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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one):
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2021
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO _______
COMMISSION FILE NUMBER: 814-00237
GLADSTONE CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 54-2040781
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1521 WESTBRANCH DRIVE, SUITE 100 22102
MCLEAN, VIRGINIA (Zip Code)
(Address of principal executive office)
(703) 287-5800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share GLAD The Nasdaq Global Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer ý
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The number of shares of the issuer’s common stock, $0.001 par value per share, outstanding as of February 1, 2022 was 34,304,371.


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Part I. Financial information
Item I Financial Statements (Unaudited)
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
December 31,
2021
September 30,
2021
ASSETS
Investments, at fair value:
Non-Control/Non-Affiliate investments (Cost of $493,149 and $447,566, respectively)
$ 504,836  $ 454,601 
Affiliate investments (Cost of $41,106 and $70,682, respectively)
37,678  82,281 
Control investments (Cost of $41,477 and $28,264, respectively)
34,081  20,730 
Cash and cash equivalents 1,272  671 
Restricted cash and cash equivalents 175  175 
Interest receivable, net 2,125  2,361 
Due from administrative agent 3,788  2,951 
Deferred financing costs, net 889  1,033 
Other assets, net 2,524  1,697 
TOTAL ASSETS $ 587,368  $ 566,500 
LIABILITIES
Borrowings, at fair value (Cost of $53,900 and $50,500, respectively)
$ 53,900  $ 50,500 
Notes payable, net of unamortized deferred financing costs of $2,762 and $2,202, respectively
197,238  186,611 
Accounts payable and accrued expenses 495  490 
Interest payable 3,647  1,797 
Fees due to Adviser(A)
1,558  2,255 
Fee due to Administrator(A)
466  382 
Other liabilities 6,211  6,026 
TOTAL LIABILITIES $ 263,515  $ 248,061 
Commitments and contingencies(B)
NET ASSETS
Common stock, $0.001 par value per share, 44,560,000 and 44,560,000 shares authorized, respectively, and 34,304,371 and 34,304,371 shares issued and outstanding, respectively
$ 34  $ 34 
Capital in excess of par value 392,494  392,494 
Cumulative net unrealized appreciation (depreciation) of investments 863  11,100 
Under (over) distributed net investment income 1,971  149 
Accumulated net realized losses (71,509) (85,338)
Total distributable loss (68,675) (74,089)
TOTAL NET ASSETS $ 323,853  $ 318,439 
NET ASSET VALUE PER COMMON SHARE $ 9.44  $ 9.28 
(A)Refer to Note 4—Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
(B)Refer to Note 9—Commitments and Contingencies in the accompanying Notes to Consolidated Financial Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
December 31,
2021 2020
INVESTMENT INCOME
Interest income
Non-Control/Non-Affiliate investments
$ 10,154  $ 10,222 
Affiliate investments
1,067  910 
Control investments
508  415 
Cash and cash equivalents
  — 
Total interest income (excluding PIK interest income)
11,729  11,547 
PIK interest income
Non-Control/Non-Affiliate investments
1,137  535 
Total PIK interest income
1,137  535 
Total interest income
12,866  12,082 
Success fee income
Affiliate Investments 1,563  — 
Total success fee income 1,563  — 
Dividend income
Non-Control/Non-Affiliate investments 992  366 
Control investments 69  222 
Total dividend income 1,061  588 
Prepayment fee income
Non-Control/Non-Affiliate investments 605  200 
Affiliate Investments 44  — 
Total prepayment fee income 649  200 
Other income 28  12 
Total investment income 16,167  12,882 
EXPENSES
Base management fee(A)
2,520  2,002 
Loan servicing fee(A)
1,462  1,348 
Incentive fee(A)
2,091  1,367 
Administration fee(A)
379  355 
Interest expense on borrowings and notes payable
3,007  2,568 
Amortization of deferred financing costs
289  418 
Professional fees
264  218 
Other general and administrative expenses
384  324 
Expenses, before credits from Adviser
10,396  8,600 
Credit to base management fee - loan servicing fee(A)
(1,462) (1,348)
Credits to fees from Adviser - other(A)
(1,927) (650)
Total expenses, net of credits
7,007  6,602 
NET INVESTMENT INCOME 9,160  6,280 
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss):
Non-Control/Non-Affiliate investments
472  (2,143)
Affiliate investments 13,408  — 
Control investments
  (1)
Other
(700) (8)
Total net realized gain (loss)
13,180  (2,152)
Net unrealized appreciation (depreciation):
Non-Control/Non-Affiliate investments
4,652  7,887 
Affiliate investments
(15,027) (95)
Control investments
138  703 
Other
  (320)
Total net unrealized appreciation (depreciation)
(10,237) 8,175 
Net realized and unrealized gain (loss)
2,943  6,023 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,103  $ 12,303 
BASIC AND DILUTED PER COMMON SHARE:
Net investment income
$ 0.27  $ 0.20 
Net increase (decrease) in net assets resulting from operations
$ 0.35  $ 0.38 
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted
34,304,371  32,097,542 
(A) Refer to Note 4—Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
2021 2020
NET ASSETS, SEPTEMBER 30
$ 318,439  $ 233,743 
OPERATIONS
Net investment income
9,160  6,280 
Net realized gain (loss) on investments
13,880  (2,144)
Net realized gain (loss) on other
(700) (8)
Net unrealized appreciation (depreciation) of investments
(10,237) 8,495 
Net unrealized depreciation (appreciation) of other
  (320)
Net increase (decrease) in net assets resulting from operations
12,103  12,303 
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.20 per share and $0.19 per share, respectively)(A)
(6,689) (6,100)
Distributions to common stockholders from return of capital ($0.00 per share and $0.01 per share, respectively)(A)
  (180)
Net decrease in net assets from distributions (6,689) (6,280)
CAPITAL TRANSACTIONS
Issuance of common stock   7,491 
Discounts, commissions and offering costs for issuance of common stock   (140)
Net increase (decrease) in net assets resulting from capital transactions   7,351 
NET INCREASE (DECREASE) IN NET ASSETS 5,414  13,374 
NET ASSETS, DECEMBER 31 $ 323,853  $ 247,117 
(A)Refer to Note 8 – 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.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Three Months Ended December 31,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting from operations $ 12,103  $ 12,303 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchase of investments (110,794) (29,098)
Principal repayments on investments 79,743  30,631 
Net proceeds from sale of investments 16,690  3,511 
Increase in investments due to PIK interest or other
(1,079) (654)
Net change in premiums, discounts and amortization (266)
Net realized loss (gain) on investments (13,880) 2,144 
Net realized loss (gain) on other 700 
Net unrealized depreciation (appreciation) of investments 10,237  (8,495)
Net unrealized appreciation (depreciation) of other   320 
Changes in assets and liabilities:
Amortization of deferred financing costs 289  418 
Decrease (increase) in interest receivable, net 236  872 
Decrease (increase) in funds due from administrative agent (837) (254)
Decrease (increase) in other assets, net (827) 157 
Increase (decrease) in accounts payable and accrued expenses 5  223 
Increase (decrease) in interest payable 1,850  155 
Increase (decrease) in fees due to Adviser(A)
(697) 24 
Increase (decrease) in fee due to Administrator(A)
84  105 
Increase (decrease) in other liabilities 653  (173)
Net cash provided by (used in) operating activities (5,790) 12,199 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit 138,200  21,500 
Repayments on line of credit (134,800) (133,200)
Proceeds from issuance of long term debt 50,000  100,000 
Redemption of long term debt (38,813) — 
Financing costs (1,507) (2,513)
Proceeds from issuance of common stock   7,491 
Discounts, commissions and offering costs for issuance of common stock   (112)
Distributions paid to common stockholders (6,689) (6,280)
Net cash provided by (used in) financing activities 6,391  (13,114)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS 601  (915)
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD 846  2,469 
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD $ 1,447  $ 1,554 
CASH PAID FOR INTEREST $ 1,157  $ 2,413 
NON-CASH ACTIVITIES(B)
$ 468  $ — 
(A)Refer to Note 4—Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
(B)Non-cash activities relate to estimated tax liabilities associated with a portfolio company exit.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2021
(UNAUDITED)
(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) – 155.9%
Secured First Lien Debt – 108.0%
Aerospace and Defense – 20.2%
Antenna Research Associates, Inc. – Term Debt (L + 10.0%, 12.0% Cash, 4.0% PIK, Due 11/2023)(E)
$ 11,718  $ 11,718  $ 11,718 
Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 2/2026)(C)
19,500  19,500  19,524 
SpaceCo Holdings, LLC – Line of Credit, $400 available (L + 6.8%, 7.8% Cash, Due 12/2025)(C)
1,600  1,600  1,604 
SpaceCo Holdings, LLC – Term Debt (L + 6.8%, 7.8% Cash, Due 12/2025)(C)
32,338  31,864  32,418 
64,682  65,264 
Beverage, Food, and Tobacco – 13.3%
Café Zupas – Line of Credit, $4,000 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
—  —  — 
Café Zupas – Delayed Draw Term Loan, $0 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
1,970  1,970  1,980 
Café Zupas – Term Debt (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
24,000  24,000  24,120 
Eegee’s LLC – Line of Credit, $1,000 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
—  —  — 
Eegee’s LLC – Delayed Draw Term Loan, $7,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
—  —  — 
Eegee’s LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
17,000  17,000  16,958 
42,970  43,058 
Buildings and Real Estate – 0.5%
GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 9.0% Cash, Due 9/2022)(C)
700  700  697 
GFRC 360, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 9/2022)(C)
1,000  1,000  996 
1,700  1,693 
Diversified/Conglomerate Manufacturing – 10.8%
Engineering Manufacturing Technologies, LLC – Line of Credit, $3,000 available (L + 8.3%, 9.3% Cash, Due 10/2026)(C)
—  —  — 
Engineering Manufacturing Technologies, LLC – Term Debt (L + 8.3%, 9.3% Cash, Due 10/2026)(C)
22,500  22,500  22,500 
Unirac, Inc. – Line of Credit, $627 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)
627  627  628 
Unirac, Inc. – Delayed Draw Term Loan, $1,254 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)
—  —  — 
Unirac, Inc. – Term Debt (L + 7.0%, 8.0% Cash, Due 6/2026)(C)
11,921  11,665  11,951 
34,792  35,079 
Diversified/Conglomerate Service – 27.2%
DKI Ventures, LLC – Term Debt (L + 8.3%, 9.3% Cash, 4.0% PIK, Due 12/2023)(C)
5,818  5,804  4,975 
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 12/2022)(C)
1,000  1,000  820 
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 4/2025)(C)
29,000  29,000  23,780 
Fix-It Group, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.0% Cash, Due 12/2026)(C)
—  —  — 
Fix-It Group, LLC – Term Debt (L + 7.0%, 8.0% Cash, Due 12/2026)(C)
10,000  10,000  10,000 
Fix-It Group, LLC – Delayed Draw Term Loan, $10,000 available (L + 7.0%, 8.0% Cash, Due 12/2026)(C)
—  —  — 
MCG Energy Solutions, LLC – Line of Credit, $3,000 available (L + 7.5%, 8.5% Cash, Due 3/2026)(C)
—  —  — 
MCG Energy Solutions, LLC – Term Debt (L + 7.5%, 8.5% Cash, 3.5% PIK, Due 3/2026)(C)
20,274  20,274  19,767 
R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% Cash, Due 12/2023)(C)(F)
829  829  792 
R2i Holdings, LLC – Term Debt (8.0% Cash, Due 12/2023)(C)(F)
18,750  18,750  17,906 
WorkforceQA, LLC – Line of Credit, $2,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)
—  —  — 
WorkforceQA, LLC – Term Debt (L + 9.0%, 10.0% Cash, Due 12/2026)(C)(H)
10,000  10,000  10,000 
95,657  88,040 
Healthcare, Education, and Childcare – 23.5%
ALS Education, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.5% Cash, Due 5/2025)(C)
—  —  — 
ALS Education, LLC – Term Debt (L + 7.0%, 8.5% Cash, Due 5/2025)(C)
20,350  20,350  20,375 
EL Academies, Inc. – Delayed Draw Term Loan, $0 available (L + 8.0%, 9.0% Cash, Due 8/2022)(C)
16,000  16,000  16,040 
EL Academies, Inc. – Term Debt (L + 8.0%, 9.0% Cash, Due 8/2022)(C)
12,000  12,000  12,030 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2021
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
HH-Inspire Acquisition, Inc. – Line of Credit, $3,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)
—  —  — 
HH-Inspire Acquisition, Inc. – Term Debt (L + 6.8%, 7.8% Cash, Due 12/2026)(C)
16,000  16,000  16,000 
HH-Inspire Acquisition, Inc. – Delayed Draw Term Loan, $10,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)
—  —  — 
Turn Key Health Clinics, LLC – Line of Credit, $1,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
500  500  500 
Turn Key Health Clinics, LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
11,000  11,000  11,000 
75,850  75,945 
Machinery – 1.7%
Arc Drilling Holdings LLC – Line of Credit, $875 available (L + 8.0%, 9.3% Cash, Due 11/2022)(C)
125  125  122 
Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 10.8% Cash, 3.0% PIK, Due 11/2022)(C)
5,793  5,793  5,591 
5,918  5,713 
Printing and Publishing – 0.0%
Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 7.3% Cash, Due 2/2015)(E)(V)(Q)
$ 107  107   
Telecommunications – 10.8%
B+T Group Acquisition, Inc.(S) – Line of Credit, $0 available (L + 11.0%, 13.0% Cash, Due 12/2024)(C)
1,200  1,200  1,179 
B+T Group Acquisition, Inc.(S) – Term Debt (L + 11.0%, 13.0% Cash, Due 12/2024)(C)
6,000  6,000  5,895 
NetFortris Corp. – Term Debt (L + 11.0%, 4.0% Cash, 7.5% PIK, Due 5/2021)(C)(Q)

27,871  27,586  27,871 
34,786  34,945 
Total Secured First Lien Debt $ 356,462  $ 349,737 
Secured Second Lien Debt – 30.4%
Automobile – 3.2%
Sea Link International IRB, Inc. – Term Debt (11.3% Cash, 2.0% PIK, Due 3/2023)(C)(F)
$ 10,949  $ 10,949  $ 10,333 
Beverage, Food, and Tobacco – 1.1%
8th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 7.9% Cash, Due 10/2026)(D)
3,682  3,701  3,526 
Diversified/Conglomerate Manufacturing – 10.8%
Springfield, Inc. – Term Debt (L + 9.0%, 10.0% Cash, Due 12/2026)(C)
30,000  30,000  30,000 
Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 9.1% Cash, Due 5/2027)(D)
5,000  4,808  4,769 
34,808  34,769 
Diversified/Conglomerate Service – 4.5%
CHA Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 4/2026)(D)(U)
3,000  2,961  2,760 
Gray Matter Systems, LLC – Term Debt (12.0% Cash, Due 12/2026)(C)(F)
8,100  8,065  8,120 
Keystone Acquisition Corp. – Term Debt (L + 9.3%, 10.3% Cash, Due 5/2025)(D)(U)(X)
4,000  3,957  3,840 
14,983  14,720 
Home and Office Furnishings, Housewares and Durable Consumer Products – 3.1%
Belnick, Inc. – Term Debt (11.0% Cash, Due 8/2023)(C)(F)(X)
10,000  10,000  10,000 
Machinery – 0.2%
CPM Holdings, Inc. – Term Debt (L + 8.3%, 8.4% Cash, Due 11/2026)(D)
798  798  795 
Oil and Gas – 7.5%
Imperative Holdings Corporation – Term Debt (L + 10.3%, 12.3% Cash, 1.8% PIK, Due 9/2022)(C)
25,934  25,934  24,184 
Total Secured Second Lien Debt $ 101,173  $ 98,327 
Unsecured Debt – 0.0%
Diversified/Conglomerate Service – 0.0%
Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022)(E)(F)
$ 198  $ 198  $ 66 
Preferred Equity – 5.6%
Automobile – 0.0%
Sea Link International IRB, Inc. – Preferred Stock(E)(G)
98,039  98  133 
Beverage, Food, and Tobacco – 0.0%
Triple H Food Processors, LLC – Preferred Stock(E)(G)
75  75  106 
Buildings and Real Estate – 0.3%
GFRC 360, LLC – Preferred Stock(E)(G)
1,000  1,025  825 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2021
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
Diversified/Conglomerate Service – 2.7%
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  8,624 
7,500  8,624 
Healthcare, Education, and Childcare – 0.2%
HH-Inspire Acquisition, Inc. – Preferred Stock(E)(G)
750,000  750  750 
Oil and Gas – 0.5%
FES Resources Holdings LLC – Preferred Equity Units(E)(G)
6,350  6,350  — 
Imperative Holdings Corporation – Preferred Equity Units(E)(G)
13,740  632  1,629 
6,982  1,629 
Telecommunications – 1.9%
B+T Group Acquisition, Inc.(S) – Preferred Stock(E)(G)
6,130  2,024  5,696 
NetFortris Corp. – Preferred Stock(E)(G)
7,890,860  789  425 
2,813  6,121 
Total Preferred Equity $ 19,243  $ 18,188 
Common Equity – 11.9%
Aerospace and Defense – 4.8%
 Antenna Research Associates, Inc. – Common Equity Units(E)(G)
4,283  $ 4,283  $ 13,609 
 Ohio Armor Holdings, LLC – Common Equity(E)(G)
1,000  1,000  1,931 
5,283  15,540 
Automobile– 0.0%
Sea Link International IRB, Inc.– Common Equity Units(E)(G)
823,333  823  17 
Beverage, Food, and Tobacco – 0.4%
Triple H Food Processors, LLC – Common Stock(E)(G)
250,000  250  1,328 
Buildings and Real Estate – 0.0%
GFRC 360, LLC – Common Stock Warrants(E)(G)
45.0  % —  — 
Diversified/Conglomerate Manufacturing – 0.9%
 Engineering Manufacturing Technologies, LLC – Common Stock(E)(G)
6,000  3,000  3,000 
Diversified/Conglomerate Service – 0.2%
 WorkforceQA, LLC – Common Stock(E)(G)
500  500  500 
Healthcare, Education, and Childcare – 2.3%
GSM MidCo LLC – Common Stock(E)(G)
767  767  940 
  Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment)(G)(L)(R)
3.5  % 1,358  6,487 
2,125  7,427 
Machinery – 0.0%
Arc Drilling Holdings LLC – Common Stock(E)(G)
15,000  1,500  52 
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  92 
499  92 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0%
Funko Acquisition Holdings, LLC(S) – Common Units(G)(T)
6,290  30  80 
Telecommunications – 0.1%
B+T Group Acquisition, Inc.(S) – Common Stock Warrant(E)(G)
1.5  % —  331 
NetFortris Corp. – Common Stock Warrant(E)(G)
— 
1  331 
Textiles and Leather – 3.2%
Targus Cayman HoldCo, Ltd. – Common Stock(E)(G)
3,076,414  2,062  10,151 
Total Common Equity $ 16,073  $ 38,518 
Total Non-Control/Non-Affiliate Investments $ 493,149  $ 504,836 
AFFILIATE INVESTMENTS(N) – 11.6%
Secured First Lien Debt – 9.8%
Diversified/Conglomerate Manufacturing – 1.9%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2021
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 10.5%, 12.5% Cash, Due 8/2024)(C)
$ 6,140  $ 6,140  $ 6,079 
Diversified/Conglomerate Service – 7.9%
Encore Dredging Holdings, LLC – Line of Credit, $1,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
2,000  2,000  2,005 
Encore Dredging Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
23,500  23,500  23,559 
Encore Dredging Holdings, LLC – Delayed Draw Term Loan, $5,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
—  —  — 
25,500  25,564 
Total Secured First Lien Debt $ 31,640  $ 31,643 
Preferred Equity – 1.6%
Diversified/Conglomerate Manufacturing – 0.0%
Edge Adhesives Holdings, Inc.(S) – Preferred Stock(E)(G)
5,466  $ 5,466  $  
Diversified/Conglomerate Service– 1.4%
Encore Dredging Holdings, LLC – Preferred Stock(E)(G)
3,200,000  3,200  $ 4,518 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Preferred Stock(E)(G)
500,000  500  754 
Total Preferred Equity $ 9,166  $ 5,272 
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  763 
Total Common Equity $ 300  $ 763 
Total Affiliate Investments $ 41,106  $ 37,678 
CONTROL INVESTMENTS(O) – 10.5%
Secured First Lien Debt – 4.5%
Diversified/Conglomerate Manufacturing – 0.8%
LWO Acquisitions Company LLC – Term Debt (L + 7.5%, 10.0% Cash, Due 6/2021)(E)(Q)
$ 6,000  $ 6,000  $ 2,530 
LWO Acquisitions Company LLC – Term Debt (Due 6/2021)(E)(P)(Q)
10,632  10,632  — 
16,632  2,530 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 3.3%
WB Xcel Holdings, LLC – Line of Credit, $832 available (L + 10.5%, 11.5% Cash, Due 11/2026)(E)
668  668  668 
WB Xcel Holdings, LLC – Term Debt (L + 10.5%, 11.5% Cash, Due 11/2026)(E)
9,975  9,975  9,975 
10,643  10,643 
Printing and Publishing – 0.4%
TNCP Intermediate HoldCo, LLC – Line of Credit, $800 available (8.0% Cash, Due 10/2024)(E)(F)
1,200  1,200  1,200 
Total Secured First Lien Debt $ 28,475  $ 14,373 
Secured Second Lien Debt – 2.4%
Automobile– 2.4%
Defiance Integrated Technologies, Inc. – Term Debt (L + 9.5%, 11.0% Cash, Due 5/2026)(E)
$ 7,905  $ 7,905  $ 7,905 
Unsecured Debt – 0.0%
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Term Debt (Due 6/2023)(E)(P)
$ 95  $ 95  $  
Preferred Equity – 0.9%
Automobile– 0.1%
Defiance Integrated Technologies, Inc. – Preferred Stock(E)(G)
6,043  $ 250  $ 273 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.8%
WB Xcel Holdings, LLC – Preferred Stock(E)(G)
333  2,750  2,750 
Total Preferred Equity $ 3,000  $ 3,023 
Common Equity – 2.7%
Automobile– 0.7%
Defiance Integrated Technologies, Inc. – Common Stock(E)(G)
33,231  $ 580  $ 2,326 
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Common Units(E)(G)
921,000  921   
Machinery – 1.4%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2021
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
PIC 360, LLC – Common Equity Units(E)(G)
750  1  4,471 
Printing and Publishing – 0.6%
TNCP Intermediate HoldCo, LLC – Common Equity Units(E)(G)
790,000  500  1,983 
Total Common Equity $ 2,002  $ 8,780 
Total Control Investments $ 41,477  $ 34,081 
TOTAL INVESTMENTS – 178.0%
$ 575,732  $ 576,595 
(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 $522.3 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 December 31, 2021, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 1.1% of total investments, at fair value, as of December 31, 2021.
(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 0.10% as of December 31, 2021. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.
(C)Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”).
(D)Fair value was based on the indicative bid price on or near December 31, 2021, 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 the Company 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. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.75% (Floor 1.0%) per the credit agreement and the Consolidated Schedule of Investments above reflects such higher rate.
(I)Represents the principal balance for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable.
(J)Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.
(K)Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of December 31, 2021.
(L)There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.
(M)Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
(N)Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.
(O)Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities.
(P)Debt security does not have a stated interest rate that is payable thereon.
(Q)Investment maturity date has passed. Investment continues to make applicable interest payments.
(R)Fair value was based on net asset value provided by the fund as a practical expedient.
(S)One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(T)Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(U)The cash interest rate on this investment was indexed to 90-day LIBOR, which was 0.21% as of December 31, 2021.
(V)The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 3.25% as of December 31, 2021.
(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)Investment was exited subsequent to December 31, 2021. Refer to Note 11 – Subsequent Events in the accompanying Notes to the Consolidated Financial Statements for additional information.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2021
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(M) – 142.8%
Secured First Lien Debt – 95.5%
Aerospace and Defense – 20.3%
Antenna Research Associates, Inc. – Term Debt (L + 10.0%, 12.0% Cash, 4.0% PIK, Due 11/2023)(E)
$ 11,763  $ 11,763  $ 11,763 
Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 2/2026)(C)
19,500  19,500  19,549 
SpaceCo Holdings, LLC – Line of Credit, $1,300 available (L + 6.8%, 7.8% Cash, Due 12/2025)(C)
700  700  700 
SpaceCo Holdings, LLC – Term Debt (L + 6.8%, 7.8% Cash, Due 12/2025)(C)
32,544  32,044  32,544 
64,007  64,556 
Beverage, Food, and Tobacco – 13.5%
Café Zupas – Line of Credit, $4,000 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
—  —  — 
Café Zupas – Delayed Draw Term Loan, $3,030 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
1,970  1,970  1,987 
Café Zupas – Term Debt (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
24,000  24,000  24,210 
Eegee’s LLC – Line of Credit, $1,000 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
—  —  — 
Eegee’s LLC – Delayed Draw Term Loan, $7,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
—  —  — 
Eegee’s LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
17,000  17,000  16,936 
42,970  43,133 
Buildings and Real Estate – 0.5%
GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 9.0% Cash, Due 9/2022)(C)
700  700  699 
GFRC 360, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 9/2022)(C)
1,000  1,000  999 
1,700  1,698 
Diversified/Conglomerate Manufacturing – 3.8%
Unirac, Inc. – Line of Credit, $1,003 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)(U)
251  251  250 
Unirac, Inc. – Delayed Draw Term Loan, $1,254 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)(U)
—  —  — 
Unirac, Inc. – Term Debt (L + 7.0%, 8.0% Cash, Due 6/2026)(C)(U)
11,921  11,652  11,891 
11,903  12,141 
Diversified/Conglomerate Service – 21.3%
DKI Ventures, LLC – Line of Credit, $2,500 available (L + 8.3%, 9.3% Cash, 2.0% PIK, Due 12/2021)(C)
—  —  — 
DKI Ventures, LLC – Term Debt (L + 8.3%, 9.3% Cash, 2.0% PIK, Due 12/2023)(C)
5,739  5,724  5,008 
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 12/2022)(C)
1,000  1,000  785 
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 4/2025)(C)
29,000  29,000  22,765 
MCG Energy Solutions, LLC – Line of Credit, $3,000 available (L + 7.5%, 8.5% Cash, Due 3/2026)(C)
—  —  — 
MCG Energy Solutions, LLC – Term Debt (L + 7.5%, 8.5% Cash, 1.5% PIK, Due 3/2026)(C)
20,129  20,129  19,927 
MCG Energy Solutions, LLC – Delayed Draw Term Loan, $3,000 available (L + 7.5%, 8.5% Cash, 1.5% PIK, Due 3/2026)(C)
—  ` —  — 
R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% Cash, Due 12/2021)(C)(F)
829  829  803 
R2i Holdings, LLC – Term Debt (8.0% Cash, Due 12/2021)(C)(F)
19,000  19,000  18,406 
75,682  67,694 
Healthcare, Education, and Childcare – 24.9%
ALS Education, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.5% Cash, Due 5/2025)(C)
—  —  — 
ALS Education, LLC – Term Debt (L + 7.0%, 8.5% Cash, Due 5/2025)(C)
20,680  20,680  20,809 
Effective School Solutions LLC – Line of Credit, $2,000 available (L + 7.3%, 8.3% Cash, Due 12/2025)(C)
—  —  — 
Effective School Solutions LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 12/2025)(C)
19,000  19,000  19,095 
Effective School Solutions LLC – Delayed Draw Term Loan, $3,200 available (L + 7.3%, 8.3% Cash, Due 12/2025)(C)
—  —  — 
EL Academies, Inc. – Delayed Draw Term Loan, $0 available (L + 8.0%, 9.0% Cash, Due 8/2022)(C)
16,000  16,000  16,000 
EL Academies, Inc. – Term Debt (L + 8.0%, 9.0% Cash, Due 8/2022)(C)
12,000  12,000  12,000 
Turn Key Health Clinics, LLC – Line of Credit, $1,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
500  500  499 
Turn Key Health Clinics, LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)
11,000  11,000  10,986 
79,180  79,389 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2021
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
Machinery – 1.8%
Arc Drilling Holdings LLC – Line of Credit, $875 available (L + 8.0%, 9.3% Cash, Due 11/2022)(C)
125  125  122 
Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 10.8% Cash, 3.0% PIK, Due 11/2022)(C)
5,824  5,824  5,577 
5,949  5,699 
Printing and Publishing – 0.0%
Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 7.3% Cash, Due 2/2015)(E)(V)(Q)
$ 107  107   
Telecommunications – 9.4%
B+T Group Acquisition, Inc.(S) – Line of Credit, $0 available (L + 11.0%, 13.0% Cash, Due 12/2021)(C)
1,200  1,200  1,158 
B+T Group Acquisition, Inc.(S) – Term Debt (L + 11.0%, 13.0% Cash, Due 12/2021)(C)
6,000  6,000  5,790 
NetFortris Corp. – Term Debt (L + 11.0%, 4.0% Cash, 7.5% PIK, Due 5/2021)(C)(Q)

27,350  26,946  22,837 
34,146  29,785 
Total Secured First Lien Debt $ 315,644  $ 304,095 
Secured Second Lien Debt – 30.6%
Automobile – 3.3%
Sea Link International IRB, Inc. – Term Debt (11.3% Cash, 2.0% PIK, Due 3/2023)(C)(F)
$ 10,893  $ 10,893  $ 10,376 
Beverage, Food, and Tobacco – 1.1%
8th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 7.8% Cash, Due 10/2026)(D)
3,682  3,702  3,646 
Chemicals, Plastics, and Rubber – 3.2%
Phoenix Aromas & Essential Oils, LLCTerm Debt (L + 9.3%, 10.3% Cash, Due 5/2024)(C)
10,012  9,986  10,062 
Diversified/Conglomerate Manufacturing – 1.5%
Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 9.1% Cash, Due 5/2027)(D)
5,000  4,801  4,701 
Diversified/Conglomerate Service – 8.7%
CHA Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 4/2026)(D)(U)
3,000  2,960  2,700 
Gray Matter Systems, LLC – Term Debt (12.0% Cash, Due 12/2026)(C)(F)
8,100  8,064  8,130 
Keystone Acquisition Corp. – Term Debt (L + 9.3%, 10.3% Cash, Due 5/2025)(D)(U)
4,000  3,954  3,790 
Prophet Brand Strategy – Delayed Draw Term Loan, $5,000 available (L + 8.5%, 10.5% Cash, Due 2/2025)(Y)(Z)
—  —  — 
Prophet Brand Strategy – Term Debt (L + 8.5%, 10.5% Cash, Due 2/2025)(Y)(Z)
13,000  13,000  13,130 
27,978  27,750 
Healthcare, Education, and Childcare – 1.8%
Medical Solutions Holdings, Inc. Term Debt (L + 8.4%, 9.4% Cash, Due 6/2025)(C)
3,000  2,974  2,940 
Medical Solutions Holdings, Inc. Term Debt (L + 8.8%, 9.8% Cash, Due 6/2025)(C)
3,000  2,957  2,940 
5,931  5,880 
Home and Office Furnishings, Housewares and Durable Consumer Products – 3.2%
Belnick, Inc. – Term Debt (11.0% Cash, Due 8/2023)(C)(F)
10,000  10,000  10,025 
Machinery – 0.2%
CPM Holdings, Inc. – Term Debt (L + 8.3%, 8.3% Cash, Due 11/2026)(D)
798  798  790 
Oil and Gas – 7.6%
Imperative Holdings Corporation – Term Debt (L + 10.3%, 12.3% Cash, 1.8% PIK, Due 9/2022)(C)
26,569  26,569  24,178 
Total Secured Second Lien Debt $ 100,658  $ 97,408 
Unsecured Debt – 0.0%
Diversified/Conglomerate Service – 0.0%
Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022)(E)(F)
$ 198  $ 198  $ 10 
Preferred Equity – 5.7%
Automobile – 0.0%
Sea Link International IRB, Inc. – Preferred Stock(E)(G)
98,039  98  127 
Beverage, Food, and Tobacco – 0.0%
Triple H Food Processors, LLC – Preferred Stock(E)(G)
75  75  102 
Buildings and Real Estate – 0.3%
GFRC 360, LLC – Preferred Stock(E)(G)
1,000  1,025  864 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
12

Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2021
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
Diversified/Conglomerate Service – 2.8%
Frontier Financial Group Inc. – Preferred Stock(E)(G)
766  500  — 
Frontier Financial Group Inc. – Preferred Stock Warrant(E)(G)
168  —  — 
MCG Energy Solutions, LLC – Preferred Stock(E)
7,000,000  7,000  8,861 
7,500  8,861 
Oil and Gas – 0.5%
FES Resources Holdings LLC – Preferred Equity Units(E)(G)
6,350  6,350  — 
Imperative Holdings Corporation – Preferred Equity Units(E)(G)
13,740  632  1,551 
6,982  1,551 
Telecommunications – 2.1%
B+T Group Acquisition, Inc.(S) – Preferred Stock(E)(G)
6,130  2,024  5,691 
NetFortris Corp. – Preferred Stock(E)(G)
7,890,860  789  914 
2,813  6,605 
Total Preferred Equity $ 18,493  $ 18,110 
Common Equity – 11.0%
Aerospace and Defense – 4.8%
 Antenna Research Associates, Inc. – Common Equity Units(E)(G)
4,283  $ 4,283  $ 13,444 
 Ohio Armor Holdings, LLC – Common Equity(E)(G)
1,000  1,000  1,749 
5,283  15,193 
Automobile– 0.1%
Sea Link International IRB, Inc.– Common Equity Units(E)(G)
823,333  823  300 
Beverage, Food, and Tobacco – 0.5%
Triple H Food Processors, LLC – Common Stock(E)(G)
250,000  250  1,504 
Buildings and Real Estate – 0.0%
GFRC 360, LLC – Common Stock Warrants(E)(G)
45.0  % —  — 
Healthcare, Education, and Childcare – 2.3%
GSM MidCo LLC – Common Stock(E)(G)
767  767  924 
  Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment)(G)(L)(R)
3.5  % 1,358  6,487 
2,125  7,411 
Machinery – 0.0%
Arc Drilling Holdings LLC – Common Stock(E)(G)
15,000  1,500   
Oil and Gas – 0.0%
FES Resources Holdings LLC – Common Equity Units(E)(G)
6,233  —  — 
Total Safety Holdings, LLC – Common Equity(E)(G)
435  499  132 
499  132 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0%
Funko Acquisition Holdings, LLC(S) – Common Units(G)(T)
6,290  30  78 
Telecommunications – 0.1%
B+T Group Acquisition, Inc.(S) – Common Stock Warrant(E)(G)
1.5  % —  330 
NetFortris Corp. – Common Stock Warrant(E)(G)
— 
1  330 
Textiles and Leather – 3.2%
Targus Cayman HoldCo, Ltd. – Common Stock(E)(G)
3,076,414  2,062  10,030 
Total Common Equity $ 12,573  $ 34,978 
Total Non-Control/Non-Affiliate Investments $ 447,566  $ 454,601 
AFFILIATE INVESTMENTS(N) – 25.8%
Secured First Lien Debt – 9.1%
Diversified/Conglomerate Manufacturing – 1.7%
Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 10.5%, 12.5% Cash, Due 2/2022)(C)
$ 5,540  $ 5,540  $ 5,540 
Diversified/Conglomerate Service – 7.4%
Encore Dredging Holdings, LLC – Line of Credit, $3,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
—  —  — 
Encore Dredging Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
23,500  23,500  23,618 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
13

Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2021
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
Encore Dredging Holdings, LLC – Delayed Draw Term Loan, $5,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
—  —  — 
23,500  23,618 
Total Secured First Lien Debt $ 29,040  $ 29,158 
Secured Second Lien Debt – 9.6%
Diversified Natural Resources, Precious Metals and Minerals – 9.6%
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)
$ 6,000  $ 6,000  $ 6,540 
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)
8,000  8,000  8,633 
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)
3,300  3,300  3,491 
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)
3,000  3,000  3,199 
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)
2,500  2,500  2,500 
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)
6,200  6,200  6,200 
29,000  30,563 
Total Secured Second Lien Debt $ 29,000  $ 30,563 
Preferred Equity – 3.4%
Diversified/Conglomerate Manufacturing – 0.0%
Edge Adhesives Holdings, Inc.(S) – Preferred Stock(E)(G)
5,466  $ 5,466  $  
Diversified/Conglomerate Service– 1.4%
Encore Dredging Holdings, LLC – Preferred Stock(E)(G)
3,200,000  3,200  4,525 
Diversified Natural Resources, Precious Metals and Minerals – 1.8%
Lignetics, Inc. – Preferred Stock(G)(Y)(Z)
78,097  1,321  5,602 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Preferred Stock(E)(G)
500,000  500  739 
Total Preferred Equity $ 10,487  $ 10,866 
Common Equity – 3.7%
Diversified Natural Resources, Precious Metals and Minerals – 3.5%
Lignetics, Inc. – Common Stock(G)(Y)(Z)
152,603  $ 1,855  $ 10,969 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Common Stock(E)(G)
800,000  300  725 
Total Common Equity $ 2,155  $ 11,694 
Total Affiliate Investments $ 70,682  $ 82,281 
CONTROL INVESTMENTS(O) – 6.5%
Secured First Lien Debt – 1.3%
Diversified/Conglomerate Manufacturing – 0.9%
LWO Acquisitions Company LLC – Term Debt (L + 7.5%, 10.0% Cash, Due 6/2021)(E)(Q)
$ 6,000  $ 6,000  $ 2,841 
LWO Acquisitions Company LLC – Term Debt (Due 6/2021)(E)(P)(Q)
10,632  10,632  — 
16,632  2,841 
Printing and Publishing – 0.4%
TNCP Intermediate HoldCo, LLC – Line of Credit, $700 available (8.0% Cash, Due 10/2024)(E)(F)
1,300  1,300  1,300 
Total Secured First Lien Debt $ 17,932  $ 4,141 
Secured Second Lien Debt – 2.5%
Automobile– 2.5%
Defiance Integrated Technologies, Inc. – Term Debt (L + 9.5%, 11.0% Cash, Due 5/2026)(E)
$ 7,985  $ 7,985  $ 7,985 
Unsecured Debt – 0.0%
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Term Debt (Due 6/2023)(E)(P)
$ 95  $ 95  $  
Preferred Equity – 0.1%
Automobile– 0.1%
Defiance Integrated Technologies, Inc. – Preferred Stock(E)(G)
6,043  $ 250  $ 270 
Common Equity – 2.6%
Automobile– 0.8%
Defiance Integrated Technologies, Inc. – Common Stock(E)(G)
33,231  $ 580  $ 2,623 
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Common Units(E)(G)
921,000  921   
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2021
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
Cost Fair Value
Machinery – 1.3%
PIC 360, LLC – Common Equity Units(E)(G)
750  1  3,983 
Printing and Publishing – 0.5%
TNCP Intermediate HoldCo, LLC – Common Equity Units(E)(G)
790,000  500  1,728 
Total Common Equity $ 2,002  $ 8,334 
Total Control Investments $ 28,264  $ 20,730 
TOTAL INVESTMENTS – 175.1% $ 546,512  $ 557,612 

(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 $512.0 million at fair value, are pledged as collateral under our revolving line of credit, as described further in Note 5—Borrowings in the accompanying Notes to Consolidated Financial Statements. Under the Investment Company Act of 1940, as amended (the “1940 Act”), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2021, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 1.2% of total investments, at fair value, as of September 30, 2021.
(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 0.08% as of September 30, 2021. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.
(C)Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”).
(D)Fair value was based on the indicative bid price on or near September 30, 2021, 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)Reserved.
(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, 2021.
(L)There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.
(M)Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
(N)Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.
(O)Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities.
(P)Debt security does not have a stated interest rate that is payable thereon.
(Q)Investment maturity date has passed. Investment continues to make applicable interest payments.
(R)Fair value was based on net asset value provided by the fund as a practical expedient.
(S)One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(T)Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(U)The cash interest rate on this investment was indexed to 90-day LIBOR, which was 0.13% as of September 30, 2021.
(V)The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 3.25% as of September 30, 2021.
(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 $59.4 million; cumulative gross unrealized appreciation for federal income tax purposes is $57.7 million. Cumulative net unrealized depreciation is $1.7 million, based on a tax cost of $559.3 million.
(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, 2021.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Table of Contents
GLADSTONE CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2021
(DOLLAR AMOUNTS IN TABLES 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 of established businesses 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 to our line of credit. The financial statements of Business Loan are consolidated with those of Gladstone Capital Corporation. We may also have significant subsidiaries (as defined under Rule 1-02(w)(2) of the U.S. Securities and Exchange Commission’s (“SEC”) Regulation S-X) whose financial statements are not consolidated with ours. We did not have any unconsolidated subsidiaries that met any of the significance conditions under Rule 1-02(w)(2) of the SEC’s Regulation S-X as of or during the three month period ended December 31, 2021 or the three month period ended December 31, 2020.
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
Unaudited Interim Financial Statements and Basis of Presentation
We prepare our interim financial statements in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, we have not included in this quarterly report all of the information and notes required by GAAP for annual financial statements. The accompanying Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in 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. In our opinion, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim periods have been included. The results of operations for the three months ended December 31, 2021 are not necessarily indicative of results that ultimately may be achieved for the fiscal year ending
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September 30, 2022 or any future interim periods. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as filed with the SEC on November 15, 2021.
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.
Investment Valuation Policy
Accounting Recognition
We record our investments at fair value in accordance with the FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) and the 1940 Act. Investment transactions are recorded on the trade date. Realized gains or losses are generally measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Unrealized appreciation or depreciation primarily reflects the change in investment fair values, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Board Responsibility
In accordance with the 1940 Act, our board of directors (“Board of Directors”) has the ultimate responsibility for reviewing and determining, in good faith, the fair value of our investments for which market quotations are not readily available based on our investment valuation policy (which has been approved by our Board of Directors) (the “Policy”). Such review occurs in three phases. First, prior to its quarterly meetings, the Board of Directors receives written valuation recommendations and supporting materials provided by professionals of the Adviser and Administrator with oversight and direction from the chief valuation officer (the “Valuation Team”). Second, the Valuation Committee of our Board of Directors (comprised entirely of independent directors) meets to review the valuation recommendations and supporting materials, discusses the information provided by the Valuation Team, determines whether the Valuation Team has followed the Policy, determines whether the Valuation Team’s recommended fair value is reasonable in light of the Policy, and reviews other facts and circumstances, as necessary. Third, after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committee’s findings to the entire Board of Directors so that the full Board of Directors may review and determine in good faith the fair value of such investments in accordance with the Policy.
There is no single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the specific facts and circumstances of each individual investment. In determining the fair value of our investments, the Valuation Team, led by the chief valuation officer, uses the Policy, and each quarter the Valuation Committee and Board of Directors review the Policy to determine if changes thereto are advisable and whether the Valuation Team has applied the Policy consistently.
Use of Third Party Valuation Firms
The Valuation Team engages third party valuation firms to provide independent assessments of fair value of certain of our investments.
ICE Data Pricing and Reference Data, LLC (“ICE”), a valuation specialist, generally provides estimates of fair value on our proprietary debt investments. The Valuation Team generally assigns ICE’s estimates of fair value to our debt investments where we do not have the ability to effectuate a sale of the applicable portfolio company. The Valuation Team corroborates ICE’s estimates of fair value using one or more of the valuation techniques discussed below. The Valuation Team’s estimate of value on a specific debt investment may significantly differ from ICE’s. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation Team has followed the Policy and whether the Valuation Team’s recommended fair value is reasonable in light of the Policy and other facts and circumstances before determining fair value.
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We may engage other independent valuation firms to provide earnings multiple ranges, as well as other information, and evaluate such information for incorporation into the total enterprise value (“TEV”) of certain of our investments.  Generally, at least once per year, we engage an independent valuation firm to value or review the valuation of each of our significant equity investments, which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including review of all inputs provided by the independent valuation firm.  The Valuation Team then makes a recommendation to our Valuation Committee and Board of Directors as to the fair value.  Our Board of Directors reviews the recommended fair value, and whether it is reasonable in light of the Policy, and other relevant facts and circumstances, as necessary, before determining fair value.
Valuation Techniques
In accordance with ASC 820, the Valuation Team uses the following techniques when valuing our investment portfolio:
Total Enterprise Value — In determining the fair value using a TEV, the Valuation Team first calculates the TEV of the portfolio company by incorporating some or all of the following factors: the portfolio company’s ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the trailing or projected 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. Generally, the Valuation Team uses a DCF analysis to calculate TEV to corroborate estimates of value for our equity investments where we do not have the ability to effectuate a sale of a portfolio company or for debt of credit impaired portfolio companies.
Yield Analysis — The Valuation Team generally determines the fair value of our debt investments for which we do not have the ability to effectuate a sale of the applicable portfolio company using the yield analysis, which includes a DCF calculation and assumptions that the Valuation Team believes market participants would use, including, estimated remaining life, current market yield, current leverage, and interest rate spreads. This technique develops a modified discount rate that incorporates risk premiums including increased probability of default, increased loss upon default and increased liquidity risk. Generally, the Valuation Team uses the yield analysis to corroborate both estimates of value provided by ICE and market quotes.
Market Quotes — For our investments for which a limited market exists, we generally base fair value on readily available and reliable market quotations which are corroborated by the Valuation Team (generally by using the yield analysis described above). In addition, the Valuation Team assesses trading activity for similar investments and evaluates variances in quotations and other market insights to determine if any available quoted prices are reliable. Typically, the Valuation Team uses the lower indicative bid price (“IBP”) in the bid-to-ask price range obtained from the respective originating syndication agent’s trading desk on or near the valuation date. The Valuation Team may take further steps to consider additional information to validate that price in accordance with the Policy. For securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date. For restricted securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date less a discount for the restriction, which includes consideration of the nature and term to expiration of the restriction.
Investments in Funds — For equity investments in other funds for which we cannot effectuate a sale of the fund, the Valuation Team generally determines the fair value of our invested capital at the net asset value (“NAV”) provided by the fund. Any invested capital that is not yet reflected in the NAV provided by the fund is valued at
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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 December 31, 2021 and September 30, 2021, there were no loans on non-accrual status.
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 December 31, 2021 and September 30, 2021, we held five and six OID loans, respectively, primarily from the syndicated loans in our portfolio. We recorded OID income of $0.1 million and $21 thousand during the three months ended December 31, 2021 and December 31, 2020, respectively. The unamortized balance of OID investments as of December 31, 2021 and September 30, 2021 totaled $1.0 million and $1.1 million, respectively. As of each of December 31, 2021 and September 30, 2021, we had seven investments which had a PIK interest component. We recorded PIK interest income of $1.1 million and $0.5 million during the three months ended December 31, 2021 and December 31, 2020, respectively. We collected $12 thousand and $2.2 million in PIK interest in cash during the three months ended December 31, 2021 and December 31, 2020, respectively.
Success Fee Income Recognition
We record success fees as income when earned, which often occurs upon receipt of cash. Success fees are generally contractually due upon a change of control in a portfolio company, typically resulting from an exit or sale, and are non-recurring.
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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.
Related Party Fees
We are party to the Advisory Agreement with the Adviser, which is owned and controlled by our chairman and chief executive officer. In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee. Additionally, we pay the Adviser a loan servicing fee as compensation for its services as servicer under the terms of our revolving credit facility with KeyBank National Association (“KeyBank”), as administrative agent, lead arranger and lender (as amended and/or restated from time to time, our “Credit Facility”). These fees are accrued at the end of the quarter when the services are performed and generally paid the following quarter.
We are also party to the Administration Agreement with the Administrator, which is owned and controlled by our chairman and chief executive officer, whereby we pay separately for administrative services. Refer to Note 4Related Party Transactions for additional information regarding these related party fees and agreements.
NOTE 3. INVESTMENTS
Fair Value
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 in those 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 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 each of December 31, 2021 and September 30, 2021, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment in Funko 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.
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
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the three months ended December 31, 2021 and 2020, there were no investments transferred into or out of Levels 1, 2 or 3 of the valuation hierarchy.
As of December 31, 2021 and September 30, 2021, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy:
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of December 31, 2021:
Secured first lien debt
$ 395,753  $ —  $ —  $ 395,753 
Secured second lien debt
106,232  —  —  106,232 
Unsecured debt
66  —  — 

66 
Preferred equity
26,483  —  — 

26,483 
Common equity/equivalents
41,574 
(A)
— 

80 
(B)
41,494 
Total Investments at December 31, 2021
$ 570,108  $   $ 80