What changed in this filing

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Item 1. Business

2025-11-17 compared with 2024-11-13 · 52 added, 48 removed, 506 unchanged (17% of the section changed)

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We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (“U.S.”).

As of September 30, 2024, shares of our common stock trade on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol “GLAD” and our 7.75% Notes due 2028 (the “2028 Notes”) trade on Nasdaq under the ticker symbol “GLADZ.” Our 6.25% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), our 3.75% notes due 2027 (the “2027 Notes”) and our 5.125% notes due 2026 (the “2026 Notes”) are not listed or traded on any exchange or automated quotation system.

Shares of our common stock trade on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol “GLAD”.

Our 6.25% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), our 3.75% notes due 2027 (the “2027 Notes”), and our 5.875% Convertible Notes due 2030 (the “2030 Convertible Notes”) are not listed or traded on any exchange or automated quotation system.

The outstanding shares and per share amounts of the Company’s common stock in this Annual Report have been retroactively adjusted for the 1-for-2 reverse stock split (the “Reverse Stock Split”) effected on April 4, 2024 (effective April 5, 2024 for trading purposes) for all activity prior to that date, unless stated otherwise.

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We are externally managed by the Adviser, an investment adviser registered with the SEC and an affiliate of ours, pursuant to an investment advisory and management agreement (as amended and/or restated from time to time, the “Advisory Agreement”).

The Adviser manages our investment activities.

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

Each of the Adviser and the Administrator are privately-held companies that are indirectly owned and controlled by David Gladstone, our chairman and chief executive officer.

Gladstone and Terry Lee Brubaker, our chief operating officer, also serve on the board of directors of the Adviser, the board of managers of the Administrator, and as executive officers of the Adviser and the Administrator.

The Administrator employs, among others, our chief financial officer and treasurer, chief valuation officer, chief compliance officer, general counsel and secretary (who also serves as the president of the Administrator) and their respective staffs.

Each of the Adviser and the Administrator are privately-held companies that are indirectly owned by David Gladstone, our chairman and chief executive officer.

Gladstone also serves on the board of directors of the Adviser, the board of managers of the Administrator, and as an executive officer of the Adviser and the Administrator.

The Administrator employs, among others, our chief financial officer and treasurer, chief valuation officer, chief compliance officer, chief administrative officer, co-general counsels and co-secretaries (one of whom also serves as the president of the Administrator) and their respective staffs.

The Adviser and Administrator have extensive experience in our lines of business and also provide investment advisory and administrative services, respectively, to our affiliates, including:

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(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 $25 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;

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.

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;

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.

To achieve our objectives, our primary investment strategy is to invest in several categories of debt and equity securities, with each investment generally ranging from $8 million to $40 million, although investment size may vary, depending upon our total assets or available capital at the time of investment.

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

In September 2025, the SEC granted us a new Co-Investment Order that contains a more flexible requirement that allocations be “fair and equitable” to us and that the Adviser consider the interests of us in allocations and which minimizes certain board approval requirements from the prior Co-Investment Order.

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

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In some cases, we will own a significant portion of the equity and in other cases we may have voting control of the businesses in which we invest.

acquisition is made, qualifying assets (other than certain assets related to our operations) represent at least 70.0% of our total assets.

Under the 1940 Act, we may not acquire any asset other than assets of the type listed in Section 55 of the 1940 Act, which are referred to as “qualifying assets” and generally include each of the investment types listed above, unless, at the time the acquisition is made, qualifying assets (other than certain assets related to our operations) represent at least 70.0% of our total assets.

See “— Regulation as a BDC — Qualifying Assets.

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Investments Fair Value Percentage of

Diversified/Conglomerate Service $ 179,032 22.5 % $ 135,060 19.2 %

Diversified/Conglomerate Manufacturing 160,264 20.1 158,061 22.4

Aerospace and Defense 153,096 19.2 97,836 13.9

Healthcare, Education, and Childcare $ 273,262 31.8 % $ 101,707 12.8 %

Diversified/Conglomerate Manufacturing 202,466 23.6 160,264 20.1

Diversified/Conglomerate Service 152,042 17.7 179,032 22.5

Beverage, Food, and Tobacco 54,605 6.4 88,327 11.1

Home and Office Furnishings, Housewares and Durable Consumer Products 30,000 3.5 — —

Automobile 27,361 3.2 28,286 3.6

Machinery 26,381 3.1 21,816 2.7

Oil and Gas 20,554 2.6 27,830 3.9

Personal, Food, and Miscellaneous Services 23,700 2.7 — —

Cargo Transportation 20,000 2.3 20,200 2.5

Oil and Gas 17,512 2.0 20,554 2.6

Personal and Non-Durable Consumer Products 13,866 1.6 13,586 1.7

Printing and Publishing 5,809 0.7 4,312 0.5

Aerospace and Defense 1,184 0.1 153,096 19.2

Other, < 2.0% 10,936 1.3 5,080 0.7

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South $ 287,371 33.5 % $ 314,010 39.4 %

West 249,082 31.3 224,235 31.8

Midwest 237,417 27.6 192,897 24.2

West 233,564 27.2 249,082 31.3

Northeast 100,772 11.7 40,271 5.1

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Marcotte, to authorize the submission of an indication of interest (“IOI”) to the prospective portfolio company.

If the prospective portfolio company passes this initial screening and the IOI is accepted by the prospective company, the investment professionals will seek approval to issue a letter of intent (“LOI”) to the prospective company from the Adviser’s investment committee, which currently is comprised of David Gladstone, Terry Lee Brubaker, Robert L.

Marcotte, Laura Gladstone, and John Sateri.

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The Adviser’s investment committee for the Company is comprised of Messrs.

Gladstone, Brubaker, Marcotte and Sateri and Ms.

Gladstone, Marcotte and Sateri and Ms.

Gladstone, each of whom have a wealth of experience in our area of operation.

Gladstone and Messrs.

Gladstone, Brubaker and Sateri also serve on the Adviser’s investment committee for the other Affiliated Public Funds.

Gladstone and Sateri also serve on the Adviser’s investment committee for the other Affiliated Public Funds.

Gladstone has over 20 years of experience in investing in middle market companies and continues to hold the role of managing director with the Company and the Adviser.

Each of Messrs.

Gladstone, Marcotte and Sateri have over 30 years of experience in investing in middle market companies and with operating in the BDC marketplace in general.

Gladstone and Brubaker also have principal management responsibility for the Adviser as its executive officers, and have worked together at the Gladstone Companies for more than 20 years.

Brubaker has over 30 years of experience in acquisitions and operations of companies.

These five individuals dedicate a significant portion of their time to managing our investment portfolio.

Gladstone, Marcotte and Sateri has over 30 years of experience in investing in middle market companies and with operating in the BDC marketplace in general.

Gladstone also has principal management responsibility for the Adviser as its executive officer, and has worked at the Gladstone Companies for more than 20 years.

These four individuals dedicate a significant portion of their time to managing our investment portfolio.

Our senior management has extensive experience providing capital to lower middle market companies.

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The Adviser seeks to identify potential investments through active origination and due diligence and through its dialogue with numerous private equity firms and other members of the financial community with whom the Adviser’s investment professionals have long-term relationships.

We believe that the Adviser’s investment professionals have developed a broad

network of contacts within the investment, commercial banking, private equity and investment management communities, and that their reputation, experience and focus on investing in lower middle market companies enables us to source and identify well-positioned prospective portfolio companies that provide attractive investment opportunities.

We believe that the Adviser’s investment professionals have developed a broad network of contacts within the investment, commercial banking, private equity and investment management communities,

and that their reputation, experience and focus on investing in lower middle market companies enables us to source and identify well-positioned prospective portfolio companies that provide attractive investment opportunities.

Additionally, the Adviser expects to generate information from its professionals’ network of accountants, consultants, lawyers and management teams of portfolio companies and other contacts to support the Adviser’s investment activities.

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Investment Advisory and Management Agreement

In 2006, we entered into the Advisory Agreement, which was most recently amended and restated in April 2022.

In 2006, we entered into the Advisory Agreement, which was most recently amended and restated in January 2025.

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.

On July 10, 2025, 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, 2026.

Gladstone, our chairman and chief executive officer, controls the Adviser.

The Board of Directors considered the following factors as the basis for its decision to renew the Advisory Agreement:

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• 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;

• 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.

• 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% (2.50% 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;

• 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% (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.

Quarterly Incentive Fee Based on Net Investment Income

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Administration Agreement

We reimburse the Administrator pursuant to the Administration Agreement for our allocable portion of the Administrator’s expenses incurred while performing services to us, which are primarily rent and salaries and benefits 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), and their respective staffs.

We reimburse the Administrator pursuant to the Administration Agreement for our allocable portion of the Administrator’s expenses incurred while performing services to us, which are primarily rent and salaries and benefits expenses of the Administrator’s employees, including our chief financial officer and treasurer, chief compliance officer, chief valuation officer and co-general counsel and co-secretary (who also serves as the Administrator’s president), and their respective staffs.

Our allocable portion of the Administrator’s expenses are 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.

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federal income tax considerations applicable to us, to our qualification and taxation as a RIC for U.S.

federal income tax purposes under Subchapter M of the Code and to the ownership and disposition of our shares.

federal income tax purposes under Subchapter M of the Code and to the ownership and disposition of our common stock.

This summary does not purport to be a complete description of all of the tax considerations relating thereto.

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This summary does not discuss any aspect of state, local or foreign tax laws, or the U.S.

estate or gift tax.

Stockholders are urged to consult their tax advisors regarding their particular situations and the possible applicability of federal, state, local, non-U.S.

estate or gift tax, and it does not discuss any tax considerations relevant to holders of our preferred stock or Notes.

Stockholders and note holders are urged to consult their tax advisors regarding their particular situations and the possible applicability of federal, state, local, non-U.S.

or other tax laws, and any proposed tax law changes.

stockholder” is a beneficial owner of stock that is for U.S.

stockholder” is a beneficial owner of our common stock that is for U.S.

federal income tax purposes:

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federal income taxation regardless of its source.

To qualify for treatment as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90.0% of our taxable ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (“Investment Company Taxable Income”).

over our realized net long-term capital losses (“Investment Company Taxable Income”).

We refer to this as the “annual distribution requirement.” We must also meet several additional requirements, including:

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If we fail to distribute in a timely manner an amount at least equal to the sum of (1) 98.0% of our ordinary income for the calendar year, (2) 98.2% of our net capital gains for the one-year period ending on October 31 of the calendar year (or November 30 or December 31 of that year if we are permitted to elect and so elect) and (3) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable (together, the “excise tax distribution requirements”), we will be subject to a 4% nondeductible federal excise tax on the portion of the undistributed amounts of such income that are less than the amounts required to be distributed based on the excise tax distribution requirements.

For the calendar year ended December 31, 2024, we incurred $0.1 million in excise taxes.

For the calendar years ended December 31, 2023 and 2022, we did not incur any excise taxes.

As of September 30, 2024, our capital loss carryforward was $ 47.4 million.

If we acquire debt obligations that (i) were originally issued at a discount, (ii) bear interest at rates that are not either fixed rates or certain qualified variable rates, or (iii) are not unconditionally payable at least annually over the life of the obligation, we will be required to include in taxable income each year a portion of the original issue discount (“OID”) that accrues over the life of the obligation.

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Both OID and PIK income will be included in our Investment Company Taxable Income even though we receive no cash corresponding to such amounts.

As a result, we may be required to make additional distributions corresponding to such OID and PIK amounts in order to satisfy the annual distribution requirement and to continue to qualify as a RIC or to avoid the imposition of federal income and excise taxes.

As a result, we may be required to make

additional distributions corresponding to such OID and PIK amounts in order to satisfy the annual distribution requirement and to continue to qualify as a RIC or to avoid the imposition of federal income and excise taxes.

In this event, we may be required to sell investments or other assets to meet the RIC distribution requirements.

For the year ended September 30, 2024, we recorded $ 0.4 million of OID income and the unamortized balance of OID investments as of September 30, 2024

totaled $ 0.6 million.

As of September 30, 2024, we had eight investments which had a PIK interest component and we recorded PIK interest income of $ 5.7 million during the year ended September 30, 2024.

For the year ended September 30, 2025, we recorded $ 0.4 million of OID income and the unamortized balance of OID investments as of September 30, 2025 totaled $ 0.2 million.

As of September 30, 2025, we had nine investments which had a PIK interest component and we recorded PIK interest income of $ 5.0 million during the year ended September 30, 2025.

Taxation of Our U.S.

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For any period during which we qualify as a RIC for U.S.

federal income tax purposes, distributions to our stockholders attributable to our Investment Company Taxable Income generally will be taxable as ordinary income to our stockholders to the extent of our current or accumulated earnings and profits.

federal income tax purposes, distributions to our U.S.

stockholders attributable to our Investment Company Taxable Income generally will be taxable as ordinary income to our U.S.

stockholders to the extent of our current or accumulated earnings and profits.

We first allocate our earnings and profits to distributions to our preferred stockholders, if any, and then to distributions to our common stockholders based on priority in our capital structure.

Any distributions in excess of our earnings and profits will first be treated as a return of capital to the extent of the stockholder’s adjusted basis in his or her shares of stock and thereafter as capital gain.

Distributions of our long-term capital gains, reported by us as such, will be taxable to our stockholders as long-term capital gains regardless of the stockholder’s holding period of the stock and whether the distributions are paid in cash or invested in additional stock.

Distributions of our long-term capital gains, reported by us as such, will be taxable to our stockholders as long-term capital gains regardless of the U.S.

stockholder’s holding period of the stock and whether the distributions are paid in cash or invested in additional stock.

Corporate U.S.

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stockholder has held the shares for more than one year.

Otherwise, it will be classified as short-term capital gain or loss.

Otherwise, it will be classified as short-term

capital gain or loss.

However, any capital loss arising from the sale or disposition of shares of our stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares.

All or a portion of any loss realized upon a taxable disposition of shares will be disallowed under the Code’s “wash sale” rule if other substantially identical shares are

purchased within 30 days before or after the disposition.

All or a portion of any loss realized upon a taxable disposition of shares will be disallowed under the Code’s “wash sale” rule if other substantially identical shares are purchased within 30 days before or after the disposition.

In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.Under the tax laws in effect as of the date of this filing, individual U.S.

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A BDC generally must make available significant managerial assistance to issuers of certain of its portfolio securities that the BDC counts as a qualifying asset for the 70.0% test described above.

Making available significant managerial

assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.

Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.

Significant managerial assistance also includes the exercise of a controlling influence over the management and policies of the portfolio company.

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• Volatility in the capital markets may make it more difficult to raise capital and may adversely affect the valuations of our investments.

• Tariffs may adversely affect us or our portfolio companies.

• We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the U.S.

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• The indentures under which our unsecured notes were issued contain limited protection for holders of such notes.

information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.

• Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.

Code of Ethics

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

What changed 10-K

Item 1. Business