GLADSTONE CAPITAL CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Management ’ s Annual Report on Internal Control over Financial Reporting 69 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 70 Consolidated Statements of Assets and Liabilities as of September 30, 202 2 and 202 1 72 Consolidated Statements of Operations for the years ended September 30, 202 2 , 202 1 and 20 20 73 Consolidated Statements of Changes in Net Assets for the years ended September 30, 202 2 , 202 1 and 20 20 75 Consolidated Statements of Cash Flows for the years ended September 30, 202 2 , 202 1 and 20 20 76 Consolidated Schedules of Investments as of September 30, 202 2 and 202 1 77 Notes to Consolidated Financial Statements 90 68 Table of Contents Management’s Annual Report on Internal Control over Financial Reporting To the Stockholders and Board of Directors of Gladstone Capital Corporation: Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and include those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of September 30, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on its assessment, management has concluded that our internal control over financial reporting was effective as of September 30, 2022. November 14, 2022 69 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Gladstone Capital Corporation Opinion on the Financial Statements We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Gladstone Capital Corporation and its subsidiaries (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended September 30, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations, changes in its net assets and its cash flows for each of the three years in the period ended September 30, 2022 in conformity with accounting principles generally accepted in the United States of America. We have also previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of assets and liabilities, including the consolidated schedules of investments, of the Company as of September 30, 2020, 2019, 2018, 2017, 2016, 2015, 2014, and 2013, and the related consolidated statements of operations, changes in net assets and cash flows for the years ended September 30, 2019, 2018, 2017, 2016, 2015, 2014, and 2013 (none of which are presented herein), and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information set forth in the Senior Securities table of the Company for each of the ten years in the period ended September 30, 2022, appearing on pages 47-48 under Item 5 of this Form 10-K, is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of September 30, 2022 and 2021 by correspondence with the custodian, agent banks and portfolio company investees; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 70 Table of Contents Valuation of Level 3 Investments As described in Notes 2 and 3 to the consolidated financial statements, the Company held $643.16 million of total level 3 investments at fair value as of September 30, 2022. Management uses significant unobservable inputs in estimating the fair value of its level 3 investments, including (i) with respect to investments valued using a total enterprise value, portfolio company earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, revenue and revenue multiples, or a discounted cash flow analysis using estimated risk-adjusted discount rates; (ii) with respect to investments valued using a yield analysis, a modified discount rate; and (iii) with respect to investments valued using market quotations for which a limited market exists, the lower indicative bid price in the bid-to-ask price range. The principal considerations for our determination that performing procedures relating to the valuation of level 3 investments is a critical audit matter are (i) the significant judgment by management to determine the fair value of these level 3 investments using a total enterprise value or yield analysis due to the use of significant unobservable inputs, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the EBITDA and EBITDA multiples and revenue and revenue multiples used in a total enterprise value and the modified discount rate used in a yield analysis, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, either (i) testing management’s process for determining the fair value estimate, including testing the completeness and accuracy of data provided by management, evaluating the appropriateness of management’s valuation methods, and evaluating the reasonableness of the EBITDA and EBITDA multiples and revenue and revenue multiples used in a total enterprise value and the modified discount rate used in a yield analysis by considering current and past performance of the investment, consistency of the unobservable inputs with external market data and evidence obtained in other areas of the audit, and management’s historical forecasting accuracy, or (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent fair value estimate for certain level 3 investments and comparison of management’s estimate to the independently developed estimate. Developing an independent fair value estimate involved testing the completeness and accuracy of data provided by management and independently developing significant unobservable inputs related to the modified discount rate for those investments valued using a yield analysis and the EBITDA and EBITDA multiples or revenue and revenue multiples for those investments valued using a total enterprise value. /s/ PricewaterhouseCoopers LLP Washington, DC November 14, 2022 We have served as the Company’s auditor since 2002. 71 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) September 30, 2022 September 30, 2021 ASSETS Investments, at fair value: Non-Control/Non-Affiliate investments (Cost of $571,736 and $447,566, respectively) $ 574,811 $ 454,601 Affiliate investments (Cost of $49,412 and $70,682, respectively) 39,091 82,281 Control investments (Cost of $34,905 and $28,264, respectively) 35,713 20,730 Cash and cash equivalents 2,011 671 Restricted cash and cash equivalents 96 175 Interest receivable, net 2,737 2,361 Due from administrative agent 3,199 2,951 Deferred financing costs, net 836 1,033 Other assets, net 2,474 1,697 TOTAL ASSETS $ 660,968 $ 566,500 LIABILITIES Line of credit at fair value (Cost of $141,800 and $50,500, respectively) $ 141,800 $ 50,500 Notes payable, net of unamortized deferred financing costs of $2,393 and $2,202, respectively 197,607 186,611 Accounts payable and accrued expenses 500 490 Interest payable 2,517 1,797 Fees due to Adviser (A) 2,104 2,255 Fee due to Administrator (A) 423 382 Other liabilities 530 6,026 TOTAL LIABILITIES $ 345,481 $ 248,061 Commitments and contingencies (B) NET ASSETS Common stock, $0.001 par value per share, 44,560,000 and 44,560,000 shares authorized, respectively, and 34,734,796 and 34,304,371 shares issued and outstanding, respectively $ 35 $ 34 Capital in excess of par value (C) 395,542 392,494 Cumulative net unrealized appreciation (depreciation) of investments (6,438) 11,100 Under (over) distributed net investment income (C) (500) 149 Accumulated net realized losses (73,152) (85,338) Total distributable loss (80,090) (74,089) TOTAL NET ASSETS $ 315,487 $ 318,439 NET ASSET VALUE PER COMMON SHARE $ 9.08 $ 9.28 (A) Refer to Note 4— Related Party Transactions for additional information. (B) Refer to Note 11— Commitments and Contingencies for additional information. (C) Refer to Note 9— Distributions to Common Stockholders for additional information. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 72 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Year ended September 30, 2022 2021 2020 INVESTMENT INCOME Interest income Non-Control/Non-Affiliate investments $ 43,771 $ 40,953 $ 37,469 Affiliate investments 3,523 4,815 4,296 Control investments 2,454 1,646 1,661 Cash and cash equivalents 11 — 17 Total interest income (excluding PIK interest income) 49,759 47,414 43,443 PIK interest income Non-Control/Non-Affiliate investments 4,014 2,545 2,578 Affiliate investments 215 — — Total PIK interest income 4,229 2,545 2,578 Total interest income 53,988 49,959 46,021 Success fee income Non-Control/Non-Affiliate investments 3,231 202 350 Affiliate investments 1,563 — — Total success fee income 4,794 202 350 Dividend income Non-Control/Non-Affiliate investments 2,181 1,645 166 Control investments 1,281 611 559 Total dividend income 3,462 2,256 725 Other income 906 1,377 863 Total investment income 63,150 53,794 47,959 EXPENSES Base management fee (A) 10,247 8,674 7,568 Loan servicing fee (A) 6,329 5,579 5,819 Incentive fee (A) 7,511 5,746 5,251 Administration fee (A) 1,610 1,438 1,430 Interest expense on line of credit and notes payable 12,966 11,513 9,991 Amortization of deferred financing costs 1,175 1,347 1,484 Professional fees 803 806 877 Other general and administrative expenses 1,362 1,101 1,228 Expenses, before credits from Adviser 42,003 36,204 33,648 Credit to base management fee - loan servicing fee (A) (6,329) (5,579) (5,819) Credit to fees from Adviser - other (A) (4,803) (2,953) (5,033) Total expenses, net of credits 30,871 27,672 22,796 NET INVESTMENT INCOME 32,279 26,122 25,163 NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss): Non-Control/Non-Affiliate investments 504 4,179 (7,413) Affiliate investments 13,408 — (63) Control investments (8,496) — — Other (243) (999) (1,407) Total net realized gain (loss) 5,173 3,180 (8,883) Net unrealized appreciation (depreciation): 73 Table of Contents Non-Control/Non-Affiliate investments (3,960) 33,786 (11,355) Affiliate investments (21,920) 16,742 (1,643) Control investments 8,342 4,819 (5,672) Other — (350) 517 Total net unrealized appreciation (depreciation) (17,538) 54,997 (18,153) Net realized and unrealized gain (loss) (12,365) 58,177 (27,036) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 19,914 $ 84,299 $ (1,873) BASIC AND DILUTED PER COMMON SHARE: Net investment income $ 0.94 $ 0.79 $ 0.81 Net increase (decrease) in net assets resulting from operations $ 0.58 $ 2.54 $ (0.06) WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted 34,351,663 33,234,482 31,040,852 (A) Refer to Note 4— Related Party Transactions for additional information. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 74 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (DOLLAR AMOUNTS IN THOUSANDS) Year ended September 30, 2022 2021 2020 OPERATIONS Net investment income $ 32,279 $ 26,122 $ 25,163 Net realized gain (loss) on investments 5,416 4,179 (7,476) Net realized loss on other (243) (999) (1,407) Net unrealized appreciation (depreciation) of investments (17,538) 55,347 (18,670) Net unrealized appreciation (depreciation) of other — (350) 517 Net increase (decrease) in net assets from operations 19,914 84,299 (1,873) DISTRIBUTIONS Distributions to common stockholders from net investment income ( $0.76 , $0.75, and $0.80 per share, respectively) (A) (25,916) (24,987) (24,752) Distributions to common stockholders from return of capital ( $0.04 , $0.03, and $0.01 per share, respectively) (A) (1,406) (985) (411) Net decrease in net assets from distributions (27,322) (25,972) (25,163) CAPITAL TRANSACTIONS Issuance of common stock 4,533 26,850 11,664 Offering costs for issuance of common stock (77) (481) (215) Net increase (decrease) in net assets from capital transactions 4,456 26,369 11,449 NET INCREASE (DECREASE) IN NET ASSETS (2,952) 84,696 (15,587) NET ASSETS, BEGINNING OF YEAR 318,439 233,743 249,330 NET ASSETS, END OF YEAR $ 315,487 $ 318,439 $ 233,743 (A) Refer to Note 9 – Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements for additional information. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 75 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) Year ended September 30, 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net increase (decrease) in net assets resulting from operations $ 19,914 $ 84,299 $ (1,873) Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: Purchase of investments (274,898) (181,841) (149,906) Principal repayments on investments 159,992 126,816 75,992 Proceeds from sale of investments 15,848 15,848 2,763 Increase in investments due to paid-in-kind interest or other (4,532) (5,994) (2,400) Net change in premiums, discounts and amortization (445) 876 (329) Net realized loss (gain) on investments (5,416) (4,179) 7,685 Net unrealized depreciation (appreciation) of investments 17,538 (55,347) 18,670 Net realized loss (gain) on other 243 999 1,407 Net unrealized depreciation (appreciation) of other — 350 (517) Amortization of deferred financing costs 1,175 1,347 1,484 Changes in assets and liabilities: Decrease (increase) in interest receivable, net (376) 640 (376) Decrease (increase) in funds due from administrative agent (248) (848) 723 Decrease (increase) in other assets, net (787) (941) 255 Increase (decrease) in accounts payable and accrued expenses 10 113 (199) Increase (decrease) in interest payable 720 616 339 Increase (decrease) in fees due to Adviser (A) (151) 569 234 Increase (decrease) in fee due to Administrator (A) 41 53 (37) Increase (decrease) in other liabilities (5,029) 2,562 (6) Net cash provided by (used in) operating activities (76,401) (14,062) (46,091) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 328,900 238,800 204,500 Repayments on line of credit (237,600) (316,300) (143,400) Redemption of mandatorily redeemable preferred stock — — (51,750) Proceeds from issuance of notes payable 50,000 150,000 38,813 Redemption of notes payable (38,813) (57,500) — Financing costs (1,968) (3,036) (1,677) Proceeds from issuance of common stock 4,533 26,850 11,664 Offering costs for issuance of common stock (68) (403) (175) Distributions paid to common stockholders (27,322) (25,972) (25,163) Net cash provided by (used in) financing activities 77,662 12,439 32,812 NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS 1,261 (1,623) (13,279) CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR 846 2,469 15,748 CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF YEAR $ 2,107 $ 846 $ 2,469 CASH PAID DURING YEAR FOR INTEREST $ 12,246 $ 10,897 $ 9,652 NON-CASH ACTIVITIES (B) 7,489 6,633 — (A) Refer to Note 4 — Related Party Transactions for additional information. (B) Non-cash activities relate to estimated tax liabilities and escrows associated with portfolio company exits and the following transactions: • In June 2022, our investment in LWO Acquisitions Company LLC was restructured, resulting in non-cash activity of $6.8 million and new investments in Lonestar EMS, LLC, which are listed on the accompanying Consolidated Schedule of Investments as of September 30, 2022. • In June 2021, our investment in NetFortris Corp. was restructured. As part of the transaction, approximately $3.5 million of fees and accrued interest were capitalized to the term loan. • Approximately $3.1 million of non-cash activities consists of estimated tax liabilities for portfolio company exits that occurred during the year ended September 30, 2021. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 76 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value NON-CONTROL/NON-AFFILIATE INVESTMENTS (M) – 182.2% Secured First Lien Debt – 131.2% Aerospace and Defense – 23.4% Antenna Research Associates, Inc. – Term Debt (SOFR + 10.0%, 13.0% Cash, 4.0% PIK, Due 11/2026) (E) $ 21,973 $ 21,973 $ 21,973 Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 11.1% Cash, Due 2/2026) (C) 18,913 18,913 18,558 SpaceCo Holdings, LLC – Line of Credit, $100 available (L + 7.0%, 10.8% Cash, Due 12/2025) (C)(U) 1,900 1,900 1,886 SpaceCo Holdings, LLC – Term Debt (L + 7.0%, 10.8% Cash, Due 12/2025) (C)(U) 31,719 31,326 31,481 74,112 73,898 Beverage, Food, and Tobacco – 18.7% Café Zupas – Line of Credit, $4,000 available (L + 7.4%, 10.5% Cash, Due 12/2024) (C) — — — Café Zupas – Delayed Draw Term Loan, $0 available (L + 7.4%, 10.5% Cash, Due 12/2024) (C) 1,970 1,970 1,958 Café Zupas – Term Debt (L + 7.4%, 10.5% Cash, Due 12/2024) (C) 23,460 23,460 23,313 Eegee’s LLC – Line of Credit, $1,000 available (L + 8.3%, 11.4% Cash, Due 6/2026) (C) — — — Eegee’s LLC – Delayed Draw Term Loan, $4,500 available (L + 8.3%, 11.4% Cash, Due 6/2026) (C) 3,000 3,000 2,910 Eegee’s LLC – Term Debt (L + 8.3%, 11.4% Cash, Due 6/2026) (C) 17,000 17,000 16,490 Salt & Straw, LLC – Line of Credit, $1,200 available (L + 8.0%, 11.1% Cash, Due 9/2027) (C) 800 800 800 Salt & Straw, LLC – Delayed Draw Term Loan, $11,500 available (L + 8.0%, 11.1% Cash, Due 9/2027) (C) — — — Sokol & Company Holdings, LLC – Term Debt (SOFR + 7.0%, 10.0% Cash, Due 8/2027) (C)(AA) 13,500 13,500 13,500 59,730 58,971 Buildings and Real Estate – 0.5% GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 11.1% Cash, Due 9/2023) (C) 700 700 681 GFRC 360, LLC – Term Debt (L + 8.0%, 11.1% Cash, Due 9/2023) (C) 1,000 1,000 973 1,700 1,654 Diversified/Conglomerate Manufacturing – 22.3% Engineering Manufacturing Technologies, LLC – Line of Credit, $3,000 available (L + 8.3%, 11.4% Cash, Due 10/2026) (C) — — — Engineering Manufacturing Technologies, LLC – Term Debt (L + 8.3%, 11.4% Cash, Due 10/2026) (C) 22,500 22,500 22,134 Salvo Technologies, Inc. – Term Debt (SOFR + 9.5%, 12.5% Cash, Due 4/2027) (C)(AA) 11,887 11,887 11,619 Viva Railings, LLC – Line of Credit, $4,000 available (L + 7.0%, 10.1% Cash, Due 5/2027) (C) — — — Viva Railings, LLC – Term Debt (L + 7.0%, 10.1% Cash, Due 5/2027) (C) 21,800 21,800 21,364 Unirac Holdings, Inc. – Line of Credit, $2,222 available (SOFR + 6.5%, 9.5% Cash, Due 9/2027) (C)(AA) — — — Unirac Holdings, Inc. – Delayed Draw Term Loan, $2,778 available (SOFR + 6.5%, 9.5% Cash, Due 9/2027) (C)(AA) — — — Unirac Holdings, Inc. – Term Debt (SOFR + 6.5%, 9.5% Cash, Due 9/2027) (C)(AA) 15,000 14,628 15,000 70,815 70,117 Diversified/Conglomerate Service – 31.1% Axios Industrial Group, LLC – Term Debt (SOFR + 9.5%, 12.6% Cash, Due 10/2027) (C)(AA) 9,000 9,000 8,741 Axios Industrial Group, LLC– Delayed Draw Term Loan, $5,000 available (SOFR + 9.5%, 12.6% Cash, Due 10/2027) (C)(AA) 3,000 3,000 2,914 DKI Ventures, LLC – Term Debt (SOFR + 8.0%, 11.0% Cash, Due 12/2023) (C) 5,915 5,915 4,554 ENET Holdings, LLC – Term Debt (L + 7.3%, 10.4% Cash, Due 4/2025) (C) 24,360 24,360 23,142 Fix-It Group, LLC – Line of Credit, $3,000 available (L + 7.0%, 10.1% Cash, Due 12/2026) (C)(U) — — — Fix-It Group, LLC – Term Debt (L + 7.0%, 10.1% Cash, Due 12/2026) (C)(U) 10,000 10,000 9,950 Fix-It Group, LLC– Delayed Draw Term Loan, $10,000 available (L + 7.0%, 10.1% Cash, Due 12/2026) (C)(U) — — — 77 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) MCG Energy Solutions, LLC – Line of Credit, $3,000 available (L + 7.5%, 10.6% Cash, Due 3/2026) (C) — — — MCG Energy Solutions, LLC – Term Debt (L + 7.5%, 10.6% Cash, 3.5% PIK, Due 3/2026) (C) 20,820 20,820 19,779 R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% PIK, Due 12/2023) (F)(Y) 829 829 829 R2i Holdings, LLC – Term Debt (8.0% PIK, Due 12/2023) (F)(Y) 18,000 18,000 18,000 WorkforceQA, LLC– Line of Credit, $2,000 available (L + 6.5%, 9.6% Cash, Due 12/2026) (C)(U) — — — WorkforceQA, LLC – Term Debt (L + 8.5%, 11.6% Cash, Due 12/2026) (C)(H)(U) 10,000 10,000 9,975 101,924 97,884 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 78 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Healthcare, Education, and Childcare - 31.3% ALS Education, LLC – Line of Credit, $3,000 available (L + 7.0%, 10.1% Cash, Due 5/2025) (C) — — — ALS Education, LLC – Term Debt (L + 7.0%, 10.1% Cash, Due 5/2025) (C) 19,690 19,690 19,468 HH-Inspire Acquisition, Inc. – Line of Credit, $1,500 available (L + 6.8%, 9.9% Cash, Due 12/2026) (C)(U) 1,500 1,500 1,489 HH-Inspire Acquisition, Inc. – Term Debt (L + 6.8%, 9.9% Cash, Due 12/2026) (C)(U) 16,000 16,000 15,880 HH-Inspire Acquisition, Inc. – Term Debt (L + 6.8%, 9.9% Cash, Due 12/2026) (C)(U) 8,000 8,000 7,940 HH-Inspire – Delayed Draw Term Loan, $0 available (L + 6.8%, 9.9% Cash, Due 12/2026) (C)(U) 10,000 10,000 9,925 Pansophic Learning Ltd. – Term Debt (L + 7.3%, 10.4% Cash, Due 3/2027) (C) 28,000 27,961 27,825 Pansophic Learning Ltd. – Term Debt (L + 7.3%, 10.4% Cash, Due 3/2027) (C) 5,000 4,993 4,969 Turn Key Health Clinics, LLC – Line of Credit, $1,500 available (L + 7.3%, 10.4% Cash, Due 6/2026) (C) 500 500 495 Turn Key Health Clinics, LLC – Term Debt (L + 7.3%, 10.4% Cash, Due 6/2026) (C) 11,000 11,000 10,890 99,644 98,881 Machinery -1.7% Arc Drilling Holdings LLC – Line of Credit, $1,000 available (L + 8.0%, 11.1% Cash, Due 11/2022) (C) — — — Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 12.6% Cash, 3.0% PIK, Due 11/2022) (C) 5,625 5,625 5,350 5,625 5,350 Printing and Publishing – 0.0% Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 10.3% Cash, Due 2/2015) (E)(V)(Q) 107 107 — Telecommunications – 2.2% B+T Group Acquisition, Inc.(S) – Line of Credit, $0 available (L + 11.0%, 14.1% Cash, Due 12/2024) (C) 1,200 1,200 1,146 B+T Group Acquisition, Inc.(S) – Term Debt (L + 11.0%, 14.1% Cash, Due 12/2024) (C) 6,000 6,000 5,730 7,200 6,876 Total Secured First Lien Debt $ 420,857 $ 413,631 Secured Second Lien Debt – 34.3% Automobile – 3.5% Sea Link International IRB, Inc. – Term Debt (14.5% PIK, Due 12/2025) (C)(F) $ 11,719 $ 11,679 $ 11,074 Beverage, Food, and Tobacco – 1.0% 8 th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 10.9% Cash, Due 10/2026) (D) 3,682 3,698 3,020 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 79 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Diversified/Conglomerate Manufacturing – 10.8% Springfield, Inc. – Term Debt (L + 10.0%, 13.1% Cash, Due 12/2026) (C) 30,000 30,000 29,738 Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 12.1% Cash, Due 5/2027) (D) 5,000 4,829 4,313 34,829 34,051 Diversified/Conglomerate Service – 2.3% CHA Holdings, Inc. – Term Debt (L + 8.8%, 12.5% Cash, Due 4/2026) (D)(U) 3,000 2,967 2,700 Gray Matter Systems, LLC – Term Debt (11.3% Cash, Due 12/2026) (C)(F) 2,100 2,069 2,084 Gray Matter Systems, LLC – Delayed Draw Term Loan, $4,000 available (11.3% Cash, Due 12/2026) (C)(F) 2,500 2,476 2,481 7,512 7,265 Healthcare, Education, and Childcare – 9.1% Giving Home Health Care, LLC – Term Debt (12.5% Cash, Due 2/2028) (C)(F) 28,800 28,800 28,800 Machinery – 0.2% CPM Holdings, Inc. – Term Debt (L + 8.3%, 11.4% Cash, Due 11/2026) (D) 798 798 758 Oil and Gas – 7.4% Imperative Holdings Corporation – Term Debt (L + 10.3%, 13.4% Cash, Due 9/2024) (C) 24,016 23,968 23,295 Total Secured Second Lien Debt $ 111,284 $ 108,263 Unsecured Debt – 0.0% Diversified/Conglomerate Service – 0.0% Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022) (E)(F) $ 198 $ 198 $ 55 Preferred Equity – 5.6% Automobile – 0.0% Sea Link International IRB, Inc. – Preferred Stock (E)(G) 98,039 98 153 Beverage, Food, and Tobacco – 0.0% Triple H Food Processors, LLC – Preferred Stock (E)(G) 75 75 120 Buildings and Real Estate – 0.2% GFRC 360, LLC – Preferred Stock (E)(G) 1,000 1,025 551 Diversified/Conglomerate Manufacturing – 0.8% Salvo Technologies, Inc. – Preferred Stock (E)(G) 2,500 2,500 2,584 Diversified/Conglomerate Service – 2.6% Frontier Financial Group Inc. – Preferred Stock (E)(G) 766 500 — Frontier Financial Group Inc. – Preferred Stock Warrant (E)(G) 168 — — MCG Energy Solutions, LLC – Preferred Stock (E) 7,000,000 7,000 8,151 7,500 8,151 Healthcare, Education, and Childcare – 0.3% HH-Inspire Acquisition, Inc. – Preferred Stock (E)(G) 854,848 956 945 Oil and Gas – 0.6% FES Resources Holdings LLC – Preferred Equity Units (E)(G) 6,350 6,350 — Imperative Holdings Corporation – Preferred Equity Units (E)(G) 1,474,225 632 2,028 6,982 2,028 Telecommunications – 1.1% B+T Group Acquisition, Inc. (S) – Preferred Stock (E)(G) 6,130 2,024 2,718 NetFortris Holdings LLC – Preferred Stock (E)(G) 7,890,860 789 469 2,813 3,187 Total Preferred Equity $ 21,949 $ 17,719 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 80 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Common Equity – 11.1% Aerospace and Defense – 4.7% Antenna Research Associates, Inc. – Common Equity Units (E)(G) 4,283 $ 4,283 $ 13,734 Ohio Armor Holdings, LLC – Common Equity (E)(G) 100 1,000 1,017 5,283 14,751 Automobile – 0.0% Sea Link International IRB, Inc.– Common Equity Units (E)(G) 823,333 823 105 Beverage, Food, and Tobacco – 0.7% Sokol & Company Holdings, LLC - Common Stock (E)(G) 1,500,000 1,500 1,500 Triple H Food Processors, LLC – Common Stock (E)(G) 250,000 250 672 1,750 2,172 Buildings and Real Estate – 0.0% GFRC 360, LLC – Common Stock Warrants (E)(G) 45.0 % — — Diversified/Conglomerate Manufacturing – 0.6% Engineering Manufacturing Technologies, LLC – Common Stock (E)(G) 6,000 3,000 1,773 Diversified/Conglomerate Service – 0.1% WorkforceQA, LLC – Common Stock (E)(G) 500 500 456 Healthcare, Education, and Childcare – 2.5% Giving Home Health Care, LLC - Warrant (E)(G) 10,667 19 19 GSM MidCo LLC – Common Stock (E)(G) 767 767 1,359 Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment) (G)(L)(R) 3.5 % 1,223 6,397 2,009 7,775 Machinery – 0.0% Arc Drilling Holdings LLC – Common Stock (E)(G) 15,000 1,500 — Oil and Gas – 0.0% FES Resources Holdings LLC – Common Equity Units (E)(G) 6,233 — — Total Safety Holdings, LLC – Common Equity (E)(G) 435 499 50 499 50 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% Funko Acquisition Holdings, LLC (S) – Common Units (G)(T) 4,239 22 58 Telecommunications – 0.0% B+T Group Acquisition, Inc. (S) – Common Stock Warrant (E)(G) 1.5 % — 25 Textiles and Leather – 2.5% Targus Cayman HoldCo, Ltd. – Common Stock (G)(Y)(Z) 3,076,414 2,062 7,978 Total Common Equity $ 17,448 $ 35,143 Total Non-Control/Non-Affiliate Investments $ 571,736 $ 574,811 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS 81 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value AFFILIATE INVESTMENTS (N) - 12.4% Secured First Lien Debt – 11.0% Diversified/Conglomerate Manufacturing – 0.8% Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 5.5%, 8.6% Cash, Due 8/2024) (E) $ 6,140 $ 6,140 $ 2,550 Diversified/Conglomerate Service – 10.2% Encore Dredging Holdings, LLC – Line of Credit, $3,000 available (L + 8.3%, 11.4% Cash, Due 12/2025) (C) — — — Encore Dredging Holdings, LLC – Term Debt (L + 7.0%, 10.1% Cash, 1.5% PIK, Due 12/2025) (C) 23,611 23,611 22,962 Encore Dredging Holdings, LLC – Term Debt (L + 7.0%, 10.1% Cash, 2.5% PIK, Due 12/2025) (C) 4,532 4,532 4,407 Encore Dredging Holdings, LLC – Delayed Draw Term Loan, $0 available (L + 7.0%, 10.1% Cash, 1.5% PIK, Due 12/2025) (C) 5,023 5,023 4,885 33,166 32,254 Total Secured First Lien Debt $ 39,306 $ 34,804 Preferred Equity – 1.2% Diversified/Conglomerate Manufacturing – 0.0% Edge Adhesives Holdings, Inc. (S) – Preferred Stock (E)(G) 5,466 $ 5,466 $ — Diversified/Conglomerate Service – 0.9% Encore Dredging Holdings, LLC (S) – Preferred Stock (E)(G) 3,840,000 3,840 2,842 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.3% Canopy Safety Brands, LLC – Preferred Stock (E)(G) 500,000 500 798 Total Preferred Equity $ 9,806 $ 3,640 Common Equity – 0.2% Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2% Canopy Safety Brands, LLC – Common Stock (E)(G) 800,000 300 647 Total Common Equity $ 300 $ 647 Total Affiliate Investments $ 49,412 $ 39,091 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 82 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value CONTROL INVESTMENTS (O) – 11.3% Secured First Lien Debt – 4.9% Diversified/Conglomerate Manufacturing – 1.0% Lonestar EMS, LLC – Term Debt (8.0% Cash, Due 6/2027) (E)(F) $ 3,250 $ 3,250 $ 3,030 Personal and Non-Durable Consumer Products (Manufacturing Only) – 3.6% WB Xcel Holdings, LLC - Line of Credit, $32 available (L + 10.5%, 13.6% Cash, Due 11/2026) (E) 1,468 1,468 1,468 WB Xcel Holdings, LLC - Term Loan (L + 10.5%, 13.6% Cash, Due 11/2026) (E) 9,925 9,925 9,925 11,393 11,393 Printing and Publishing – 0.3% TNCP Intermediate HoldCo, LLC – Line of Credit, $1,000 available (8.0% Cash, Due 10/2024) (E)(F) 1,000 1,000 1,000 Total Secured First Lien Debt $ 15,643 $ 15,423 Secured Second Lien Debt – 2.4% Automobile– 2.4% Defiance Integrated Technologies, Inc. – Term Debt (L + 9.5%, 12.6% Cash, Due 5/2026) (E) $ 7,665 $ 7,665 $ 7,665 Unsecured Debt – 0.0% Diversified/Conglomerate Manufacturing – 0.0% LWO Acquisitions Company LLC – Term Debt (Due 6/2023) (E)(P) $ 95 $ 95 $ — Preferred Equity – 1.8% Personal and Non-Durable Consumer Products (Manufacturing Only) – 1.8% WB Xcel Holdings, LLC - Preferred Stock (E)(G) 333 $ 2,750 $ 5,687 Common Equity – 2.2% Automobile– 0.4% Defiance Integrated Technologies, Inc. – Common Stock (E)(G) 33,321 $ 580 $ 1,147 Diversified/Conglomerate Manufacturing – 0.0% Circuitronics EMS Holdings LLC – Common Units (E)(G) 921,000 921 — Lonestar EMS, LLC – Common Units (E)(G) 100 % 6,750 — 7,671 — Machinery – 1.1% PIC 360, LLC – Common Equity Units (E)(G) 750 1 3,454 Printing and Publishing – 0.7% TNCP Intermediate HoldCo, LLC – Common Equity Units (E)(G) 790,000 500 2,337 Total Common Equity $ 8,752 $ 6,938 Total Control Investments $ 34,905 $ 35,713 TOTAL INVESTMENTS – 205.9% $ 656,053 $ 649,615 (A) Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $577.6 million at fair value, are pledged as collateral under our revolving line of credit, as described further in Note 5— Borrowings in the accompanying Notes to Consolidated Financial Statements. Under the Investment Company Act of 1940, as amended (the “1940 Act”), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2022, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 1.0% of total investments, at fair value, as of September 30, 2022. (B) Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 3.14% as of September 30, 2022. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date. (C) Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”). (D) Fair value was based on the indicative bid price on or near September 30, 2022, offered by the respective syndication agent’s trading desk. (E) Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the portfolio company’s securities in order of their relative priority in the capital structure. (F) Debt security has a fixed interest rate. 83 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS) (G) Security is non-income producing. (H) The Company has entered into an agreement that entitles it to the "last out" tranche of the first lien secured loan, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.50% (Floor 1.0%) per the credit agreement and the Consolidated Schedule of Investments above reflects such higher rate. (I) Represents the principal balance for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable. (J) Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase. (K) Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of September 30, 2022. (L) There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured. (M) Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities. (N) Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities. (O) Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities. (P) Debt security does not have a stated interest rate that is payable thereon. (Q) Investment maturity date has passed. Investment continues to make applicable interest payments. (R) Fair value was based on net asset value provided by the fund as a practical expedient. (S) One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission. (T) Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures" (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3— Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (U) The cash interest rate on this investment was indexed to 90-day LIBOR, which was 3.75% as of September 30, 2022. (V) The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 6.25% as of September 30, 2022. (W) Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the ASC 820 fair value hierarchy. Refer to Note 3 — Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (X) Cumulative gross unrealized depreciation for federal income tax purposes is $52.3 million; cumulative gross unrealized appreciation for federal income tax purposes is $35.2 million. Cumulative net unrealized depreciation is $17.1 million, based on a tax cost of $666.7 million. (Y) Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to occur imminently. (Z) Investment was exited subsequent to September 30, 2022. Refer to Note 15 – Subsequent Events in the accompanying Notes to the Consolidated Financial Statements for additional information. (AA) The cash interest rate on this investment was indexed to the 30-day Secured Overnight Financing Rate (“SOFR”), which was 3.04% as of September 30, 2022. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 84 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value NON-CONTROL/NON-AFFILIATE INVESTMENTS (M) – 142.8% Secured First Lien Debt – 95.5% Aerospace and Defense – 20.3% Antenna Research Associates, Inc. – Term Debt (L + 10.0%, 12.0% Cash, 4.0% PIK, Due 11/2023) (E) $ 11,763 $ 11,763 $ 11,763 Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 2/2026) (C) 19,500 19,500 19,549 SpaceCo Holdings, LLC – Line of Credit, $1,300 available (L + 6.8%, 7.8% Cash, Due 12/2025) (C) 700 700 700 SpaceCo Holdings, LLC – Term Debt (L + 6.8%, 7.8% Cash, Due 12/2025) (C) 32,544 32,044 32,544 64,007 64,556 Beverage, Food, and Tobacco – 13.5% Café Zupas – Line of Credit, $4,000 available (L + 7.4%, 8.9% Cash, Due 12/2024) (C) — — — Café Zupas – Delayed Draw Term Debt, $3,030 available (L + 7.4%, 8.9% Cash, Due 12/2024) (C) 1,970 1,970 1,987 Café Zupas – Term Debt (L + 7.4%, 8.9% Cash, Due 12/2024) (C) 24,000 24,000 24,210 Eegee’s LLC – Line of Credit, $1,000 available (L + 7.3%, 8.3% Cash, Due 6/2026) (C) — — — Eegee’s LLC – Delayed Draw Term Debt, $7,500 available (L + 7.3%, 8.3% Cash, Due 6/2026) (C) — — — Eegee’s LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026) (C) 17,000 17,000 16,936 42,970 43,133 Buildings and Real Estate – 0.5% GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 9.0% Cash, Due 9/2022) (C) 700 700 699 GFRC 360, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 9/2022) (C) 1,000 1,000 999 1,700 1,698 Diversified/Conglomerate Manufacturing – 3.8% Unirac, Inc. – Line of Credit, $1,003 available (L + 7.0%, 8.0% Cash, Due 6/2026) (C)(U) 251 251 250 Unirac, Inc. – Delayed Draw Term Debt, $1,254 available (L + 7.0%, 8.0% Cash, Due 6/2026) (C)(U) — — — Unirac, Inc. – Term Debt (L + 7.0%, 8.0% Cash, Due 6/2026) (C)(U) 11,921 11,652 11,891 11,903 12,141 Diversified/Conglomerate Service – 21.3% DKI Ventures, LLC – Line of Credit, $2,500 available (L + 8.3%, 9.3% Cash, 2.0% PIK, Due 12/2021) (C) — — — DKI Ventures, LLC – Term Debt (L + 8.3%, 9.3% Cash, 2.0% PIK, Due 12/2023) (C) 5,739 5,724 5,008 ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 12/2022) (C) 1,000 1,000 785 ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 4/2025) (C) 29,000 29,000 22,765 MCG Energy Solutions, LLC – Line of Credit, $3,000 available (L + 7.5%, 8.5% Cash, Due 3/2026) (C) — — — MCG Energy Solutions, LLC – Term Debt (L + 7.5%, 8.5% Cash, 1.5% PIK, Due 3/2026) (C) 20,129 20,129 19,927 MCG Energy Solutions, LLC – Delayed Draw Term Debt, $3,000 available (L + 7.5%, 8.5% Cash, 1.5% PIK, Due 3/2026) (C) — ` — — R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% Cash, Due 12/2021) (C)(F) 829 829 803 R2i Holdings, LLC – Term Debt (8.0% Cash, Due 12/2021) (C)(F) 19,000 19,000 18,406 75,682 67,694 Healthcare, Education, and Childcare – 24.9% ALS Education, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.5% Cash, Due 5/2025) (C) — — — ALS Education, LLC – Term Debt (L + 7.0%, 8.5% Cash, Due 5/2025) (C) 20,680 20,680 20,809 Effective School Solutions LLC – Line of Credit, $2,000 available (L + 7.3%, 8.3% Cash, Due 12/2025) (C) — — — Effective School Solutions LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 12/2025) (C) 19,000 19,000 19,095 Effective School Solutions LLC – Delayed Draw Term Debt, $3,200 available (L + 7.3%, 8.3% Cash, Due 12/2025) (C) — — — EL Academies, Inc. – Delayed Draw Term Debt, $0 available (L + 8.0%, 9.0% Cash, Due 8/2022) (C) 16,000 16,000 16,000 EL Academies, Inc. – Term Debt (L + 8.0%, 9.0% Cash, Due 8/2022) (C) 12,000 12,000 12,000 Turn Key Health Clinics, LLC – Line of Credit, $1,500 available (L + 7.3%, 8.3% Cash, Due 6/2026) (C) 500 500 499 Turn Key Health Clinics, LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026) (C) 11,000 11,000 10,986 79,180 79,389 85 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Machinery – 1.8% Arc Drilling Holdings LLC – Line of Credit, $875 available (L + 8.0%, 9.3% Cash, Due 11/2022) (C) 125 125 122 Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 10.8% Cash, 3.0% PIK, Due 11/2022) (C) 5,824 5,824 5,577 5,949 5,699 Printing and Publishing – 0.0% Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 7.3% Cash, Due 2/2015) (E)(V)(Q) $ 107 107 — Telecommunications – 9.4% B+T Group Acquisition, Inc. (S) – Line of Credit, $0 available (L + 11.0%, 13.0% Cash, Due 12/2021) (C) 1,200 1,200 1,158 B+T Group Acquisition, Inc. (S) – Term Debt (L + 11.0%, 13.0% Cash, Due 12/2021) (C) 6,000 6,000 5,790 NetFortris Corp. – Term Debt (L + 11.0%, 4.0% Cash, 7.5% PIK, Due 5/2021) (C)(Q) 27,350 26,946 22,837 34,146 29,785 Total Secured First Lien Debt $ 315,644 $ 304,095 Secured Second Lien Debt – 30.6% Automobile – 3.3% Sea Link International IRB, Inc. – Term Debt (11.3% Cash, 2.0% PIK, Due 3/2023) (C)(F) $ 10,893 $ 10,893 $ 10,376 Beverage, Food, and Tobacco – 1.1% 8th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 7.8% Cash, Due 10/2026) (D) 3,682 3,702 3,646 Chemicals, Plastics, and Rubber – 3.2% Phoenix Aromas & Essential Oils, LLC – Term Debt (L + 9.3%, 10.3% Cash, Due 5/2024) (C) 10,012 9,986 10,062 Diversified/Conglomerate Manufacturing – 1.5% Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 9.1% Cash, Due 5/2027) (D) 5,000 4,801 4,701 Diversified/Conglomerate Service – 8.7% CHA Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 4/2026) (D)(U) 3,000 2,960 2,700 Gray Matter Systems, LLC – Term Debt (12.0% Cash, Due 12/2026) (C)(F) 8,100 8,064 8,130 Keystone Acquisition Corp. – Term Debt (L + 9.3%, 10.3% Cash, Due 5/2025) (D)(U) 4,000 3,954 3,790 Prophet Brand Strategy – Delayed Draw Term Debt, $5,000 available (L + 8.5%, 10.5% Cash, Due 2/2025) (Y)(Z) — — — Prophet Brand Strategy – Term Debt (L + 8.5%, 10.5% Cash, Due 2/2025) (Y)(Z) 13,000 13,000 13,130 27,978 27,750 Healthcare, Education, and Childcare – 1.8% Medical Solutions Holdings, Inc. – Term Debt (L + 8.4%, 9.4% Cash, Due 6/2025) (C) 3,000 2,974 2,940 Medical Solutions Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 6/2025) (C) 3,000 2,957 2,940 5,931 5,880 Home and Office Furnishings, Housewares and Durable Consumer Products – 3.2% Belnick, Inc. – Term Debt (11.0% Cash, Due 8/2023) (C)(F) 10,000 10,000 10,025 Machinery – 0.2% CPM Holdings, Inc. – Term Debt (L + 8.3%, 8.3% Cash, Due 11/2026) (D) 798 798 790 Oil and Gas – 7.6% Imperative Holdings Corporation – Term Debt (L + 10.3%, 12.3% Cash, 1.8% PIK, Due 9/2022) (C) 26,569 26,569 24,178 Total Secured Second Lien Debt $ 100,658 $ 97,408 Unsecured Debt – 0.0% Diversified/Conglomerate Service – 0.0% Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022) (E)(F) $ 198 $ 198 $ 10 Preferred Equity – 5.7% Automobile – 0.0% Sea Link International IRB, Inc. – Preferred Stock (E)(G) 98,039 98 127 Beverage, Food, and Tobacco – 0.0% Triple H Food Processors, LLC – Preferred Stock (E)(G) 75 75 102 Buildings and Real Estate – 0.3% GFRC 360, LLC – Preferred Stock (E)(G) 1,000 1,025 864 86 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Diversified/Conglomerate Service – 2.8% Frontier Financial Group Inc. – Preferred Stock (E)(G) 766 500 — Frontier Financial Group Inc. – Preferred Stock Warrant (E)(G) 168 — — MCG Energy Solutions, LLC – Preferred Stock (E) 7,000,000 7,000 8,861 7,500 8,861 Oil and Gas – 0.5% FES Resources Holdings LLC – Preferred Equity Units (E)(G) 6,350 6,350 — Imperative Holdings Corporation – Preferred Equity Units (E)(G) 13,740 632 1,551 6,982 1,551 Telecommunications – 2.1% B+T Group Acquisition, Inc. (S) – Preferred Stock (E)(G) 6,130 2,024 5,691 NetFortris Corp. – Preferred Stock (E)(G) 7,890,860 789 914 2,813 6,605 Total Preferred Equity $ 18,493 $ 18,110 Common Equity – 11.0% Aerospace and Defense – 4.8% Antenna Research Associates, Inc. – Common Equity Units (E)(G) 4,283 $ 4,283 $ 13,444 Ohio Armor Holdings, LLC – Common Equity (E)(G) 1,000 1,000 1,749 5,283 15,193 Automobile– 0.1% Sea Link International IRB, Inc.– Common Equity Units (E)(G) 823,333 823 300 Beverage, Food, and Tobacco – 0.5% Triple H Food Processors, LLC – Common Stock (E)(G) 250,000 250 1,504 Buildings and Real Estate – 0.0% GFRC 360, LLC – Common Stock Warrants (E)(G) 45.0 % — — Healthcare, Education, and Childcare – 2.3% GSM MidCo LLC – Common Stock (E)(G) 767 767 924 Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment) (G)(L)(R) 3.5 % 1,358 6,487 2,125 7,411 Machinery – 0.0% Arc Drilling Holdings LLC – Common Stock (E)(G) 15,000 1,500 — Oil and Gas – 0.0% FES Resources Holdings LLC – Common Equity Units (E)(G) 6,233 — — Total Safety Holdings, LLC – Common Equity (E)(G) 435 499 132 499 132 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% Funko Acquisition Holdings, LLC (S) – Common Units (G)(T) 6,290 30 78 Telecommunications – 0.1% B+T Group Acquisition, Inc. (S) – Common Stock Warrant (E)(G) 1.5 % — 330 NetFortris Corp. – Common Stock Warrant (E)(G) 1 1 — 1 330 Textiles and Leather – 3.2% Targus Cayman HoldCo, Ltd. – Common Stock (E)(G) 3,076,414 2,062 10,030 Total Common Equity $ 12,573 $ 34,978 Total Non-Control/Non-Affiliate Investments $ 447,566 $ 454,601 AFFILIATE INVESTMENTS (N) – 25.8% Secured First Lien Debt – 9.1% Diversified/Conglomerate Manufacturing – 1.7% Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 10.5%, 12.5% Cash, Due 2/2022) (C) $ 5,540 $ 5,540 $ 5,540 Diversified/Conglomerate Service – 7.4% Encore Dredging Holdings, LLC – Line of Credit, $3,000 available (L + 8.0%, 9.0% Cash, Due 12/2025) (C) — — — Encore Dredging Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 12/2025) (C) 23,500 23,500 23,618 87 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Encore Dredging Holdings, LLC – Delayed Draw Term Debt, $5,000 available (L + 8.0%, 9.0% Cash, Due 12/2025) (C) — — — 23,500 23,618 Total Secured First Lien Debt $ 29,040 $ 29,158 Secured Second Lien Debt – 9.6% Diversified Natural Resources, Precious Metals and Minerals – 9.6% Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026) (Y)(Z) $ 6,000 $ 6,000 $ 6,540 Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026) (Y)(Z) 8,000 8,000 8,633 Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026) (Y)(Z) 3,300 3,300 3,491 Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026) (Y)(Z) 3,000 3,000 3,199 Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026) (Y)(Z) 2,500 2,500 2,500 Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026) (Y)(Z) 6,200 6,200 6,200 29,000 30,563 Total Secured Second Lien Debt $ 29,000 $ 30,563 Preferred Equity – 3.4% Diversified/Conglomerate Manufacturing – 0.0% Edge Adhesives Holdings, Inc. (S) – Preferred Stock (E)(G) 5,466 $ 5,466 $ — Diversified/Conglomerate Service– 1.4% Encore Dredging Holdings, LLC – Preferred Stock (E)(G) 3,200,000 3,200 4,525 Diversified Natural Resources, Precious Metals and Minerals – 1.8% Lignetics, Inc. – Preferred Stock (G)(Y)(Z) 78,097 1,321 5,602 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2% Canopy Safety Brands, LLC – Preferred Stock (E)(G) 500,000 500 739 Total Preferred Equity $ 10,487 $ 10,866 Common Equity – 3.7% Diversified Natural Resources, Precious Metals and Minerals – 3.5% Lignetics, Inc. – Common Stock (G)(Y)(Z) 152,603 $ 1,855 $ 10,969 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2% Canopy Safety Brands, LLC – Common Stock (E)(G) 800,000 300 725 Total Common Equity $ 2,155 $ 11,694 Total Affiliate Investments $ 70,682 $ 82,281 CONTROL INVESTMENTS (O) – 6.5% Secured First Lien Debt – 1.3% Diversified/Conglomerate Manufacturing – 0.9% LWO Acquisitions Company LLC – Term Debt (L + 7.5%, 10.0% Cash, Due 6/2021) (E)(Q) $ 6,000 $ 6,000 $ 2,841 LWO Acquisitions Company LLC – Term Debt (Due 6/2021) (E)(P)(Q) 10,632 10,632 — 16,632 2,841 Printing and Publishing – 0.4% TNCP Intermediate HoldCo, LLC – Line of Credit, $700 available (8.0% Cash, Due 10/2024) (E)(F) 1,300 1,300 1,300 Total Secured First Lien Debt $ 17,932 $ 4,141 Secured Second Lien Debt – 2.5% Automobile– 2.5% Defiance Integrated Technologies, Inc. – Term Debt (L + 9.5%, 11.0% Cash, Due 5/2026) (E) $ 7,985 $ 7,985 $ 7,985 Unsecured Debt – 0.0% Diversified/Conglomerate Manufacturing – 0.0% LWO Acquisitions Company LLC – Term Debt (Due 6/2023) (E)(P) $ 95 $ 95 $ — Preferred Equity – 0.1% Automobile– 0.1% Defiance Integrated Technologies, Inc. – Preferred Stock (E)(G) 6,043 $ 250 $ 270 Common Equity – 2.6% Automobile– 0.8% Defiance Integrated Technologies, Inc. – Common Stock (E)(G) 33,231 $ 580 $ 2,623 Diversified/Conglomerate Manufacturing – 0.0% LWO Acquisitions Company LLC – Common Units (E)(G) 921,000 921 — 88 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(W)(K) Principal/ Shares/ Units (J)(I) Cost Fair Value Machinery – 1.3% PIC 360, LLC – Common Equity Units (E)(G) 750 1 3,983 Printing and Publishing – 0.5% TNCP Intermediate HoldCo, LLC – Common Equity Units (E)(G) 790,000 500 1,728 Total Common Equity $ 2,002 $ 8,334 Total Control Investments $ 28,264 $ 20,730 TOTAL INVESTMENTS – 175.1% $ 546,512 $ 557,612 (1) Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $512.0 million at fair value, are pledged as collateral under our revolving line of credit, as described further in Note 5— Borrowings in the accompanying Notes to Consolidated Financial Statements . Under the Investment Company Act of 1940, as amended (the “1940 Act”), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2021, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 1.2% of total investments, at fair value, as of September 30, 2021. (2) Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 0.08% as of September 30, 2021. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date. (3) Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”). (4) Fair value was based on the indicative bid price on or near September 30, 2021, offered by the respective syndication agent’s trading desk. (5) Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the portfolio company’s securities in order of their relative priority in the capital structure. (6) Debt security has a fixed interest rate. (7) Security is non-income producing. (8) Reserved. (9) Represents the principal balance for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable. (10) Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase. (11) Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of September 30, 2021. (12) There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured. (13) Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities. (14) Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities. (15) Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities. (16) Debt security does not have a stated interest rate that is payable thereon. (17) Investment maturity date has passed. Investment continues to make applicable interest payments. (18) Fair value was based on net asset value provided by the fund as a practical expedient. (19) One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission. (20) Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3— Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (21) The cash interest rate on this investment was indexed to 90-day LIBOR, which was 0.13% as of September 30, 2021. (22) The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 3.25% as of September 30, 2021. (23) Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the ASC 820 fair value hierarchy. Refer to Note 3— Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (24) Cumulative gross unrealized depreciation for federal income tax purposes is $59.4 million; cumulative gross unrealized appreciation for federal income tax purposes is $57.7 million. Cumulative net unrealized depreciation is $1.7 million, based on a tax cost of $559.3 million. (25) Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to occur imminently. (26) Investment was exited subsequent to September 30, 2021. 89 Table of Contents GLADSTONE CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2022 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND AS OTHERWISE INDICATED) NOTE 1. ORGANIZATION Gladstone Capital Corporation was incorporated under the Maryland General Corporation Law on May 30, 2001 and completed an initial public offering on August 24, 2001. The terms “the Company,” “we,” “our” and “us” all refer to Gladstone Capital Corporation and its consolidated subsidiaries. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and are applying the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services-Investment Companies” (“ASC 946”). In addition, we have elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (“U.S.”). Our investment objectives are to: (1) achieve and grow current income by investing in debt securities of established lower middle market companies (which we generally define as companies with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $3 million to $15 million) in the U.S. that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities, in connection with our debt investments, that we believe can grow over time to permit us to sell our equity investments for capital gains. Gladstone Business Loan, LLC (“Business Loan”), a wholly-owned subsidiary of ours, was established on February 3, 2003, for the sole purpose of holding certain investments pledged as collateral under our line of credit. The financial statements of Business Loan are consolidated with those of Gladstone Capital Corporation. We are externally managed by Gladstone Management Corporation (the “Adviser”), an affiliate of ours and an SEC registered investment adviser, pursuant to an investment advisory and management agreement (as amended and/or restated from time to time, the “Advisory Agreement”). Administrative services are provided by Gladstone Administration, LLC (the “Administrator”), an affiliate of ours and the Adviser, pursuant to an administration agreement (the “Administration Agreement”). Refer to Note 4— Related Party Transactions for additional information regarding these arrangements. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation We prepare our Consolidated Financial Statements and the accompanying notes in accordance with accounting principles generally accepted in the U.S. (“GAAP ” ) and conform to Regulation S-X. Management believes it has made all necessary adjustments so that our accompanying Consolidated Financial Statements are presented fairly and that all such adjustments are of a normal recurring nature. Our accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Consolidation In accordance with Article 6 of Regulation S-X, we do not consolidate portfolio company investments. Under the investment company rules and regulations pursuant to the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, codified in ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries. Use of Estimates Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported in our accompanying Consolidated Financial Statements and these Notes to Consolidated Financial Statements. Actual results may differ from those estimates. 90 Table of Contents Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation in the Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements. Reclassifications did not impact net increase in net assets resulting from operations, total assets, total liabilities, or total net assets, or Consolidated Statements of Cash Flows classifications. Classification of Investments In accordance with the provisions of the 1940 Act applicable to BDCs, we classify portfolio investments on our accompanying Consolidated Financial Statements into the following categories: • Control Investments— Control investments are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities of such portfolio company; • Affiliate Investments — Affiliate investments are those in which we own, with the power to vote, between 5.0% and 25.0% of the issued and outstanding voting securities that are not classified as Control investments; and • Non-Control/Non-Affiliate Investments — Non-Control/Non-Affiliate investments are those that are neither control nor affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities. Cash and cash equivalents We consider all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of three months or less at the time of purchase to be cash equivalents. Cash is carried at cost, which approximates fair value. We place our cash with financial institutions, and at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit. We seek to mitigate this concentration of credit risk by depositing funds with major financial institutions. Restricted Cash and Cash Equivalents Restricted cash is cash held in escrow that was generally received as part of an investment exit. Restricted cash is carried at cost, which approximates fair value. Investment Valuation Policy Accounting Recognition We record our investments at fair value in accordance with the FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) and the 1940 Act. Investment transactions are recorded on the trade date. Realized gains or losses are generally measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Unrealized appreciation or depreciation primarily reflects the change in investment fair values, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. Board Responsibility In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which permits a BDC’s board of directors to designate its investment adviser as a valuation designee to perform fair value determinations for its investment portfolio, subject to the active oversight of such board. Our board of directors (the “Board of Directors”) has approved investment valuation policies and procedures pursuant to Rule 2a-5 (the “Policy”) and, in July 2022, designated the Adviser to serve as the Board of Directors’ valuation designee. In accordance with the 1940 Act and SEC Rule 2a-5, our Board of Directors has the ultimate responsibility for reviewing and determining, in good faith, the fair value of our investments for which market quotations are not readily available based on our Policy and for overseeing the valuation designee. Such review and oversight includes receiving written fair value determinations and supporting materials provided by the valuation designee, in coordination with the Administrator 91 Table of Contents and with the oversight by the Company’s chief valuation officer (collectively, the “Valuation Team”). The Valuation Committee of our Board of Directors (comprised entirely of independent directors) meets to review the valuation determinations and supporting materials, discusses the information provided by the Valuation Team, determines whether the Valuation Team has followed the Policy, and reviews other facts and circumstances, including current valuation risks, conflicts of interest, material valuation matters, appropriateness of valuation methodologies, back-testing results, price challenges/overrides, and ongoing monitoring and oversight of pricing services. After the Valuation Committee concludes its meeting, it and the chief valuation officer, representing the Valuation Designee, present the Valuation Committee’s findings to the entire Board of Directors so that the full Board of Directors may review and approve in good faith the Valuation Designee’s determined fair values of such investments in accordance with the Policy. There is no single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the specific facts and circumstances of each individual investment. In determining the fair value of our investments, the Valuation Team, led by the chief valuation officer, uses the Policy, and each quarter the Valuation Committee and Board of Directors review the Policy to determine if changes thereto are advisable and whether the Valuation Team has applied the Policy consistently. Use of Third Party Valuation Firms The Valuation Team engages third party valuation firms to provide independent assessments of fair value of certain of our investments. ICE Data Pricing and Reference Data, LLC (“ICE”), a valuation specialist, generally provides estimates of fair value on our proprietary debt investments. The Valuation Team generally assigns ICE’s estimates of fair value to our debt investments where we do not have the ability to effectuate a sale of the applicable portfolio company. The Valuation Team corroborates ICE’s estimates of fair value using one or more of the valuation techniques discussed below. The Valuation Team’s estimate of value on a specific debt investment may significantly differ from ICE’s. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation Team has followed the Policy and whether the Valuation Team’s recommended fair value is reasonable in light of the Policy and other facts and circumstances before determining fair value. We may engage other independent valuation firms to provide earnings multiple ranges, as well as other information, and evaluate such information for incorporation into the total enterprise value (“TEV”) of certain of our investments. Generally, at least once per year, we engage an independent valuation firm to value or review the valuation of each of our significant equity investments, which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including review of all inputs provided by the independent valuation firm. The Valuation Team then makes a recommendation to our Valuation Committee and Board of Directors as to the fair value. Our Board of Directors reviews the recommended fair value, and whether it is reasonable in light of the Policy, and other relevant facts and circumstances before determining fair value. Valuation Techniques In accordance with ASC 820, the Valuation Team uses the following techniques when valuing our investment portfolio: • Total Enterprise Value — In determining the fair value using a TEV, the Valuation Team first calculates the TEV of the portfolio company by incorporating some or all of the following factors: the portfolio company’s ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the trailing or projected 12 month revenue or EBITDA); EBITDA multiples obtained from our indexing methodology whereby the original transaction EBITDA multiple at the time of our closing is indexed to a general subset of comparable disclosed transactions and EBITDA multiples from recent sales to third parties of similar securities in similar industries; a comparison to publicly traded securities in similar industries, and other pertinent factors. The Valuation Team generally reviews industry statistics and may use outside experts when gathering this information. Once the TEV is determined for a portfolio company, the Valuation Team generally allocates the TEV to the portfolio company’s securities based on the facts and circumstances of the securities, which typically results in the allocation of fair value to securities based on the order of their relative priority in the capital structure. Generally, the Valuation Team uses TEV to value our equity investments and, in the circumstances where we have the ability to effectuate a sale of a portfolio company, our debt investments. TEV is primarily calculated using EBITDA and EBITDA multiples; however, TEV may also be calculated using revenue and revenue multiples or a discounted cash flow (“DCF”) analysis whereby future expected cash flows of 92 Table of Contents the portfolio company are discounted to determine a net present value using estimated risk-adjusted discount rates, which incorporate adjustments for nonperformance and liquidity risks. • Yield Analysis — The Valuation Team generally determines the fair value of our debt investments for which we do not have the ability to effectuate a sale of the applicable portfolio company using the yield analysis, which includes a DCF calculation and assumptions that the Valuation Team believes market participants would use, including, estimated remaining life, current market yield, current leverage, and interest rate spreads. This technique develops a modified discount rate that incorporates risk premiums including increased probability of default, increased loss upon default and increased liquidity risk. Generally, the Valuation Team uses the yield analysis to corroborate both estimates of value provided by ICE and market quotes. • Market Quotes — For our investments for which a limited market exists, we generally base fair value on readily available and reliable market quotations which are corroborated by the Valuation Team (generally by using the yield analysis described above). In addition, the Valuation Team assesses trading activity for similar investments and evaluates variances in quotations and other market insights to determine if any available quoted prices are reliable. Typically, the Valuation Team uses the lower indicative bid price (“IBP”) in the bid-to-ask price range obtained from the respective originating syndication agent’s trading desk on or near the valuation date. The Valuation Team may take further steps to consider additional information to validate that price in accordance with the Policy. For securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date. For restricted securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date less a discount for the restriction, which includes consideration of the nature and term to expiration of the restriction. • Investments in Funds — For equity investments in other funds for which we cannot effectuate a sale of the fund, the Valuation Team generally determines the fair value of our invested capital at the net asset value (“NAV”) provided by the fund. Any invested capital that is not yet reflected in the NAV provided by the fund is valued at par value. The Valuation Team may also determine fair value of our investments in other investment funds based on the capital accounts of the underlying entity. In addition to the valuation techniques listed above, the Valuation Team may also consider other factors when determining the fair value of our investments, including: the nature and realizable value of the collateral, including external parties’ guaranties, any relevant offers or letters of intent to acquire the portfolio company, timing of expected loan repayments, and the markets in which the portfolio company operates. Fair value measurements of our investments may involve subjective judgments and estimates and due to the uncertainty inherent in valuing these securities, the determinations of fair value may fluctuate from period to period and may differ materially from the values that could be obtained if a ready market for these securities existed. Our NAV could be materially affected if the determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities. Additionally, changes in the market environment and other events that may occur over the life of the investment may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which it is recorded. Refer to Note 3— Investments for additional information regarding fair value measurements and our application of ASC 820. Revenue Recognition Interest Income Recognition Interest income, including the amortization of premiums, acquisition costs and amendment fees, the accretion of original issue discounts (“OID”), and paid-in-kind (“PIK”) interest, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 90 days or more past due or if our qualitative assessment indicates that the debtor is unable to service its debt or other obligations, we will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, we remain contractually entitled to this interest. Interest payments received on non-accrual loans may be recognized as income or applied to the cost basis depending upon management's judgment. Generally, non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current, or due to a restructuring such that the interest income is deemed to be collectible. As of September 30, 2022 and 2021, there were no loans on non-accrual status. 93 Table of Contents We currently hold, and we expect to hold in the future, some loans in our portfolio that contain OID or PIK provisions. We recognize OID for loans originally issued at discounts and recognize the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Thus, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain our ability to be taxed as a RIC, we may need to pay out both OID and PIK non-cash income amounts in the form of distributions, even though we have not yet collected the cash on either. As of September 30, 2022 and 2021, we held four and six OID loans, respectively, primarily from syndicated loans as well as some participation interests in our portfolio. We recorded OID income of $0.5 million, $0.3 million, and $0.3 million during the years ended September 30, 2022, 2021, and 2020, respectively. The unamortized balance of OID investments as of September 30, 2022 and 2021 totaled $0.9 million and $1.1 million, respectively. As of September 30, 2022 and 2021, we had six and seven investments which had a PIK interest component, respectively. We recorded PIK interest income of $4.2 million, $2.5 million, and $2.6 million during the years ended September 30, 2022, 2021, and 2020, respectively. We collected $2.4 million, $3.4 million, and $0.1 million of PIK interest in cash during the years ended September 30, 2022, 2021, and 2020, respectively. Success Fee Income Recognition We record success fees as income when earned, which often occurs upon receipt of cash. Success fees are generally contractually due upon a change of control in a portfolio company, typically resulting from an exit or sale, and are non-recurring. Dividend Income Recognition We accrue dividend income on preferred and common equity securities to the extent that such amounts are expected to be collected and if we have the option to collect such amounts in cash or other consideration. Deferred Financing and Offering Costs Deferred financing and offering costs consist of costs incurred to obtain financing, including lender fees and legal fees. Certain costs associated with our Credit Facility (as defined below) are deferred and amortized using the straight-line method, which approximates the effective interest method, over the term of our Credit Facility’s revolving period. Costs associated with the issuance of our notes payable are presented as discounts to the principal amount of the notes payable and are amortized using the straight-line method, which approximates the effective interest method, over the term of the notes. Costs associated with the issuance of our mandatorily redeemable preferred stock are presented as discounts to the liquidation value of the mandatorily redeemable preferred stock and are amortized using the straight-line method, which approximates the effective interest method, over the term of the respective series of preferred stock. Refer to Note 5 — Borrowings and Note 6 — Mandatorily Redeemable Preferred Stock for further discussion. Related Party Fees We are party to the Advisory Agreement with the Adviser, which is owned and controlled by our chairman and chief executive officer. In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee. Additionally, we pay the Adviser a loan servicing fee as compensation for its services as servicer under the terms of our revolving line of credit with KeyBank National Association (“KeyBank”), as administrative agent, lead arranger and lender (as amend and/or restated from time to time, our “Credit Facility”). These fees are accrued at the end of the quarter when the services are performed and generally paid the following quarter. We are also party to the Administration Agreement with the Administrator, which is owned and controlled by our chairman and chief executive officer, whereby we pay separately for administrative services. Refer to Note 4— Related Party Transactions for additional information regarding these related party fees and agreements. Income Taxes We intend to continue to qualify for treatment as a RIC under subchapter M of the Code, which generally allows us to avoid paying corporate income taxes on any income or gains that we distribute to our stockholders. We intend to continue 94 Table of Contents to distribute sufficient dividends to eliminate taxable income. Refer to Note 10— Federal and State Income Taxes for additional information regarding our RIC requirements. ASC 740, “Income Taxes” requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to satisfy the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current fiscal year. We have evaluated the implications of ASC 740, for all open tax years and in all major tax jurisdictions, and determined that there is no material impact on our accompanying Consolidated Financial Statements. Our federal tax returns for fiscal years 2019 to 2021 remain subject to examination by the Internal Revenue Service (“IRS”). Distributions Distributions to stockholders are recorded on the ex-dividend date. We are required to pay out at least 90.0% of our Investment Company Taxable Income (as defined below), which is generally our net ordinary income plus the excess of our net short-term capital gains over net long-term capital losses for each taxable year as a distribution to our stockholders in order to maintain our ability to be taxed as a RIC under Subchapter M of the Code. It is our policy to pay out as a distribution up to 100.0% of those amounts. The amount to be paid is determined by our Board of Directors each quarter and is based on the annual earnings estimated by our management. Based on that estimate, a distribution is declared each quarter and is paid out monthly over the course of the respective quarter. Refer to Note 9— Distributions to Common Stockholders for further information. Our transfer agent, Computershare, Inc., offers a dividend reinvestment plan for our common stockholders. This is an “opt in” dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional shares of our common stock. Common stockholders who do not make such election will receive their distributions in cash. Common stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. As plan agent, Computershare, Inc. purchases shares in the open market in connection with the obligations under the plan. Recent Accounting Pronouncements In June 2022, the FASB issued Accounting Standards Update 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”), which clarifies the measurement and presentation of fair value for equity securities subject to contractual restrictions that prohibit the sale of the equity security. ASU 2022-03 is effective for annual reporting periods beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. Our adoption of ASU 2022-03 did not have a material impact on our financial position, results of operations or cash flows. In August 2021, the FASB issued Accounting Standards Update 2021-06, “Presentation of Financial Statements (Topic 205): Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946)” (“ASU 2021-06”), which codifies SEC final rules. ASU 2021-06 is effective immediately. Our adoption of ASU 2021-06 did not have a material impact on our financial position, results of operations or cash flows. NOTE 3. INVESTMENTS In accordance with ASC 820, the fair value of each investment is determined to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the following three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date. • Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical financial instruments in active markets; • Level 2 — inputs to the valuation methodology include quoted prices for similar financial instruments in active or inactive markets, and inputs that are observable for the financial instrument, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers; and 95 Table of Contents • Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect assumptions that market participants would use when pricing the financial instrument and can include the Valuation Team’s assumptions based upon the best available information. When a determination is made to classify our investments within Level 3 of the valuation hierarchy, such determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable, or Level 3, inputs, observable inputs (or components that are actively quoted and can be validated to external sources). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Investments in funds measured using NAV as a practical expedient are not categorized within the fair value hierarchy. As of September 30, 2022, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment in Funko Acquisition Holdings, LLC (“Funko”), which was valued using Level 2 inputs, and our investment in Leeds Novamark Capital I, L.P. (“Leeds”), which was valued using NAV as a practical expedient. As of September 30, 2021, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment in Funko, which was valued using Level 2 inputs, and our investment in Leeds, which was valued using NAV as a practical expedient. We transfer investments in and out of Level 1, 2, and 3 of the valuation hierarchy as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. During the years ended September 30, 2022 and 2021, there were no investments transferred into or out of Levels 1, 2 or 3 of the valuation hierarchy. As of September 30, 2022 and 2021, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy: Fair Value Measurements Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) As of September 30, 2022: Secured first lien debt $ 463,858 $ — $ — $ 463,858 Secured second lien debt 115,928 — — 115,928 Unsecured debt 55 — — 55 Preferred equity 27,046 — — 27,046 Common equity/equivalents 36,331 (A) — 58 (B) 36,273 Total Investments as of September 30, 2022: $ 643,218 $ — $ 58 $ 643,160 96 Table of Contents Fair Value Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) As of September 30, 2021: Secured first lien debt $ 337,394 $ — $ — $ 337,394 Secured second lien debt 135,956 — — 135,956 Unsecured debt 10 — — 10 Preferred equity 29,246 — — 29,246 Common equity/equivalents 48,519 (A) — 78 (B) 48,441 Total Investments as of September 30, 2021: $ 551,125 $ — $ 78 $ 551,047 (A) Excludes our investment in Leeds with a fair value of $6.4 million and $6.5 million as of September 30, 2022 and 2021, respectively. Leeds was valued using NAV as a practical expedient. (B) Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability as our investment was subject to certain restrictions. 97 Table of Contents The following table presents our portfolio investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy and carried at fair value as of September 30, 2022 and 2021 by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type: Total Recurring Fair Value Measurements Reported in Consolidated Statements of Assets and Liabilities Using Significant Unobservable Inputs (Level 3) September 30, 2022 September 30, 2021 Non-Control/Non-Affiliate Investments Secured first lien debt $ 413,631 $ 304,095 Secured second lien debt 108,263 97,408 Unsecured debt 55 10 Preferred equity 17,719 18,110 Common equity/equivalents 28,688 (A) 28,413 (B) Total Non-Control/Non-Affiliate Investments $ 568,356 $ 448,036 Affiliate Investments Secured first lien debt $ 34,804 $ 29,158 Secured second lien debt — 30,563 Preferred equity 3,640 10,866 Common equity/equivalents 647 11,694 Total Affiliate Investments $ 39,091 $ 82,281 Control Investments Secured first lien debt $ 15,423 $ 4,141 Secured second lien debt 7,665 7,985 Preferred equity 5,687 270 Common equity/equivalents 6,938 8,334 Total Control Investments $ 35,713 $ 20,730 Total Investments at Fair Value Using Level 3 Inputs $ 643,160 $ 551,047 (A) Excludes our investments in Leeds and Funko with fair values of $6.4 million and $58 thousand, respectively, as of September 30, 2022. Leeds was valued using NAV as a practical expedient, and Funko was valued using Level 2 inputs. (B) Excludes our investments in Leeds and Funko with fair values of $6.5 million and $78 thousand, respectively, as of September 30, 2021. Leeds was valued using NAV as a practical expedient, and Funko was valued using Level 2 inputs. 98 Table of Contents In accordance with ASC 820, the following table provides quantitative information about our Level 3 fair value measurements of our investments as of September 30, 2022 and 2021. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements. The weighted average calculations in the table below are based on the principal balances for all debt related calculations and on the cost basis for all equity related calculations for the particular input. Quantitative Information about Level 3 Fair Value Measurements Range / Weighted Average as of September 30, 2022 September 30, 2021 Valuation Techniques/ Methodologies Unobservable Input September 30, 2022 September 30, 2021 Secured first lien debt (A) $ 423,912 $ 321,490 Yield Analysis Discount Rate 8.0%–29.5% / 11.8% 7.5%–31.2% / 12.4% 39,946 15,904 TEV EBITDA multiple 4.8x–6.7x / 6.2x 5.4x–5.9x / 5.9x EBITDA $800–$10,257 / $7,605 $620–$10,209 / $9,255 Revenue multiple 0.3x–0.6x / 0.5x 0.3x–0.3x / 0.3x Revenue $11,514–$16,320 / $14,656 $9,968–$9,968 / $9,968 Secured second lien debt 97,472 106,464 Yield Analysis Discount Rate 11.5%–15.4% / 13.8% 10.1%—23.7% / 14.7% 10,791 21,507 Market Quote IBP 82.0%–95.0% / 86.5% 90.0%–99.0% / 95.7% 7,665 7,985 TEV EBITDA multiple 5.6x–5.6x / 5.6x 6.0x–6.0x / 6.0x EBITDA $3,299–$3,299 / $3,299 $3,125–$3,125 / $3,125 Unsecured debt 55 10 TEV Revenue multiple 0.3x–1.3x / l.0x 0.3x–1.4x / l.0x Revenue $764–$11,514 / $4,249 $752–$9,968 / $3,740 Preferred and common equity / equivalents (B) 63,319 77,687 TEV EBITDA multiple 4.1x–11.0x / 6.5x 3.7x–9.5x / 7.2x EBITDA $800–$74,512 / $11,742 $620–$62,547 / $14,788 Revenue multiple 0.3x–4.4x / 1.4x 0.3x–4.0x / 2.0x Revenue $764–$42,926 / $19,963 $752–$144,889 / $29,437 Total Level 3 Investments, at Fair Value $ 643,160 $ 551,047 (A) Fair value as of September 30, 2022 includes one proprietary debt investment totaling $18.8 million, which was valued using the expected payoff amount as the unobservable input. Fair value as of September 30, 2021 includes two proprietary debt investments totaling $43.7 million, which were valued using the expected payoff amount as the unobservable input. (B) Fair value as of September 30, 2022 includes one syndicated equity investment totaling $8.0 million, which was valued using the expected payoff amount as the unobservable input. Fair value as of September 30, 2021 includes one proprietary equity investment totaling $16.6 million, which was valued using the expected payoff amount as the unobservable input. Fair value as of September 30, 2022 excludes our investments in Leeds and Funko with fair values of $6.4 million and $58 thousand, respectively, as of September 30, 2022. Fair value as of September 30, 2021 excludes our investments in Leeds and Funko with fair values of $6.5 million and $78 thousand, respectively, as of September 30, 2021. Leeds was valued using NAV as a practical expedient and Funko was valued using Level 2 inputs as of both September 30, 2022 and 2021. Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in market yields, discount rates, or a (decrease)/increase in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a (decrease)/increase, respectively, in the fair value of certain of our investments. 99 Table of Contents Changes in Level 3 Fair Value Measurements of Investments The following tables provide the changes in fair value, broken out by security type, during the years ended September 30, 2022 and 2021 for all investments for which we determine fair value using unobservable (Level 3) inputs. Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Year Ended September 30, 2022 Secured First Lien Debt Secured Second Lien Debt Unsecured Debt Preferred Equity Common Equity/ Equivalents Total Fair Value as of September 30, 2021 $ 337,394 $ 135,956 $ 10 $ 29,246 $ 48,441 $ 551,047 Total gains (losses): Net realized gain (loss) (A) (8,471) — (25) — 13,876 5,380 Net unrealized appreciation (depreciation) (B) (693) 267 20 (3,166) (12,968) (16,540) Reversal of prior period net depreciation (appreciation) on realization (B) 13,967 (1,601) 25 (4,309) (9,113) (1,031) New investments, repayments and settlements: (C) Issuances/originations 204,970 62,570 25 6,846 5,019 279,430 Settlements/repayments (77,898) (81,264) — (250) — (159,412) Net proceeds from sales 1,339 — — (1,321) (15,732) (15,714) Transfers (6,750) — — — 6,750 — Fair Value as of September 30, 2022 $ 463,858 $ 115,928 $ 55 $ 27,046 $ 36,273 $ 643,160 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Year Ended September 30, 2021 Secured First Lien Debt Secured Second Lien Debt Unsecured Debt Preferred Equity Common Equity/ Equivalents Total Fair Value as of September 30, 2020 $ 213,468 $ 196,986 $ 4,299 $ 7,000 $ 23,881 $ 445,634 Total gains (losses): — Net realized gain (loss) (A) — — — — 3,849 3,849 Net unrealized appreciation (depreciation) (B) 2,246 7,931 (7) 11,948 37,578 59,696 Reversal of prior period net depreciation (appreciation) on realization (B) 72 (763) 133 — (6,069) (6,627) New investments, repayments and settlements: (C) Issuances/originations 166,517 9,607 113 10,298 1,300 187,835 Settlements/repayments (24,909) (97,805) (4,528) — — (127,242) Net proceeds from sales — — — — (12,098) (12,098) Transfers (20,000) 20,000 — — — — Fair Value as of September 30, 2021 $ 337,394 $ 135,956 $ 10 $ 29,246 $ 48,441 $ 551,047 (A) Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the corresponding period. (B) Included in net unrealized appreciation (depreciation) on investments on our accompanying Consolidated Statements of Operations for the corresponding period. (C) Includes increases in the cost basis of investments resulting from new portfolio investments, accretion of discounts, PIK, and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments. 100 Table of Contents Investment Activity Proprietary Investments As of September 30, 2022 and 2021, we held 46 and 38 proprietary investments with an aggregate fair value of $630.8 million and $525.9 million, or 97.1% and 94.3% of the total portfolio at fair value, respectively. The following significant proprietary investment transactions occurred during the year ended September 30, 2022: • In October 2021, we invested $26.3 million in Engineering Manufacturing Technologies, LLC through secured first lien debt and equity. • In November 2021, our investment in Lignetics, Inc. was sold, which resulted in the recognition of success fee income of $1.6 million and a realized gain of $13.4 million. In connection with the sale, we received net cash proceeds of approximately $47.2 million, including the repayment of our debt investment of $29.0 million at par. • In November 2021, our investment in Prophet Brand Strategy paid off at par for net cash proceeds of $13.1 million. In conjunction with the payoff, we received a prepayment fee of $0.1 million. • In November 2021, our investment in Effective School Solutions LLC paid off at par for net cash proceeds of $19.5 million. In conjunction with the payoff, we received a prepayment fee of $0.5 million. • In November 2021, we invested $13.4 million in WB Xcel Holdings, LLC through secured first lien debt and equity. • In December 2021, our investment in Phoenix Aromas & Essential Oils, LLC paid off at par for net cash proceeds of $10.0 million. • In December 2021, we invested $10.0 million in Fix-it Group, Inc. through secured first lien debt. • In December 2021, we invested $10.5 million in Workforce QA LLC through secured first lien debt and equity. • In December 2021, we invested $30.0 million in Springfield, Inc. through secured second lien debt. • In December 2021, we invested $16.8 million in HH-Inspire Acquisition, Inc. (“HH-Inspire”) through secured first lien debt and preferred equity. In June 2022, we invested an additional $11.5 million in HH-Inspire through secured first lien debt. In August 2022, we invested an additional $0.2 million in HH-Inspire through additional preferred equity. In September 2022, we invested an additional $8.0 million in HH-Inspire through secured first lien debt. • In January 2022, our investment in Belnick, Inc. paid off at par for net cash proceeds of $10.0 million. • In March 2022, we invested $5.0 million in Pansophic Learning Ltd., an existing portfolio company, through secured first lien debt. • In March 2022, our investment in NetFortris Corp. was sold, which resulted in the recognition of success fee income of $3.2 million. In connection with the sale, we received net cash proceeds of $29.0 million, including the repayment of our debt investment of $28.8 million at par. We continue to retain an equity investment in NetFortris Holdings LLC with a cost basis of $0.8 million and fair value of $0.5 million as of September 30, 2022. • In April 2022, we invested $12.0 million in Axios Industrial Group, LLC through secured first lien debt. • In April 2022, we invested $14.4 million in Salvo Technologies, Inc. through secured first lien debt and membership units. • In May 2022, we invested $21.8 million in Viva Railings, LLC through secured first lien debt. • In June 2022, our investment in LWO Acquisitions Company LLC (“LWO”) was restructured upon emergence from Chapter 11 bankruptcy protection. As part of the restructuring, our existing $16.8 million debt investment in LWO was converted to $3.3 million of first lien debt and $6.8 million of common equity in Lonestar EMS, LLC. In conjunction with the restructuring, we recorded a net realized loss of approximately $8.5 million, including the write off of approximately $1.8 million in other receivables. 101 Table of Contents • In August 2022, we invested $28.8 million in Giving Home Health Care LLC through secured second lien debt and common equity warrants. • In August 2022, we invested $15.0 million in Sokol & Company Holdings, LLC through secured first lien debt and common equity. • In August 2022, we invested an additional $2.5 million in Gray Matter Systems, LLC, an existing investment, through secured second lien debt. • In September 2022, we invested an additional $10.5 million in Antenna Research Associates, Inc., an existing investment, through secured first lien debt. • In September 2022, we extended Salt and Straw, LLC a $2.0 million line of credit commitment and an $11.5 million delayed draw term loan commitment. We funded $0.8 million on the line of credit at close. • In September 2022, Unirac, Inc. was sold. In conjunction with the sale, we received net cash proceeds of $11.8 million, including the repayment of our debt investment at par and a $0.1 million prepayment penalty. • In September 2022, we invested $15.0 million in Unirac Holdings, Inc. through secured first lien debt. We also extended Unirac Holdings, Inc. a $2.2 million line of credit commitment and a $2.8 million delayed draw term loan commitment, both of which were both unfunded at close. Syndicated Investments As of September 30, 2022 and 2021, we held six and eight syndicated investments with an aggregate fair value of $18.8 million and $31.7 million, or 2.9% and 5.7% of the total portfolio at fair value, respectively. The following significant syndicated investment transactions occurred during the year ended September 30, 2022: • In November 2021, our investment in Medical Solutions Holdings, Inc. paid off at par for net cash proceeds of $6.0 million. • In January 2022, our investment in Keystone Acquisition Corp. paid off at par for net cash proceeds of $4.0 million. Investment Concentrations As of September 30, 2022, our investment portfolio consisted of investments in 52 portfolio companies located in 24 states in 13 different industries, with an aggregate fair value of $649.6 million. The five largest investments at fair value as of September 30, 2022 totaled $174.5 million, or 26.9% of our total investment portfolio, as compared to the five largest investments at fair value as of September 30, 2021 totaling $166.2 million, or 29.8% of our total investment portfolio. As of September 30, 2022 and 2021, our average investment by obligor was $12.6 million and $11.9 million at cost, respectively. The following table outlines our investments by security type as of September 30, 2022 and 2021: September 30, 2022 September 30, 2021 Cost Fair Value Cost Fair Value Secured first lien debt $ 475,806 72.5 % $ 463,858 71.4 % $ 362,616 66.3 % $ 337,394 60.5 % Secured second lien debt 118,949 18.2 115,928 17.8 137,643 25.2 135,956 24.4 Unsecured debt 293 0.0 55 0.0 293 0.1 10 0.0 Total debt investments 595,048 90.7 579,841 89.2 500,552 91.6 473,360 84.9 Preferred equity 34,505 5.3 27,046 4.2 29,230 5.3 29,246 5.2 Common equity/equivalents 26,500 4.0 42,728 6.6 16,730 3.1 55,006 9.9 Total equity investments 61,005 9.3 69,774 10.8 45,960 8.4 84,252 15.1 Total Investments $ 656,053 100.0 % $ 649,615 100.0 % $ 546,512 100.0 % $ 557,612 100.0 % 102 Table of Contents Our investments at fair value consisted of the following industry classifications as of September 30, 2022 and 2021: Industry Classification September 30, 2022 September 30, 2021 Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments Diversified/Conglomerate Service $ 148,907 22.9 % $ 132,458 23.8 % Healthcare, Education, and Childcare 136,401 21.0 92,680 16.6 Diversified/Conglomerate Manufacturing 114,105 17.6 25,223 4.5 Aerospace and Defense 88,649 13.6 79,749 14.3 Beverage, Food, and Tobacco 64,283 9.9 48,385 8.7 Oil and Gas 25,373 3.9 25,861 4.6 Automobile 20,144 3.1 21,681 3.9 Personal and Non-Durable Consumer Products 18,583 2.9 1,542 0.3 Telecommunications 10,088 1.6 36,720 6.6 Machinery 9,562 1.5 10,472 1.9 Textiles and Leather 7,978 1.2 10,030 1.8 Diversified Natural Resources, Precious Metals, and Minerals — — 47,134 8.4 Chemicals, Plastics, and Rubber — — 10,062 1.8 Home and Office Furnishings, Housewares, and Durable Consumer Products — — 10,025 1.8 Other, < 2.0% 5,542 0.8 5,590 1.0 Total Investments $ 649,615 100.0 % $ 557,612 100.0 % Our investments at fair value were included in the following U.S. geographic regions as of September 30, 2022 and 2021: Location September 30, 2022 September 30, 2021 Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments South $ 326,524 50.3 % $ 238,917 42.8 % West 169,415 26.1 184,247 33.0 Midwest 118,191 18.2 85,970 15.5 Northeast 35,485 5.4 48,478 8.7 Total Investments $ 649,615 100.0 % $ 557,612 100.0 % The geographic composition indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional locations in other geographic regions. 103 Table of Contents Investment Principal Repayments 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, 2022: Year Ending September 30, Amount 2023 (A) $ 17,708 2024 58,399 2025 80,786 2026 155,974 2027 246,348 Thereafter 36,975 Total contractual repayments $ 596,190 Adjustments to cost basis of debt investments (1,142) Investments in equity securities 61,005 Investments held as of September 30, 2022 at Cost: $ 656,053 (A) Includes debt investments with contractual principal amounts totaling $0.3 million for which the maturity date has passed as of September 30, 2022. Receivables from Portfolio Companies Receivables from portfolio companies represent non-recurring costs incurred on behalf of such portfolio companies and are included in other assets on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables from portfolio companies when the receivable balance becomes 90 days or more past due or if it is determined, based upon management’s judgment, that the portfolio company is unable to pay its obligations. We write-off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of September 30, 2022 and 2021, we had gross receivables from portfolio companies of $0.5 million and $0.7 million, respectively. The allowance for uncollectible receivables was $0 as of each of September 30, 2022 and 2021. NOTE 4. RELATED PARTY TRANSACTIONS Transactions with the Adviser We have been externally managed by the Adviser pursuant to the Advisory Agreement since October 1, 2004 pursuant to which we pay the Adviser a base management fee and an incentive fee for its services. On July 12, 2022, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of such party, unanimously approved the renewal of the Advisory Agreement through August 31, 2023. We also pay the Adviser a loan servicing fee for its role of servicer pursuant to our Credit Facility. The entire loan servicing fee paid to the Adviser by Business Loan is non-contractually, unconditionally and irrevocably credited against the base management fee otherwise payable to the Adviser, since Business Loan is a consolidated subsidiary of ours, and overall, the base management fee (including any loan servicing fee) cannot exceed 1.75% of total assets (including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings) during any given fiscal year pursuant to the Advisory Agreement. Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of the Adviser, which is 100% indirectly owned and controlled by Mr. Gladstone. Robert Marcotte (our president) also serves as executive vice president of private equity (debt) of the Adviser. Michael LiCalsi, our general counsel and secretary (who also serves as the Administrator’s president, general counsel and secretary), is also the executive vice president of administration of our Adviser. 104 Table of Contents The following table summarizes the base management fee, incentive fee, and loan servicing fee and associated non-contractual, unconditional and irrevocable credits reflected in our accompanying Consolidated Statements of Operations: Year Ended September 30, 2022 2021 2020 Average total assets subject to base management fee (A) $ 585,543 $ 495,657 $ 432,457 Multiplied by annual base management fee of 1.75% 1.75 % 1.75 % 1.75 % Base management fee (B) 10,247 8,674 7,568 Portfolio company fee credit (4,196) (2,195) (1,589) Syndicated loan fee credit (170) (307) (406) Net Base Management Fee $ 5,881 $ 6,172 $ 5,573 Loan servicing fee (B) $ 6,329 $ 5,579 $ 5,819 Credit to base management fee - loan servicing fee (B) (6,329) (5,579) (5,819) Net Loan Servicing Fee $ — $ — $ — Incentive fee (B) $ 7,511 $ 5,746 $ 5,251 Incentive fee credit (437) (451) (3,038) Net Incentive Fee $ 7,074 $ 5,295 $ 2,213 Portfolio company fee credit $ (4,196) $ (2,195) $ (1,589) Syndicated loan fee credit (170) (307) (406) Incentive fee credit (437) (451) (3,038) Credit to Fees from Adviser—Other (B) $ (4,803) $ (2,953) $ (5,033) (A) Average total assets subject to the base management fee is defined in the Advisory Agreement as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the two most recently completed quarters within the respective years and adjusted appropriately for any share issuances or repurchases during the period. (B) Reflected as a line item on our accompanying Consolidated Statements of Operations. Base Management Fee The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 1.75%, computed on the basis of the value of our average total assets at the end of the two most recently-completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or repurchases during the period. Additionally, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include: (i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships; (iii) consulting services regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) taking a primary role in interviewing, vetting and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees for such services against the base management fee that we would otherwise be required to pay to the Adviser; however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees, totaling $8 thousand, $0.1 million, and $0.1 million for the years ended September 30, 2022, 2021, and 2020, respectively, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser primarily for the valuation of portfolio companies. 105 Table of Contents Our Board of Directors accepted a non-contractual, unconditional, and irrevocable credit from the Adviser to reduce the annual base management fee on syndicated loan participations to 0.5%, to the extent that proceeds resulting from borrowings were used to purchase such syndicated loan participations, for each of the years ended September 30, 2022 and 2021. Loan Servicing Fee The Adviser also services the loans held by Business Loan (the borrower under the Credit Facility), in return for which the Adviser receives a 1.5% annual fee payable monthly based on the aggregate outstanding balance of loans pledged under our Credit Facility. As discussed in the notes to the table above, we treat payment of the loan servicing fee pursuant to the Credit Facility as a pre-payment of the base management fee under the Advisory Agreement. Accordingly, these loan servicing fees are 100% non-contractually, unconditionally and irrevocably credited back to us by the Adviser. Incentive Fee The incentive fee consists of two parts: an income-based incentive fee and a capital gains-based incentive fee. The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% (2.0% during the period from April 1, 2020 through March 31, 2023) of our net assets, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted appropriately for any share issuances or repurchases during the period (the “hurdle rate”). The income-based incentive fee with respect to our pre-incentive fee net investment income is generally payable quarterly to the Adviser and is computed as follows: • no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate; • 100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% (2.4375% during the period from April 1, 2020 through March 31, 2022 and 2.50% from April 1, 2022 through March 31, 2023) of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter; and • 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% (2.4375% during the period from April 1, 2020 through March 31, 2022 and 2.50% from April 1, 2022 through March 31, 2023) of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter. On April 12, 2022, our Board of Directors approved an amendment of the Advisory Agreement which extended the temporary revision to the hurdle rate through March 31, 2023 and increased the excess incentive fee hurdle rate from 2.1875% per quarter (8.75% annualized) to 2.50% per quarter (10.0% annualized), up from the 2.4375% per quarter (9.75% annualized) in effect since April 1, 2020. The second part of the incentive fee is a capital gains-based incentive fee that is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement, as of the termination date) and equals 20.0% of our “net realized capital gains” (as defined herein) as of the end of the fiscal year. In determining the capital gains-based incentive fee payable to the Adviser, we calculate “net realized capital gains” at the end of each applicable year by subtracting the sum of our cumulative aggregate realized capital losses and our entire portfolio’s aggregate unrealized capital depreciation from our cumulative aggregate realized capital gains. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the original cost of such investment since inception. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the original cost of such investment since inception. The entire portfolio’s aggregate unrealized capital depreciation, if any, equals the sum of the difference between the valuation of each investment as of the applicable calculation date and the original cost of such investment. At the end of the applicable fiscal year, the amount of capital gains that serves as the basis for our calculation of the capital gains-based incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less the entire portfolio’s aggregate unrealized capital depreciation, if any. If this number is positive at the end of such fiscal year, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. No capital gains-based incentive fee has been recorded or paid since our inception through September 30, 2022, as cumulative unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses. 106 Table of Contents In accordance with GAAP, a capital gains-based incentive fee accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital appreciation and depreciation. If such amount is positive at the end of a period, then GAAP requires us to record a capital gains- based incentive fee equal to 20.0% of such amount, less the aggregate amount of actual capital gains-based incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such period. GAAP requires that the capital gains-based incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would be payable if such unrealized capital appreciation were realized. There can be no assurance that such unrealized capital appreciation will be realized in the future. No GAAP accrual for a capital gains-based incentive fee has been recorded from our inception through September 30, 2022. Our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser to reduce the income-based incentive fee to the extent net investment income did not 100.0% cover distributions to common stockholders for the years ended September 30, 2022, 2021, and 2020. Transactions with the Administrator We have entered into the Administration Agreement with the Administrator to provide administrative services. We reimburse the Administrator pursuant to the Administration Agreement for the portion of expenses the Administrator incurs while performing services for us. The Administrator’s expenses are primarily rent and the salaries, benefits and expenses of the Administrator’s employees, including: our chief financial officer and treasurer, chief compliance officer, chief valuation officer, and general counsel and secretary (who also serves as the Administrator’s president, general counsel and secretary) and their respective staffs. Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief operating officer) serve as members of the board of managers and executive officers of the Administrator, which is 100% indirectly owned and controlled by Mr. Gladstone. Another of our officers, Michael LiCalsi (our general counsel and secretary), serves as the Administrator’s president as well as the executive vice president of administration for the Adviser. Our allocable portion of the Administrator’s expenses is generally derived by multiplying the Administrator’s total expenses by the approximate percentage of time during the current quarter the Administrator’s employees performed services for us in relation to their time spent performing services for all companies serviced by the Administrator. On July 12, 2022, our Board of Directors, including a majority of the directors who are not parties to the Administration Agreement or interested persons of either party, approved the renewal of the Administration Agreement through August 31, 2023. Other Transactions Gladstone Securities, LLC (“Gladstone Securities”), a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation, which is 100% indirectly owned and controlled by Mr. Gladstone, our chairman and chief executive officer, has provided other services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional and irrevocable credits against the base management fee or incentive fee. Gladstone Securities received fees from portfolio companies totaling $1.1 million, $0.8 million, and $0.9 million during the years ended September 30, 2022, 2021, and 2020, respectively. Related Party Fees Due Amounts due to related parties on our accompanying Consolidated Statements of Assets and Liabilities were as follows: September 30, 2022 September 30, 2021 Base management fee due to (from) Adviser $ (189) $ 385 Loan servicing fee due to Adviser 423 343 Incentive fee due to (from) Adviser 1,870 1,527 Total fees due to (from) Adviser 2,104 2,255 Fee due to Administrator 423 382 Total Related Party Fees Due $ 2,527 $ 2,637 107 Table of Contents In addition to the above fees, other operating expenses due to the Adviser as of September 30, 2022 and 2021, totaled $44 thousand and $35 thousand, respectively. In addition, net expenses payable to Gladstone Investment Corporation (for reimbursement purposes), which includes certain co-investment expenses, totaled $13 thousand and $38 thousand as of September 30, 2022 and 2021, respectively. These amounts are generally settled in the quarter subsequent to being incurred and are included in other liabilities on the accompanying Consolidated Statements of Assets and Liabilities as of September 30, 2022 and 2021. NOTE 5. BORROWINGS Revolving Line of Credit On May 13, 2021, we, through Business Loan, amended and restated the Credit Facility to, among other things, (i) decrease the commitment amount from $205.0 million to $175.0 million, (ii) extend the revolving period end date to October 31, 2023, (iii) extend the maturity date to October 31, 2025 (at which time all principal and interest will be due and payable if the Credit Facility is not extended by the revolving period end date), (iv) reduce the interest rate margin to 2.70% during the revolving period and 3.25% thereafter, with a LIBOR floor of 0.35%, (v) revise the unused fee to include an additional fee tier of 0.35% per annum on the daily undrawn amounts if the average unused amount is equal to or less than 35% during the applicable period, (vi) provide for certain excess concentration limits, including a reduced second lien limit and a new broadly syndicated loan limit and (vii) add customary LIBOR replacement language. We incurred fees of approximately $1.1 million in connection with this amendment and restatement, which are being amortized through our Credit Facility’s revolving period end date of October 31, 2023. On September 12, 2022, we, through Business Loan, entered into Amendment No. 1 to the Credit Facility to update the reference rate from LIBOR to SOFR plus an 11 basis point credit spread adjustment. On September 20, 2022, we, through Business Loan, entered into Amendment No. 2 to the Credit Facility to increase the size of the credit facility by $50.0 million from $175.0 million to $225.0 million, as permitted under the terms of the Credit Facility. The following tables summarize noteworthy information related to our Credit Facility: As of September 30, 2022 2021 Commitment amount $ 225,000 $ 175,000 Borrowings outstanding, at cost 141,800 50,500 Availability (A) 60,068 103,897 Year Ended September 30, 2022 2021 2020 Weighted average borrowings outstanding, at cost $ 56,122 $ 59,382 $ 103,504 Weighted average interest rate (B) 6.1 % 5.0 % 4.3 % Commitment (unused) fees incurred $ 1,105 $ 1,194 $ 541 (A) Available borrowings are subject to various constraints imposed under our Credit Facility, based on the aggregate loan balance pledged by Business Loan, which varies as loans are added and repaid, regardless of whether such repayments are prepayments or made as contractually required. (B) Includes unused commitment fees and excludes the impact of deferred financing costs. Our Credit Facility also requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank. KeyBank is also the trustee of the account and generally remits the collected funds to us once each month. Amounts collected in the lockbox account with KeyBank are presented as Due from administrative agent on the accompanying Consolidated Statement of Assets and Liabilities as of September 30, 2022 and 2021. Our Credit Facility contains covenants that require Business Loan to maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions), and restrict material changes to our credit and collection policies without the lenders’ consent. Our Credit Facility also generally limits distributions to our stockholders on a fiscal year basis to the sum of our net investment income, net capital gains and amounts elected to have been paid during the prior year in accordance with Section 855(a) of the Code. Business Loan is 108 Table of Contents also subject to certain limitations on the type of loan investments it can apply as collateral towards the borrowing base to receive additional borrowing availability under our Credit Facility, including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life and lien property. Our Credit Facility further requires Business Loan to comply with other financial and operational covenants, which obligate Business Loan to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of 25 obligors required in the borrowing base. Additionally, we are required to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of $325.0 million plus 50.0% of all equity and subordinated debt raised after May 13, 2021 less 50% of any equity and subordinated debt retired or redeemed after May 13, 2021, which equates to $336.7 million as of September 30, 2022, (ii) asset coverage with respect to “senior securities representing indebtedness” of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of September 30, 2022, and as defined in our Credit Facility, we had a net worth of $512.3 million, asset coverage on our “senior securities representing indebtedness” of 190.4%, calculated in accordance with the requirements of Section 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. In addition, we had 33 obligors in our Credit Facility’s borrowing base as of September 30, 2022. As of September 30, 2022, we were in compliance with all of our Credit Facility covenants. Fair Value We elected to apply the fair value option of ASC 825, “Financial Instruments,” specifically for the Credit Facility, which was consistent with our application of ASC 820 to our investments. Generally, the fair value of our Credit Facility is determined using a yield analysis which includes a DCF calculation and the assumptions that the Valuation Team believes market participants would use, including the estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. As of September 30, 2022, the discount rate used to determine the fair value of our Credit Facility was one-month Term SOFR, plus 2.81% per annum, plus a 0.50% unused commitment fee. As of September 30, 2021, the discount rate used to determine the fair value of our Credit Facility was 30-day LIBOR, plus 2.97% per annum, plus a 1.00% unused commitment fee. Generally, an increase or decrease in the discount rate used in the DCF calculation may result in a corresponding decrease or increase, respectively, in the fair value of our Credit Facility. As of September 30, 2022 and 2021, our Credit Facility was valued using Level 3 inputs and any changes in its fair value are recorded in net unrealized depreciation (appreciation) of other on our accompanying Consolidated Statements of Operations. The following tables present our Credit Facility carried at fair value as of September 30, 2022 and 2021, on our accompanying Consolidated Statements of Assets and Liabilities for Level 3 of the hierarchy established by ASC 820 and the changes in fair value of our Credit Facility during the years ended September 30, 2022 and 2021: Total Recurring Fair Value Measurement Reported in Consolidated Statements of Assets and Liabilities Using Significant Unobservable Inputs (Level 3) As of September 30, 2022 2021 Credit Facility $ 141,800 $ 50,500 Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3) Year Ended September 30, 2022 2021 Fair value as of September 30, 2021 and 2020, respectively $ 50,500 $ 127,650 Borrowings 328,900 238,800 Repayments (237,600) (316,300) Net unrealized appreciation (depreciation) (A) — 350 Fair Value as of September 30, 2022 and 2021, respectively $ 141,800 $ 50,500 109 Table of Contents (A) Included in net unrealized appreciation (depreciation) of other on our accompanying Consolidated Statements of Operations for the years ended September 30, 2022 and 2021. The fair value of the collateral under our Credit Facility totaled approximately $577.6 million and $512.0 million as of September 30, 2022 and 2021, respectively. Notes Payable In November 2021, we completed a private placement of $50.0 million aggregate principal amount of 3.75% Notes due 2027 (the “2027 Notes”) for net proceeds of approximately $48.5 million after deducting initial purchasers’ costs, commissions and offering expenses borne by us. The 2027 Notes will mature on May 1, 2027 and may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to maturity at par plus a “make-whole” premium, if applicable. The 2027 Notes bear interest at a rate of 3.75% per year. Interest is payable semi-annually on May 1 and November 1 of each year (which equates to approximately $1.9 million per year). In April 2022, pursuant to the registration rights agreement we entered into in connection with the 2027 Notes, we conducted an exchange offer through which we offered to exchange all of our then outstanding 2027 Notes (the “Restricted Notes”) that were issued on November 4, 2021, for an equal aggregate principal amount of our new 3.75% Notes due 2027 (the “Exchange Notes”) that had been registered with the SEC under the Securities Act of 1933, as amended. The terms of the Exchange Notes are identical to those of the outstanding Restricted Notes, except that the transfer restrictions and registration rights relating to the Restricted Notes do not apply to the Exchange Notes, and the Exchange Notes do not provide for the payment of additional interest in the event of a registration default. In December 2020, we completed an offering of $100.0 million aggregate principal amount of 5.125% Notes due 2026 (the “2026 Notes”) for net proceeds of approximately $97.7 million after deducting underwriting discounts, commissions and offering expenses borne by us. In March 2021, we completed an offering of an additional $50.0 million aggregate principal amount of the 2026 Notes for net proceeds of approximately $50.6 million after adding premiums and deducting underwriting costs, commissions and offering expenses borne by us. The 2026 Notes will mature on January 31, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to maturity at par plus a “make-whole” premium, if applicable. The 2026 Notes bear interest at a rate of 5.125% per year. Interest is payable semi-annually on January 31 and July 31 of each year (which equates to approximately $7.7 million per year). In October 2019, we completed an offering of $38.8 million aggregate principal amount of 5.375% Notes due 2024 (the “2024 Notes”), inclusive of the overallotment option exercised by the underwriters, for net proceeds of approximately $37.5 million after deducting underwriting discounts, commissions and offering expenses borne by us. On November 1, 2021, we voluntarily redeemed the 2024 Notes with an aggregate principal amount outstanding of $38.8 million. The 2024 Notes would have otherwise matured on November 1, 2024. In November 2018, we completed an offering of $57.5 million aggregate principal amount of 6.125% Notes due 2023 (the “2023 Notes”), inclusive of the overallotment option exercised by the underwriters, for net proceeds of $55.4 million after deducting underwriting discounts, commissions and offering expenses borne by us. On January 7, 2021, we voluntarily redeemed the 2023 Notes with an aggregate principal amount outstanding of $57.5 million. The redemption amount was $58.1 million inclusive of accrued interest through the date of redemption. In connection with the voluntary redemption of the 2023 Notes, we incurred a loss on extinguishment of debt of $1.2 million, which is primarily comprised of the unamortized deferred issuance costs at the time of redemption. The 2023 Notes would have otherwise matured on November 1, 2024. The indenture relating to the 2027 Notes and 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 2027 Notes and the 2026 Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements. The 2027 Notes and 2026 Notes are recorded at the principal amount, plus applicable premiums, less discounts and offering costs, on our Consolidated Statements of Assets and Liabilities. 110 Table of Contents The fair value, based on a DCF analysis, of the 2027 Notes as of September 30, 2022 was $44.2 million. The fair value, based on a DCF analysis, of the 2026 Notes as of September 30, 2022 was $142.8 million. We consider the 2027 Notes and 2026 Notes to be Level 3 within the ASC 820 fair value hierarchy. NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK In September 2017, we completed a public offering of approximately 2.1 million shares of our Series 2024 Term Preferred Stock at a public offering price of $25.00 per share. The shares of our Series 2024 Term Preferred Stock were traded under the ticker symbol “GLADN” on Nasdaq as of September 30, 2019. On October 2, 2019, we voluntarily redeemed all 2,070,000 outstanding shares of our Series 2024 Term Preferred Stock at a redemption price of $25.00 per share, which represents the liquidation preference per share, plus accrued and unpaid dividends through October 1, 2019 in the amount of $0.004166 per share, for a total payment per share of $25.004166 and an aggregate redemption price of approximately $51.8 million. In connection with the voluntary redemption of our Series 2024 Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.4 million, which has been reflected in Realized loss on other in our accompanying Consolidated Statement of Operations and which is primarily comprised of the unamortized deferred issuance costs at the time of redemption. NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS Our shelf 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 or preferred stock. As of September 30, 2022, we had the ability to issue up to an additional $295.5 million in securities under the registration statement. Common Stock Offerings In May 2021, we entered into an equity distribution agreement with Jefferies LLC, as amended in August 2022 (the “Jefferies Sales Agreement”) under which we have the ability to issue and sell, from time to time, shares of our common stock with an aggregate offering price of up to $60.0 million. During the year ended September 30, 2022, we sold 430,425 shares of our common stock under the Jefferies Sales Agreement, at a weighted-average price of $10.53 per share and raised $4.5 million of gross proceeds. Net proceeds, after deducting commissions and offering costs borne by us, were approximately $4.5 million. As of September 30, 2022, we had a remaining capacity to sell up to an additional $47.8 million of our common stock under the Jefferies Sales Agreement. NOTE 8. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE The following table sets forth the computation of basic and diluted net increase (decrease) in net assets resulting from operations per weighted average common share for the years ended September 30, 2022, 2021, and 2020: Year Ended September 30, 2022 2021 2020 Numerator for basic and diluted net increase (decrease) in net assets resulting from operations per common share $ 19,914 $ 84,299 $ (1,873) Denominator for basic and diluted weighted average common shares 34,351,663 33,234,482 31,040,852 Basic and diluted net increase (decrease) in net assets resulting from operations per common share $ 0.58 $ 2.54 $ (0.06) NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS To qualify to be taxed as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our taxable ordinary income plus the excess of our net short- term capital gains over net long-term capital losses (“Investment Company Taxable Income”). The amount to be paid out as distributions to our stockholders is determined by our Board of Directors quarterly and is based on management’s estimate of Investment Company Taxable Income. Based on that estimate, our Board of Directors declares three monthly distributions to common stockholders each quarter. 111 Table of Contents The federal income tax characteristics of all distributions will be reported to stockholders on the IRS Form 1099 after the end of each calendar year. Estimates of tax characterization made on a quarterly basis may not be representative of the actual tax characterization of cash distributions for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date. For the calendar year ended December 31, 2021, 100.0% of distributions to common stockholders were deemed to be paid from ordinary income for 1099 stockholder reporting purposes. For the calendar year ended December 31, 2020, 97.3% of distributions to common stockholders were deemed to be paid from ordinary income and 2.7% of distributions to common stockholders were deemed to be a return of capital for 1099 stockholder reporting purposes. We paid the following monthly distributions to common stockholders for the years ended September 30, 2022 and 2021: Fiscal Year Declaration Date Record Date Payment Date Distribution per Common Share 2022 October 12, 2021 October 22, 2021 October 29, 2021 $ 0.065 October 12, 2021 November 19, 2021 November 30, 2021 0.065 October 12, 2021 December 23, 2021 December 31, 2021 0.065 January 11, 2022 January 21, 2022 January 31, 2022 0.065 January 11, 2022 February 18, 2022 February 28, 2022 0.065 January 11, 2022 March 23, 2022 March 31, 2022 0.065 April 12, 2022 April 22, 2022 April 29, 2022 0.0675 April 12, 2022 May 20, 2022 May 31, 2022 0.0675 April 12, 2022 June 22, 2022 June 30, 2022 0.0675 July 12, 2022 July 22, 2022 July 29, 2022 0.0675 July 12, 2022 August 23, 2022 August 31, 2022 0.0675 July 12, 2022 September 22, 2022 September 30, 2022 0.0675 Year Ended September 30, 2022: $ 0.795 2021 October 13, 2020 October 23, 2020 October 30, 2020 $ 0.065 October 13, 2020 November 20, 2020 November 30, 2020 0.065 October 13, 2020 December 23, 2020 December 31, 2020 0.065 January 12, 2021 January 22, 2021 January 29, 2021 0.065 January 12, 2021 February 17, 2021 February 26, 2021 0.065 January 12, 2021 March 18, 2021 March 31, 2021 0.065 April 13, 2021 April 23, 2021 April 30, 2021 0.065 April 13, 2021 May 19, 2021 May 28, 2021 0.065 April 13, 2021 June 18, 2021 June 30, 2021 0.065 July 13, 2021 July 23, 2021 July 30, 2021 0.065 July 13, 2021 August 23, 2021 August 31, 2021 0.065 July 13, 2021 September 22, 2021 September 30, 2021 0.065 Year Ended September 30, 2021: $ 0.78 Aggregate distributions declared and paid to our common stockholders were approximately $27.3 million and $26.0 million for the years ended September 30, 2022 and 2021, respectively, and were declared based on estimates of Investment Company Taxable Income. For the fiscal years ended September 30, 2022, 2021, and 2020, distributions declared and paid exceeded taxable income available for common distributions resulting in a partial return of capital of approximately $1.4 million, $1.0 million, and $0.4 million, respectively. 112 Table of Contents The components of our net assets on a tax basis were as follows: Year Ended September 30, 2022 2021 Common stock $ 35 $ 34 Capital in excess of par value 395,542 392,494 Cumulative net unrealized appreciation (depreciation) of investments (6,438) 11,100 Cumulative net unrealized appreciation of other — — Capital loss carryforward (62,910) (72,251) Post-October tax loss deferral — — Other temporary differences (10,742) (12,938) Net Assets $ 315,487 $ 318,439 We intend to retain some or all of our realized capital gains first to the extent we have available capital loss carryforwards and second, through treating the retained amount as a “deemed distribution.” As of September 30, 2022, we had $62.9 million of capital loss carryforwards that do not expire. For the years ended September 30, 2022 and 2021, we recorded the following adjustments for permanent book-tax differences to reflect tax character. Results of operations, total net assets, and cash flows were not affected by these adjustments. Year Ended September 30, 2022 2021 Undistributed net investment income $ (5,606) $ 39 Accumulated net realized losses 7,013 959 Capital in excess of par value (1,407) (998) NOTE 10. FEDERAL AND STATE INCOME TAXES We intend to continue to maintain our qualifications as a RIC for federal income tax purposes. As a RIC, we are generally not subject to federal income tax on the portion of our taxable income and gains that we distribute to stockholders. To maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements. In addition, to qualify to be taxed as a RIC, we must also meet certain annual stockholder distribution requirements. To satisfy the RIC annual distribution requirement, we must distribute to stockholders at least 90.0% of our Investment Company Taxable Income. Our policy generally is to make distributions to our stockholders in an amount up to 100.0% of our Investment Company Taxable Income. Because we have distributed more than 90.0% of our Investment Company Taxable Income, no income tax provisions have been recorded for the years ended September 30, 2022, 2021, and 2020. In an effort to limit certain federal excise taxes imposed on RICs, a RIC has to distribute to stockholders, during each calendar year, an amount close to the sum of (1) 98.0% of our ordinary income for the calendar year, (2) 98.2%, of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. No excise tax provisions have been recorded for the years ended September 30, 2022, 2021, and 2020. Under the RIC Modernization Act, we are permitted to carry forward capital losses that we may incur in taxable years beginning after September 30, 2011 for an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. NOTE 11. COMMITMENTS AND CONTINGENCIES Legal Proceedings We are party to certain legal proceedings incidental to the normal course of our business. We are required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable. When 113 Table of Contents loss contingencies are not both probable and estimable, we do not establish reserves. Based on current knowledge, we do not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our financial condition, results of operations or cash flows. Additionally, based on our current knowledge, we do not believe such loss contingencies are both probable and estimable and therefore, as of September 30, 2022 and 2021, we had no established reserves for such loss contingencies. Escrow Holdbacks From time to time, we enter into arrangements relating to exits of certain investments whereby specific amounts of the proceeds are held in escrow to be used to satisfy potential obligations, as stipulated in the sales agreements. We record escrow amounts in Restricted cash and cash equivalents, if received in cash but subject to potential obligations or other contractual restrictions, or as escrow receivables in Other assets, net, if not yet received in cash, on our accompanying Consolidated Statements of Assets and Liabilities. We establish reserves and holdbacks against escrow amounts if we determine that it is probable and estimable that a portion of the escrow amounts will not ultimately be released or received at the end of the escrow period. Reserves and holdbacks against escrow amounts were $0.2 million and $0.3 million as of September 30, 2022 and September 30, 2021, respectively. Financial Commitments and Obligations We have lines of credit, delayed draw term loans, and an uncalled capital commitment with certain of our portfolio companies that have not been fully drawn. Since these commitments have expiration dates and we expect many will never be fully drawn, the total commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused lines of credit, the unused delayed draw term loans and the uncalled capital commitment as of September 30, 2022 and 2021 to be immaterial. The following table summarizes the amounts of our unused lines of credit, delayed draw term loans and uncalled capital commitment, at cost, as of September 30, 2022 and 2021, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and Liabilities: As of September 30, 2022 2021 Unused line of credit commitments (A) $ 36,225 $ 25,549 Delayed draw term loans (A) 37,778 27,984 Uncalled capital commitment 843 843 Total $ 74,846 $ 54,376 (A) There may be specific covenant requirements that temporarily limit a portfolio company’s availability to draw on an unused line of credit commitment or a delayed draw term loan. 114 Table of Contents NOTE 12. FINANCIAL HIGHLIGHTS As of and for the Year Ended September 30, 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Per Common Share Data: Net asset value at beginning of period / year (A) $ 9.28 $ 7.40 $ 8.22 $ 8.32 $ 8.40 $ 8.62 $ 9.06 $ 9.51 $ 9.81 $ 8.98 Income from operations (B) Net investment income 0.94 0.79 0.81 0.84 0.85 0.84 0.84 0.84 0.87 0.88 Net realized and unrealized gain (loss) on investments (0.35) 1.79 (0.84) (0.15) (0.16) (0.12) (0.35) (0.50) (0.23) 0.49 Net realized and unrealized gain (loss) on other (0.01) (0.04) (0.03) (0.01) — (0.05) — 0.06 (0.11) 0.16 Total from operations 0.58 2.54 (0.06) 0.68 0.69 0.67 0.49 0.40 0.53 1.53 Distributions to common stockholders from (B)(C) Net Investment Income (0.76) (0.75) (0.80) (0.82) (0.84) (0.84) (0.70) (0.84) (0.12) (0.78) Realized gains — — — — — — (0.14) — — — Return of capital (0.04) (0.03) (0.01) (0.02) — — — — (0.72) (0.06) Total distributions (0.80) (0.78) (0.81) (0.84) (0.84) (0.84) (0.84) (0.84) (0.84) (0.84) Capital share transactions (B) Issuance of common stock — — — — — — — 0.06 — — Discounts, commissions, and offering costs — (0.01) — (0.01) (0.01) (0.04) (0.05) (0.01) — — Repurchase of common stock — — — — — — 0.02 — — — Repayment of principal on employee notes — — — — — — — — — 0.14 Net anti-dilutive (dilutive) effect of equity offering (D) 0.02 0.15 0.05 0.07 0.08 (0.02) (0.05) (0.06) — — Total capital share transactions 0.02 0.14 0.05 0.06 0.07 (0.06) (0.08) (0.01) — 0.14 Other, net (B)(E) — (0.02) — — — 0.01 (0.01) — 0.01 — Net asset value at end of period / year (A) $ 9.08 $ 9.28 $ 7.40 $ 8.22 $ 8.32 $ 8.40 $ 8.62 $ 9.06 $ 9.51 $ 9.81 Per common share market value at beginning of year $ 11.30 $ 7.41 $ 9.75 $ 9.50 $ 9.50 $ 8.13 $ 8.13 $ 8.77 $ 8.73 $ 8.75 Per common share market value at end of year 8.49 11.30 7.41 9.75 9.50 9.50 8.13 8.13 8.77 8.73 Total return (F) (19.16) % 64.93 % (15.75) % 12.55 % 9.53 % 27.90 % 11.68 % 2.40 % 9.62 % 9.90 % Common stock outstanding at end of year (A) 34,734,796 34,304,371 31,566,850 30,345,923 28,501,980 26,160,684 23,344,422 21,131,622 21,000,160 21,000,160 Statement of Assets and Liabilities Data: Net assets at end of year $ 315,487 $ 318,439 $ 233,743 $ 249,330 $ 237,092 $ 219,650 $ 201,207 $ 191,444 $ 199,660 $ 205,992 Average net assets (G) 320,838 275,509 235,266 239,851 234,092 215,421 193,228 198,864 201,009 189,599 Senior Securities Data: Borrowings under line of credit, at cost $ 141,800 $ 50,500 $ 128,000 $ 66,900 $ 110,000 $ 93,000 $ 71,300 $ 127,300 $ 36,700 $ 46,900 Mandatorily redeemable preferred stock — — — 51,750 51,750 51,750 61,000 61,000 61,000 38,497 Notes Payable 200,000 188,813 96,313 57,500 — — — — — — 115 Table of Contents Ratios/Supplemental Data: Ratio of net expenses to average net assets (H)(I) 9.62 % 10.04 % 9.69 % 10.61 % 9.61 % 8.26 % 10.16 % 10.24 % 9.06 % 9.37 % Ratio of net investment income to average net assets (J) 10.06 9.48 10.70 10.25 9.86 9.95 10.08 8.90 9.14 9.70 (A) Based on actual shares outstanding at the end of the corresponding fiscal year. (B) Based on weighted average basic per share data. (C) The tax character of distributions is determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP. (D) During the fiscal years ended September 30, 2022, 2021, 2020, 2019, and 2018, the anti-dilution was a result of issuing common shares during the period at a price above the then-current NAV per share. During the fiscal years ended September 30, 2017, 2016, and 2015, the net dilution was a result of issuing common shares during the period at a price below the then-current NAV per share. (E) Represents the impact of the different share amounts (weighted average shares outstanding during the fiscal year and shares outstanding at the end of the fiscal year) in the per share data calculations and rounding impacts. (F) Total return equals the change in the ending market value of our common stock from the beginning of the fiscal year, taking into account distributions reinvested in accordance with the terms of our dividend reinvestment plan. Total return does not take into account distributions that may be characterized as a return of capital or any sales load paid by a stockholder. For further information on the estimated character of our distributions to common stockholders, refer to Note 9— Distributions to Common Stockholders. (G) Computed using the average of the balance of net assets at the end of each month of the fiscal year. (H) Ratio of net expenses to average net assets is computed using total expenses, net of credits from the Adviser, to the base management, loan servicing, and incentive fees. (I) Had we not received any non-contractual, unconditional and irrevocable credits of fees from the Adviser, the ratio of net expenses to average net assets would have been 13.13%, 13.17%, 14.36%, 14.18%, 13.12%, 12.14%, 13.40%, 13.65%, 11.88%, and 10.18% for the fiscal years ended September 30, 2022, 2021, 2020, 2019, 2017, 2016, 2015, 2014, and 2013, respectively. (J) Had we not received any non-contractual, unconditional and irrevocable credits of fees from the Adviser, the ratio of net investment income to average net assets would have been 6.61%, 6.40%, 6.11%, 6.74%, 6.41%, 6.13%, 6.90%, 5.55%, 6.37%, and 8.90% for the fiscal years ended September 30, 2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, and 2013, respectively. 116 Table of Contents NOTE 13. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES In accordance with the SEC’s Regulation S-X, we do not consolidate portfolio company investments. Further, in accordance with ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries. We did not have any unconsolidated subsidiaries that met any of the significance conditions under Rule l-02(w)(2) of the SEC’s Regulation S-X as of or during at least one of the years ended September 30, 2022, 2021, and 2020. NOTE 14. SUBSEQUENT EVENTS Credit Facility In October 2022, we entered into Amendment No. 3 to the Credit Facility to increase the commitment amount by $20.0 million from $225.0 million to $245.0 million, as permitted under the terms of the Credit Facility. Portfolio Activity In October 2022, our investment in Targus Cayman HoldCo Ltd. was sold for net proceeds of approximately $8.0 million including certain receivables. In October and November 2022, we received distributions totaling $6.0 million from our investment in Leeds Novamark Capital I, L.P. related primarily to the sale of underlying assets in the fund. Election of Director Effective October 11, 2022, Paula Novara was elected to our Board of Directors. Ms. Novara also serves as head of human resources, facilities and office management and IT of the Adviser and certain of its affiliates. Distributions In October 2022, our Board of Directors declared the following monthly cash distributions to common stockholders: Record Date Payment Date Distribution per Common Share October 21, 2022 October 31, 2022 $ 0.07 November 18, 2022 November 30, 2022 0.07 December 20, 2022 December 30, 2022 0.07 Total for the Quarter $ 0.21 117 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.