)

PSI Molded Plastics, Inc.

— (1,767) — (1,767)

Brunswick Bowling Products, Inc.

B+T Group Acquisition, Inc.

— (2,303) — (2,303)

1 unchanged sentence

— (2,402) — (2,402)

B+T Group Acquisition, Inc.

— (2,742) — (2,742)

Nth Degree Investment Group, LLC 42,284 (7,195) (38,028) (2,939)

Horizon Facilities Services, Inc.

PSI Molded Plastics, Inc.

— (4,474) — (4,474)

Phoenix Door Systems, Inc.

Educators Resource, Inc.

— (5,507) — (5,507)

Mason West, LLC — (10,285) — (10,285)

Horizon Facilities Services, Inc.

— (19,888) — (19,888)

Other, net (<$1.0 million, net) 21 (384) 4 (359)

Total $ 42,305 $ 22,299 $ (38,024) $ 26,580

Six Months Ended September 30, 2023

Nine Months Ended December 31, 2023

Portfolio Company Realized Gain (Loss) Unrealized Appreciation (Depreciation) Reversal of Unrealized (Appreciation) Depreciation Net Gain (Loss)

2 unchanged sentences

Nth Degree Investment Group, LLC — 15,951 — 15,951

Mason West, LLC — 11,690 — 11,690

Educators Resource, Inc.

2 unchanged sentences

— 9,630 — 9,630

Mason West, LLC — 9,206 — 9,206

SFEG Holdings, Inc.

— 7,325 — 7,325

The Maids International, LLC — 3,747 — 3,747

Galaxy Technologies Holdings, Inc.

Dema/Mai Holdings, Inc.

— 3,780 — 3,780

Nocturne Luxury Villas, Inc.

Galaxy Technologies Holdings, Inc.

— 3,539 — 3,539

UPB Acquisition, Inc.

The Maids International, LLC — 3,190 — 3,190

Utah Pacific Bridge & Steel, Ltd.

— 1,833 — 1,833

2 unchanged sentences

Gladstone SOG Investments, Inc.

PSI Molded Plastics, Inc.

882 — (93) 789

Dema/Mai Holdings, Inc.

- Atlanta, LLC — (741) — (741)

Nocturne Luxury Villas, Inc.

— (806) — (806)

1 unchanged sentence

273 (1,394) — (1,121)

B+T Group Acquisition, Inc.

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

Home Concepts Acquisition, Inc.

— (1,565) — (1,565)

PSI Molded Plastics, Inc.

— (5,635) — (5,635)

Horizon Facilities Services, Inc.

4 unchanged sentences

— (9,071) — (9,071)

B+T Group Acquisition, Inc.

— (10,107) — (10,107)

Other, net (<$1.0 million, net) 291 (313) — (22)

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Net Realized Gain (Loss)

During the six months ended September 30, 2024, we recorded net realized gains on investments of $42.3 million, primarily due to a $42.3 million realized gain from the exit of Nth Degree.

During the six months ended September 30, 2023, we recorded net realized gains on investments of $1.4 million, primarily due to $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.

During the nine months ended December 31, 2024, we recorded net realized gains on investments of $42.3 million, primarily due to a $42.3 million realized gain from the exit of Nth Degree.

During the nine months ended December 31, 2023, we recorded net realized gains on investments of $44.9 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.

Net Unrealized Appreciation (Depreciation)

Net unrealized depreciation of investments of $53.1 million for the six months ended September 30, 2024 was primarily due to the reversal of unrealized appreciation of Nth Degree upon exit and decreased performance of certain of our portfolio companies.

Net unrealized depreciation of investments of $15.7 million for the nine months ended December 31, 2024 was primarily due to the reversal of unrealized appreciation of Nth Degree upon exit and decreased performance of certain of our portfolio companies.

Net unrealized appreciation of investments of $47.9 million for the six months ended September 30, 2023 was primarily due to increased performance of certain of our portfolio companies and an increase in transaction multiples used to estimate the fair value of certain of our portfolio companies, in addition to increased fair value as a result of expected payoff amounts for certain investments.

These increases were partially offset by decreased performance of certain of our other portfolio companies.

Across our entire investment portfolio, we recorded net unrealized depreciation of $28.2 million on our equity positions and depreciation of $24.9 million on our debt positions , for the six months ended September 30, 2024 .

As of September 30, 2024 , the fair value of our investment portfolio was more than the cost basis by $13.2 million , as compared to March 31, 2024, when the fair value of our investment portfolio was more than the cost basis by $32.9 million, representing net unrealized depreciation of $53.1 million for the six months ended September 30, 2024 .

Our entire portfolio had a fair value of 101.6% of cost as of September 30, 2024 .

Net unrealized appreciation of investments of $1.4 million for the nine months ended December 31, 2023 was primarily due to increased performance of certain of our portfolio companies and an increase in transaction multiples used to estimate the fair value of certain of our portfolio companies.

These increases were partially offset by a reversal of unrealized appreciation of Counsel Press upon exit and decreased performance of certain of our other portfolio companies.

Across our entire investment portfolio, we recorded net unrealized depreciation of $27.0 million on our debt positions and appreciation of $11.3 million on our equity positions, for the nine months ended December 31, 2024 .

As of December 31, 2024 , the fair value of our investment portfolio was more than the cost basis by $50.5 million , as compared to March 31, 2024, when the fair value of our investment portfolio was more than the cost basis by $66.2 million , representing net unrealized depreciation of $15.7 million for the nine months ended December 31, 2024 .

Our entire portfolio had a fair value of 104.9% of cost as of December 31, 2024 .

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Net cash provided by operating activities for the six months ended September 30, 2024 was $75.5 million compared to net cash used in operating activities of $96.6 million for the six months ended September 30, 2023.

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

Purchases of investments were $20.1 million during the six months ended September 30, 2024, compared to $114.8 million during the six months ended September 30, 2023.

Aggregate net proceeds from the sale and recapitalization of investments and principal repayments of investments totaled $76.5 million during the six months ended September 30, 2024, compared to $1.8 million during the six months ended September 30, 2023.

As of September 30, 2024, we had equity investments in and/or loans to 22 portfolio companies with an aggregate cost basis of $840.1 million.

As of September 30, 2023, we had equity investments in and/or loans to 26 portfolio companies with an aggregate cost basis of $834.8 million.

The following table summarizes our total portfolio investment activity during the six months ended September 30, 2024 and 2023:

Six Months Ended September 30,

Net cash used in operating activities for the nine months ended December 31, 2024 was $96.4 million compared to net cash used in operating activities of $75.7 million for the nine months ended December 31, 2023.

This change was primarily due to an increase in purchases of investments.

Purchases of investments were $207.2 million during the nine months ended December 31, 2024, compared to $183.0 million during the nine months ended December 31, 2023.

Aggregate net proceeds from the sale and recapitalization of investments and principal repayments of investments totaled $82.0 million during the nine months ended December 31, 2024, compared to $79.7 million during the nine months ended December 31, 2023.

As of December 31, 2024, we had equity investments in and/or loans to 26 portfolio companies with an aggregate cost basis of $1.0 billion.

As of December 31, 2023, we had equity investments in and/or loans to 25 portfolio companies with an aggregate cost basis of $868.5 million.

The following table summarizes our total portfolio investment activity during the nine months ended December 31, 2024 and 2023:

Nine Months Ended December 31,

Beginning investment portfolio, at fair value $ 920,504 $ 753,543

7 unchanged sentences

Ending investment portfolio, at fair value $ 1,072,230 $ 902,808

The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of September 30, 2024:

For the remaining six months ending March 31, 2025

The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of December 31, 2024:

For the remaining three months ending March 31, 2025

For the fiscal years ending March 31:

Thereafter 129,506

Total contractual repayments $ 780,457

Investments in equity securities 241,284

Total cost basis of investments held as of September 30, 2024:

Total cost basis of investments held as of December 31, 2024:

Financing Activities

Net cash used in financing activities for the six months ended September 30, 2024 was $76.0 million, which consisted primarily of $58.1 million of net repayments under the Credit Facility, $17.6 million in distributions to common stockholders and $0.3 million of deferred financing and offering costs.

Net cash provided by financing activities for the six months ended September 30, 2023 was $95.9 million, which consisted primarily of $74.8 million of gross proceeds from the issuance of our 8.00% 2028 Notes and $44.1 million of net borrowings under the Credit Facility and $4.1 million of proceeds from the issuance of common stock, net of expenses and shelf offering registration costs, partially offset by $24.3 million in distributions to common stockholders and $2.7 million of deferred financing and offering costs.

Net cash provided by financing activities for the nine months ended December 31, 2024 was $96.3 million, which consisted primarily of $126.5 million of gross proceeds from the issuance of our 7.875% 2030 Notes, $24.5 million of net borrowings under the Credit Facility and $2.0 million of proceeds from issuance of common stock, net of expenses and shelf offering registration costs, partially offset by $52.1 million in distributions to common stockholders and $4.6 million of deferred financing and offering costs.

Net cash provided by financing activities for the nine months ended December 31, 2023 was $76.1 million, which consisted primarily of $74.8 million of gross proceeds from the issuance of our 8.00% 2028 Notes, $47.4 million of net borrowings under the Credit Facility and $25.0 million of proceeds from the issuance of common stock, net of expenses and shelf offering registration costs, partially offset by $67.4 million in distributions to common stockholders and $3.7 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 $0.08 per common share for each of the six months from April through September 2024, and a supplemental distribution of $0.70 per common share paid in October 2024.

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

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 nine months from April through December 2024, and a supplemental distribution of $0.70 per common share paid in October 2024.

See also “ Recent Developments - Distributions and Dividends ” for a discussion of cash distributions to common stockholders declared and paid by our Board of Directors in January 2025.

For the fiscal year ended March 31, 2024, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $18.7 million of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year.

1 unchanged sentence

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 six months ended September 30, 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 Capital in excess of par value .

For the nine months ended December 31, 2024, we recorded $1.2 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which increased Overdistributed net investment income and Accumulated net realized gain in excess of distributions and decreased Capital in excess of par value .

Dividend Reinvestment Plan

12 unchanged sentences

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 all $450.0 million of the securities registered 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 permitted 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.

This registration statement was terminated on April 18, 2024.

As of the date of this report, we have the ability to issue up to $321.5 million of the securities registered under the registration statement.

In May 2024, we entered into equity distribution agreements with Oppenheimer & Co., B.

1 unchanged sentence

There were no shares sold under the 2024 Common Stock ATM Program during the three and six months ended September 30, 2024.

As of September 30, 2024, we had remaining capacity under the 2024 Common Stock ATM Program to sell all $75.0 million.

As of December 31, 2024, we had remaining capacity to sell up to an additional $73.0 million of common stock under the 2024 Common Stock ATM Program.

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

and Virtu Americas LLC (each a “2022 Sales Agent”), under which we had 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 what is commonly referred to as an "at-the-market" program (the "2022 Common Stock ATM Program").

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

1 unchanged sentence

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

and Virtu Americas LLC in order to add B.

and Virtu Americas LLC to add B.

Riley Securities, Inc.

1 unchanged sentence

The 2022 Common Stock ATM Program terminated in connection with our entry into the 2024 Common Stock ATM Program.

We did not have any sales of common stock during three and six months eneded September 30, 2024.

During the three and six months ended September 30, 2023, we sold 304,170 shares of common stock under the 2022 Common Stock ATM Program, with a weighted-average gross price of $13.55 per share and a weighted-average net price of $13.35 per share after deducting commissions and offering costs borne by us, raising approximately $4.1 million and $4.1 million of gross and net proceeds, respectively.

During the three and nine months ended December 31, 2024, we sold 148,714 shares of our common stock under the 2024 Common Stock ATM Program, with a weighted-average gross price of $13.64 per share and a weighted-average net price of $13.48 per share after deducting commissions and offering costs borne by us, raising approximately $2.0 million and $2.0 million of gross and net proceeds, respectively.

All of these sales were above our then current estimated NAV per share.

During the three months ended December 31, 2023, we sold 1,456,279 shares of common stock under the 2022 Common Stock ATM Program, with a weighted-average gross price of $14.51 per share and a weighted-average net price of $14.28 per share after deducting commissions and offering costs borne by us, raising approximately $21.1 million and $20.8 million of gross and net proceeds, respectively.

All of these sales were above our then current estimated NAV per share.

During the nine months ended December 31, 2023, we sold 1,760,449 shares of common stock under the 2022 Common Stock ATM Program, with a weighted-average gross price of $14.34 per share and a weighted-average net price of $14.12 per share after deducting commissions and offering costs borne by us, raising approximately $25.3 million and $24.9 million of gross and net proceeds, respectively.

All of these sales were above our then current estimated NAV per share.

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

2 unchanged sentences

Generally, the 1940 Act provides that we may not issue and sell our common stock at a price below our NAV per common share, other than to our then-existing common stockholders pursuant to a rights offering, without first obtaining approval from our stockholders and our independent directors and meeting other stated requirements.

As of September 30, 2024, the closing market price of our common stock was $ 14.45 per share, representing a 15.7 % premium to our NAV per share of $ 12.49 as of September 30, 2024.

As of December 31, 2024, the closing market price of our common stock was $ 13.25 per share, representing a 0.4 % discount to our NAV per share of $ 13.30 as of December 31, 2024.

Revolving Line of Credit

We, through our wholly-owned subsidiary, Business Investment, are party to a 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.

As of September 30, 2024, the Credit Facility provides for maximum borrowings of $200.0 million, with a revolving period end date of October 30, 2026 and a maturity date of October 30, 2028.

As of September 30, 2024, advances under the Credit Facility generally bore 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.

We, through our wholly-owned subsidiary, Business Investment, are party to a Credit Facility with 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.

As of December 31, 2024, the Credit Facility provided for maximum borrowings of $200.0 million, with a revolving period end date of October 30, 2026 and a maturity date of October 30, 2028.

As of the date of this report, the Credit Facility provides for maximum borrowings of $ 250.0 million.

See " Overview - Revolving Line of Credit ".

As of December 31, 2024, advances under the Credit Facility generally bore interest at 30-day Term SOFR, subject to a floor of 0.35 %, with a SOFR credit spread adjustment of 10 basis points, plus a margin of 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.

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.

At September 30, 2024, we had $ 8.9 million of borrowings outstanding on the Credit Facility and as of the date of this report, we had $40.2 million outstanding under the Credit Facility.

At December 31, 2024, we had $ 91.5 million of borrowings outstanding on the Credit Facility and as of the date of this report, we had $89.4 million outstanding under the Credit Facility.

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 guaranty 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 $ 348.7 million as of September 30, 2024, (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 September 30, 2024, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $ 789.2 million, asset coverage on our senior securities representing indebtedness of 229.3 %, 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 September 30, 2024, we had availability, after adjustments for various constraints based on collateral quality, of $ 191.1 million under the Credit Facility and were in compliance with all covenants under the Credit Facility.

Additionally, the Credit Facility contains a performance guaranty 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 $ 412.9 million as of December 31, 2024, (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 December 31, 2024, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $ 943.9 million, asset coverage on our senior securities representing indebtedness of 185.9 %, 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 December 31, 2024, we had availability, after adjustments for various constraints based on collateral quality, of $ 108.5 million under the Credit Facility and were in compliance with all covenants under the Credit Facility.

Notes Payable

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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.

7.875 % Notes due 2030

In December 2024 , we completed a public offering of the 7.875 % 2030 Notes with an aggregate principal amount of $ 126.5 million, which resulted in net proceeds of approximately $ 122.4 million after deducting underwriting discounts, commissions and offering costs borne by us.

The 7.875 % 2030 Notes are traded under the ticker symbol “GAINI” on Nasdaq.

The 7.875 % 2030 Notes will mature on February 1, 2030 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 February 1, 2027.

The 7.875 % 2030 Notes bear interest at a rate of 7.875 % per year (which equates to $10.0 milli on per year), payable quarterly in arrears.

The indenture relating to the 7.875 % 2030 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 7.875 % 2030 Notes and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.

The 7.875 % 2030 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 $ 4.1 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 February 1, 2030, the maturity date.

OFF-BALANCE SHEET ARRANGEMENTS

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Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections.

As a result, as of September 30, 2024 and March 31, 2024, we had unrecognized, contractual off-balance sheet success fee receivables of $50.2 million and $44.9 million (or approximately $1.37 and $1.23 per common share), respectively, on our debt investments.

As a result, as of December 31, 2024 and March 31, 2024, we had unrecognized, contractual off-balance sheet success fee receivables of $52.8 million and $44.9 million (or approximately $1.43 and $1.23 per common share), respectively, on our debt investments.

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

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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 September 30, 2024 to be insignificant.

The following table shows our contractual obligations as of September 30, 2024, at cost:

We estimate the fair value of the combined unused line of credit commitments as of December 31, 2024 to be insignificant.

The following table shows our contractual obligations as of December 31, 2024, at cost:

Payments Due by Period

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(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 September 30, 2024.

(C) Includes interest payments due on the Credit Facility, 5.00% 2026 Notes, 4.875% 2028 Notes, 8.00% 2028 Notes and 7.875% 2030 Notes, as applicable.

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

Critical Accounting Estimates

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The Adviser’s risk rating system covers both qualitative and quantitative aspects of the business and the securities we hold.

The following table reflects risk ratings for all loans in our portfolio as of September 30, 2024 and March 31, 2024:

Rating September 30, 2024 March 31, 2024

The following table reflects risk ratings for all loans in our portfolio as of December 31, 2024 and March 31, 2024:

Rating December 31, 2024 March 31, 2024

Weighted-average

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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 September 30, 2024 and March 31, 2024.

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

Recent Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis