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 71 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 72 Consolidated Statements of Assets and Liabilities as of September 30, 202 3 and 202 2 74 Consolidated Statements of Operations for the years ended September 30, 202 3 , 202 2 and 20 21 75 Consolidated Statements of Changes in Net Assets for the years ended September 30, 202 3 , 202 2 and 20 21 77 Consolidated Statements of Cash Flows for the years ended September 30, 202 3 , 202 2 and 20 21 78 Consolidated Schedules of Investments as of September 30, 202 3 and 202 2 79 Notes to Consolidated Financial Statements 93 70 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, 2023, 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, 2023. November 13, 2023 71 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, 2023 and 2022, and the related consolidated statements of operations, of changes in net assets and of cash flows for each of the three years in the period ended September 30, 2023, 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, 2023 and 2022, 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, 2023 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, 2021, 2020, 2019, 2018, 2017, 2016, 2015, and 2014, and the related consolidated statements of operations, changes in net assets and cash flows for the years ended September 30, 2020, 2019, 2018, 2017, 2016, 2015, and 2014 (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, 2023, appearing on pages 51-52 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, 2023 and 2022 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. 72 Table of Contents Valuation of Level 3 Investments As described in Notes 2 and 3 to the consolidated financial statements, the Company held $704.56 million of total level 3 investments at fair value as of September 30, 2023. 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, District of Colombia November 13, 2023 We have served as the Company’s auditor since 2002. 73 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) September 30, 2023 September 30, 2022 ASSETS Investments, at fair value: Non-Control/Non-Affiliate investments (Cost of $ 671,397 and $ 571,736 , respectively) $ 663,544 $ 574,811 Affiliate investments (Cost of $ 16,746 and $ 49,412 , respectively) 10,421 39,091 Control investments (Cost of $ 34,126 and $ 34,905 , respectively) 30,850 35,713 Cash and cash equivalents 1,306 2,011 Restricted cash and cash equivalents 95 96 Interest receivable, net 6,100 2,737 Due from administrative agent 2,936 3,199 Deferred financing costs, net 1,335 836 Other assets, net 2,911 2,474 TOTAL ASSETS $ 719,498 $ 660,968 LIABILITIES Line of credit at fair value (Cost of $ 47,800 and $ 141,800 , respectively) $ 47,800 $ 141,800 Notes payable, net of unamortized deferred financing costs of $ 3,886 and $ 2,393 , respectively 253,114 197,607 Accounts payable and accrued expenses 1,006 500 Interest payable 2,956 2,517 Fees due to Adviser (A) 3,872 2,104 Fee due to Administrator (A) 479 423 Other liabilities 1,576 530 TOTAL LIABILITIES $ 310,803 $ 345,481 Commitments and contingencies (B) NET ASSETS Common stock, $ 0.001 par value per share, 44,000,000 and 44,560,000 shares authorized, respectively, and 43,508,897 and 34,734,796 shares issued and outstanding, respectively $ 44 $ 35 Capital in excess of par value (C) 481,480 395,542 Cumulative net unrealized appreciation (depreciation) of investments ( 17,454 ) ( 6,438 ) Under (over) distributed net investment income (C) 4,741 ( 500 ) Accumulated net realized losses ( 60,116 ) ( 73,152 ) Total distributable loss ( 72,829 ) ( 80,090 ) TOTAL NET ASSETS $ 408,695 $ 315,487 NET ASSET VALUE PER COMMON SHARE $ 9.39 $ 9.08 (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. 74 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Year ended September 30, 2023 2022 2021 INVESTMENT INCOME Interest income Non-Control/Non-Affiliate investments $ 72,656 $ 43,771 $ 40,953 Affiliate investments 3,799 3,523 4,815 Control investments 2,889 2,454 1,646 Cash and cash equivalents 136 11 — Total interest income (excluding PIK interest income) 79,480 49,759 47,414 PIK interest income Non-Control/Non-Affiliate investments 2,737 4,014 2,545 Affiliate investments 510 215 — Control investments 303 — — Total PIK interest income 3,550 4,229 2,545 Total interest income 83,030 53,988 49,959 Success fee income Non-Control/Non-Affiliate investments 935 3,231 202 Affiliate investments — 1,563 — Total success fee income 935 4,794 202 Dividend income Non-Control/Non-Affiliate investments 830 2,181 1,645 Control investments 691 1,281 611 Total dividend income 1,521 3,462 2,256 Other income 948 906 1,377 Total investment income 86,434 63,150 53,794 EXPENSES Base management fee (A) 11,998 10,247 8,674 Loan servicing fee (A) 8,053 6,329 5,579 Incentive fee (A) 10,255 7,511 5,746 Administration fee (A) 1,716 1,610 1,438 Interest expense on line of credit and notes payable 20,847 12,966 11,513 Amortization of deferred financing costs 1,529 1,175 1,347 Professional fees 980 803 806 Other general and administrative expenses 1,478 1,362 1,101 Expenses, before credits from Adviser 56,856 42,003 36,204 Credit to base management fee - loan servicing fee (A) ( 8,053 ) ( 6,329 ) ( 5,579 ) Credit to fees from Adviser - other (A) ( 3,389 ) ( 4,803 ) ( 2,953 ) Total expenses, net of credits 45,414 30,871 27,672 NET INVESTMENT INCOME 41,020 32,279 26,122 NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss): Non-Control/Non-Affiliate investments 9,661 504 4,179 Affiliate investments — 13,408 — Control investments 2,684 ( 8,496 ) — Other 319 ( 243 ) ( 999 ) Total net realized gain (loss) 12,664 5,173 3,180 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 75 Table of Contents Net unrealized appreciation (depreciation): Non-Control/Non-Affiliate investments ( 10,928 ) ( 3,960 ) 33,786 Affiliate investments 3,996 ( 21,920 ) 16,742 Control investments ( 4,084 ) 8,342 4,819 Other — — ( 350 ) Total net unrealized appreciation (depreciation) ( 11,016 ) ( 17,538 ) 54,997 Net realized and unrealized gain (loss) 1,648 ( 12,365 ) 58,177 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 42,668 $ 19,914 $ 84,299 BASIC AND DILUTED PER COMMON SHARE: Net investment income $ 1.10 $ 0.94 $ 0.79 Net increase (decrease) in net assets resulting from operations $ 1.14 $ 0.58 $ 2.54 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted 37,315,922 34,351,663 33,234,482 (A) Refer to Note 4— Related Party Transactions for additional information. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 76 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (DOLLAR AMOUNTS IN THOUSANDS) Year ended September 30, 2023 2022 2021 OPERATIONS Net investment income $ 41,020 $ 32,279 $ 26,122 Net realized gain (loss) on investments 12,345 5,416 4,179 Net realized gain (loss) on other 319 ( 243 ) ( 999 ) Net unrealized appreciation (depreciation) of investments ( 11,016 ) ( 17,538 ) 55,347 Net unrealized appreciation of other — — ( 350 ) Net increase (decrease) in net assets from operations 42,668 19,914 84,299 DISTRIBUTIONS Distributions to common stockholders from net investment income ( $ 0.94 , $ 0.76 , and $ 0.75 per share, respectively) (A) ( 35,407 ) ( 25,916 ) ( 24,987 ) Distributions to common stockholders from return of capital ( $ 0.00 , $ 0.04 , and $ 0.03 per share, respectively) (A) — ( 1,406 ) ( 985 ) Net decrease in net assets from distributions ( 35,407 ) ( 27,322 ) ( 25,972 ) CAPITAL TRANSACTIONS Issuance of common stock 87,394 4,533 26,850 Offering costs for issuance of common stock ( 1,447 ) ( 77 ) ( 481 ) Net increase (decrease) in net assets from capital transactions 85,947 4,456 26,369 NET INCREASE (DECREASE) IN NET ASSETS 93,208 ( 2,952 ) 84,696 NET ASSETS, BEGINNING OF YEAR 315,487 318,439 233,743 NET ASSETS, END OF YEAR $ 408,695 $ 315,487 $ 318,439 (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. 77 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) Year ended September 30, 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net increase (decrease) in net assets resulting from operations $ 42,668 $ 19,914 $ 84,299 Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: Purchase of investments ( 175,477 ) ( 274,898 ) ( 181,841 ) Principal repayments on investments 107,505 159,992 126,816 Proceeds from sale of investments 18,005 15,848 15,848 Increase in investments due to paid-in-kind interest or other ( 3,699 ) ( 4,532 ) ( 5,994 ) Net change in premiums, discounts and amortization 114 ( 445 ) 876 Net realized gain on investments ( 12,345 ) ( 5,416 ) ( 4,179 ) Net unrealized depreciation (appreciation) of investments 11,016 17,538 ( 55,347 ) Net realized loss (gain) on other ( 319 ) 243 999 Net unrealized depreciation (appreciation) of other — — 350 Amortization of deferred financing costs 1,529 1,175 1,347 Changes in assets and liabilities: Decrease (increase) in interest receivable, net ( 3,363 ) ( 376 ) 640 Decrease (increase) in funds due from administrative agent 263 ( 248 ) ( 848 ) Decrease (increase) in other assets, net ( 572 ) ( 787 ) ( 941 ) Increase (decrease) in accounts payable and accrued expenses 506 10 113 Increase (decrease) in interest payable 439 720 616 Increase (decrease) in fees due to Adviser (A) 1,768 ( 151 ) 569 Increase (decrease) in fee due to Administrator (A) 56 41 53 Increase (decrease) in other liabilities 1,046 ( 5,029 ) 2,562 Net cash provided by (used in) operating activities ( 10,860 ) ( 76,401 ) ( 14,062 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 149,000 328,900 238,800 Repayments on line of credit ( 243,000 ) ( 237,600 ) ( 316,300 ) Proceeds from issuance of notes payable 57,000 50,000 150,000 Redemption of notes payable — ( 38,813 ) ( 57,500 ) Financing costs ( 3,522 ) ( 1,968 ) ( 3,036 ) Proceeds from issuance of common stock 87,394 4,533 26,850 Offering costs for issuance of common stock ( 1,311 ) ( 68 ) ( 403 ) Distributions paid to common stockholders ( 35,407 ) ( 27,322 ) ( 25,972 ) Net cash provided by (used in) financing activities 10,154 77,662 12,439 NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS ( 706 ) 1,261 ( 1,623 ) CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR 2,107 846 2,469 CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF YEAR $ 1,401 $ 2,107 $ 846 CASH PAID DURING YEAR FOR INTEREST $ 20,408 $ 12,246 $ 10,897 NON-CASH ACTIVITIES (B) 2,416 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 October 2022, our investment in Targus Cayman HoldCo Ltd. was sold for net proceeds of approximately $ 8.0 million, resulting in a realized gain of approximately $ 5.9 million. As part of the proceeds, we received an interest in B. Riley Financial, Inc. 6.75 % senior notes in the amount of $ 2.4 million. • 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. 78 Table of Contents GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2023 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(K)(Q) Principal/ Shares/ Units (I)(J) Cost Fair Value NON-CONTROL/NON-AFFILIATE INVESTMENTS (M) – 162.4 % Secured First Lien Debt – 120.3 % Aerospace and Defense – 19.3 % Antenna Research Associates, Inc. – Term Debt (S + 10.0 %, 15.3 % Cash, 4.0 % PIK, Due 11/2026) (E) $ 30,048 $ 30,048 $ 30,048 Ohio Armor Holdings, LLC – Term Debt (S + 8.0 %, 13.3 % Cash, Due 2/2026) (C) 17,738 17,738 17,294 SpaceCo Holdings, LLC – Line of Credit, $ 550 available (S + 7.2 %, 12.5 % Cash, Due 12/2025) (C)(U) 1,450 1,450 1,434 SpaceCo Holdings, LLC – Term Debt (S + 7.2 %, 12.5 % Cash, Due 12/2025) (C)(U) 30,284 29,961 29,944 79,197 78,720 Beverage, Food, and Tobacco – 17.8 % Café Zupas – Line of Credit, $ 1,500 available (S + 6.8 %, 12.1 % Cash, Due 12/2024) (C) — — — Café Zupas – Delayed Draw Term Loan, $ 2,070 available (S + 6.8 %, 12.1 % Cash, Due 12/2024) (C) 7,970 7,970 7,850 Café Zupas – Term Debt (S + 6.8 %, 12.1 % Cash, Due 12/2024) (C) 23,460 23,460 23,108 Eegee’s LLC – Line of Credit, $ 1,000 available (S + 7.8 %, 13.1 % Cash, Due 6/2026) (C) — — — Eegee’s LLC – Delayed Draw Term Loan, $ 4,500 available (S + 7.8 %, 13.1 % Cash, Due 6/2026) (C) 3,000 3,000 2,865 Eegee’s LLC – Term Debt (S + 7.8 %, 13.1 % Cash, Due 6/2026) (C) 17,000 17,000 16,235 Salt & Straw, LLC – Line of Credit, $ 2,000 available (S + 9.1 %, 14.4 % Cash, Due 9/2027) (C) — — — Salt & Straw, LLC – Delayed Draw Term Loan, $ 1,300 available (S + 9.1 %, 14.4 % Cash, Due 9/2027) (C) 10,200 10,133 9,715 Sokol & Company Holdings, LLC – Term Debt (S + 7.0 %, 12.3 % Cash, Due 8/2027) (C) 13,500 13,500 13,095 75,063 72,868 Buildings and Real Estate – 0.5 % GFRC 360, LLC – Line of Credit, $ 175 available (S + 8.0 %, 13.3 % Cash, Due 9/2024) (C) 1,275 1,275 1,205 GFRC 360, LLC – Term Debt (S + 8.0 %, 13.3 % Cash, Due 9/2024) (C) 1,000 1,000 945 2,275 2,150 Diversified/Conglomerate Manufacturing – 27.9 % Engineering Manufacturing Technologies, LLC – Line of Credit, $ 3,000 available (S + 8.3 %, 13.6 % Cash, Due 10/2026) (C) — — — Engineering Manufacturing Technologies, LLC – Term Debt (S + 8.3 %, 13.6 % Cash, Due 10/2026) (C) 21,500 21,500 19,726 NeoGraf Solutions LLC – Line of Credit, $ 4,500 available (S + 7.0 %, 11.0 % Cash, 1.3 % PIK, Due 1/2028) (C) — — — NeoGraf Solutions LLC – Term Debt (S + 7.0 %, 11.0 % Cash, 1.3 % PIK, Due 1/2028) (C) 27,154 27,154 26,000 OCI, LLC – Term Debt (S + 7.5 %, 12.8 % Cash, Due 5/2028) (C) 20,000 20,000 19,800 Salvo Technologies, Inc. – Term Debt (S + 9.5 %, 14.8 % Cash, Due 4/2027) (C) 11,768 11,768 10,900 Unirac Holdings, Inc. – Line of Credit, $ 1,244 available (S + 6.5 %, 11.8 % Cash, Due 9/2027) (C) 978 978 980 Unirac Holdings, Inc. – Delayed Draw Term Loan, $ 1,669 available (S + 6.5 %, 11.8 % Cash, Due 9/2027) (C) 1,108 1,108 1,111 Unirac Holdings, Inc. – Term Debt (S + 6.5 %, 11.8 % Cash, Due 9/2027) (C) 14,888 14,577 14,925 Viva Railings, LLC – Line of Credit, $ 4,000 available (S + 7.1 %, 12.4 % Cash, Due 5/2027) (C) — — — Viva Railings, LLC – Term Debt (S + 7.1 %, 12.4 % Cash, Due 5/2027) (C) 20,747 20,747 20,436 117,832 113,878 Diversified/Conglomerate Service – 25.5 % Axios Industrial Group, LLC – Term Debt (S + 8.6 %, 13.9 % Cash, Due 10/2027) (C) 11,550 11,519 11,291 DKI Ventures, LLC – Line of Credit, $ 170 available ( 9.0 % Cash, Due 12/2025) (C)(F) 205 205 113 DKI Ventures, LLC – Term Debt ( 9.0 % Cash, Due 12/2025) (C)(F) 5,915 5,915 3,253 ENET Holdings, LLC – Term Debt (S + 8.3 %, 13.6 % Cash, Due 4/2025) (C) 22,289 22,289 21,397 Fix-It Group, LLC – Line of Credit, $ 2,500 available (S + 8.1 %, 13.4 % Cash, Due 12/2026) (C) 500 500 499 Fix-It Group, LLC – Term Debt (S + 8.1 %, 13.4 % Cash, Due 12/2026) (C) 12,200 12,200 12,170 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, 2023 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(K)(Q) Principal/ Shares/ Units (I)(J) Cost Fair Value Fix-It Group, LLC – Delayed Draw Term Loan, $ 0 available (S + 8.1 %, 13.4 % Cash, Due 12/2026) (C) 6,911 6,911 6,894 Leadpoint Business Services, LLC – Term Debt (S + 8.5 %, 13.8 % Cash, Due 2/2028) (C) 13,500 13,500 13,399 MCG Energy Solutions, LLC – Term Debt (S + 7.6 %, 12.9 % Cash, 3.5 % PIK, Due 3/2026) (C) 20,146 20,107 17,628 Trowbridge Chicago, LLC – Line of Credit, $ 2,000 available (S + 7.0 %, 12.3 % Cash, Due 6/2029) (C) — — — Trowbridge Chicago, LLC – Term Debt (S + 7.0 %, 12.3 % Cash, Due 6/2029) (C) 5,750 5,750 5,664 WorkforceQA, LLC – Line of Credit, $ 1,600 available (S + 6.5 %, 11.8 % Cash, Due 12/2026) (C) 400 400 400 WorkforceQA, LLC – Term Debt (S + 8.4 %, 13.7 % Cash, Due 12/2026) (C)(H) 10,000 9,971 9,987 WorkforceQA, LLC – Term Debt (S + 9.3 %, 14.6 % Cash, Due 12/2026) (C)(H) 1,600 1,595 1,598 110,862 104,293 Healthcare, Education, and Childcare – 26.5 % ALS Education, LLC – Line of Credit, $ 3,000 available (S + 7.0 %, 12.3 % Cash, Due 5/2025) (C) — — — ALS Education, LLC – Term Debt (S + 7.0 %, 12.3 % Cash, Due 5/2025) (C) 18,700 18,700 18,700 HH-Inspire Acquisition, Inc. – Line of Credit, $ 478 available (S + 8.0 %, 13.4 % Cash, Due 4/2028) (C)(U) 1,359 1,359 1,347 HH-Inspire Acquisition, Inc. – Term Debt (S + 8.0 %, 13.4 % Cash, Due 4/2028) (C)(U) 16,013 16,013 15,872 HH-Inspire Acquisition, Inc. – Term Debt (S + 8.0 %, 13.4 % Cash, Due 4/2028) (C)(U) 3,225 3,225 3,197 Pansophic Learning, Ltd. – Term Debt (S + 7.5 %, 12.9 % Cash, Due 3/2027) (C)(U) 28,000 27,968 27,965 Pansophic Learning, Ltd. – Term Debt (S + 7.5 %, 12.9 % Cash, Due 3/2027) (C)(U) 5,000 4,994 4,994 Technical Resource Management, LLC – Line of Credit, $ 1,000 available (S + 8.0 %, 13.3 % Cash, Due 4/2028) (C) 2,000 2,000 1,970 Technical Resource Management, LLC – Term Debt (S + 8.0 %, 13.3 % Cash, Due 4/2028) (C) 23,000 23,000 22,655 Technical Resource Management, LLC – Delayed Draw Term Loan, $ 2,500 available (S + 8.0 %, 13.3 % Cash, Due 4/2028) (C) — — — Turn Key Health Clinics, LLC – Line of Credit, $ 1,500 available (S + 7.3 %, 12.6 % Cash, Due 6/2026) (C) 500 500 499 Turn Key Health Clinics, LLC – Term Debt (S + 7.3 %, 12.6 % Cash, Due 6/2026) (C) 11,000 11,000 10,986 108,759 108,185 Machinery – 1.4 % Arc Drilling Holdings LLC – Line of Credit, $ 1,000 available (S + 11.5 %, 10.5 % Cash, 6.3 % PIK, Due 2/2024) (C) — — — Arc Drilling Holdings LLC – Term Debt (S + 11.5 %, 10.5 % Cash, 6.3 % PIK, Due 2/2024) (C) 5,928 5,928 5,724 5,928 5,724 Telecommunications – 1.4 % B+T Group Acquisition, Inc. (S) – Line of Credit, $ 0 available (S + 2.0 %, 7.3 % Cash, Due 12/2024) (C) 1,200 1,200 978 B+T Group Acquisition, Inc. (S) – Term Debt (S + 2.0 %, 7.3 % Cash, Due 12/2024) (C) 6,000 6,000 4,890 7,200 5,868 Total Secured First Lien Debt $ 507,116 $ 491,686 Secured Second Lien Debt – 29.5 % Automobile – 3.8 % Sea Link International IRB, Inc. – Term Debt ( 11.3 % Cash, 2.0 % PIK, Due 12/2025) (C)(F) 12,083 12,053 11,675 Sea Link International IRB, Inc. – Term Debt ( 12.0 % Cash, 2.0 % PIK, Due 12/2025) (C)(F) 4,000 4,000 4,000 16,053 15,675 Beverage, Food, and Tobacco – 0.6 % 8th Avenue Food & Provisions, Inc. – Term Debt (S + 7.9 %, 13.2 % Cash, Due 10/2026) (D) 3,683 3,683 2,495 Diversified/Conglomerate Manufacturing – 8.9 % OCI, LLC – Term Debt ( 7.0 % Cash, 7.0 % PIK, Due 11/2028) (C)(F) 2,012 2,012 1,992 Springfield, Inc. – Term Debt (S + 10.1 %, 15.4 % Cash, Due 12/2026) (C) 30,000 30,000 29,850 Tailwind Smith Cooper Intermediate Corporation – Term Debt (S + 9.0 %, 14.4 % Cash, Due 5/2027) (D)(U) 5,000 4,856 4,294 36,868 36,136 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, 2023 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(K)(Q) Principal/ Shares/ Units (I)(J) Cost Fair Value Diversified/Conglomerate Service – 4.0 % CHA Holdings, Inc. – Term Debt (S + 9.0 %, 14.4 % Cash, Due 4/2026) (D)(U) 3,000 2,974 2,820 Gray Matter Systems, LLC – Term Debt ( 12.0 % Cash, 2.0 % PIK, Due 12/2026) (C)(F) 13,645 13,578 13,645 16,552 16,465 Healthcare, Education, and Childcare – 7.1 % Giving Home Health Care, LLC – Term Debt ( 12.5 % Cash, Due 2/2028) (C)(F) 28,800 28,800 28,800 Oil and Gas – 5.1 % Imperative Holdings Corporation – Term Debt (S + 9.8 %, 15.1 % Cash, Due 8/2028) (C) 21,015 20,871 20,858 Total Secured Second Lien Debt $ 122,827 $ 120,429 Unsecured Debt – 0.0 % Diversified/Conglomerate Service – 0.0 % Frontier Financial Group Inc. – Convertible Debt ( 6.0 % Cash, Due 6/2022) (E)(F) 198 198 24 Preferred Equity – 5.3 % Automobile – 0.0 % Sea Link International IRB, Inc. – Preferred Stock (E)(G) 98,039 98 183 Beverage, Food, and Tobacco – 0.0 % Triple H Food Processors, LLC – Preferred Stock (E)(G) 75 75 141 Buildings and Real Estate – 0.1 % GFRC 360, LLC – Preferred Stock (E)(G) 1,000 1,025 253 Diversified/Conglomerate Manufacturing – 0.3 % Salvo Technologies, Inc. – Preferred Stock (E)(G) 2,500 2,500 1,225 Diversified/Conglomerate Service – 2.4 % 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)(G) 7,000,000 7,000 8,904 Trowbridge Chicago, LLC – Preferred Stock (E)(G) 242,105 750 750 8,250 9,654 Healthcare, Education, and Childcare – 0.8 % HH-Inspire Acquisition, Inc. – Preferred Stock (E)(G) 1,329,054 2,251 3,451 Oil and Gas – 1.7 % FES Resources Holdings LLC – Preferred Equity Units (E)(G) 6,350 6,350 4,508 Imperative Holdings Corporation – Preferred Equity Units (E)(G) 972,569 488 2,318 6,838 6,826 Telecommunications – 0.0 % B+T Group Acquisition, Inc. (S) – Preferred Stock (E)(G) 6,130 2,024 — Total Preferred Equity $ 23,061 $ 21,733 Common Equity – 7.3 % Aerospace and Defense – 4.7 % Antenna Research Associates, Inc. – Common Equity Units (E)(G) 4,283 4,283 18,436 Ohio Armor Holdings, LLC – Common Equity (E)(G) 100 1,000 680 5,283 19,116 Automobile – 0.1 % Sea Link International IRB, Inc.– Common Equity Units (E)(G) 823,333 823 340 Beverage, Food, and Tobacco – 0.8 % Salt & Straw, LLC – Common Warrant (E)(G) 0.4 % — 31 Sokol & Company Holdings, LLC – Common Stock (E)(G) 1,500,000 1,500 1,612 Triple H Food Processors, LLC – Common Stock (E)(G) 250,000 250 1,641 1,750 3,284 Buildings and Real Estate – 0.0 % GFRC 360, LLC – Common Stock Warrants (E)(G) 45.0 % — — Diversified/Conglomerate Manufacturing – 0.0 % Engineering Manufacturing Technologies, LLC – Common Stock (E)(G) 6,000 3,000 — OCI, LLC – Common Units (E)(G) 306 — — NeoGraf Solutions LLC – Common Stock (E)(G) 2,000,000 2,000 — 5,000 — 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, 2023 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(K)(Q) Principal/ Shares/ Units (I)(J) Cost Fair Value Diversified/Conglomerate Service – 0.1 % WorkforceQA, LLC – Common Stock (E)(G) 532 532 359 Healthcare, Education, and Childcare – 1.5 % Giving Home Health Care, LLC – Warrant (E)(G) 10,667 19 2,794 GSM MidCo LLC – Common Stock (E)(G) 767 767 1,562 Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($ 843 uncalled capital commitment) (G)(L)(R) 3.5 % — 231 Technical Resource Management, LLC – Common Stock (E)(G) 2,000,000 2,000 1,415 2,786 6,002 Machinery – 0.1 % Arc Drilling Holdings LLC – Common Stock (E)(G) 15,000 1,500 403 Oil and Gas – 0.0 % FES Resources Holdings LLC – Common Equity Units (E)(G) 6,233 — — Total Safety Holdings, LLC – Common Equity (E)(G) 435 499 146 499 146 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0 % Funko Acquisition Holdings, LLC (S) – Common Units (G)(T) 4,239 22 22 Telecommunications – 0.0 % B+T Group Acquisition, Inc. (S) – Common Stock Warrant (E)(G) 1.5 % — — Total Common Equity $ 18,195 $ 29,672 Total Non-Control/Non-Affiliate Investments $ 671,397 $ 663,544 AFFILIATE INVESTMENTS (N) – 2.6 % Secured First Lien Debt – 0.7 % Diversified/Conglomerate Manufacturing – 0.7 % Edge Adhesives Holdings, Inc. (S) – Term Debt (S + 5.5 %, 10.8 % Cash, Due 8/2024) (E)(P) 6,140 6,140 2,895 Preferred Equity – 1.3 % Diversified/Conglomerate Manufacturing – 0.0 % Edge Adhesives Holdings, Inc. (S) – Preferred Stock (E)(G) 5,466 5,466 $ — Diversified/Conglomerate Service– 1.1 % Encore Dredging Holdings, LLC – Preferred Stock (E)(G) 3,840,000 3,840 4,265 Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2 % Canopy Safety Brands, LLC – Preferred Stock (E)(G) 500,000 500 857 Total Preferred Equity $ 9,806 $ 5,122 Common Equity – 0.6 % Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.6 % Canopy Safety Brands, LLC – Common Stock (E)(G) 1,170,370 800 2,404 Total Affiliate Investments $ 16,746 $ 10,421 CONTROL INVESTMENTS (O) – 7.5 % Secured First Lien Debt – 3.9 % Diversified/Conglomerate Manufacturing – 0.9 % Lonestar EMS, LLC – Term Debt ( 8.0 % PIK, Due 6/2027) (E)(F) 3,927 3,927 3,927 Personal and Non-Durable Consumer Products (Manufacturing Only) – 2.8 % WB Xcel Holdings, LLC – Line of Credit, $ 32 available (S + 10.5 %, 15.8 % Cash, Due 11/2026) (E) 1,468 1,468 1,468 WB Xcel Holdings, LLC – Term Debt (S + 10.5 %, 15.8 % Cash, Due 11/2026) (E) 9,825 9,825 9,825 11,293 11,293 Printing and Publishing – 0.2 % TNCP Intermediate HoldCo, LLC – Line of Credit, $ 1,100 available ( 8.0 % Cash, Due 10/2024) (E)(F) 900 900 900 Total Secured First Lien Debt $ 16,120 $ 16,120 Secured Second Lien Debt – 1.8 % Automobile – 1.8 % Defiance Integrated Technologies, Inc. – Term Debt (S + 9.6 %, 14.9 % Cash, Due 5/2026) (E) 7,425 7,425 7,425 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, 2023 (DOLLAR AMOUNTS IN THOUSANDS) Company and Investment (A)(B)(K)(Q) Principal/ Shares/ Units (I)(J) Cost Fair Value Preferred Equity – 0.0 % Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0 % WB Xcel Holdings, LLC – Preferred Stock (E)(G) 333 2,750 $ — Common Equity – 1.8 % Automobile – 1.0 % Defiance Integrated Technologies, Inc. – Common Stock (E)(G) 33,321 580 3,948 Diversified/Conglomerate Manufacturing – 0.0 % Lonestar EMS, LLC – Common Units (E)(G) 100.0 % 6,750 — Machinery – 0.1 % PIC 360, LLC – Common Equity Units (E)(G) 750 1 284 Printing and Publishing – 0.7 % TNCP Intermediate HoldCo, LLC – Common Equity Units (E)(G) 790,000 500 3,073 Total Common Equity $ 7,831 $ 7,305 Total Control Investments $ 34,126 $ 30,850 TOTAL INVESTMENTS (V) – 172.5 % $ 722,269 $ 704,815 (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 $ 628.3 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, 2023, 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 less than 0.1 % of total investments, at fair value, as of September 30, 2023. (B) Unless indicated otherwise, all cash interest rates are indexed to one-month Secured Overnight Financing Rate (“SOFR” or “S”), which was 5.32 % as of September 30, 2023. 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 SOFR 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 a third party valuation firm. (D) Fair value was based on the indicative bid price on or near September 30, 2023, 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. (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 loans, 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. (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, 2023. (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 is on non-accrual status. (Q) Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3— Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (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. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 83 Table of Contents (T) Our investment in Funko was valued using Level 2 inputs within ASC 820 of the 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 SOFR, which was 5.40 % as of September 30, 2023. (V) Cumulative gross unrealized depreciation for federal income tax purposes is $ 56.9 million; cumulative gross unrealized appreciation for federal income tax purposes is $ 33.7 million. Cumulative net unrealized depreciation is $ 23.2 million, based on a tax cost of $ 728.0 million. 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, 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 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 85 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 Fix-It Group, LLC– Delayed Draw Term Loan, $ 10,000 available (L + 7.0 %, 10.1 % Cash, Due 12/2026) (C)(U) — — — 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. 86 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. 87 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. 88 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. 89 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. 90 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 (X) – 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 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 and 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, 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 a third party valuation firm. (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. (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. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 91 Table of Contents (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 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. (AA) The cash interest rate on this investment was indexed to the 30-day SOFR, which was 3.04 % as of September 30, 2022. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 92 Table of Contents GLADSTONE CAPITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (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. 93 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 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 (“Valuation Designee”) under the 1940 Act. In accordance with the 1940 Act, our Board of Directors has the ultimate responsibility for reviewing the good faith fair value determination 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 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 94 Table of Contents 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 on the Valuation Designee’s determinations to the entire Board of Directors so that the full Board of Directors may review 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. A third party valuation firm generally provides estimates of fair value on our proprietary debt investments. The Valuation Team generally assigns the third party valuation firm’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 the third party valuation firm’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 the third party valuation firm’s. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation Team has followed the Policy and the Valuation Committee reviews whether the Valuation Team’s recommended fair value is reasonable in light of the Policy and other facts and circumstances. 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 as to the fair value. Our Valuation Committee reviews the recommended fair value, and whether it is reasonable in light of the Policy, and other relevant facts and circumstances. 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 twelve 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 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 95 Table of Contents 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 our third party valuation firm 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, the Valuation Team generally bases fair value on the closing market price of the securities we hold as of the reporting date. For restricted securities that are publicly traded, the Valuation Team generally bases 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 and the lack of marketability of the security. • 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, 2023, our loan to Edge Adhesives Holdings, Inc. was on non-accrual status with a cost basis of $ 6.1 million, or 0.9 % of the cost basis of all debt investments in our portfolio, and a fair value of $ 2.9 million, or 0.5 % of the fair value of all debt investments in our portfolio. There were no loans on non-accrual status as of September 30, 2022. 96 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 each of September 30, 2023 and 2022, we held four OID loans. We recorded OID income of $ 0.2 million, $ 0.5 million, and $ 0.3 million during the years ended September 30, 2023, 2022, and 2021, respectively. The unamortized balance of OID investments as of September 30, 2023 and 2022 totaled $ 0.7 million and $ 0.9 million, respectively. As of September 30, 2023 and 2022, we had eight and six investments which had a PIK interest component, respectively. We recorded PIK interest income of $ 3.6 million, $ 4.2 million, and $ 2.5 million during the years ended September 30, 2023, 2022, and 2021, respectively. We collected $ 1.1 million, $ 2.4 million, and $ 3.4 million of PIK interest in cash during the years ended September 30, 2023, 2022, and 2021, 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. Refer to Note 5 — Borrowings for further discussion. Related Party Fees We are party to the Advisory Agreement with the Adviser, which is indirectly 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 indirectly 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 to distribute sufficient dividends to eliminate taxable income. Refer to Note 10— Federal and State Income Taxes for additional information regarding our RIC requirements. 97 Table of Contents 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 2020 to 2022 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 early adoption of ASU 2022-03 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 • 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 98 Table of Contents 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, 2023, 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, 2022, 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, 2023 and 2022, there were no investments transferred into or out of Levels 1, 2 or 3 of the valuation hierarchy. As of September 30, 2023 and 2022, 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, 2023: Secured first lien debt $ 510,701 $ — $ — $ 510,701 Secured second lien debt 127,854 — — 127,854 Unsecured debt 24 — — 24 Preferred equity 26,855 — — 26,855 Common equity/equivalents 39,150 (A) — 22 (B) 39,128 Total Investments as of September 30, 2023: $ 704,584 $ — $ 22 $ 704,562 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, 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 (A) Excludes our investment in Leeds with a fair value of $ 0.2 million and $ 6.4 million as of September 30, 2023 and 2022, 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. 99 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, 2023 and 2022 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, 2023 September 30, 2022 Non-Control/Non-Affiliate Investments Secured first lien debt $ 491,686 $ 413,631 Secured second lien debt 120,429 108,263 Unsecured debt 24 55 Preferred equity 21,733 17,719 Common equity/equivalents 29,419 (A) 28,688 (B) Total Non-Control/Non-Affiliate Investments $ 663,291 $ 568,356 Affiliate Investments Secured first lien debt $ 2,895 $ 34,804 Preferred equity 5,122 3,640 Common equity/equivalents 2,404 647 Total Affiliate Investments $ 10,421 $ 39,091 Control Investments Secured first lien debt $ 16,120 $ 15,423 Secured second lien debt 7,425 7,665 Preferred equity — 5,687 Common equity/equivalents 7,305 6,938 Total Control Investments $ 30,850 $ 35,713 Total Investments at Fair Value Using Level 3 Inputs $ 704,562 $ 643,160 (A) Excludes our investments in Leeds and Funko with fair values of $ 0.2 million and $ 22 thousand, respectively, as of September 30, 2023. 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 $ 6.4 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. 100 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, 2023 and 2022. 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, 2023 September 30, 2022 Valuation Techniques/ Methodologies Unobservable Input September 30, 2023 September 30, 2022 Secured first lien debt (A) $ 461,638 $ 423,912 Yield Analysis Discount Rate 11.8 %– 29.9 % / 14.8 % 8.0 %– 29.5 % / 11.8 % 49,063 39,946 TEV EBITDA multiple 4.7 x– 6.8 x / 6.7 x 4.8 x– 6.7 x / 6.2 x EBITDA $ 995 –$ 14,002 / $ 13,624 $ 800 –$ 10,257 / $ 7,605 Revenue multiple 0.3 x– 0.8 x / 0.6 x 0.3 x– 0.6 x / 0.5 x Revenue $ 14,934 –$ 16,283 / $ 15,361 $ 11,514 –$ 16,320 / $ 14,656 Secured second lien debt 110,820 97,472 Yield Analysis Discount Rate 12.5 %– 15.6 % / 14.5 % 11.5 %— 15.4 % / 13.8 % 9,609 10,791 Market Quote IBP 67.8 %– 94.0 % / 82.2 % 82.0 %– 95.0 % / 86.5 % 7,425 7,665 TEV EBITDA multiple 5.6 x– 5.6 x / 5.6 x 5.6 x– 5.6 x / 5.6 x EBITDA $ 3,690 –$ 3,690 / $ 3,690 $ 3,299 –$ 3,299 / $ 3,299 Unsecured debt 24 55 TEV Revenue multiple 1.0 x– 1.0 x / 1.0 x 0.3 x– 1.3 x / 1.0 x Revenue $ 5,044 –$ 5,044 / $ 5,044 $ 764 –$ 11,514 / $ 4,249 Preferred and common equity / equivalents (B) 65,983 63,319 TEV EBITDA multiple 4.7 x– 13.0 x / 6.9 x 4.1 x– 11.0 x / 6.5 x EBITDA $ 995 –$ 112,841 / $ 10,570 $ 800 –$ 74,512 / $ 11,742 Revenue multiple 0.3 x– 3.0 x / 1.2 x 0.3 x– 4.4 x / 1.4 x Revenue $ 4,213 –$ 16,283 / $ 14,959 $ 764 –$ 42,926 / $ 19,963 Total Level 3 Investments, at Fair Value $ 704,562 $ 643,160 (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. (B) Fair value as of September 30, 2023 excludes our investments in Leeds and Funko with fair values of $ 0.2 million and $ 22 thousand, respectively. 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. Leeds was valued using NAV as a practical expedient and Funko was valued using Level 2 inputs as of both September 30, 2023 and 2022. 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 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. 101 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, 2023 and 2022 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, 2023 Secured First Lien Debt Secured Second Lien Debt Unsecured Debt Preferred Equity Common Equity/ Equivalents Total Fair Value as of September 30, 2022 $ 463,858 $ 115,928 $ 55 $ 27,046 $ 36,273 $ 643,160 Total gains (losses): Net realized gain (loss) (A) ( 107 ) — ( 95 ) ( 279 ) 8,695 8,214 Net unrealized appreciation (depreciation) (B) ( 7,577 ) 617 ( 31 ) ( 1,829 ) 10,563 1,743 Reversal of prior period net depreciation (appreciation) on realization (B) 850 6 95 526 ( 9,257 ) ( 7,780 ) New investments, repayments and settlements: (C) Issuances/originations 154,762 15,421 — 2,045 4,532 176,760 Settlements/repayments ( 101,085 ) ( 4,118 ) — — — ( 105,203 ) Net proceeds from sales — — — ( 654 ) ( 11,678 ) ( 12,332 ) Transfers — — — — — — Fair Value as of September 30, 2023 $ 510,701 $ 127,854 $ 24 $ 26,855 $ 39,128 $ 704,562 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 (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. 102 Table of Contents Investment Activity Proprietary Investments As of September 30, 2023 and 2022, we held 47 and 46 proprietary investments with an aggregate fair value of $ 695.1 million and $ 630.8 million, or 98.6 % and 97.1 % of the total portfolio at fair value, respectively. The following significant proprietary investment transactions occurred during the year ended September 30, 2023: • In October and November 2022, we received distributions totaling $ 6.0 million from our investment in Leeds, related primarily to the sale of underlying assets in the fund, which resulted in a realized gain of approximately $ 4.4 million. We retain an equity investment in Leeds with no remaining cost basis and a fair value of $ 0.2 million as of September 30, 2023. • In December 2022, our investment in R2i Holdings, LLC paid off at par for net cash proceeds of $ 19.2 million. • In January 2023, we invested $ 29.0 million in NeoGraf Solutions LLC (“NeoGraf”) through secured first lien debt and common equity. We also extended NeoGraf a $ 4.5 million line of credit commitment, which was unfunded at close. • In January and March 2023, we invested a total of $ 6.3 million in Salt & Straw, LLC, an existing portfolio company, through funding on our existing delayed draw term loan commitment. • In March 2023, we invested $ 13.5 million in Leadpoint Business Services, LLC through secured first lien debt. We also extended the company a $ 5.5 million line of credit commitment which was fully funded as of March 31, 2023. In May 2023, the line of credit was paid off at par for net cash proceeds of $ 5.5 million and terminated. • In April 2023, we invested $ 25.0 million in Technical Resource Management, LLC (“Technical”) through secured first lien debt and equity. We also extended Technical a $ 3.0 million line of credit commitment and a $ 2.5 million delayed draw term loan commitment, each of which were unfunded at close. • In April 2023, our debt investment in HH-Inspire Acquisition, Inc. (“Inspire”) was refinanced. Our original debt investment totaling $ 35.5 million was redeemed at par plus a $ 0.2 million prepayment fee and we invested a total of $ 16.8 million in Inspire through new secured first lien debt and equity, which was net funded through the redemption of our original debt investment. We also extended Inspire a $ 1.8 million line of credit commitment, which was unfunded at close. In June 2023, we invested an additional $ 3.4 million in Inspire through secured first lien debt and equity. • In May 2023, we invested $ 22.0 million in OCI, LLC through secured first lien debt, secured second lien debt, and common equity. • In June 2023, the majority of our investment in PIC 360, LLC was sold resulting in a net realized gain of $ 3.7 million. We continue to retain a small equity investment in PIC 360 with a fair value of approximately $ 0.3 million. • In June 2023, we invested $ 6.5 million in Trowbridge Chicago, LLC (“Trowbridge”) through secured first lien debt and preferred equity. We also extended Trowbridge a $ 2.0 million line of credit commitment and a $ 5.3 million delayed draw term loan commitment, each of which were unfunded at close. In September 2023, the delayed draw term loan commitment expired. • In July 2023, we invested an additional $ 5.0 million in Gray Matter Systems, LLC, an existing portfolio company, through secured second lien debt. • In September 2023, we invested an additional $ 4.0 million in Sea Link International IRB, Inc., an existing portfolio company, through secured second lien debt. • In September 2023, we invested an additional $ 8.1 million in Antenna Research Associates, Inc., an existing portfolio company, through secured first lien debt. • In September 2023, our debt investment in Encore Dredging Holdings, LLC (“Encore”) was repaid at par plus $ 0.4 million in prepayment and early termination fees. We retain an equity investment in Encore with cost basis of $ 3.8 million and fair value of $ 4.3 million as of September 30, 2023. 103 Table of Contents Syndicated Investments As of September 30, 2023 and 2022, we held four and six syndicated investments with an aggregate fair value of $ 9.7 million and $ 18.8 million, or 1.4 % and 2.9 % of the total portfolio at fair value, respectively. The following significant syndicated investment transactions occurred during the year ended September 30, 2023: • In October 2022, our investment in Targus Cayman HoldCo Ltd. was sold for net proceeds of approximately $ 8.0 million, which resulted in a realized gain of approximately $ 5.9 million. As part of the proceeds, we received an interest in B. Riley Financial, Inc. 6.75 % senior notes in the amount of $ 2.4 million which are traded on Nasdaq under the trading symbol RILYO. In June 2023, we redeemed our investment in B. Riley Financial, Inc. 6.75 % senior notes at par for proceeds of $ 2.4 million. • In September 2023, our investment in CPM Holdings, Inc. paid off at par for net cash proceeds of $ 0.8 million. Investment Concentrations As of September 30, 2023, our investment portfolio consisted of investments in 51 portfolio companies located in 23 states in 12 different industries, with an aggregate fair value of $ 704.8 million. The five largest investments at fair value as of September 30, 2023 totaled $ 176.9 million, or 25.1 % of our total investment portfolio, as compared to the five largest investments at fair value as of September 30, 2022 totaling $ 174.5 million, or 26.9 % of our total investment portfolio. As of September 30, 2023 and 2022, our average investment by obligor was $ 14.2 million and $ 12.6 million at cost, respectively. The following table outlines our investments by security type as of September 30, 2023 and 2022: September 30, 2023 September 30, 2022 Cost Fair Value Cost Fair Value Secured first lien debt $ 529,376 73.3 % $ 510,701 72.5 % $ 475,806 72.5 % $ 463,858 71.4 % Secured second lien debt 130,252 18.1 127,854 18.1 118,949 18.2 115,928 17.8 Unsecured debt 198 0.0 24 0.0 293 0.0 55 0.0 Total debt investments 659,826 91.4 638,579 90.6 595,048 90.7 579,841 89.2 Preferred equity 35,617 4.9 26,855 3.8 34,505 5.3 27,046 4.2 Common equity/equivalents 26,826 3.7 39,381 5.6 26,500 4.0 42,728 6.6 Total equity investments 62,443 8.6 66,236 9.4 61,005 9.3 69,774 10.8 Total Investments $ 722,269 100.0 % $ 704,815 100.0 % $ 656,053 100.0 % $ 649,615 100.0 % 104 Table of Contents Our investments at fair value consisted of the following industry classifications as of September 30, 2023 and 2022: Industry Classification September 30, 2023 September 30, 2022 Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments Diversified/Conglomerate Manufacturing $ 158,061 22.4 % $ 114,105 17.6 % Healthcare, Education, and Childcare 146,438 20.8 136,401 21.0 Diversified/Conglomerate Service 135,060 19.2 148,907 22.9 Aerospace and Defense 97,836 13.9 88,649 13.6 Beverage, Food, and Tobacco 78,788 11.2 64,283 9.9 Oil and Gas 27,830 3.9 25,373 3.9 Automobile 27,571 3.9 20,144 3.1 Personal and Non-Durable Consumer Products 14,576 2.1 18,583 2.9 Machinery 6,411 0.9 9,562 1.5 Telecommunications 5,868 0.8 10,088 1.6 Textiles and Leather — — 7,978 1.2 Other, < 2.0% 6,376 0.9 5,542 0.8 Total Investments $ 704,815 100.0 % $ 649,615 100.0 % Our investments at fair value were included in the following U.S. geographic regions as of September 30, 2023 and 2022: Location September 30, 2023 September 30, 2022 Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments South $ 273,181 38.8 % $ 326,524 50.3 % West 224,235 31.8 169,415 26.1 Midwest 145,122 20.6 118,191 18.2 Northeast 62,277 8.8 35,485 5.4 Total Investments $ 704,815 100.0 % $ 649,615 100.0 % The geographic composition indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional locations in other geographic regions. 105 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, 2023: Year Ending September 30, Amount 2024 (A) $ 24,385 2025 90,725 2026 137,108 2027 254,660 2028 146,440 Thereafter 7,762 Total contractual repayments $ 661,080 Adjustments to cost basis of debt investments ( 1,254 ) Investments in equity securities 62,443 Investments held as of September 30, 2023 at Cost: $ 722,269 (A) Includes debt investments with contractual principal amounts totaling $ 0.2 million for which the maturity date has passed as of September 30, 2023. 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, 2023 and 2022, we had gross receivables from portfolio companies of $ 0.8 million and $ 0.5 million, respectively. The allowance for uncollectible receivables was $ 9 thousand and $ 0 as of September 30, 2023 and 2022, respectively. 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 11, 2023, 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, 2024. 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 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. 106 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, 2023 2022 2021 Average total assets subject to base management fee (A) $ 685,600 $ 585,543 $ 495,657 Multiplied by annual base management fee of 1.75 % 1.75 % 1.75 % 1.75 % Base management fee (B) 11,998 10,247 8,674 Portfolio company fee credit ( 3,263 ) ( 4,196 ) ( 2,195 ) Syndicated loan fee credit ( 126 ) ( 170 ) ( 307 ) Net Base Management Fee $ 8,609 $ 5,881 $ 6,172 Loan servicing fee (B) $ 8,053 $ 6,329 $ 5,579 Credit to base management fee - loan servicing fee (B) ( 8,053 ) ( 6,329 ) ( 5,579 ) Net Loan Servicing Fee $ — $ — $ — Incentive fee (B) $ 10,255 $ 7,511 $ 5,746 Incentive fee credit — ( 437 ) ( 451 ) Net Incentive Fee $ 10,255 $ 7,074 $ 5,295 Portfolio company fee credit $ ( 3,263 ) $ ( 4,196 ) $ ( 2,195 ) Syndicated loan fee credit ( 126 ) ( 170 ) ( 307 ) Incentive fee credit — ( 437 ) ( 451 ) Credit to Fees from Adviser—Other (B) $ ( 3,389 ) $ ( 4,803 ) $ ( 2,953 ) (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 $ 0 , $ 8 thousand, and $ 0.1 million for the years ended September 30, 2023, 2022, and 2021, 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. 107 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, 2023 and 2022. 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. 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, 2023, as cumulative unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses. 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 108 Table of Contents 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, 2023. 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 and 2021, which credits totaled $ 0.4 million and $ 0.5 million, respectively. There were no such credits during the year ended September 30, 2023. 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 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 11, 2023, 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, 2024. 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 $ 0.8 million, $ 1.1 million, and $ 0.8 million during the years ended September 30, 2023, 2022, and 2021, respectively. See Note 6 — Cumulative Redeemable Preferred Stock Offering for a description of the dealer manager agreement between us and Gladstone Securities. Related Party Fees Due Amounts due to related parties on our accompanying Consolidated Statements of Assets and Liabilities were as follows: September 30, 2023 September 30, 2022 Base management fee due to (from) Adviser $ 670 $ ( 189 ) Loan servicing fee due to Adviser 455 423 Incentive fee due to (from) Adviser 2,747 1,870 Total fees due to (from) Adviser 3,872 2,104 Fee due to Administrator 479 423 Total Related Party Fees Due $ 4,351 $ 2,527 In addition to the above fees, other operating expenses due to the Adviser as of September 30, 2023 and 2022 totaled $ 65 thousand and $ 44 thousand, respectively. In addition, net expenses payable to Gladstone Investment Corporation (for reimbursement purposes), which includes certain co-investment expenses, totaled $ 19 thousand and $ 13 thousand as of 109 Table of Contents September 30, 2023 and 2022, 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, 2023 and 2022. 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. On October 31, 2022, we, through Business Loan, entered into Amendment No. 3 to the Credit Facility to increase the size of the Credit Facility by $ 20.0 million from $ 225.0 million to $ 245.0 million, as permitted under the terms of the Credit Facility. On June 16, 2023, we, through Business Loan, entered into Amendment No. 4 to the Credit Facility to, among other things, (i) decrease the commitment amount from $ 245.0 million to $ 223.7 million, (ii) extend the revolving period end date to October 31, 2025, (iii) extend the maturity date to October 31, 2027 (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) increase the interest rate margin to 3.00 % during the revolving period and 3.50 % thereafter, (v) update the SOFR credit spread adjustment to 10 basis points, and (vi) provide for certain excess concentration limits. We incurred fees of approximately $ 1.2 million in connection with this amendment, which are being amortized through our Credit Facility’s revolving period end date of October 31, 2025. The following tables summarize noteworthy information related to our Credit Facility: As of September 30, 2023 2022 Commitment amount $ 223,659 $ 225,000 Borrowings outstanding, at cost 47,800 141,800 Availability (A) 169,060 60,068 Year Ended September 30, 2023 2022 2021 Weighted average borrowings outstanding, at cost $ 133,692 $ 56,122 $ 59,382 Weighted average interest rate (B) 8.0 % 6.1 % 5.0 % Commitment (unused) fees incurred $ 624 $ 1,105 $ 1,194 (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 110 Table of Contents administrative agent on the accompanying Consolidated Statement of Assets and Liabilities as of September 30, 2023 and 2022. 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 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 $ 408.9 million as of September 30, 2023, (ii) asset coverage with respect to “senior securities representing indebtedness” of at least 150 % (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of September 30, 2023, and as defined in our Credit Facility, we had a net worth of $ 660.5 million, asset coverage on our “senior securities representing indebtedness” of 231.1 %, 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 37 obligors in our Credit Facility’s borrowing base as of September 30, 2023. As of September 30, 2023, 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, 2023, the discount rate used to determine the fair value of our Credit Facility was one-month Term SOFR, plus 3.10 % per annum, plus a 1.00 % unused commitment fee. 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. 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, 2023 and 2022, 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, 2023 and 2022, 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, 2023 and 2022: Total Recurring Fair Value Measurement Reported in Consolidated Statements of Assets and Liabilities Using Significant Unobservable Inputs (Level 3) As of September 30, 2023 2022 Credit Facility $ 47,800 $ 141,800 111 Table of Contents Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3) Year Ended September 30, 2023 2022 Fair value as of September 30, 2022 and 2021, respectively $ 141,800 $ 50,500 Borrowings 149,000 328,900 Repayments ( 243,000 ) ( 237,600 ) Net unrealized (appreciation) depreciation (A) — — Fair Value as of September 30, 2023 and 2022, respectively $ 47,800 $ 141,800 (A) Included in net unrealized (appreciation) depreciation of other on our accompanying Consolidated Statements of Operations for the years ended September 30, 2023 and 2022. The fair value of the collateral under our Credit Facility totaled approximately $ 628.3 million and $ 577.6 million as of September 30, 2023 and 2022, respectively. Notes Payable In August 2023, we completed an offering of $ 57.0 million aggregate principal amount of 7.75 % Notes due 2028 (the “2028 Notes”) for net proceeds of approximately $ 55.1 million after deducting underwriting discounts, commissions and offering expenses borne by us. The 2028 Notes are traded under the ticker symbol “GLADZ” on the Nasdaq Global Select Market. The 2028 Notes will mature on September 1, 2028 and may be redeemed in whole or in part at any time or from time to time at our option on or after September 1, 2025. The 2028 Notes bear interest at a rate of 7.75 % per year. Interest is payable quarterly on March 1, June 1, September 1, and December 1 of each year beginning December 1, 2023 (which equates to approximately $ 4.4 million per year). 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 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. 112 Table of Contents The indenture relating to the 2028 Notes, 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 2028 Notes, 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 2028 Notes, 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. The fair value, based on the last quoted closing price, of the 2028 Notes as of September 30, 2023 was $ 57.1 million. We consider the trading price of the 2028 Notes to be a Level 1 input within the ASC 820 hierarchy. The fair value, based on a DCF analysis, of the 2027 Notes as of September 30, 2023 was $ 44.5 million. The fair value, based on a DCF analysis, of the 2026 Notes as of September 30, 2023 was $ 143.1 million. We consider the 2027 Notes and 2026 Notes to be Level 3 within the ASC 820 fair value hierarchy. NOTE 6. CUMULATIVE REDEEMABLE PREFERRED STOCK OFFERING In May 2023, we entered into a Dealer Manager Agreement pursuant to which we may sell a maximum of 6,000,000 shares of 6.25 % Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), par value $ 0.001 per share, on a “reasonable best efforts” basis through our affiliated dealer manager, Gladstone Securities, at a public offering price of $ 25.00 per share (the “Series A Offering”). As of September 30, 2023, no shares of Series A Preferred Stock have been issued. Under the Dealer Manager Agreement, Gladstone Securities will provide certain sales, promotional and marketing services to us in connection with the Series A Offering, and we will pay Gladstone Securities (i) selling commissions of up to 7.0 % of the gross proceeds from sales of Series A Preferred Stock in the Series A Offering, and (ii) a dealer manager fee of up to 3.0 % of the gross proceeds from sales of Series A Preferred Stock in the Series A Offering. Gladstone Securities may, in its sole discretion, reallow a portion of the dealer manager fee to participating broker-dealers in support of the Series A Offering. Pursuant to the Dealer Manager Agreement, the offering of the Series A Preferred Stock will terminate on the date that is the earlier of (1) December 31, 2026 (unless earlier terminated or extended by our Board of Directors) and (2) the date on which all 6,000,000 shares of Series A Preferred Stock offered are sold. 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, 2023, we had the ability to issue up to an additional $ 151.1 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 “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 $ 100.0 million in an “at the market offering” (the “ATM Program”). In July 2023, we amended and restated the Sales Agreement to add Huntington Securities, Inc. as a sales agent under the ATM Program in addition to Jefferies LLC. During the year ended September 30, 2023, we sold 8,774,101 shares of our common stock under the Sales Agreement, at a weighted-average price of $ 9.96 per share and raised $ 87.4 million of gross proceeds. Net proceeds, after deducting commissions and offering costs borne by us, were approximately $ 85.9 million. As of September 30, 2023, we had a remaining capacity to sell up to an additional $ 0.4 million of our common stock under the Sales Agreement. 113 Table of Contents 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, 2023, 2022, and 2021: Year Ended September 30, 2023 2022 2021 Numerator for basic and diluted net increase (decrease) in net assets resulting from operations per common share $ 42,668 $ 19,914 $ 84,299 Denominator for basic and diluted weighted average common shares 37,315,922 34,351,663 33,234,482 Basic and diluted net increase (decrease) in net assets resulting from operations per common share $ 1.14 $ 0.58 $ 2.54 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. 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, 2022, 93.2 % of distributions to common stockholders were deemed to be paid from ordinary income and 6.8 % of distributions were deemed to be return of capital for 1099 stockholder reporting purposes. 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. 114 Table of Contents We paid the following monthly distributions to common stockholders for the years ended September 30, 2023 and 2022: Fiscal Year Declaration Date Record Date Payment Date Distribution per Common Share 2023 October 11, 2022 October 21, 2022 October 31, 2022 $ 0.07 October 11, 2022 November 18, 2022 November 30, 2022 0.07 October 11, 2022 December 20, 2022 December 30, 2022 0.07 January 10, 2023 January 20, 2023 January 31, 2023 0.075 January 10, 2023 February 17, 2023 February 28, 2023 0.075 January 10, 2023 March 17, 2023 March 31, 2023 0.075 April 11, 2023 April 21, 2023 April 28, 2023 0.08 April 11, 2023 May 23, 2023 May 31, 2023 0.08 April 11, 2023 June 21, 2023 June 30, 2023 0.08 July 11, 2023 July 21, 2023 July 31, 2023 0.0825 July 11, 2023 August 23, 2023 August 31, 2023 0.0825 July 11, 2023 September 7, 2023 September 15, 2023(A) 0.02 July 11, 2023 September 21, 2023 September 29, 2023 0.0825 Year Ended September 30, 2023: $ 0.9425 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 (A) Represents a supplemental distribution to common stockholders. Aggregate distributions declared and paid to our common stockholders were approximately $ 35.4 million and $ 27.3 million for the years ended September 30, 2023 and 2022, respectively, and were declared based on estimates of Investment Company Taxable Income. For the fiscal year ended September 30, 2023, our current and accumulated earnings and profits exceeded common stock distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $ 5.0 million of the first common distributions paid to common stockholders in the subsequent fiscal year as having been paid in the prior year. For the fiscal years ended September 30, 2022 and 2021, distributions declared and paid exceeded taxable income available for common distributions resulting in a partial return of capital of approximately $ 1.4 million and $ 1.0 million, respectively. 115 Table of Contents The components of our net assets on a tax basis were as follows: Year Ended September 30, 2023 2022 Common stock $ 44 $ 35 Capital in excess of par value 481,480 395,542 Cumulative net unrealized appreciation (depreciation) of investments ( 17,454 ) ( 6,438 ) Undistributed ordinary income 4,978 — Capital loss carryforward ( 54,425 ) ( 62,910 ) Other temporary differences ( 5,928 ) ( 10,742 ) Net Assets $ 408,695 $ 315,487 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, 2023, we had $ 54.4 million of capital loss carryforwards that do not expire. For the years ended September 30, 2023 and 2022, 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, 2023 2022 Undistributed net investment income $ ( 373 ) $ ( 5,606 ) Accumulated net realized losses 373 7,013 Capital in excess of par value — ( 1,407 ) 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, 2023, 2022, and 2021. 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, 2023, 2022, and 2021. 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 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 116 Table of Contents 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, 2023 and 2022, 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 $ 0.6 million and $ 0.2 million as of September 30, 2023 and September 30, 2022, 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, 2023 and 2022 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, 2023 and 2022, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and Liabilities: As of September 30, 2023 2022 Unused line of credit commitments (A) $ 32,349 $ 36,225 Delayed draw term loans (A) 12,039 37,778 Uncalled capital commitment 843 843 Total $ 45,231 $ 74,846 (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. 117 Table of Contents NOTE 12. FINANCIAL HIGHLIGHTS As of and for the Year Ended September 30, 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Per Common Share Data: Net asset value at beginning of year (A) $ 9.08 $ 9.28 $ 7.40 $ 8.22 $ 8.32 $ 8.40 $ 8.62 $ 9.06 $ 9.51 $ 9.81 Income from operations (B) Net investment income 1.10 0.94 0.79 0.81 0.84 0.85 0.84 0.84 0.84 0.87 Net realized and unrealized gain (loss) on investments 0.03 ( 0.35 ) 1.79 ( 0.84 ) ( 0.15 ) ( 0.16 ) ( 0.12 ) ( 0.35 ) ( 0.50 ) ( 0.23 ) Net realized and unrealized gain (loss) on other 0.01 ( 0.01 ) ( 0.04 ) ( 0.03 ) ( 0.01 ) — ( 0.05 ) — 0.06 ( 0.11 ) Total from operations 1.14 0.58 2.54 ( 0.06 ) 0.68 0.69 0.67 0.49 0.40 0.53 Distributions to common stockholders from (B)(C) Net Investment Income ( 0.94 ) ( 0.76 ) ( 0.75 ) ( 0.80 ) ( 0.82 ) ( 0.84 ) ( 0.84 ) ( 0.70 ) ( 0.84 ) ( 0.12 ) Realized gains — — — — — — — ( 0.14 ) — — Return of capital — ( 0.04 ) ( 0.03 ) ( 0.01 ) ( 0.02 ) — — — — ( 0.72 ) Total distributions ( 0.94 ) ( 0.80 ) ( 0.78 ) ( 0.81 ) ( 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 — — Net anti-dilutive (dilutive) effect of equity offering (D) 0.13 0.02 0.15 0.05 0.07 0.08 ( 0.02 ) ( 0.05 ) ( 0.06 ) — Total capital share transactions 0.13 0.02 0.14 0.05 0.06 0.07 ( 0.06 ) ( 0.08 ) ( 0.01 ) — Other, net (B)(E) ( 0.02 ) — ( 0.02 ) — — — 0.01 ( 0.01 ) — 0.01 Net asset value at end of period / year (A) $ 9.39 $ 9.08 $ 9.28 $ 7.40 $ 8.22 $ 8.32 $ 8.40 $ 8.62 $ 9.06 $ 9.51 Per common share market value at beginning of year $ 8.49 $ 11.30 $ 7.41 $ 9.75 $ 9.50 $ 9.50 $ 8.13 $ 8.13 $ 8.77 $ 8.73 Per common share market value at end of year 9.64 8.49 11.30 7.41 9.75 9.50 9.50 8.13 8.13 8.77 Total return (F) 24.85 % ( 19.16 ) % 64.93 % ( 15.75 ) % 12.55 % 9.53 % 27.90 % 11.68 % 2.40 % 9.62 % Common stock outstanding at end of year (A) 43,508,897 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 Statement of Assets and Liabilities Data: Net assets at end of year $ 408,695 $ 315,487 $ 318,439 $ 233,743 $ 249,330 $ 237,092 $ 219,650 $ 201,207 $ 191,444 $ 199,660 Average net assets (G) 349,518 320,838 275,509 235,266 239,851 234,092 215,421 193,228 198,864 201,009 Senior Securities Data: Borrowings under line of credit, at cost $ 47,800 $ 141,800 $ 50,500 $ 128,000 $ 66,900 $ 110,000 $ 93,000 $ 71,300 $ 127,300 $ 36,700 Mandatorily redeemable preferred stock — — — — 51,750 51,750 51,750 61,000 61,000 61,000 Notes Payable 257,000 200,000 188,813 96,313 57,500 — — — — — Ratios/Supplemental Data: Ratio of net expenses to average net assets (H)(I) 12.99 % 9.62 % 10.04 % 9.69 % 10.61 % 9.61 % 8.26 % 10.16 % 10.24 % 9.06 % Ratio of net investment income to average net assets (J) 11.74 10.06 9.48 10.70 10.25 9.86 9.95 10.08 8.90 9.14 118 Table of Contents (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, 2023, 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 16.31 %, 13.13 %, 13.17 %, 14.36 %, 14.18 %, 13.12 %, 12.14 %, 13.40 %, 13.65 %, and 11.88 % for the fiscal years ended September 30, 2023, 2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, and 2014, 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 8.49 %, 6.61 %, 6.40 %, 6.11 %, 6.74 %, 6.41 %, 6.13 %, 6.90 %, 5.55 %, and 6.37 % for the fiscal years ended September 30, 2023, 2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, and 2014, respectively. 119 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, 2023, 2022, and 2021. NOTE 14. SUBSEQUENT EVENTS Portfolio Activity In November 2023, we invested $ 11.0 million in Quality Environmental Midco, Inc. (“Quality”) through secured first lien debt and preferred equity. We also extended Quality a $ 2.0 million line of credit commitment, which was unfunded at close. Distributions On October 10, 2023, our Board of Directors declared the following distributions to common and preferred stockholders: Record Date Payment Date Distribution per Common Share October 20, 2023 October 31, 2023 $ 0.0825 November 20, 2023 November 30, 2023 0.0825 December 18, 2023 December 29, 2023 0.0825 Total for the Quarter $ 0.2475 Record Date Payment Date Distribution per Series A Preferred Stock(A) October 25, 2023 November 3, 2023 $ 0.130208 November 28, 2023 December 5, 2023 0.130208 December 27, 2023 January 5, 2024 0.130208 Total for the Quarter $ 0.390624 (A) As of November 13, 2023, there are no shares of Series A Preferred Stock outstanding. 120 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.