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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 MARCH 31, 2022
OR
oTRANSITION 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)
MARYLAND54-2040781
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1521 WESTBRANCH DRIVE, SUITE 10022102
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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per shareGLADThe 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 May 2, 2022 was 34,304,371.


Table of Contents
GLADSTONE CAPITAL CORPORATION
TABLE OF CONTENTS
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Table of Contents
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)
March 31,
2022
September 30,
2021
ASSETS
Investments, at fair value:
Non-Control/Non-Affiliate investments (Cost of $449,787 and $447,566, respectively)
$460,391 $454,601 
Affiliate investments (Cost of $46,106 and $70,682, respectively)
39,883 82,281 
Control investments (Cost of $41,572 and $28,264, respectively)
37,429 20,730 
Cash and cash equivalents1,432 671 
Restricted cash and cash equivalents212 175 
Interest receivable, net2,906 2,361 
Due from administrative agent2,341 2,951 
Deferred financing costs, net783 1,033 
Other assets, net2,962 1,697 
TOTAL ASSETS$548,339 $566,500 
LIABILITIES
Borrowings, at fair value (Cost of $17,400 and $50,500, respectively)
$17,400 $50,500 
Notes payable, net of unamortized deferred financing costs of $2,664 and $2,202, respectively
197,336 186,611 
Accounts payable and accrued expenses541 490 
Interest payable2,203 1,797 
Fees due to Adviser(A)
3,198 2,255 
Fee due to Administrator(A)
579 382 
Other liabilities1,615 6,026 
TOTAL LIABILITIES$222,872 $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 value392,494 392,494 
Cumulative net unrealized appreciation (depreciation) of investments238 11,100 
Under (over) distributed net investment income933 149 
Accumulated net realized losses(68,232)(85,338)
Total distributable loss(67,061)(74,089)
TOTAL NET ASSETS$325,467 $318,439 
NET ASSET VALUE PER COMMON SHARE$9.49 $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
March 31,
Six Months Ended
March 31,
2022202120222021
INVESTMENT INCOME
Interest income
Non-Control/Non-Affiliate investments
$10,614 $9,967 $20,768 $20,189 
Affiliate investments
739 1,064 1,806 1,974 
Control investments
695 410 1,203 825 
Cash and cash equivalents
 —  — 
Total interest income (excluding PIK interest income)
12,048 11,441 23,777 22,988 
PIK interest income
Non-Control/Non-Affiliate investments
914 445 2,051 980 
Total PIK interest income
914 445 2,051 980 
Total interest income
12,962 11,886 25,828 23,968 
Success fee income
Non-Control/Non-Affiliate Investments3,231 — 3,231 — 
Affiliate Investments — 1,563 — 
Total success fee income3,231 — 4,794 — 
Dividend income
Non-Control/Non-Affiliate investments517 209 1,509 575 
Control investments520 30 589 252 
Total dividend income1,037 239 2,098 827 
Prepayment fee income
Non-Control/Non-Affiliate investments 700 605 900 
Affiliate Investments — 44 — 
Total prepayment fee income 700 649 900 
Other income30 60 58 72 
Total investment income17,260 12,885 33,427 25,767 
EXPENSES
Base management fee(A)
2,479 2,095 4,999 4,097 
Loan servicing fee(A)
1,520 1,396 2,982 2,744 
Incentive fee(A)
1,971 1,381 4,062 2,748 
Administration fee(A)
401 332 780 687 
Interest expense on borrowings and notes payable
3,020 2,822 6,027 5,390 
Amortization of deferred financing costs
274 338 563 756 
Professional fees
207 160 471 378 
Other general and administrative expenses
315 238 699 562 
Expenses, before credits from Adviser
10,187 8,762 20,583 17,362 
Credit to base management fee - loan servicing fee(A)
(1,520)(1,396)(2,982)(2,744)
Credits to fees from Adviser - other(A)
(102)(880)(2,029)(1,530)
Total expenses, net of credits
8,565 6,486 15,572 13,088 
NET INVESTMENT INCOME8,695 6,399 17,855 12,679 
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss):
Non-Control/Non-Affiliate investments
 63 472 (2,080)
Affiliate investments — 13,408 — 
Control investments
 —  (1)
Other
233 (1,152)(467)(1,160)
Total net realized gain (loss)
233 (1,089)13,413 (3,241)
Net unrealized appreciation (depreciation):
Non-Control/Non-Affiliate investments
(1,083)13,963 3,569 21,850 
Affiliate investments
(2,795)724 (17,822)629 
Control investments
3,253 1,322 3,391 2,025 
Other
 (20) (340)
Total net unrealized appreciation (depreciation)
(625)15,989 (10,862)24,164 
Net realized and unrealized gain (loss)
(392)14,900 2,551 20,923 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$8,303 $21,299 $20,406 $33,602 
BASIC AND DILUTED PER COMMON SHARE:
Net investment income
$0.25 $0.20 $0.52 $0.39 
Net increase (decrease) in net assets resulting from operations
$0.24 $0.65 $0.59 $1.03 
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted
34,304,371 32,765,980 34,304,371 32,428,089 
(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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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
20222021
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 ASSETS5,414 13,374 
NET ASSETS, DECEMBER 31$323,853 $247,117 
OPERATIONS
Net investment income8,695 6,399 
Net realized gain (loss) on investments 63 
Net realized gain (loss) on other233 (1,152)
Net unrealized appreciation (depreciation) of investments(625)16,009 
Net unrealized depreciation (appreciation) of other (20)
Net increase (decrease) in net assets resulting from operations8,303 21,299 
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.20 per share and $0.18 per share, respectively)(A)
(6,689)(5,714)
Distributions to common stockholders from return of capital ($0.00 per share and $0.02 per share, respectively)(A)
 (685)
Net decrease in net assets from distributions(6,689)(6,399)
CAPITAL TRANSACTIONS
Issuance of common stock 9,037 
Discounts, commissions and offering costs for issuance of common stock (166)
Net increase (decrease) in net assets resulting from capital transactions 8,871 
NET INCREASE (DECREASE) IN NET ASSETS1,614 23,771 
NET ASSETS, MARCH 31$325,467 $270,888 
(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)
Six Months Ended March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting from operations$20,406 $33,602 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchase of investments(121,569)(101,098)
Principal repayments on investments130,600 78,456 
Net proceeds from sale of investments16,922 3,690 
Increase in investments due to PIK interest or other
(2,614)(1,081)
Net change in premiums, discounts and amortization(547)181 
Net realized loss (gain) on investments(13,880)2,081 
Net realized loss (gain) on other467 1,160 
Net unrealized depreciation (appreciation) of investments10,862 (24,504)
Net unrealized appreciation (depreciation) of other 340 
Changes in assets and liabilities:
Amortization of deferred financing costs563 756 
Decrease (increase) in interest receivable, net(545)420 
Decrease (increase) in funds due from administrative agent610 (583)
Decrease (increase) in other assets, net(1,265)(76)
Increase (decrease) in accounts payable and accrued expenses51 433 
Increase (decrease) in interest payable406 978 
Increase (decrease) in fees due to Adviser(A)
943 (144)
Increase (decrease) in fee due to Administrator(A)
197 167 
Increase (decrease) in other liabilities(3,943)471 
Net cash provided by (used in) operating activities37,664 (4,751)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit161,500 157,600 
Repayments on line of credit(194,600)(244,400)
Proceeds from issuance of long term debt50,000 150,000 
Redemption of long term debt(38,813)(57,500)
Financing costs(1,575)(1,946)
Proceeds from issuance of common stock 16,528 
Discounts, commissions and offering costs for issuance of common stock (247)
Distributions paid to common stockholders(13,378)(12,679)
Net cash provided by (used in) financing activities(36,866)7,356 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS798 2,605 
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD846 2,469 
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD$1,644 $5,074 
CASH PAID FOR INTEREST$5,621 $4,412 
NON-CASH ACTIVITIES(B)
$710 $— 
(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 and escrows associated with portfolio company exits.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2022
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
CostFair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(M) – 141.4%
Secured First Lien Debt – 100.5%
Aerospace and Defense – 19.9%
Antenna Research Associates, Inc. – Term Debt (L + 10.0%, 12.0% Cash, 4.0% PIK, Due 11/2023)(E)
$11,672 $11,672 $11,672 
Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 2/2026)(C)
19,500 19,500 19,451 
SpaceCo Holdings, LLC – Line of Credit, $400 available (L + 7.0%, 8.0% Cash, Due 12/2025)(C)
1,600 1,600 1,600 
SpaceCo Holdings, LLC – Term Debt (L + 7.0%, 8.0% Cash, Due 12/2025)(C)
32,131 31,684 32,131 
64,456 64,854 
Beverage, Food, and Tobacco – 13.2%
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 1,970 
Café Zupas – Term Debt (L + 7.4%, 8.9% Cash, Due 12/2024)(C)
23,820 23,820 23,820 
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 17,021 
42,790 42,811 
Buildings and Real Estate – 0.5%
GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 9.0% Cash, Due 9/2022)(C)
700 700 693 
GFRC 360, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 9/2022)(C)
1,000 1,000 990 
1,700 1,683 
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 22,359 
Unirac, Inc. – Line of Credit, $125 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)
1,128 1,128 1,130 
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)
11,771 11,527 11,786 
35,155 35,275 
Diversified/Conglomerate Service – 27.4%
DKI Ventures, LLC – Term Debt (L + 8.3%, 9.3% Cash, 4.0% PIK, Due 12/2023)(C)
5,876 5,876 4,863 
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 12/2022)(C)
1,000 1,000 895 
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 4/2025)(C)
29,000 29,000 25,955 
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 9,913 
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)
20,451 20,451 19,685 
R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% Cash, Due 12/2023)(C)(F)
829 829 763 
R2i Holdings, LLC – Term Debt (8.0% Cash, Due 12/2023)(C)(F)
18,500 18,500 17,020 
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 9,975 
95,656 89,069 
Healthcare, Education, and Childcare – 24.8%
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 20,299 
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 15,920 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2022
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
CostFair Value
HH-Inspire Acquisition, Inc. – Delayed Draw Term Loan, $10,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)
— — — 
Pansophic Learning Ltd. – Term Debt (L + 7.3%, 8.3% Cash, Due 3/2027)(C)(Y)
28,000 27,958 28,000 
Pansophic Learning Ltd. – Term Debt (L + 7.3%, 8.3% Cash, Due 3/2027)(C)(Y)
5,000 4,993 5,000 
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 
80,801 80,704 
Machinery – 1.7%
Arc Drilling Holdings LLC – Line of Credit, $875 available (L + 8.0%, 9.3% Cash, Due 11/2022)(C)
125 125 120 
Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 10.8% Cash, 3.0% PIK, Due 11/2022)(C)
5,837 5,837 5,459 
5,962 5,579 
Printing and Publishing – 0.0%
Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 7.5% Cash, Due 2/2015)(E)(V)(Q)
$107 107  
Telecommunications – 2.2%
B+T Group Acquisition, Inc.(S) – Line of Credit, $0 available (L + 11.0%, 13.0% Cash, Due 12/2024)(C)
1,200 1,200 1,173 
B+T Group Acquisition, Inc.(S) – Term Debt (L + 11.0%, 13.0% Cash, Due 12/2024)(C)
6,000 6,000 5,865 
7,200 7,038 
Total Secured First Lien Debt$333,827 $327,013 
Secured Second Lien Debt – 23.8%
Automobile – 3.2%
Sea Link International IRB, Inc. – Term Debt (11.3% Cash, 2.0% PIK, Due 3/2023)(C)(F)
$11,003 $11,003 $10,343 
Beverage, Food, and Tobacco – 1.0%
8th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 8.2% Cash, Due 10/2026)(D)
3,682 3,700 3,315 
Diversified/Conglomerate Manufacturing – 10.6%
Springfield, Inc. – Term Debt (L + 9.0%, 10.0% Cash, Due 12/2026)(C)
30,000 30,000 29,925 
Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 9.5% Cash, Due 5/2027)(D)
5,000 4,815 4,662 
34,815 34,587 
Diversified/Conglomerate Service – 1.5%
CHA Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 4/2026)(D)(U)
3,000 2,963 2,760 
Gray Matter Systems, LLC – Term Debt (12.0% Cash, Due 12/2026)(C)(F)
2,100 2,066 2,100 
5,029 4,860 
Machinery – 0.2%
CPM Holdings, Inc. – Term Debt (L + 8.3%, 8.7% Cash, Due 11/2026)(D)
798 798 790 
Oil and Gas – 7.3%
Imperative Holdings Corporation – Term Debt (L + 10.3%, 12.3% Cash, 1.8% PIK, Due 9/2024)(C)
25,296 25,237 23,778 
Total Secured Second Lien Debt$80,582 $77,673 
Unsecured Debt – 0.0%
Diversified/Conglomerate Service – 0.0%
Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022)(E)(F)
$198 $198 $64 
Preferred Equity – 5.9%
Automobile – 0.0%
Sea Link International IRB, Inc. – Preferred Stock(E)(G)
98,039 98 139 
Beverage, Food, and Tobacco – 0.0%
Triple H Food Processors, LLC – Preferred Stock(E)(G)
75 75 111 
Buildings and Real Estate – 0.3%
GFRC 360, LLC – Preferred Stock(E)(G)
1,000 1,025 964 
Diversified/Conglomerate Service – 2.6%
Frontier Financial Group Inc. – Preferred Stock(E)(G)
766 500 — 
Frontier Financial Group Inc. – Preferred Stock Warrant(E)(G)
168 — — 
MCG Energy Solutions, LLC – Preferred Stock(E)
7,000,000 7,000 8,503 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2022
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
CostFair Value
7,500 8,503 
Healthcare, Education, and Childcare – 0.3%
HH-Inspire Acquisition, Inc. – Preferred Stock(E)(G)
750,000 750 802 
Oil and Gas – 0.6%
FES Resources Holdings LLC – Preferred Equity Units(E)(G)
6,350 6,350 — 
Imperative Holdings Corporation – Preferred Equity Units(E)(G)
13,740 632 1,770 
6,982 1,770 
Telecommunications – 2.1%
B+T Group Acquisition, Inc.(S) – Preferred Stock(E)(G)
6,130 2,024 6,320 
NetFortris Holdings LLC – Preferred Stock(E)(G)(Z)
7,890,860 789 647 
2,813 6,967 
Total Preferred Equity$19,243 $19,256 
Common Equity – 11.2%
Aerospace and Defense – 4.3%
 Antenna Research Associates, Inc. – Common Equity Units(E)(G)
4,283 $4,283 $11,985 
 Ohio Armor Holdings, LLC – Common Equity(E)(G)
1,000 1,000 1,912 
5,283 13,897 
Automobile – 0.0%
Sea Link International IRB, Inc.– Common Equity Units(E)(G)
823,333 823 43 
Beverage, Food, and Tobacco – 0.3%
Triple H Food Processors, LLC – Common Stock(E)(G)
250,000 250 914 
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 2,779 
Diversified/Conglomerate Service – 0.2%
 WorkforceQA, LLC – Common Stock(E)(G)
500 500 590 
Healthcare, Education, and Childcare – 1.9%
GSM MidCo LLC – Common Stock(E)(G)
767 767 1,184 
  Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment)(G)(L)(R)
3.5 %1,223 4,964 
1,990 6,148 
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 83 
499 83 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0%
Funko Acquisition Holdings, LLC(S) – Common Units(G)(T)
6,290 30 76 
Telecommunications – 0.1%
B+T Group Acquisition, Inc.(S) – Common Stock Warrant(E)(G)
1.5 % 395 
Textiles and Leather – 3.5%
Targus Cayman HoldCo, Ltd. – Common Stock(E)(G)
3,076,414 2,062 11,460 
Total Common Equity$15,937 $36,385 
Total Non-Control/Non-Affiliate Investments$449,787 $460,391 
AFFILIATE INVESTMENTS(N) – 12.3%
Secured First Lien Debt – 11.2%
Diversified/Conglomerate Manufacturing – 1.9%
Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 5.5%, 7.5% Cash, Due 8/2024)(C)
$6,140 $6,140 $6,048 
Diversified/Conglomerate Service – 9.3%
Encore Dredging Holdings, LLC – Line of Credit, $1,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
2,000 2,000 1,988 
Encore Dredging Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
23,500 23,500 23,353 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
8

Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2022
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
CostFair Value
Encore Dredging Holdings, LLC – Delayed Draw Term Loan, $0 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)
5,000 5,000 4,969 
30,500 30,310 
Total Secured First Lien Debt$36,640 $36,358 
Preferred Equity – 0.9%
Diversified/Conglomerate Manufacturing – 0.0%
Edge Adhesives Holdings, Inc.(S) – Preferred Stock(E)(G)
5,466 $5,466 $ 
Diversified/Conglomerate Service– 0.7%
Encore Dredging Holdings, LLC – Preferred Stock(E)(G)
3,200,000 3,200 $2,057 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Preferred Stock(E)(G)
500,000 500 768 
Total Preferred Equity$9,166 $2,825 
Common Equity – 0.2%
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Common Stock(E)(G)
800,000 300 700 
Total Common Equity$300 $700 
Total Affiliate Investments$46,106 $39,883 
CONTROL INVESTMENTS(O) – 11.5%
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)(X)
$6,000 $6,000 $2,638 
LWO Acquisitions Company LLC – Term Debt (Due 6/2021)(E)(P)(Q)(X)
10,732 10,732 — 
16,732 2,638 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 3.3%
WB Xcel Holdings, LLC – Line of Credit, $682 available (L + 10.5%, 11.5% Cash, Due 11/2026)(E)
818 818 818 
WB Xcel Holdings, LLC – Term Debt (L + 10.5%, 11.5% Cash, Due 11/2026)(E)
9,975 9,975 9,975 
10,793 10,793 
Printing and Publishing – 0.4%
TNCP Intermediate HoldCo, LLC – Line of Credit, $900 available (8.0% Cash, Due 10/2024)(E)(F)
1,100 1,100 1,100 
Total Secured First Lien Debt$28,625 $14,531 
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)
$7,825 $7,825 $7,825 
Unsecured Debt – 0.0%
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Term Debt (Due 6/2023)(E)(P)(X)
$95 $95 $ 
LWO Acquisitions Company LLC – Term Debt (Due 8/2022)(E)(P)(X)
25 25 — 
$120 $ 
Preferred Equity – 1.8%
Automobile– 0.1%
Defiance Integrated Technologies, Inc. – Preferred Stock(E)(G)
6,043 $250 $278 
Personal and Non-Durable Consumer Products (Manufacturing Only) – 1.7%
WB Xcel Holdings, LLC – Preferred Stock(E)(G)
333 2,750 5,576 
Total Preferred Equity$3,000 $5,854 
Common Equity – 2.8%
Automobile– 0.9%
Defiance Integrated Technologies, Inc. – Common Stock(E)(G)
33,231 $580 $3,034 
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Common Units(E)(G)(X)
921,000 921  
Machinery – 1.2%
PIC 360, LLC – Common Equity Units(E)(G)
750 1 4,061 
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
9

Table of Contents
GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2022
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)
Principal/
Shares/
Units(J)(I)
CostFair Value
Printing and Publishing – 0.7%
TNCP Intermediate HoldCo, LLC – Common Equity Units(E)(G)
790,000 500 2,124 
Total Common Equity$2,002 $9,219 
Total Control Investments$41,572 $37,429 
TOTAL INVESTMENTS – 165.2%
$537,465 $537,703 
(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 $478.3 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 March 31, 2022, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 0.9% of total investments, at fair value, as of March 31, 2022.
(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 0.45% as of March 31, 2022. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.
(C)Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”).
(D)Fair value was based on the indicative bid price on or near March 31, 2022, offered by the respective syndication agent’s trading desk.
(E)Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the portfolio company’s securities in order of their relative priority in the capital structure.
(F)Debt security has a fixed interest rate.
(G)Security is non-income producing.
(H)The Company has entered into an agreement that entitles it to the "last out" tranche of the first lien secured loan, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.75% (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 March 31, 2022.
(L)There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.
(M)Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
(N)Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.
(O)Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities.
(P)Debt security does not have a stated interest rate that is payable thereon.
(Q)Investment maturity date has passed. Investment continues to make applicable interest payments.
(R)Fair value was based on net asset value provided by the fund as a practical expedient.
(S)One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(T)Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(U)The cash interest rate on this investment was indexed to 90-day LIBOR, which was 0.96% as of March 31, 2022.
(V)The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 3.50% as of March 31, 2022.
(W)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the ASC 820 fair value hierarchy. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(X)In February 2022, LWO Acquisitions Company LLC filed for Chapter 11 bankruptcy protection.
(Y)Investment formerly known as EL Academies, Inc.
(Z)Investment formerly known as NetFortris Corp.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
10

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)
CostFair 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.
11

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)
CostFair 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)
CostFair 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.
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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)
CostFair 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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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)
CostFair 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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GLADSTONE CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2022
(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 six month period ended March 31, 2022 or the six month period ended March 31, 2021.
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 and six months ended March 31, 2022 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 March 31, 2022 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 March 31, 2022 and September 30, 2021, we held four and six OID loans, respectively, primarily from the syndicated loans in our portfolio. We recorded OID income of $87 thousand and $0.2 million during the three and six months ended March 31, 2022, respectively, and $39 thousand and $0.1 million during the three and six months ended March 31, 2021, respectively. The unamortized balance of OID investments as of March 31, 2022 and September 30, 2021 totaled $0.9 million and $1.1 million, respectively. As of March 31, 2022 and September 30, 2021, we had six and seven investments which had a PIK interest component, respectively. We recorded PIK interest income of $0.9 million and $2.1 million during the three and six months ended March 31, 2022, respectively, and $0.4 million and $1.0 million during the three and six months ended March 31, 2021, respectively. We collected $2.4 million in PIK interest in cash during each of the three and six months ended March 31, 2022, and $1.2 million and $3.4 million during the three and six months ended March 31, 2021, respectively.
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Success Fee Income Recognition
We record success fees as income when earned, which often occurs upon receipt of cash. Success fees are generally contractually due upon a change of control in a portfolio company, typically resulting from an exit or sale, and are non-recurring.
Dividend Income Recognition
We accrue dividend income on preferred and common equity securities to the extent that such amounts are expected to be collected and if we have the option to collect such amounts in cash or other consideration.
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 March 31, 2022 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
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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 the six months ended March 31, 2022 and 2021, there were no investments transferred into or out of Levels 1, 2 or 3 of the valuation hierarchy.
As of March 31, 2022 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 March 31, 2022:
Secured first lien debt
$377,902 $— $— $377,902 
Secured second lien debt
85,498 — — 85,498 
Unsecured debt
64 — — 

64 
Preferred equity
27,935 — — 

27,935 
Common equity/equivalents
41,340 
(A)
— 

76 
(B)
41,264 
Total Investments at March 31, 2022
$532,739 $ $76 $532,663 
Fair Value Measurements
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of September 30, 2021:
Secured first lien debt
$337,394 $— $— $337,394 
Secured second lien debt
135,956 — — 135,956 
Unsecured debt
10 — — 

10 
Preferred equity
29,246 — — 

29,246 
Common equity/equivalents
48,519 
(A)
— 

78 
(B)
48,441 
Total Investments as of September 30, 2021
$551,125 $ $78 $551,047 
(A)Excludes our investment in Leeds with a fair value of $5.0 million and $6.5 million as of March 31, 2022 and September 30, 2021, respectively. Leeds was valued using NAV as a practical expedient.
(B)Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability as our investment was subject to certain restrictions.
21

The following table presents our portfolio investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy and carried at fair value as of March 31, 2022 and September 30, 2021, by caption on our accompanying Consolidated Statements of Assets and Liabilities and by security type:
Total Recurring Fair Value Measurements Reported in
Consolidated Statements of Assets and Liabilities
Using Significant Unobservable Inputs (Level 3)
March 31, 2022September 30, 2021
Non-Control/Non-Affiliate Investments
Secured first lien debt$327,013 $304,095 
Secured second lien debt77,673 97,408 
Unsecured debt64 10 
Preferred equity19,256 18,110 
Common equity/equivalents31,345 
(A)
28,413 
(B)
Total Non-Control/Non-Affiliate Investments
$455,351 $448,036 
Affiliate Investments
Secured first lien debt$36,358 $29,158 
Secured second lien debt 30,563 
Preferred equity2,825 10,866 
Common equity/equivalents700 11,694 
Total Affiliate Investments$39,883 $82,281 
Control Investments
Secured first lien debt$14,531 $4,141 
Secured second lien debt7,825 7,985 
Preferred equity5,854 270 
Common equity/equivalents9,219 8,334 
Total Control Investments
$37,429 $20,730 
Total Investments at Fair Value Using Level 3 Inputs$532,663 $551,047 
(A)Excludes our investments in Leeds and Funko with fair values of $5.0 million and $76 thousand, respectively, as of March 31, 2022. Leeds was valued using NAV as a practical expedient, and Funko was valued using Level 2 inputs.
(B)Excludes our investments in Leeds and Funko with fair values of $6.5 million and $78 thousand, respectively, as of September 30, 2021. Leeds was valued using NAV as a practical expedient, and Funko was valued using Level 2 inputs.
In accordance with ASC 820, the following table provides quantitative information about our Level 3 fair value measurements of our investments as of March 31, 2022 and September 30, 2021. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements.
22

The weighted average calculations in the table below are based on the principal balances for all debt related calculations and on the cost basis for all equity related calculations for the particular input.
Quantitative Information about Level 3 Fair Value Measurements

Range / Weighted Average as of

March 31,
2022
September 30,
2021
Valuation
Techniques/
Methodologies
Unobservable
Input
March 31,
2022
September 30,
2021


Secured first lien debt
$351,699 $321,490 
Yield Analysis
Discount Rate
7.9% - 26.2%
/ 10.5%
7.5% - 31.2%
/ 12.4%

26,203 15,904 
TEV
EBITDA multiple
5.3x – 7.4x
/ 6.5x
5.4x – 5.9x
/ 5.9x


EBITDA
$689 - $9,506
/ $5,871
$620 - $10,209
/ $9,255


Revenue multiple
0.3x – 0.3x
/ 0.3x
0.3x – 0.3x
/ 0.3x


Revenue
$9,744 - $9,744
/ $9,744
$9,968 - $9,968
/ $9,968


Secured second lien debt
66,146 106,464 
Yield Analysis
Discount Rate
10.1% - 20.2%
/ 14.5%
10.1% - 23.7%
/ 14.7%

11,527 21,507 
Market Quote
IBP
90.0% - 99.0%
/ 92.4%
90.0% - 99.0%
/ 95.7%

7,825 7,985 
TEV
EBITDA multiple
5.9x – 5.9x
/ 5.9x
6.0x – 6.0x
/ 6.0x


EBITDA
$3,532 - $3,532
/ $3,532
$3,125 - $3,125
/ $3,125


Unsecured debt
64 10 
TEV
Revenue multiple
0.3x – 1.3x
/ 0.9x
0.3x – 1.4x
/ 1.0x


Revenue
$722 - $9,744
/ $4,127
$752 - $9,968
/ $3,740


Preferred and common equity / equivalents(A)
69,199 77,687 
TEV
EBITDA multiple
4.5x – 10.0x
/ 6.8x
3.7x – 9.5x
/ 7.2x


EBITDA
$689 -$54,654
/ $9,841
$620 -$62,547
/ $14,788


Revenue multiple
0.3x – 4.4x
/ 2.2x
0.3x– 4.0x
/ 2.0x


Revenue
$722 -$175,678
/ $30,837
$752 -$144,889
/ $29,437
Total Level 3 Investments, at Fair Value
$532,663 $551,047 
(A)Fair value as of March 31, 2022 excludes our investments in Leeds and Funko with fair values of $5.0 million and $76 thousand, respectively. Fair value as of September 30, 2021 excludes our investments in Leeds and Funko with fair values of $6.5 million and $78 thousand, respectively. Leeds was valued using NAV as a practical expedient and Funko was valued using Level 2 inputs as of both March 31, 2022 and September 30, 2021.
Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in market yields or, discount rates, or a (decrease)/increase in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a (decrease)/increase, respectively, in the fair value of certain of our investments.
Changes in Level 3 Fair Value Measurements of Investments
The following tables provide the changes in fair value, broken out by security type, during the three and six months ended March 31, 2022 and 2021 for all investments for which we determine fair value using unobservable (Level 3) inputs.
23


Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three months ended March 31, 2022Secured
First Lien
Debt
Secured
Second Lien
Debt
Unsecured
Debt
Preferred
Equity
Common
Equity/
Equivalents
Total
Fair Value as of December 31, 2021$395,753 $106,232 $66 $26,483 $41,494 $570,028 
Total gains (losses):
Net realized gain (loss)(A)
— — — — — — 
Net unrealized appreciation (depreciation)(B)
(81)(180)(27)1,452 (230)934 
Reversal of prior period net depreciation (appreciation) on realization(B)
(285)117 — — (167)
New investments, repayments and settlements: (C)
Issuances/originations
12,120 166 25 — — 12,311 
Settlements/repayments
(29,605)(20,837)— — — (50,442)
Net proceeds from sales
— — — — (1)(1)
Fair Value as of March 31, 2022
$377,902 $85,498 $64 $27,935 $41,264 $532,663 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six months ended March 31, 2022Secured
First Lien
Debt
Secured
Second Lien
Debt
Unsecured
Debt
Preferred
Equity
Common
Equity/
Equivalents
Total
Fair Value as of September 30, 2021
$337,394 $135,956 $10 $29,246 $48,441 $551,047 
Total gains (losses):
Net realized gain (loss)(A)
— — — — 13,876 13,876 
Net unrealized appreciation (depreciation)(B)
4,412 379 29 791 292 5,903 
Reversal of prior period net depreciation (appreciation) on realization(B)
(380)(1,601)— (4,281)(9,113)(15,375)
New investments, repayments and settlements: (C)
Issuances/originations
86,823 30,336 25 3,500 3,500 124,184 
Settlements/repayments
(50,347)(79,572)— — — (129,919)
Net proceeds from sales
— — — (1,321)(15,732)(17,053)
Fair Value as of March 31, 2022
$377,902 $85,498 $64 $27,935 $41,264 $532,663 









24

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three months ended March 31, 2021Secured
First Lien
Debt
Secured
Second
Lien Debt
Unsecured
Debt
Preferred
Equity
Common
Equity/
Equivalents
Total
Fair Value as of December 31, 2020$219,921 $194,219 $15 $9,236 $24,473 $447,864 
Total gains (losses):
Net realized gain (loss)(A)
— — — — — — 
Net unrealized appreciation (depreciation)(B)
1,156 2,190 (2)(385)12,986 15,945 
Reversal of prior period net depreciation (appreciation) on realization(B)
20 (210)— — — (190)
New investments, repayments and settlements: (C)
Issuances/originations
64,210 217 — 7,000 1,000 72,427 
Settlements/repayments
(11,845)(36,159)— — — (48,004)
Fair Value as of March 31, 2021
$273,462 $160,257 $13 $15,851 $38,459 $488,042 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six months ended March 31, 2021Secured
First Lien
Debt
Secured
Second
Lien Debt
Unsecured
Debt
Preferred
Equity
Common
Equity/
Equivalents
Total
Fair Value as of September 30, 2020
$213,468 $196,986 $4,299 $7,000 $23,881 $445,634 
Total gains (losses):
Net realized gain (loss)(A)
— — — — (2,393)(2,393)
Net unrealized appreciation (depreciation)(B)
2,088 3,199 (4)(247)16,283 21,319 
Reversal of prior period net depreciation (appreciation) on realization(B)
20 (210)133 — 2,950 2,893 
New investments, repayments and settlements: (C)
Issuances/originations
91,414 554 113 9,098 1,000 102,179 
Settlements/repayments
(13,528)(60,272)(4,528)— — (78,328)
Net proceeds from sales
— — — — (3,262)(3,262)
Transfers(20,000)20,000 — — — — 
Fair Value as of March 31, 2021
$273,462 $160,257 $13 $15,851 $38,459 $488,042 
(A)Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the corresponding period.
(B)Included in net unrealized appreciation (depreciation) on investments on our accompanying Consolidated Statements of Operations for the corresponding period.
(C)Includes increases in the cost basis of investments resulting from new portfolio investments, accretion of discounts, PIK, and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.
Investment Activity
Proprietary Investments
As of March 31, 2022 and September 30, 2021, we held 39 and 38 proprietary investments with an aggregate fair value of $514.6 million and $525.9 million, or 95.7% and 94.3% of the total investment portfolio at fair value, respectively. The following significant proprietary investment transactions occurred during the six months ended March 31, 2022:

In October 2021, we invested $26.3 million in Engineering Manufacturing Technologies, LLC through secured first lien debt and equity.

25

In November 2021, our investment in Lignetics, Inc. was sold, which resulted in the recognition of success fee income of $1.6 million and a realized gain of $13.4 million. In connection with the sale, we received net cash proceeds of approximately $47.2 million, including the repayment of our debt investment of $29.0 million at par.

In November 2021, our investment in Prophet Brand Strategy paid off at par for net cash proceeds of $13.1 million. In conjunction with the payoff, we received a prepayment fee of $0.1 million.

In November 2021, our investment in Effective School Solutions LLC paid off at par for net cash proceeds of $19.5 million. In conjunction with the payoff, we received a prepayment fee of $0.5 million.

In November 2021, we invested $13.4 million in WB Xcel Holdings, LLC through secured first lien debt and equity.

In December 2021, our investment in Phoenix Aromas & Essential Oils, LLC paid off at par for net cash proceeds of $10.0 million.

In December 2021, we invested $10.0 million in Fix-it Group, Inc. through secured first lien debt.

In December 2021, we invested $10.5 million in Workforce QA LLC through secured first lien debt and equity.

In December 2021, we invested $30.0 million in Springfield, Inc. through secured second lien debt.

In December 2021, we invested $16.8 million in HH-Inspire Acquisition, Inc. through secured first lien debt and equity.

In January 2022, our investment in Belnick, Inc. paid off at par for net cash proceeds of $10.0 million.

In March 2022, we invested $5.0 million in Pansophic Learning Ltd., an existing portfolio company, through secured first lien debt.

In March 2022, our investment in NetFortris Corp. was sold, which resulted in the recognition of success fee income of $3.2 million. In connection with the sale, we received net cash proceeds of $29.0 million, including the repayment of our debt investment of $28.8 million at par. We continue to retain an equity investment in NetFortris Holdings, LLC with a cost basis of $0.8 million and fair value of $0.6 million as of March 31, 2022.
Syndicated Investments
As of March 31, 2022 and September 30, 2021, we held six and eight syndicated investments with an aggregate fair value of $23.1 million and $31.7 million, or 4.3% and 5.7% of the total investment portfolio at fair value, respectively. The following significant syndicated investment transaction occurred during the six months ended March 31, 2022:

In November 2021, our investment in Medical Solutions Holdings, Inc. paid off at par for net cash proceeds of $6.0 million.

In January 2022, our investment in Keystone Acquisition Corp. paid off at par for net cash proceeds of $4.0 million.


Investment Concentrations
As of March 31, 2022, our investment portfolio consisted of investments in 45 portfolio companies located in 22 states in 13 different industries, with an aggregate fair value of $537.7 million. The five largest investments at fair value as of March 31, 2022 totaled $158.4 million, or 29.5% of our total investment portfolio, as compared to the five largest investments at fair value as of September 30, 2021 totaling $166.2 million, or 29.8% of our total investment portfolio. As of each of March 31, 2022 and September 30, 2021, our average investment by obligor was $11.9 million at cost.
26

The following table outlines our investments by security type as of March 31, 2022 and September 30, 2021:
March 31, 2022September 30, 2021
CostFair ValueCostFair Value
Secured first lien debt$399,092 74.3 %$377,902 70.3 %$362,616 66.3 %$337,394 60.5 %
Secured second lien debt88,407 16.4 85,498 15.9 137,643 25.2 135,956 24.4 
Unsecured debt318 0.1 64 0.0 293 0.1 10 — 
Total debt investments487,817 90.8 463,464 86.2 500,552 91.6 473,360 84.9 
Preferred equity31,409 5.8 27,935 5.2 29,230 5.3 29,246 5.2 
Common equity/equivalents18,239 3.4 46,304 8.6 16,730 3.1 55,006 9.9 
Total equity investments
49,648 9.2 74,239 13.8 45,960 8.4 84,252 15.1 
Total Investments
$537,465 100.0 %$537,703 100.0 %$546,512 100.0 %$557,612 100.0 %
Our investments at fair value consisted of the following industry classifications as of March 31, 2022 and September 30, 2021:
March 31, 2022September 30, 2021
Industry ClassificationFair ValuePercentage of
Total
Investments
Fair ValuePercentage of
Total
Investments
Diversified/Conglomerate Service$135,453 25.2 %$132,458 23.8 %
Healthcare, Education, and Childcare87,654 16.3 92,680 16.6 
Diversified/Conglomerate Manufacturing81,327 15.1 25,223 4.5 
Aerospace and Defense78,751 14.7 79,749 14.3 
Beverage, Food, and Tobacco47,151 8.8 48,385 8.7 
Oil and Gas25,631 4.8 25,861 4.6 
Automobile21,662 4.0 21,681 3.9 
Personal and Non-Durable Consumer Products17,913 3.3 1,542 0.3 
Telecommunications14,400 2.7 36,720 6.6 
Textiles and Leather11,460 2.1 10,030 1.8 
Machinery10,430 1.9 10,472 1.9 
Diversified Natural Resources, Precious Metals and Minerals  47,134 8.4 
Chemicals, Plastics and Rubber   10,062 1.8 
Home and Office Furnishings, Housewares, and Durable Consumer Products  10,025 1.8 
Other, < 2.0%5,871 1.1 5,590 1.0 
Total Investments$537,703 100.0 %$557,612 100.0 %
Our investments at fair value were included in the following U.S. geographic regions as of March 31, 2022 and September 30, 2021:
March 31, 2022September 30, 2021
Location
Fair Value
Percentage of
Total
Investments
Fair Value
Percentage of
Total Investments
South$254,309 47.3 %$238,917 42.8 %
West139,513 25.9 184,247 33.0 
Midwest109,221 20.3 85,970 15.5 
Northeast34,660 6.5 48,478 8.7 
Total Investments$537,703 100.0 %$557,612 100.0 %
The geographic composition indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional locations in other geographic regions.
27

Investment Principal Repayments
The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31, 2022:
Amount
For the remaining six months ending September 30:
2022(A)
$23,440 
For the fiscal years ending September 30:
202327,469 

202466,011 

202582,477 

2026146,035 

Thereafter143,424 

Total contractual repayments
$488,856 

Adjustments to cost basis of debt investments(1,039)

Investments in equity securities49,648 

Investments held as of March 31, 2022 at cost:
$537,465 
(A)Includes debt investments with contractual principal amounts totaling $16.8 million for which the maturity date has passed as of March 31, 2022.
Receivables from Portfolio Companies
Receivables from portfolio companies represent non-recurring costs incurred on behalf of such portfolio companies and are included in other assets on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables from portfolio companies when the receivable balance becomes 90 days or more past due or if it is determined, based upon management’s judgment, that the portfolio company is unable to pay its obligations. We write off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of March 31, 2022 and September 30, 2021, we had gross receivables from portfolio companies of $1.3 million and $0.7 million, respectively. The allowance for uncollectible receivables was $0 as of each of March 31, 2022 and September 30, 2021.
NOTE 4. RELATED PARTY TRANSACTIONS
Transactions with the Adviser
We have been externally managed by the Adviser pursuant to the Advisory Agreement since October 1, 2004 pursuant to which we pay the Adviser a base management fee and an incentive fee for its services. On July 13, 2021, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of us or the Adviser, unanimously approved the renewal of the Advisory Agreement through August 31, 2022.
We also pay the Adviser a loan servicing fee for its role of servicer pursuant to our Credit Facility. The entire loan servicing fee paid to the Adviser by Business Loan is non-contractually, unconditionally and irrevocably credited against the base management fee otherwise payable to the Adviser, since Business Loan is a consolidated subsidiary of ours, and overall, the base management fee (including any loan servicing fee) cannot exceed 1.75% of total assets (including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings) during any given fiscal year pursuant to the Advisory Agreement.
Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of the Adviser, which, as of March 31, 2022, is 100% indirectly owned and controlled by Mr. Gladstone. Robert Marcotte (our president) also serves as executive vice president of private equity (debt) of the Adviser. Michael LiCalsi, our general counsel and secretary (who also serves as the Administrator’s president, general counsel and secretary), is also the executive vice president of administration of our Adviser.
28

The following table summarizes the base management fee, incentive fee, and loan servicing fee and associated non-contractual, unconditional and irrevocable credits reflected in our accompanying Consolidated Statements of Operations:
Three Months Ended
March 31,
Six Months Ended
March 31,
2022202120222021
Average total assets subject to base management fee(A)
$566,629 $478,857 $571,314 $468,229 
Multiplied by prorated annual base management fee of 1.75%
0.4375 %0.4375 %0.8750 %0.8750 %
Base management fee(B)
$2,479 $2,095 $4,999 $4,097 
Portfolio company fee credit(59)(574)(1,928)(926)
Syndicated loan fee credit
(43)(81)(101)(168)
Net Base Management Fee$2,377 $1,440 $2,970 $3,003 
Loan servicing fee(B)
1,520 1,396 2,982 2,744 
Credit to base management fee - loan servicing fee(B)
(1,520)(1,396)(2,982)(2,744)
Net Loan Servicing Fee$ $— $ $— 
Incentive fee(B)
1,971 1,381 4,062 2,748 
Incentive fee credit
 (225) (436)
Net Incentive Fee$1,971 $1,156 $4,062 $2,312 
Portfolio company fee credit(59)(574)(1,928)(926)
Syndicated loan fee credit
(43)(81)(101)(168)
Incentive fee credit (225) (436)
Credits to Fees From Adviser - other(B)
$(102)$(880)$(2,029)$(1,530)
(A)Average total assets subject to the base management fee is defined in the Advisory Agreement as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the two most recently completed quarters within the respective years and adjusted appropriately for any share issuances or repurchases during the period.
(B)Reflected as a line item on our accompanying Consolidated Statements of Operations.
Base Management Fee
The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 1.75%, computed on the basis of the value of our average total assets at the end of the two most recently-completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or repurchases during the period.
Additionally, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include: (i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships; (iii) consulting services regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) taking a primary role in interviewing, vetting and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees for such services against the base management fee that we would otherwise be required to pay to the Adviser; however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees, totaling $15 thousand for each of the three and six months ended March 31, 2021, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser primarily for the valuation of portfolio companies. No such amounts were retained by the Adviser for the three and six months ended March 31, 2022.
Our Board of Directors accepted a non-contractual, unconditional, and irrevocable credit from the Adviser to reduce the annual base management fee on syndicated loan participations to 0.5%, to the extent that proceeds resulting from borrowings were used to purchase such syndicated loan participations, for each of the three and six months ended March 31, 2022 and 2021.
29

Loan Servicing Fee
The Adviser also services the loans held by Business Loan (the borrower under the Credit Facility), in return for which the Adviser receives a 1.5% annual fee payable monthly based on the aggregate outstanding balance of loans pledged under our Credit Facility. As discussed in the notes to the table above, we treat payment of the loan servicing fee pursuant to the Credit Facility as a pre-payment of the base management fee under the Advisory Agreement. Accordingly, these loan servicing fees are 100% non-contractually, unconditionally and irrevocably credited back to us by the Adviser.
Incentive Fee
The incentive fee consists of two parts: an income-based incentive fee and a capital gains-based incentive fee. The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% (2.0% during the period from April 1, 2020 through March 31, 2023) of our net assets, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted appropriately for any share issuances or repurchases during the period (the “hurdle rate”). The income-based incentive fee with respect to our pre-incentive fee net investment income is generally payable quarterly to the Adviser and is computed as follows:
no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate;
100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% (2.4375% during the period from April 1, 2020 through March 31, 2022 and 2.50% from April 1, 2022 through March 31, 2023) of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter; and
20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% (2.4375% during the period from April 1, 2020 through March 31, 2022 and 2.50% from April 1, 2022 through March 31, 2023) of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter.
On April 12, 2022, our Board of Directors approved an amendment of the Advisory Agreement which extended the temporary revision to the hurdle rate through March 31, 2023 and increased the excess incentive fee hurdle rate from 2.1875% per quarter (8.75% annualized) to 2.50% per quarter (10.0% annualized), up from the 2.4375% per quarter (9.75% annualized) in effect since April 1, 2020.
The second part of the incentive fee is a capital gains-based incentive fee that is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement, as of the termination date) and equals 20.0% of our “net realized capital gains” (as defined herein) as of the end of the fiscal year. In determining the capital gains-based incentive fee payable to the Adviser, we calculate “net realized capital gains” at the end of each applicable year by subtracting the sum of our cumulative aggregate realized capital losses and our entire portfolio’s aggregate unrealized capital depreciation from our cumulative aggregate realized capital gains. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the original cost of such investment since inception. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the original cost of such investment since inception. The entire portfolio’s aggregate unrealized capital depreciation, if any, equals the sum of the difference between the valuation of each investment as of the applicable calculation date and the original cost of such investment. At the end of the applicable fiscal year, the amount of capital gains that serves as the basis for our calculation of the capital gains-based incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less the entire portfolio’s aggregate unrealized capital depreciation, if any. If this number is positive at the end of such fiscal year, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. No capital gains-based incentive fee has been recorded or paid since our inception through March 31, 2022, as cumulative unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.
In accordance with GAAP, a capital gains-based incentive fee accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital appreciation and depreciation. If such amount is
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positive at the end of a period, then GAAP requires us to record a capital gains-based incentive fee equal to 20.0% of such amount, less the aggregate amount of actual capital gains-based incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such period. GAAP requires that the capital gains-based incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would be payable if such unrealized capital appreciation were realized. There can be no assurance that such unrealized capital appreciation will be realized in the future. No GAAP accrual for a capital gains-based incentive fee has been recorded from our inception through March 31, 2022.
Our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser to reduce the income-based incentive fee to the extent net investment income did not 100.0% cover distributions to common stockholders for the three and six months ended March 31, 2021. There was no incentive fee credit during the three and six months ended March 31, 2022.
Transactions with the Administrator
We have entered into the Administration Agreement with the Administrator to provide administrative services. We reimburse the Administrator pursuant to the Administration Agreement for the portion of expenses the Administrator incurs while performing services for us. The Administrator’s expenses are primarily rent and the salaries, benefits and expenses of the Administrator’s employees, including: our chief financial officer and treasurer, chief compliance officer, chief valuation officer, and general counsel and secretary (who also serves as the Administrator’s president, general counsel and secretary) and their respective staffs. Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief operating officer) serve as members of the board of managers and executive officers of the Administrator, which, as of March 31, 2022, is 100% indirectly owned and controlled by Mr. Gladstone. Another of our officers, Michael LiCalsi (our general counsel and secretary), serves as the Administrator’s president as well as the executive vice president of administration for the Adviser.
Our allocable portion of the Administrator’s expenses is generally derived by multiplying the Administrator’s total expenses by the approximate percentage of time during the current quarter the Administrator’s employees performed services for us in relation to their time spent performing services for all companies serviced by the Administrator. On July 13, 2021, our Board of Directors, including a majority of the directors who are not parties to the Administration Agreement or interested persons of either party, approved the renewal of the Administration Agreement through August 31, 2022.
Other Transactions
Gladstone Securities, LLC (“Gladstone Securities”), a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation, which is 100% indirectly owned and controlled by Mr. Gladstone, our chairman and chief executive officer, has provided other services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional and irrevocable credits against the base management fee or incentive fee. Gladstone Securities received fees from portfolio companies totaling $25 thousand and $0.6 million during the three and six months ended March 31, 2022, respectively, and $0.3 million and $0.4 million during the three and six months ended March 31, 2021, respectively.
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Related Party Fees Due
Amounts due to related parties on our accompanying Consolidated Statements of Assets and Liabilities were as follows:
March 31, 2022September 30, 2021
Base management fee due to Adviser$857 $385 
Loan servicing fee due to Adviser370 343 
Incentive fee due to Adviser1,971 1,527 
Total fees due to Adviser
3,198 2,255 
Fee due to Administrator
579 382 
Total Related Party Fees Due
$3,777 $2,637 
In addition to the above fees, other operating expenses due to the Adviser as of March 31, 2022 and September 30, 2021, totaled $38 thousand and $35 thousand, respectively. In addition, net expenses payable to Gladstone Investment Corporation (for reimbursement purposes), which includes certain co-investment expenses, totaled $27 thousand and $38 thousand as of March 31, 2022 and September 30, 2021, respectively. These amounts are generally settled in the quarter subsequent to being incurred and are included in other liabilities on the accompanying Consolidated Statements of Assets and Liabilities as of March 31, 2022 and September 30, 2021.
NOTE 5. BORROWINGS
Revolving Credit Facility

On May 13, 2021, we, through Business Loan, amended and restated the Credit Facility to, among other things, (i) decrease the commitment amount from $205.0 million to $175.0 million, (ii) extend the revolving period end date to October 31, 2023, (iii) extend the maturity date to October 31, 2025 (at which time all principal and interest will be due and payable if the Credit Facility is not extended by the revolving period end date), (iv) reduce the interest rate margin to 2.70% during the revolving period and 3.25% thereafter, with a LIBOR floor of 0.35%, (v) revise the unused fee to include an additional fee tier of 0.35% per annum on the daily undrawn amounts if the average unused amount is equal to or less than 35% during the applicable period, (vi) provide for certain excess concentration limits, including a reduced second lien limit and a new broadly syndicated loan limit and (vii) add customary LIBOR replacement language. We incurred fees of approximately $1.1 million in connection with this amendment and restatement, which are being amortized through our Credit Facility’s revolving period end date of October 31, 2023.
The following tables summarize noteworthy information related to our Credit Facility:
March 31, 2022September 30, 2021
Commitment amount$175,000$175,000
Borrowings outstanding, at cost17,40050,500 
Availability(A)
138,093103,897 
For the Three Months Ended
March 31,
For the Six Months Ended March 31,
2022202120222021
Weighted average borrowings outstanding, at cost$42,491 $69,418 $37,677 $87,442 
Weighted average interest rate(B)
5.9 %4.6 %6.6 %4.0 %
Commitment (unused) fees incurred$344 $272 $679 $424 
(A)    Available borrowings are subject to various constraints imposed under our Credit Facility, based on the aggregate loan balance pledged by Business Loan, which varies as loans are added and repaid, regardless of whether such repayments are prepayments or made as contractually required.
(B)     Includes unused commitment fees and excludes the impact of deferred financing costs.
Our Credit Facility also requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank. KeyBank is also the trustee of the account and generally remits the
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collected funds to us once each month. Amounts collected in the lockbox account with KeyBank are presented as Due from administrative agent on the accompanying Consolidated Statement of Assets and Liabilities as of March 31, 2022 and September 30, 2021.
Our Credit Facility contains covenants that require Business Loan to maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions), and restrict material changes to our credit and collection policies without the lenders’ consent. Our Credit Facility also generally limits distributions to our stockholders on a fiscal year basis to the sum of our net investment income, net capital gains and amounts elected to have been paid during the prior year in accordance with Section 855(a) of the Code. Business Loan is also subject to certain limitations on the type of loan investments it can apply as collateral towards the borrowing base to receive additional borrowing availability under our Credit Facility, including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life and lien property. Our Credit Facility further requires Business Loan to comply with other financial and operational covenants, which obligate Business Loan to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of 25 obligors required in the borrowing base.
Additionally, we are required to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of $325.0 million plus 50.0% of all equity and subordinated debt raised after May 13, 2021 less 50% of any equity and subordinated debt retired or redeemed after May 13, 2021, which equates to $334.4 million as of March 31, 2022, (ii) asset coverage with respect to “senior securities representing indebtedness” of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.
As of March 31, 2022, and as defined in our Credit Facility, we had a net worth of $522.0 million, asset coverage on our “senior securities representing indebtedness” of 246.6%, calculated in accordance with the requirements of Section 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. In addition, we had 29 obligors in our Credit Facility’s borrowing base as of March 31, 2022. As of March 31, 2022, we were in compliance with all of our Credit Facility covenants.
Fair Value
We elected to apply the fair value option of ASC 825, “Financial Instruments,” specifically for the Credit Facility, which was consistent with our application of ASC 820 to our investments. Generally, the fair value of our Credit Facility is determined using a yield analysis which includes a DCF calculation and the assumptions that the Valuation Team believes market participants would use, including the estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. As of March 31, 2022, the discount rate used to determine the fair value of our Credit Facility was 30-day LIBOR, plus 2.70% per annum, plus a 1.00% unused commitment fee. As of September 30, 2021, the discount rate used to determine the fair value of our Credit Facility was 30-day LIBOR, plus 2.97% per annum, plus a 1.00% unused commitment fee. Generally, an increase or decrease in the discount rate used in the DCF calculation may result in a corresponding decrease or increase, respectively, in the fair value of our Credit Facility. As of March 31, 2022 and September 30, 2021, our Credit Facility was valued using Level 3 inputs and any changes in its fair value are recorded in net unrealized depreciation (appreciation) of other on our accompanying Consolidated Statements of Operations.
The following tables present our Credit Facility carried at fair value as of March 31, 2022 and September 30, 2021, on our accompanying Consolidated Statements of Assets and Liabilities for Level 3 of the hierarchy established by ASC 820 and the changes in fair value of our Credit Facility during the three and six months ended March 31, 2022 and 2021:
Total Recurring Fair Value Measurement Reported in
Consolidated Statements of Assets and Liabilities Using Significant Unobservable Inputs (Level 3)
March 31, 2022September 30, 2021
Credit Facility
$17,400 $50,500 
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Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3)
Three Months Ended
March 31,
20222021
Fair value as of December 31, 2021 and 2020, respectively$53,900 $16,270 
Borrowings
23,300 136,100 
Repayments
(59,800)(111,200)
Net unrealized appreciation(A)
 20 
Fair Value as of March 31, 2022 and 2021, respectively
$17,400 $41,190 
Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3)
Six Months Ended
March 31,
20222021
Fair value as of September 30, 2021 and 2020, respectively$50,500 $127,650 
Borrowings
161,500 157,600 
Repayments
(194,600)(244,400)
Net unrealized appreciation(A)
 340 
Fair Value as of March 31, 2022 and 2021, respectively
$17,400 $41,190 
(A)    Included in net unrealized appreciation (depreciation) of other on our accompanying Consolidated Statements of Operations for the three and six months ended March 31, 2022 and 2021.
The fair value of the collateral under our Credit Facility totaled approximately $478.3 million and $512.0 million as of March 31, 2022 and September 30, 2021, respectively.
Notes Payable

In November 2021, we completed a private placement of $50.0 million aggregate principal amount of 3.75% Notes due 2027 (the “2027 Notes”) for net proceeds of approximately $48.5 million after deducting initial purchasers’ costs, commissions and offering expenses borne by us. The 2027 Notes will mature on May 1, 2027 and may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to maturity at par plus a “make-whole” premium, if applicable. The 2027 Notes bear interest at a rate of 3.75% per year. Interest is payable semi-annually on May 1 and November 1 of each year (which equates to approximately $1.9 million per year) beginning May 1, 2022.

In December 2020, we completed a debt offering of $100.0 million aggregate principal amount of 5.125% Notes due 2026 (the “2026 Notes”) for net proceeds of approximately $97.7 million after deducting underwriting discounts, commissions and offering expenses borne by us. In March 2021, we completed a debt offering of an additional $50.0 million aggregate principal amount of the 2026 Notes for net proceeds of approximately $50.6 million after adding premiums and deducting underwriting costs, commissions and offering expenses borne by us. The 2026 Notes will mature on January 31, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to maturity at par plus a “make-whole” premium, if applicable. The 2026 Notes bear interest at a rate of 5.125% per year. Interest is payable semi-annually on January 31 and July 31 of each year (which equates to approximately $7.7 million per year).
In October 2019, we completed a public debt offering of $38.8 million aggregate principal amount of 5.375% Notes due 2024 (the “2024 Notes”), inclusive of the overallotment option exercised by the underwriters, for net proceeds of approximately $37.5 million after deducting underwriting discounts, commissions and offering expenses borne by us. On November 1, 2021, we voluntarily redeemed the 2024 Notes with an aggregate principal amount outstanding of $38.8 million. In connection with the voluntary redemption of the 2024 Notes, we incurred a loss on extinguishment of debt of $0.8 million, which is primarily comprised of the unamortized deferred issuance costs at the time of redemption. The 2024 Notes would have otherwise matured on November 1, 2024.
In November 2018, we completed a public debt offering of $57.5 million aggregate principal amount of 6.125% Notes due 2023 (the “2023 Notes”), inclusive of the overallotment option exercised by the underwriters, for net proceeds of $55.4 million after deducting underwriting discounts, commissions and offering expenses borne by us. On January 7, 2021, we voluntarily redeemed the 2023 Notes with an aggregate principal amount outstanding of $57.5 million. The redemption amount was $58.1 million inclusive of accrued interest through the date of redemption. In connection with the voluntary
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redemption of the 2023 Notes, we incurred a loss on extinguishment of debt of $1.2 million, which is primarily comprised of the unamortized deferred issuance costs at the time of redemption. The 2023 Notes would have otherwise matured on November 1, 2023.
The indenture relating to the 2027 Notes and the 2026 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 2027 Notes and the 2026 Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 2027 Notes and 2026 Notes are recorded at the principal amount, plus applicable premiums, less discounts and offering costs, on our Consolidated Statements of Assets and Liabilities.
The fair value, based on a DCF analysis, of the 2027 Notes as of March 31, 2022 was $46.5 million. The fair value, based on a DCF analysis, of the 2026 Notes as of March 31, 2022 was $150.0 million. We consider the 2027 Notes and 2026 Notes to be Level 3 within the ASC 820 fair value hierarchy.
NOTE 6. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS
Our shelf registration statement permits us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities and warrants to purchase common stock or preferred stock. As of March 31, 2022, we had the ability to issue up to $300.0 million in securities under the registration statement.
NOTE 7. NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER WEIGHTED AVERAGE COMMON SHARE
The following table sets forth the computation of basic and diluted net increase (decrease) in net assets resulting from operations per weighted average common share for the three and six months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
Six Months Ended
March 31,
2022202120222021
Numerator: basic and diluted net increase (decrease) in net assets resulting from operations per common share
$8,303 $21,299 $20,406 $33,602 
Denominator: basic and diluted weighted average common share
34,304,371 32,765,980 34,304,371 32,428,089 
Basic and diluted net increase (decrease) in net assets resulting from operations per common share
$0.24 $0.65 $0.59 $1.03 
NOTE 8. DISTRIBUTIONS TO COMMON STOCKHOLDERS
To qualify to be taxed as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our taxable ordinary income plus the excess of our net short-term capital gains over net long-term capital losses (“Investment Company Taxable Income”). The amount to be paid out as distributions to our stockholders is determined by our Board of Directors quarterly and is based on management’s estimate of Investment Company Taxable Income. Based on that estimate, our Board of Directors declares three monthly distributions to common stockholders each quarter.
The federal income tax characteristics of all distributions will be reported to stockholders on the IRS Form 1099 after the end of each calendar year. Estimates of tax characterization made on a quarterly basis may not be representative of the actual tax characterization of cash distributions for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date.
For the calendar year ended December 31, 2021, 100.0% of distributions to common stockholders were deemed to be paid from ordinary income for 1099 stockholder reporting purposes. For the calendar year ended December 31, 2020, 97.3% of
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distributions to common stockholders were deemed to be paid from ordinary income and 2.7% of distributions to common stockholders were deemed to be a return of capital for 1099 stockholder reporting purposes.
We paid the following monthly distributions to common stockholders for the six months ended March 31, 2022 and 2021:
Fiscal YearDeclaration DateRecord DatePayment DateDistribution per Common Share
2022October 12, 2021October 22, 2021October 29, 2021$0.065 
October 12, 2021November 19, 2021November 30, 20210.065 
October 12, 2021December 23, 2021December 31, 20210.065 
January 11, 2022January 21, 2022January 31, 20220.065 
January 11, 2022February 18, 2022February 28, 20220.065 
January 11, 2022March 23, 2022March 31, 20220.065 
Six Months Ended March 31, 2022:
$0.39 
Fiscal YearDeclaration DateRecord DatePayment DateDistribution per Common Share
2021October 13, 2020October 23, 2020October 30, 2020$0.065 
October 13, 2020November 20, 2020November 30, 20200.065 
October 13, 2020December 23, 2020December 31, 20200.065 
January 12, 2021January 22, 2021January 29, 20210.065 
January 12, 2021February 17, 2021February 26, 20210.065 
January 12, 2021March 18, 2021March 31, 20210.065 
Six Months Ended March 31, 2021:
$0.39 
Aggregate distributions declared and paid to our common stockholders were approximately $13.4 million and $12.7 million for the six months ended March 31, 2022 and 2021, respectively, and were declared based on estimates of Investment Company Taxable Income for the respective fiscal years. For the fiscal year ended September 30, 2021, distributions declared and paid exceeded taxable income available for common distributions resulting in a partial return of capital of approximately $1.0 million.
For the six months ended March 31, 2022 and the fiscal year ended September 30, 2021, we recorded the following adjustments for book-tax differences to reflect tax character. Results of operations, total net assets, and cash flows were not affected by these adjustments.
Six Months Ended
March 31, 2022
Year Ended
September 30, 2021
Undistributed net investment income
$(3,692)$39 
Accumulated net realized losses3,692 959 
Capital in excess of par value (998)
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NOTE 9. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are party to certain legal proceedings incidental to the normal course of our business. We are required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves. Based on current knowledge, we do not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our financial condition, results of operations or cash flows. Additionally, based on our current knowledge, we do not believe such loss contingencies are both probable and estimable and therefore, as of March 31, 2022 and September 30, 2021, we had no established reserves for such loss contingencies.
Escrow Holdbacks
From time to time, we enter into arrangements relating to exits of certain investments whereby specific amounts of the proceeds are held in escrow to be used to satisfy potential obligations, as stipulated in the sales agreements. We record escrow amounts in Restricted cash and cash equivalents, if received in cash but subject to potential obligations or other contractual restrictions, or as escrow receivables in Other assets, net, if not yet received in cash, on our accompanying Consolidated Statements of Assets and Liabilities. We establish reserves and holdbacks against escrow amounts if we determine that it is probable and estimable that a portion of the escrow amounts will not ultimately be released or received at the end of the escrow period. Reserves and holdbacks against escrow amounts were $0.5 million and $0.3 million as of March 31, 2022 and September 30, 2021, respectively.
Financial Commitments and Obligations
We have lines of credit, delayed draw term loans, and an uncalled capital commitment with certain of our portfolio companies that have not been fully drawn. Since these commitments have expiration dates and we expect many will never be fully drawn, the total commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused lines of credit, the unused delayed draw term loans and the uncalled capital commitment as of March 31, 2022 and September 30, 2021 to be immaterial.
The following table summarizes the amounts of our unused lines of credit, delayed draw term loans and uncalled capital commitment, at cost, as of March 31, 2022 and September 30, 2021, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and Liabilities:

March 31,
2022
September 30,
2021
Unused line of credit commitments(A)
$29,153 $25,549 
Delayed draw term loans28,754 27,984 
Uncalled capital commitment843 843 
Total$58,750 $54,376 
(A)    There may be specific covenant requirements that temporarily limit a portfolio company’s availability to draw on an unused line of credit commitment.
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NOTE 10. FINANCIAL HIGHLIGHTS
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Per Common Share Data:
Net asset value at beginning of period(A)
$9.44 $7.61 $9.28 $7.40 
Income from operations(B)
Net investment income
0.25 0.20 0.52 0.39 
Net realized and unrealized gain (loss) on investments
(0.02)0.49 0.08 0.69 
Net realized and unrealized gain (loss) on other
0.01 (0.04)(0.01)(0.05)
Total from operations
0.24 0.65 0.59 1.03 
Distributions to common stockholders from(B)(C)
Net investment income
(0.20)(0.18)(0.40)(0.36)
Return of capital
 (0.02) (0.03)
Total distributions
(0.20)(0.20)(0.40)(0.39)
Capital share transactions(B)
Anti-dilutive effect of common stock issuance(D)
 0.05  0.07 
Total capital share transactions
 0.05  0.07 
Other, net
0.01 — 0.02 — 
Net asset value at end of period(A)
$9.49 $8.11 $9.49 $8.11 
Per common share market value at beginning of period
$11.59 $8.86 $11.30 $7.41 
Per common share market value at end of period
11.79 9.92 11.79 9.92 
Total return(E)
3.51 %14.26 %7.95 %39.92 %
Common stock outstanding at end of period(A)
34,304,371 33,396,426 34,304,371 33,396,426 
Statement of Assets and Liabilities Data:
Net assets at end of period
$325,467 $270,888 $325,467 $270,888 
Average net assets(F)
324,891 255,449 322,892 252,408 
Senior Securities Data:
Borrowings under Credit Facility, at cost
17,400 41,200 17,400 41,200 
Long term debt200,000 188,813 200,000 188,813 
Ratios/Supplemental Data:
Ratio of net expenses to average net assets – annualized(G)(H)
10.55 %10.16 %9.65 %10.37 %
Ratio of net investment income to average net assets – annualized(I)
10.70 %10.02 %11.06 %10.05 %
(A)    Based on actual shares outstanding at the end of the corresponding period.
(B)    Based on weighted average basic per share data.
(C)    The tax character of distributions is determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP.
(D)    During the three months ended December 31, 2020, the anti-dilution was a result of issuing common shares during the period at a price above the then current NAV per share.
(E)    Total return equals the change in the ending market value of our common stock from the beginning of the fiscal year, taking into account distributions reinvested in accordance with the terms of our dividend reinvestment plan. Total return does not take into account distributions that may be characterized as a return of capital. For further information on the estimated character of our distributions to common stockholders, refer to Note 9—Distributions to Common Stockholders.
(F)    Computed using the average of the balance of net assets at the end of each month of the reporting period.
(G)    Ratio of net expenses to average net assets is computed using total expenses, net of credits from the Adviser, to the base management, loan servicing and incentive fees.
(H)    Had we not received any non-contractual, unconditional and irrevocable credits of fees from the Adviser, the ratio of net expenses to average net assets would have been 12.56% and 12.78% for the three and six months ended March 31, 2022, respectively. and 13.76% and 13.80% for the three and six months ended March 31, 2021, respectively.
(I)    Had we not received any non-contractual, unconditional and irrevocable credits of fees from the Adviser, the ratio of net investment income to average net assets would have been 8.72% and 7.98% for the three and six months ended March 31, 2022, respectively, and 6.48% and 6.68% for the three and six months ended March 31, 2021, respectively.

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NOTE 11. SUBSEQUENT EVENTS
Portfolio Activity
In April 2022, we invested $12.0 million in Axios Industrial Group, LLC through secured first lien debt.

In April 2022, we invested $14.4 million in Salvo Technologies, Inc. through secured first lien debt and membership units.

Distributions and Dividends
On April 12, 2022, our Board of Directors declared the following monthly distributions to common stockholders:
Record DatePayment DateDistribution per Common Share
April 22, 2022April 29, 2022$0.0675 
May 20, 2022May 31, 20220.0675 
June 22, 2022June 30, 20220.0675 
Total for the Quarter:$0.2025 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements contained herein, other than historical facts, may constitute “forward-looking statements.” These statements may relate to, among other things, our future operating results, our business prospects and the prospects of our portfolio companies, actual and potential conflicts of interest with Gladstone Management Corporation (the “Adviser”), our adviser, and its affiliates, the use of borrowed money to finance our investments, the adequacy of our financing sources and working capital, and our ability to co-invest, among other factors. In some cases, you can identify forward-looking statements by terminology such as “estimate,” “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “project,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative or variations of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include: (1) changes in the economy and the capital markets, including stock price volatility; (2) risks associated with negotiation and consummation of pending and future transactions; (3) the loss of one or more of our executive officers, in particular David Gladstone, Terry Lee Brubaker or Robert L. Marcotte; (4) changes in our investment objectives and strategy; (5) availability, terms (including the possibility of interest rate volatility) and deployment of capital; (6) changes in our industry, interest rates, exchange rates or the general economy; (7) our business prospects and the prospects of our portfolio companies; (8) the degree and nature of our competition; (9) changes in governmental regulation, tax rates and similar matters; (10) our ability to exit investments in a timely manner; (11) our ability to maintain our qualification as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”); (12) the impact of COVID-19 on the economy, our portfolio companies and the capital markets, including the measures taken by governmental authorities to address it, which may precipitate or exacerbate other risks and/or uncertainties and (13) those factors described herein, including Item 1A. “Risk Factors,” and in the “Risk Factors” section of our Annual Report on Form 10-K (our “Annual Report”) for the fiscal year ended September 30, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on November 15, 2021. Additionally, many of the risks and uncertainties listed above, among others, are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. We caution readers not to place undue reliance on any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements and future results could differ materially from historical performance. We have based forward-looking statements on information available to us on the date of this report. Except as required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC from time to time, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements contained in this Quarterly Report on Form 10-Q are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended.
The following analysis of our financial condition and results of operations should be read in conjunction with our accompanying Consolidated Financial Statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report. Historical financial condition and results of operations and percentage relationships among any amounts in the financial statements are not necessarily indicative of financial condition or results of operations for any future periods. Except per share amounts, dollar amounts in the tables included herein are in thousands unless otherwise indicated.
OVERVIEW
General
We were incorporated under the Maryland General Corporation Law on May 30, 2001. We operate as an externally managed, closed-end, non-diversified management investment company, and have elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we have elected to be treated as a RIC under the Code. To continue
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to qualify as a RIC for federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain requirements, including certain minimum distribution requirements.
We were established for the purpose of investing in debt and equity securities of established private businesses operating in the U.S. Our investment objectives are to: (1) achieve and grow current income by investing in debt securities of established lower middle market businesses 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. To achieve our investment objectives, our investment strategy is to invest in several categories of debt and equity securities, with each investment generally ranging from $8 million to $30 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. We expect that our investment portfolio over time will consist of approximately 90.0% debt investments and 10.0% equity investments, at cost. As of March 31, 2022, our investment portfolio was made up of approximately 90.8% debt investments and 9.2% equity investments, at cost.
We focus on investing in lower middle market companies (which we generally define as companies with annual earnings before interest, taxes, depreciation and amortization of $3 million to $15 million) in the U.S. that meet certain criteria, including the following: the sustainability of the business’ free cash flow and its ability to grow it over time, adequate assets for loan collateral, experienced management teams with a significant ownership interest in the borrower, reasonable capitalization of the borrower, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples and, to a lesser extent, the potential to realize appreciation and gain liquidity in our equity position, if any. We lend to borrowers that need funds for growth capital or to finance acquisitions or recapitalize or refinance their existing debt facilities. We seek to avoid investing in high-risk, early-stage enterprises. Our targeted portfolio companies are generally considered too small for the larger capital marketplace.
We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity. In July 2012, the SEC granted us an exemptive order (the “Co-Investment Order”) that expanded our ability to co-invest, under certain circumstances, with certain of our affiliates, including Gladstone Investment Corporation, a BDC also managed by the Adviser, and any future BDC or closed-end management investment company that is advised (or sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing, subject to the conditions in the Co-Investment Order. Since 2012, we have opportunistically made several co-investments with Gladstone Investment Corporation pursuant to the Co-Investment Order. We believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies. If we are participating in an investment with one or more co-investors, our investment is likely to be smaller than if we were investing alone.
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. 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.
Additionally, Gladstone Securities, LLC (“Gladstone Securities”), a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation, which is 100% indirectly owned and controlled by Mr. Gladstone, our chairman and chief executive officer, has provided other services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee.
Business
Portfolio and Investment Activity
In general, our investments in debt securities have a term of no more than seven years, accrue interest at variable rates (generally based on the 30-day London Interbank Offered Rate (“LIBOR”)) and, to a lesser extent, at fixed rates. We seek debt instruments that pay interest monthly or, at a minimum, quarterly, may have a success fee or deferred interest provision and are primarily interest only, with all principal and any accrued but unpaid interest due at maturity. Generally, success fees accrue at a set rate and are contractually due upon a change of control of a portfolio company, typically from an exit or sale. Some debt securities have deferred interest whereby some portion of the interest payment is added to the
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principal balance so that the interest is paid, together with the principal, at maturity. This form of deferred interest is often called paid-in-kind (“PIK”) interest.
Typically, our equity investments consist of common stock, preferred stock, limited liability company interests, or warrants to purchase the foregoing. Often, these equity investments occur in connection with our original investment, recapitalizing a business, or refinancing existing debt.
During the six months ended March 31, 2022, we invested $106.9 million in six new portfolio companies and extended $14.7 million in investments to existing portfolio companies. In addition, during the six months ended March 31, 2022, we exited seven portfolio companies through early payoffs. We received a total of $147.7 million in combined net proceeds and principal repayments from the aforementioned portfolio company exits, as well as principal repayments by existing portfolio companies, during the six months ended March 31, 2022. This activity resulted in a net decrease in our overall portfolio by one portfolio company (to 45) and a net decrease of $9.0 million in our portfolio at cost since September 30, 2021. From our initial public offering in August 2001 through March 31, 2022, we have made 589 different loans to, or investments in, 260 companies for a total of approximately $2.3 billion, before giving effect to principal repayments on investments and divestitures.
During the six months ended March 31, 2022, the following significant transactions occurred:
Proprietary Investments

In October 2021, we invested $26.3 million in Engineering Manufacturing Technologies, LLC through secured first lien debt and equity.

In November 2021, our investment in Lignetics, Inc. was sold, which resulted in the recognition of success fee income of $1.6 million and a realized gain of $13.4 million. In connection with the sale, we received net cash proceeds of approximately $47.2 million, including the repayment of our debt investment of $29.0 million at par.

In November 2021, our investment in Prophet Brand Strategy paid off at par for net cash proceeds of $13.1 million. In conjunction with the payoff, we received a prepayment fee of $0.1 million.

In November 2021, our investment in Effective School Solutions LLC paid off at par for net cash proceeds of $19.5 million. In conjunction with the payoff, we received a prepayment fee of $0.5 million.

In November 2021, we invested $13.4 million in WB Xcel Holdings, LLC through secured first lien debt and equity.

In December 2021, our investment in Phoenix Aromas & Essential Oils, LLC paid off at par for net cash proceeds of $10.0 million.

In December 2021, we invested $10.0 million in Fix-it Group, Inc. through secured first lien debt.

In December 2021, we invested $10.5 million in Workforce QA LLC through secured first lien debt and equity.

In December 2021, we invested $30.0 million in Springfield, Inc. through secured second lien debt.

In December 2021, we invested $16.8 million in HH-Inspire Acquisition, Inc. through secured first lien debt and equity.

In January 2022, our investment in Belnick, Inc. paid off at par for net cash proceeds of $10.0 million.

In March 2022, we invested $5.0 million in Pansophic Learning Ltd., an existing portfolio company, through secured first lien debt.

In March 2022, our investment in NetFortris Corp. was sold, which resulted in the recognition of success fee income of $3.2 million. In connection with the sale, we received net cash proceeds of $29.0 million, including the repayment of our debt investment of $28.8 million at par. We continue to retain an equity investment in NetFortris Holdings, LLC with a cost basis of $0.8 million and fair value of $0.6 million as of March 31, 2022.
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Syndicated Investments

In November 2021, our investment in Medical Solutions Holdings, Inc. paid off at par for net cash proceeds of $6.0 million.

In January 2022, our investment in Keystone Acquisition Corp. paid off at par for net cash proceeds of $4.0 million.


Capital Raising
We have been able to meet our capital needs through extensions of and amendments to our line of credit with KeyBank National Association (“KeyBank”), as administrative agent, lead arranger and lender (as amended and/or restated from time to time, our “Credit Facility”) and by accessing the capital markets in the form of public equity offerings of common stock and debt offerings. We have successfully extended the Credit Facility’s revolving period multiple times, most recently to October 2023, and currently have a total commitment amount of $175.0 million. In December 2020, we completed a debt offering of $100.0 million aggregate principal amount of our 5.125% Notes due 2026 (the “2026 Notes”). In March 2021, we completed a debt offering of an additional $50.0 million aggregate principal amount of the 2026 Notes. In November 2021, we completed a debt offering of $50.0 million aggregate principal amount of our 3.75% Notes due 2027 (the “2027 Notes”). Refer to “Liquidity and Capital Resources — Revolving Credit Facility,” “Liquidity and Capital Resources — Equity — Common Stock,” and “Liquidity and Capital Resources — Notes Payable” for further discussion.
Although we have been able to access the capital markets historically and in recent years, market conditions, including the impact of COVID-19, may affect the trading price of our capital stock and thus may inhibit our ability to finance new investments through the issuance of equity in the future. When our common stock trades below net asset value (“NAV”) per common share, our ability to issue equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our common stock below NAV per common share without first obtaining approval from our stockholders and our independent directors, other than through sales to our then-existing stockholders pursuant to a rights offering.
On March 31, 2022, the closing market price of our common stock was $11.79 per share, a 24.2% premium to our March 31, 2022 NAV per share of $9.49.
Regulatory Compliance
Our ability to seek external debt financing, to the extent that it is available under current market conditions, is further subject to the asset coverage limitations of the 1940 Act, which require us to have an asset coverage (as defined in Sections 18 and 61 of the 1940 Act) of at least 150% on our “senior securities representing indebtedness” and our “senior securities that are stock.”
On April 10, 2018, our Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the Company’s asset coverage requirements for senior securities changed from 200% to 150%, effective April 10, 2019.
As of March 31, 2022, our asset coverage on our “senior securities representing indebtedness” was 246.6%.
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Recent Developments
Distributions
On April 12, 2022, our Board of Directors declared the following monthly distributions to common stockholders:
Record DatePayment DateDistribution per Common Share
April 22, 2022April 29, 2022$0.0675 
May 20, 2022May 31, 20220.0675 
June 22, 2022June 30, 20220.0675 
Total for the Quarter:$0.2025 
LIBOR Transition

In general, our investments in debt securities have a term of five years, accrue interest at variable rates (based on the one-month LIBOR) and, to a lesser extent, at fixed rates. Most U.S. dollar LIBOR are currently anticipated to be phased out in June 2023. LIBOR is currently expected to transition to a new standard rate, the Secured Overnight Financing Rate (“SOFR”), which will incorporate certain overnight repo market data collected from multiple data sets. To attain an equivalent one-month rate, we currently intend to adjust the SOFR to minimize the difference between the interest that a borrower would be paying using LIBOR versus what it will be paying using SOFR. We are currently monitoring the transition and cannot assure you whether SOFR will become a standard rate for variable rate debt. We expect we will need to renegotiate certain loan documents with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to include LIBOR replacement language. Assuming that SOFR replaces LIBOR and is appropriately adjusted to equate to one-month LIBOR, we expect that there should be minimal impact on our operations.
COVID-19

We continue to monitor and work with the management teams and shareholders of our portfolio companies to navigate the significant market, operational and economic challenges created by the continuing COVID-19 pandemic. The Company’s investment portfolio continues to be focused on a diversified mix of industries and sectors that have proven to be more durable than industries or sectors that are more prone to economic cycles including consumer or retail industries. We believe our portfolio companies effectively and efficiently responded to the challenges posed by the COVID-19 pandemic and related restrictions imposed by state and local governments, including developing liquidity plans supported by internal cash reserves, shareholder support, and, as appropriate, accessing the government Paycheck Protection Program. We believe we have sufficient levels of liquidity to support our existing portfolio companies, as necessary, and selectively deploy capital in new investment opportunities.

Impact of Inflation

We believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. During the six months ended March 31, 2022 and 2021, general inflationary pressures and certain commodity price volatility have impacted our portfolio companies to varying degrees; however, the broad based impact of these pricing changes have largely been mitigated by price adjustments without adverse sales implications, and thus, have not materially impacted our portfolio companies’ ability to service their indebtedness, including our loans. Notwithstanding the results to date, we do expect that the cumulative effect of these inflationary pressures may impact the profit margins or sales of certain portfolio companies and their ability to service their debts. We continue to monitor the current inflationary environment to anticipate any impact on our portfolio companies including their availability to pay interest on our loans. We cannot assure you that our results of operations and financial condition or that of our portfolio companies will not be materially impacted by inflation in the future. See “Risk Factors— We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the U.S.”
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RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021
Three Months Ended March 31,
20222021$ Change% Change
INVESTMENT INCOME
Interest income
$12,962 $11,886 $1,076 9.1 %
Success fee, dividend, and other income
4,298 999 3,299 330.2 
Total investment income17,260 12,885 4,375 34.0 
EXPENSES
Base management fee
2,479 2,095 384 18.3 
Loan servicing fee
1,520 1,396 124 8.9 
Incentive fee
1,971 1,381 590 42.7 
Administration fee
401 332 69 20.8 
Interest expense on borrowings and notes payable
3,020 2,822 198 7.0 
Amortization of deferred financing costs
274 338 (64)(18.9)
Other expenses
522 398 124 31.2 
Expenses, before credits from Adviser10,187 8,762 1,425 16.3 
Credit to base management fee – loan servicing fee
(1,520)(1,396)(124)8.9 
Credits to fees from Adviser – other
(102)(880)778 (88.4)
Total expenses, net of credits8,565 6,486 2,079 32.1 
NET INVESTMENT INCOME8,695 6,399 2,296 35.9 
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments
 63 (63)(100.0)
Net realized gain (loss) on other
233 (1,152)1,385 (120.2)
Net unrealized appreciation (depreciation) of investments
(625)16,009 (16,634)(103.9)
Net unrealized appreciation of other
 (20)20 (100.0)
Net gain (loss) from investments and other(392)14,900 (15,292)(102.6)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$8,303 $21,299 $(12,996)(61.0)%
Investment Income
Interest income increased by 9.1% for the three months ended March 31, 2022, as compared to the prior year period. Generally, the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period multiplied by the weighted-average yield. The weighted average principal balance of our interest-bearing investment portfolio for the three months ended March 31, 2022, was $514.4 million, compared to $454.1 million for the three months ended March 31, 2021, an increase of $60.3 million, or 13.3%. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments, which decreased to 10.2% for the three months ended March 31, 2022, compared to 10.6% for the three months ended March 31, 2021, inclusive of any allowances on interest receivables made during those periods. The decrease in the weighted average yield was driven mainly by competitive marketplace conditions.
As of March 31, 2022 and September 30, 2021, there were no loans on non-accrual status.
Other income increased by $3.3 million during the three months ended March 31, 2022, as compared to the prior year period, primarily due to increases in success fees received and dividend income, partially offset by a decrease in prepayment fees received, period over period.
As of March 31, 2022 and September 30, 2021, no single investment represented greater than 10% of the total investment portfolio at fair value.
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Expenses
Expenses, net of any non-contractual, unconditional and irrevocable credits to fees from the Adviser, increased $2.1 million, or 32.1%, for the three months ended March 31, 2022, as compared to the prior year period. This increase was primarily due to a $0.9 million increase in net base management fees and a $0.8 million increase in the net incentive fee.
Total interest expense on borrowings and notes payable increased by $0.2 million, or 7.0%, during the three months ended March 31, 2022, as compared to the prior year period. This increase was driven by an increase in our overall funding needs and a change in the composition of our debt financing. Interest expense on our notes payable increased by $0.4 million period over period with the issuance of the 2027 Notes in November 2021 and the 2026 Notes in March 2021, partially offset by the redemption of our 5.375% Notes due 2024 (the “2024 Notes”) in November 2021. Interest expense on our Credit Facility decreased by $0.2 million, period over period, driven primarily by a decrease in the weighted average balance outstanding on our Credit Facility, partially offset by an increase in unused commitment fees. The weighted average balance outstanding on our Credit Facility was $42.5 million during the three months ended March 31, 2022, as compared to $69.4 million in the prior year period, a decrease of 38.8%. The effective interest rate on our Credit Facility, including unused commitment fees incurred, but excluding the impact of deferred financing costs, was 5.9% during the three months ended March 31, 2022, compared to 4.6% during the prior year period. The increase in the effective interest rate was driven primarily by a $72 thousand increase in unused commitment fees during the three months ended March 31, 2022 as compared to the prior year period.
The net base management fee earned by the Adviser increased by $0.9 million, for the three months ended March 31, 2022, as compared to the prior year period, resulting from a decrease in new deal origination credits to the base management fee from the Adviser period over period and an increase in average total assets subject to the base management fee.
The income-based incentive fee increased by $0.6 million for the three months ended March 31, 2022, as compared to the prior year period, due to higher pre-incentive fee net investment income as compared to the prior year period. During the three months ended March 31, 2021, our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser of $0.2 million to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of our distributions to common stockholders. There was no incentive fee credit during the three months ended March 31, 2022.
The base management, loan servicing and incentive fees, and associated non-contractual, unconditional and irrevocable credits, are computed quarterly, as described under “Transactions with the Adviser” in Note 4—Related Party Transactions of the Notes to Consolidated Financial Statements and are summarized in the following table:
Three Months Ended
March 31,
20222021
Average total assets subject to base management fee(A)
$566,629 $478,857 
Multiplied by prorated annual base management fee of 1.75%
0.4375 %0.4375 %
Base management fee(B)
$2,479 $2,095 
Portfolio company fee credit(59)(574)
Syndicated loan fee credit
(43)(81)
Net Base Management Fee$2,377 $1,440 
Loan servicing fee(B)
1,520 1,396 
Credit to base management fee - loan servicing fee(B)
(1,520)(1,396)
Net Loan Servicing Fee$ $— 
Incentive fee(B)
1,971 1,381 
Incentive fee credit
 (225)
Net Incentive Fee$1,971 $1,156 
Portfolio company fee credit(59)(574)
Syndicated loan fee credit
(43)(81)
Incentive fee credit (225)
Credits to Fees From Adviser - other(B)
$(102)$(880)
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(A)Average total assets subject to the base management fee is defined as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
(B)Reflected, on a gross basis, as a line item on our Consolidated Statements of Operations.
Net Realized and Unrealized Gain (Loss)
Net Realized Gain (Loss) on Investments
For the three months ended March 31, 2021, we recorded a net realized gain on investments of $0.1 million, which resulted primarily from the gain recognized on our investment in Funko, LLC. No such amounts were recorded during the three months ended March 31, 2022.
Net Unrealized Appreciation (Depreciation) of Investments
During the three months ended March 31, 2022, we recorded net unrealized depreciation of investments in the aggregate amount of $0.6 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the three months ended March 31, 2022 were as follows:
Three Months Ended March 31, 2022
Portfolio CompanyRealized Gain
(Loss)
Unrealized
Appreciation
(Depreciation)
Reversal of
Unrealized
(Appreciation)
Depreciation
Net
Gain (Loss)
WB Xcel Holdings, LLC$— $2,826 $— $2,826 
ENET Holdings, LLC— 2,250 — 2,250 
Targus Cayman HoldCo, Ltd.— 1,309 — 1,309 
Defiance Integrated Technologies, Inc.— 713 — 713 
B+T Group Acquisition Inc.— 652 — 652 
Engineering Manufacturing Technologies, LLC— (362)— (362)
MCG Energy Solutions, LLC— (380)— (380)
Triple H Food Processors, LLC— (409)— (409)
PIC 360, LLC— (410)— (410)
R2i Holdings, LLC— (665)— (665)
Leeds Novamark Capital I, L.P.— (1,388)— (1,388)
Antenna Research Associates, Inc.— (1,624)— (1,624)
Encore Dredging Holdings, LLC— (2,715)— (2,715)
Other, net (<$500)— (255)(167)(422)
Total:$ $(458)$(167)$(625)

The primary driver of net unrealized depreciation of $0.6 million for the three months ended March 31, 2022 was the decline in the financial and operational performance of certain of our portfolio companies, partially offset by improvement in the financial and operational performance of WB Xcel Holdings, LLC and ENET Holdings, LLC.
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During the three months ended March 31, 2021, we recorded net unrealized appreciation of investments in the aggregate amount of $16.0 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the three months ended March 31, 2021 were as follows:
Three Months Ended March 31, 2021
Portfolio CompanyRealized Gain
(Loss)
Unrealized
Appreciation
(Depreciation)
Reversal of
Unrealized
(Appreciation)
Depreciation
Net
Gain (Loss)
AG Transportation Holdings, LLC$— $5,512 $— $5,512 
Antenna Research Associates, Inc.— 3,521 — 3,521 
NetFortris Corp.— 1,076 — 1,076 
American Trailer Rental Group LLC— 1,015 — 1,015 
Imperative Holdings Corporation— 819 — 819 
Defiance Integrated Technologies, Inc.— 659 — 659 
TNCP Intermediate HoldCo, LLC— 639 — 639 
Targus Cayman HoldCo, Ltd.— 636 — 636 
Triple H Food Processors, LLC— 492 — 492 
Lignetics, Inc.— 432 — 432 
EL Academies, Inc.— 410 — 410 
Sea Link International IRB, Inc.— 395 — 395 
DKI Ventures, LLC— 366 — 366 
PIC 360, LLC— 338 — 338 
Canopy Safety Brands, LLC— 221 — 221 
Leeds Novamark Capital I, L.P.— 220 — 220 
ENET Holdings, LLC— (750)— (750)
Other, net (<$500)63 198 (190)71 
Total:$63 $16,199 $(190)$16,072 

The primary driver of net unrealized appreciation of $16.0 million for the three months ended March 31, 2021 was the improvement in the financial and operational performance across a number of our portfolio companies and an increase in comparable multiples used to estimate the fair value of several of our portfolio companies, partially offset by a decrease in performance of certain of our other portfolio companies.
Net Realized Gain (Loss) on Other

We incurred a loss on extinguishment of debt of $1.2 million during the three months ended March 31, 2021, which resulted from the write-off of unamortized deferred issuance costs at the time of redemption of our $57.5 million aggregate principal amount of 6.125% Notes due 2023 (the “2023 Notes”) in January 2021. During the three months ended March 31, 2022, we recorded a net realized gain on other of $0.2 million associated with escrows received.
Net Unrealized (Appreciation) Depreciation of Other

During the three months ended March 31, 2021, we recorded $20 thousand of unrealized depreciation related to a change in the fair value of our Credit Facility. No such amounts were recorded during the three months ended March 31, 2022.

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Comparison of the Six Months Ended March 31, 2022 to the Six Months Ended March 31, 2021
Six Months Ended March 31,
20222021$ Change% Change
INVESTMENT INCOME
Interest income
$25,828 $23,968 $1,860 7.8 %
Success fee, dividend, and other income
7,599 1,799 5,800 322.4 
Total investment income33,427 25,767 7,660 29.7 
EXPENSES
Base management fee
4,999 4,097 902 22.0 
Loan servicing fee
2,982 2,744 238 8.7 
Incentive fee
4,062 2,748 1,314 47.8 
Administration fee
780 687 93 13.5 
Interest expense on borrowings and notes payable
6,027 5,390 637 11.8 
Amortization of deferred financing costs
563 756 (193)(25.5)
Other expenses
1,170 940 230 24.5 
Expenses, before credits from Adviser20,583 17,362 3,221 18.6 
Credit to base management fee – loan servicing fee
(2,982)(2,744)(238)8.7 
Credits to fees from Adviser – other
(2,029)(1,530)(499)32.6 
Total expenses, net of credits15,572 13,088 2,484 19.0 
NET INVESTMENT INCOME17,855 12,679 5,176 40.8 
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments
13,880 (2,081)15,961 (767.0)
Net realized gain (loss) on other
(467)(1,160)693 (59.7)
Net unrealized appreciation (depreciation) of investments
(10,862)24,504 (35,366)(144.3)
Net unrealized appreciation of other
 (340)340 (100.0)
Net gain (loss) from investments and other2,551 20,923 (18,372)(87.8)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$20,406 $33,602 $(13,196)(39.3)%
Investment Income
Interest income increased by 7.8% for the six months ended March 31, 2022, as compared to the prior year period. Generally, the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period multiplied by the weighted-average yield. The weighted average principal balance of our interest-bearing investment portfolio for the six months ended March 31, 2022, was $504.3 million, compared to $448.7 million for the six months ended March 31, 2021, an increase of $55.6 million, or 12.4%. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments, which decreased to 10.3% for the six months ended March 31, 2022, compared to 10.7% for the six months ended March 31, 2021, inclusive of any allowances on interest receivables made during those periods. The decrease in the weighted average yield was driven mainly by competitive marketplace conditions.
As of March 31, 2022 and September 30, 2021, there were no loans on non-accrual status.
Other income increased by $5.8 million during the six months ended March 31, 2022, as compared to the prior year period, primarily due to increases in success fees received and dividend income, period over period.
As of March 31, 2022 and September 30, 2021, no single investment represented greater than 10% of the total investment portfolio at fair value.
Expenses
Expenses, net of any non-contractual, unconditional and irrevocable credits to fees from the Adviser, increased $2.5 million, or 19.0%, for the six months ended March 31, 2022, as compared to the prior year period. This increase was primarily due to a $1.8 million increase in the net incentive fee and a $0.6 million increase in interest expense on borrowings and notes payable.
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Total interest expense on borrowings and notes payable increased by $0.6 million, or 11.8%, during the six months ended March 31, 2022, as compared to the prior year period. This increase was driven by an increase in our overall funding needs and a change in the composition of our debt financing. Interest expense on our notes payable increased by $1.1 million period over period with the issuance of the 2027 Notes in November 2021 and the 2026 Notes in December 2020 and March 2021, partially offset by the redemption of the 2024 Notes in November 2021. Interest expense on our Credit Facility decreased by $0.5 million, period over period, driven primarily by a decrease in the weighted average balance outstanding on our Credit Facility, partially offset by an increase in unused commitment fees. The weighted average balance outstanding on our Credit Facility was $37.7 million during the six months ended March 31, 2022, as compared to $87.4 million in the prior year period, a decrease of 56.9%. The effective interest rate on our Credit Facility, including unused commitment fees incurred, but excluding the impact of deferred financing costs, was 6.6% during the six months ended March 31, 2022, compared to 4.0% during the prior year period. The increase in the effective interest rate was driven primarily by a $0.3 million increase in unused commitment fees during the three months ended March 31, 2022 as compared to the prior year period.
The net base management fee earned by the Adviser decreased by $33 thousand for the six months ended March 31, 2022, as compared to the prior year period, resulting from an increase in credits to the base management fee from the Adviser period over period driven by an increase in new deal activity, partially offset by an increase in average total assets subject to the base management fee.
The income-based incentive fee increased by $1.3 million for the six months ended March 31, 2022, as compared to the prior year period, due to higher pre-incentive fee net investment income as compared to the prior year period. During the six months ended March 31, 2021, our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser of $0.4 million to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of our distributions to common stockholders. There was no incentive fee credit during the six months ended March 31, 2022.
The base management, loan servicing and incentive fees, and associated non-contractual, unconditional and irrevocable credits, are computed quarterly, as described under “Transactions with the Adviser” in Note 4—Related Party Transactions of the Notes to Consolidated Financial Statements and are summarized in the following table:
Six Months Ended
March 31,
20222021
Average total assets subject to base management fee(A)
$571,314 $468,229 
Multiplied by prorated annual base management fee of 1.75%
0.8750 %0.8750 %
Base management fee(B)
$4,999 $4,097 
Portfolio company fee credit(1,928)(926)
Syndicated loan fee credit
(101)(168)
Net Base Management Fee$2,970 $3,003 
Loan servicing fee(B)
2,982 2,744 
Credit to base management fee - loan servicing fee(B)
(2,982)(2,744)
Net Loan Servicing Fee$ $— 
Incentive fee(B)
4,062 2,748 
Incentive fee credit
 (436)
Net Incentive Fee$4,062 $2,312 
Portfolio company fee credit(1,928)(926)
Syndicated loan fee credit
(101)(168)
Incentive fee credit (436)
Credits to Fees From Adviser - other(B)
$(2,029)$(1,530)
(A)Average total assets subject to the base management fee is defined as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
(B)Reflected, on a gross basis, as a line item on our Consolidated Statements of Operations.
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Net Realized and Unrealized Gain (Loss)
Net Realized Gain (Loss) on Investments
For the six months ended March 31, 2022, we recorded a net realized gain on investments of $13.9 million, which resulted primarily from a $13.4 million realized gain recognized on the sale of our investment in Lignetics, Inc.

For the six months ended March 31, 2021, we recorded a net realized loss on investments of $2.1 million, which resulted primarily from the realized loss of $2.4 million recognized on our investment in Edmentum Ultimate Holdings, LLC.
Net Unrealized Appreciation (Depreciation) of Investments
During the six months ended March 31, 2022, we recorded net unrealized depreciation of investments in the aggregate amount of $10.9 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the six months ended March 31, 2022 were as follows:
Six Months Ended March 31, 2022
Portfolio CompanyRealized Gain
(Loss)
Unrealized
Appreciation
(Depreciation)
Reversal of
Unrealized
(Appreciation)
Depreciation
Net
Gain (Loss)
NetFortris Holdings LLC$— $4,127 $(284)$3,843 
ENET Holdings, LLC— 3,300 — 3,300 
WB Xcel Holdings, LLC— 2,826 — 2,826 
Targus Cayman HoldCo, Ltd.— 1,430 — 1,430 
Imperative Holdings Corporation— 1,151 — 1,151 
B+T Group Acquisition Inc.— 784 — 784 
AG Transportation Holdings, LLC468 — — 468 
Engineering Manufacturing Technologies, LLC— (362)— (362)
Sea Link International IRB, Inc.— (388)— (388)
Triple H Food Processors, LLC— (581)— (581)
MCG Energy Solutions, LLC— (922)— (922)
R2i Holdings, LLC— (926)— (926)
Leeds Novamark Capital I, L.P.— (1,388)— (1,388)
Antenna Research Associates, Inc.— (1,459)— (1,459)
Lignetics, Inc.13,408 — (14,958)(1,550)
Encore Dredging Holdings, LLC— (2,776)— (2,776)
Other, net (<$500)(303)(133)(432)
Total:$13,880 $4,513 $(15,375)$3,018 

The primary driver of net unrealized depreciation of $10.9 million for the six months ended March 31, 2022 was the reversal of unrealized depreciation associated with the exit of our investment in Lignetics, Inc. and the decline in the financial and operational performance of certain of our other portfolio companies, partially offset by the improvement in the financial and operational performance of NetFortris Holdings LLC (formerly NetFortris Corp.) and ENET Holdings, LLC.
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During the six months ended March 31, 2021, we recorded net unrealized appreciation of investments in the aggregate amount of $24.5 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the six months ended March 31, 2021 were as follows:
Six Months Ended March 31, 2021
Portfolio CompanyRealized Gain
(Loss)
Unrealized
Appreciation
(Depreciation)
Reversal of
Unrealized
(Appreciation)
Depreciation
Net
Gain (Loss)
AG Transportation Holdings, LLC$— $6,788 $— $6,788 
Antenna Research Associates, Inc.— 4,015 — 4,015 
American Trailer Rental Group LLC— 1,213 — 1,213 
Triple H Food Processors, LLC— 1,094 — 1,094 
Targus Cayman HoldCo, Ltd.— 1,043 — 1,043 
NetFortris Corp.— 984 — 984 
PIC 360, LLC— 856 — 856 
TNCP Intermediate HoldCo, LLC— 831 — 831 
EL Academies, Inc.— 669 — 669 
DKI Ventures, LLC— 615 — 615 
Defiance Integrated Technologies, Inc.— 502 — 502 
Edmentum Ultimate Holdings, LLC(2,351)— 2,770 419 
Café Zupas— 454 — 454 
Sea Link International IRB, Inc.— 425 — 425 
Lignetics, Inc.— 417 — 417 
R2i Holdings, LLC— 412 — 412 
Keystone Acquisition Corp.— 395 — 395 
Tailwind Smith Cooper Intermediate Corporation— 334 — 334 
Vertellus Holdings LLC(41)— 313 272 
Drive Chassis Holdco, LLC— 260 — 260 
Medical Solutions Holdings, Inc.— 233 — 233 
Leeds Novamark Capital I, L.P.— 220 — 220 
Gray Matter Systems, LLC— 203 — 203 
SpaceCo Holdings, LLC— 202 — 202 
Belnick, Inc.— 175 — 175 
Canopy Safety Brands, LLC— 163 — 163 
ENET Holdings, LLC— (1,124)— (1,124)
Other, net (<$500)311 232 (190)353 
Total:$(2,081)$21,611 $2,893 $22,423 

The primary driver of net unrealized appreciation of $24.5 million for the six months ended March 31, 2021 was the improvement in the financial and operational performance across a number of our portfolio companies and an increase in comparable multiples used to estimate the fair value of several of our portfolio companies, partially offset by the decline in the financial and operational performance of certain of our other portfolio companies, including most notably, ENET Holdings, LLC.
Net Realized Loss on Other

We incurred a loss on extinguishment of debt of $0.8 million during the six months ended March 31, 2022, which resulted from the write-off of unamortized deferred issuance costs at the time of redemption of our 2024 Notes in November 2021. We incurred a loss on extinguishment of debt of $1.2 million during the six months ended March 31, 2021, which resulted from the write-off of unamortized deferred issuance costs at the time of redemption of our 2023 Notes in January 2021.
Net Unrealized (Appreciation) Depreciation of Other

During the six months ended March 31, 2021, we recorded $0.3 million of unrealized depreciation related to a change in the fair value of our Credit Facility. No such amounts were recorded during the six months ended March 31, 2022.
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LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Our cash flows from operating activities are primarily generated from the interest payments on debt securities that we receive from our portfolio companies, as well as net proceeds received through repayments or sales of our investments. We utilize this cash primarily to fund new investments, make interest payments on our Credit Facility, make distributions to our stockholders, pay management and administrative fees to the Adviser and Administrator, and for other operating expenses.
Net cash provided by operating activities for the six months ended March 31, 2022 was $37.7 million, as compared to net cash used in operating activities of $4.8 million for the six months ended March 31, 2021. The change was primarily due to an increase in principal repayments, partially offset by an increase in purchases of investments, period over period. Purchases of investments were $121.6 million during the six months ended March 31, 2022, compared to $101.1 million during the six months ended March 31, 2021. Repayments and net proceeds from sales were $147.5 million during the six months ended March 31, 2022 compared to $82.1 million during the six months ended March 31, 2021.
As of March 31, 2022, we had loans to, syndicated participations in or equity investments in 45 companies, with an aggregate cost basis of approximately $537.5 million. As of September 30, 2021, we had loans to, syndicated participations in or equity investments in 46 companies, with an aggregate cost basis of approximately $546.5 million.
The following table summarizes our total portfolio investment activity during the six months ended March 31, 2022 and 2021:

Six Months Ended March 31,

20222021
Beginning investment portfolio, at fair value
$557,612 $450,400 
New investments
106,918 101,000 
Disbursements to existing portfolio companies
14,651 98 
Scheduled principal repayments on investments
(3,662)(1,563)
Unscheduled principal repayments on investments
(126,938)(76,893)
Net proceeds from sale of investments
(17,057)(3,598)
Net unrealized appreciation (depreciation) of investments
4,513 21,611 
Reversal of prior period depreciation (appreciation) of investments on realization
(15,375)2,893 
Net realized gain (loss) on investments
13,880 (2,081)
Increase in investments due to PIK(A) or other
2,614 1,081 
Net change in premiums, discounts and amortization
547 (181)
Investment Portfolio, at Fair Value
$537,703 $492,767 
(A)PIK interest is a non-cash source of income and is calculated at the contractual rate stated in a loan agreement and added to the principal balance of a loan.
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The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of March 31, 2022:
Amount
For the remaining six months ending September 30:
2022(A)
$23,440 
For the fiscal years ending September 30:
202327,469 

202466,011 

202582,477 

2026146,035 

Thereafter143,424 

Total contractual repayments
$488,856 

Adjustments to cost basis of debt investments(1,039)

Investments in equity securities49,648 

Investments held as of March 31, 2022 at cost:
$537,465 
(A)Includes debt investments with contractual principal amounts totaling $16.8 million for which the maturity date has passed as of March 31, 2022.
Financing Activities
Net cash used in financing activities for the six months ended March 31, 2022 was $36.9 million, which consisted primarily $38.8 million used in the redemption of our 2024 Notes and $33.1 million in net repayments on our Credit Facility, partially offset by $50.0 million in gross proceeds from the issuance of our 2027 Notes.

Net cash provided by financing activities for the six months ended March 31, 2021 was $7.4 million, which consisted primarily of $150.0 million in gross proceeds from the issuance of long term debt, partially offset by $86.8 million in net repayments on our Credit Facility and $57.5 million used in the redemption of our 2023 Notes.
Distributions to Stockholders
Common Stock Distributions
To qualify to be taxed as a RIC and thus avoid corporate level federal income tax on the income we distribute to our stockholders, we are required to distribute to our stockholders on an annual basis at least 90.0% of our Investment Company Taxable Income. Additionally, our Credit Facility has a covenant that generally restricts the amount of distributions to stockholders that we can pay out to be no greater than our aggregate net investment income, net capital gains and amounts elected to have been paid during the prior year in accordance with Section 855(a) of the Code. In accordance with these requirements, we paid monthly cash distributions of $0.065 per common share for each month for the six months ended March 31, 2022 and 2021. These distributions totaled an aggregate of $13.4 million and $12.7 million for the six months ended March 31, 2022 and 2021, respectively. In April 2022, our Board of Directors declared a monthly distribution of $0.0675 per common share for each of April, May, and June 2022. Our Board of Directors declared these distributions to our stockholders based on our estimates of our Investment Company Taxable Income for the fiscal year ending September 30, 2022. From inception through March 31, 2022, we have paid 230 monthly or quarterly consecutive distributions to common stockholders totaling approximately $409.7 million or $21.43 per share.
For the fiscal year ended September 30, 2021, distributions declared and paid exceeded taxable income available for common distributions resulting in a partial return of capital of approximately $1.0 million.
The characterization of the common stockholder distributions declared and paid for the fiscal year ending September 30, 2022 will be determined at fiscal year end, based upon our investment company taxable income for the full fiscal year and distributions paid during the full fiscal year. Such a characterization made on a quarterly basis may not be representative of the actual full fiscal year characterization.
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Dividend Reinvestment Plan
Our common stockholders who hold their shares through our transfer agent, Computershare, Inc. (“Computershare”), have the option to participate in a dividend reinvestment plan offered by Computershare, as the plan agent. This is an “opt in” dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional shares of our common stock. Common stockholders who do make such election will receive their distributions in cash. Common stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. The common stockholder will have an adjusted basis in the additional common shares purchased through the plan equal to the amount of the reinvested distribution. The additional shares will have a new holding period commencing on the day following the date on which the shares are credited to the common stockholder’s account. Computershare purchases shares in the open market in connection with the obligations under the plan.
Equity
Registration Statement
Our shelf registration statement permits us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities and warrants to purchase common stock, preferred stock or debt securities. As of March 31, 2022, we had the ability to issue up to $300.0 million in securities under the registration statement.
Common Stock
We anticipate issuing equity securities to obtain additional capital in the future. However, we cannot determine the timing or terms of any future equity issuances or whether we will be able to issue equity on terms favorable to us, or at all. To the extent that our common stock trades at a market price below our NAV per share, we will generally be precluded from raising equity capital through public offerings of our common stock, other than pursuant to stockholder and independent director approval or a rights offering to existing common stockholders.
On March 31, 2022, the closing market price of our common stock was $11.79 per share, a 24.2% premium to our March 31, 2022 NAV per share of $9.49.
Revolving Credit Facility
On May 13, 2021, we, through Business Loan, amended and restated the Credit Facility to, among other things, (i) decrease the commitment amount from $205.0 million to $175.0 million, (ii) extend the revolving period end date to October 31, 2023, (iii) extend the maturity date to October 31, 2025 (at which time all principal and interest will be due and payable if the Credit Facility is not extended by the revolving period end date), (iv) reduce the interest rate margin to 2.70% during the revolving period and 3.25% thereafter, with a LIBOR floor of 0.35%, (v) revise the unused fee to include an additional fee tier of 0.35% per annum on the daily undrawn amounts if the average unused amount is equal to or less than 35% during the applicable period, (vi) provide for certain excess concentration limits, including a reduced second lien limit and a new broadly syndicated loan limit and (vii) add customary LIBOR replacement language. We incurred fees of approximately $1.1 million in connection with this amendment and restatement, which are being amortized through our Credit Facility’s revolving period end date of October 31, 2023.
Interest is payable monthly during the term of our Credit Facility. Available borrowings are subject to various constraints imposed under our Credit Facility, based on the aggregate loan balance pledged by Business Loan, which varies as loans are added and repaid, regardless of whether such repayments are prepayments or made as contractually required. Our Credit Facility also requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank and with The Bank of New York Mellon Trust Company, N.A. as custodian. KeyBank, which also serves as the trustee of the account, generally remits the collected funds to us once a month.
Our Credit Facility contains covenants that require Business Loan to maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions), and restrict material changes to our credit and collection policies without the lenders’ consents. Our Credit Facility generally limits distributions to our stockholders on a fiscal year basis to the sum of our net investment income, net capital gains and amounts elected to have been paid during the prior year in accordance with Section 855(a) of the Code. Business Loan is
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also subject to certain limitations on the type of loan investments it can apply as collateral towards the borrowing base to receive additional borrowing availability under our Credit Facility, including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life, portfolio company leverage and lien property. Our Credit Facility further requires Business Loan to comply with other financial and operational covenants, which obligate Business Loan to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of 25 obligors required in the borrowing base.
Additionally, we are required to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of $325.0 million plus 50.0% of all equity and subordinated debt raised after May 13, 2021 less 50% of any equity and subordinated debt retired or redeemed after May 13, 2021, which equates to $334.4 million as of March 31, 2022, (ii) asset coverage with respect to “senior securities representing indebtedness” of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.
As of March 31, 2022, and as defined in our Credit Facility, we had a net worth of $522.0 million, asset coverage on our “senior securities representing indebtedness” of 246.6%, calculated in accordance with the requirements of Section 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. In addition, we had 29 obligors in our Credit Facility’s borrowing base as of March 31, 2022. As of March 31, 2022, we were in compliance with all of our Credit Facility covenants. Refer to Note 5—Borrowings of the notes to our Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information regarding our Credit Facility.
Notes Payable
In November 2021, we completed a private placement of $50.0 million aggregate principal amount of the 2027 Notes for net proceeds of approximately $48.5 million after adding discounts and deducting underwriting costs, commissions and offering expenses borne by us. The 2027 Notes will mature on May 1, 2027 and may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to maturity at par plus a “make-whole” premium, if applicable. The 2027 Notes bear interest at a rate of 3.75% per year. Interest is payable semi-annually on May 1 and November 1 of each year (which equates to approximately $1.9 million per year).

In December 2020, we completed a debt offering of $100.0 million aggregate principal amount of the 2026 Notes for net proceeds of approximately $97.7 million after deducting underwriting discounts, commissions and offering expenses borne by us. In March 2021, we completed a debt offering of an additional $50.0 million aggregate principal amount of the 2026 Notes for net proceeds of approximately $50.6 million after adding premiums and deducting underwriting costs, commissions and offering expenses borne by us. The 2026 Notes will mature on January 31, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to maturity at par plus a “make-whole” premium, if applicable. The 2026 Notes bear interest at a rate of 5.125% per year. Interest is payable semi-annually on January 31 and July 31 of each year (which equates to approximately $7.7 million per year).
In October 2019, we completed a public debt offering of the 2024 Notes for net proceeds of approximately $37.5 million after deducting underwriting discounts, commissions and offering expenses borne by us. On November 1, 2021, we voluntarily redeemed the 2024 Notes with an aggregate principal amount outstanding of $38.8 million. In connection with the voluntary redemption of the 2024 Notes, we incurred a loss on extinguishment of debt of $0.8 million, which is primarily comprised of the unamortized deferred issuance costs at the time of redemption. The 2024 Notes would have otherwise matured on November 1, 2024.
In November 2018, we completed a public debt offering of $57.5 million aggregate principal amount of the 2023 Notes, inclusive of the overallotment option exercised by the underwriters, for net proceeds of $55.4 million after deducting underwriting discounts, commissions and offering expenses borne by us. On January 7, 2021, we voluntarily redeemed the 2023 Notes with an aggregate principal amount outstanding of $57.5 million. The redemption amount was $58.1 million inclusive of accrued interest through the date of redemption. In connection with the voluntary redemption of the 2023 Notes, we incurred a loss on extinguishment of debt of $1.2 million, which is primarily comprised of the unamortized deferred issuance costs at the time of redemption. The 2023 Notes would have otherwise matured on November 1, 2023.
The indenture relating to the 2027 Notes and the 2026 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset
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coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 2027 Notes and the 2026 Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 2027 Notes and 2026 Notes are recorded at the principal amount, plus applicable premiums, less discounts and offering costs, on our Consolidated Statements of Assets and Liabilities.
Off-Balance Sheet Arrangements
We generally recognize success fee income when the payment has been received. As of March 31, 2022 and September 30, 2021, we had off-balance sheet success fee receivables on our accruing debt investments of $12.1 million and $11.7 million (or approximately $0.35 per common share and $0.34 per common share), respectively, that would be owed to us, generally upon a change of control of the portfolio companies. Consistent with GAAP, we generally have not recognized our success fee receivables and related income in our Consolidated Financial Statements until earned. Due to the contingent nature of our success fees, there are no guarantees that we will be able to collect all of these success fees or know the timing of such collections.
Contractual Obligations
We have lines of credit, delayed draw term loans, and an uncalled capital commitment with certain of our portfolio companies that have not been fully drawn. Since these commitments have expiration dates and we expect many will never be fully drawn, the total commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused lines of credit, the unused delayed draw term loans, and the uncalled capital commitment as of March 31, 2022 and September 30, 2021 to be immaterial.
The following table shows our contractual obligations as of March 31, 2022, at cost:
Payments Due by Period
Contractual Obligations(A)
Less than
1 Year
1-3 Years3-5 YearsMore than 5
Years
Total
Credit Facility(B)
$— $— $17,400 $— $17,400 
Notes Payable
— — 150,000 50,000 200,000 
Interest expense on debt obligations(C)
11,729 23,457 11,420 156 46,762 
Total$11,729 $23,457 $178,820 $50,156 $264,162 
(A)Excludes our unused line of credit commitments, unused delayed draw term loans, and uncalled capital commitments to our portfolio companies in an aggregate amount of $58.8 million, at cost, as of March 31, 2022.
(B)Principal balance of borrowings outstanding under our Credit Facility, based on the maturity date following the current contractual revolver period end date.
(C)Includes estimated interest payments on our Credit Facility, 2027 Notes, and 2026 Notes. The amount of interest expense calculated for purposes of this table was based upon rates and balances as of March 31, 2022.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported consolidated amounts of assets and liabilities, including disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ materially from those estimates under different assumptions or conditions. We have identified our investment valuation policy (which has been approved by our Board of Directors) as our most critical accounting policy, which is described in Note 2— Summary of Significant Accounting Policies in the accompanying notes to our Consolidated Financial Statements included elsewhere in this Quarterly Report. Additionally, refer to Note 3—Investments in our accompanying Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information regarding fair value measurements and our application of Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures.” We have also identified our revenue recognition policy as a critical accounting policy, which is described in Note 2— Summary of Significant Accounting Policies in our accompanying Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report.
57

Investment Valuation
Credit Monitoring and Risk Rating
The Adviser monitors a wide variety of key credit statistics that provide information regarding our portfolio companies to help us assess credit quality and portfolio performance and, in some instances, used as inputs in our valuation techniques. Generally, we, through the Adviser, participate in periodic board meetings of our portfolio companies in which we hold board seats and also require them to provide annual audited and monthly unaudited financial statements. Using these statements or comparable information and board discussions, the Adviser calculates and evaluates certain credit statistics.
The Adviser risk rates all of our investments in debt securities. The Adviser does not risk rate our equity securities. For syndicated loans that have been rated by an SEC registered Nationally Recognized Statistical Rating Organization (“NRSRO”), the Adviser generally uses the average of two corporate level NRSRO’s risk ratings for such security. For all other debt securities, the Adviser uses a proprietary risk rating system. While the Adviser seeks to mirror the NRSRO systems, we cannot provide any assurance that the Adviser’s risk rating system will provide the same risk rating as an NRSRO would for these securities. The Adviser’s risk rating system is used to estimate the probability of default on debt securities and the expected loss if there is a default. The Adviser’s risk rating system uses a scale of 0 to >10, with >10 being the lowest probability of default. It is the Adviser’s understanding that most debt securities of medium-sized companies do not exceed the grade of BBB on an NRSRO scale, so there would be no debt securities in the middle market that would meet the definition of AAA, AA or A. Therefore, the Adviser’s scale begins with the designation >10 as the best risk rating which may be equivalent to a BBB from an NRSRO; however, no assurance can be given that a >10 on the Adviser’s scale is equal to a BBB or Baa2 on an NRSRO scale. The Adviser’s risk rating system covers both qualitative and quantitative aspects of the business and the securities we hold.
The following table reflects risk ratings for all proprietary loans in our portfolio as of March 31, 2022 and September 30, 2021, representing approximately 97.5% and 95.5%, respectively, of the principal balance of all debt investments in our portfolio at the end of each period:
Rating
As of
March 31,
2022
As of
September 30,
2021
Highest
10.010.0
Average
6.76.6
Weighted Average
7.47.0
Lowest
1.01.0
The following table reflects the risk ratings for all syndicated loans in our portfolio that were rated by an NRSRO as of March 31, 2022 and September 30, 2021, representing approximately 1.9% and 3.9%, respectively, of the principal balance of all debt investments in our portfolio at the end of each period:
Rating
As of
March 31,
2022
As of
September 30,
2021
Highest
4.05.0
Average
4.04.6
Weighted Average
4.04.5
Lowest
4.04.0
58

The following table reflects the risk ratings for all syndicated loans in our portfolio that were not rated by an NRSRO as of March 31, 2022 and September 30, 2021, representing approximately 0.6% and 0.6%, respectively, of the principal balance of all debt investments in our portfolio at the end of each period:
Rating
As of
March 31,
2022
As of
September 30,
2021
Highest
5.05.0
Average
5.05.0
Weighted Average
5.05.0
Lowest
5.05.0
Tax Status
We intend to continue to maintain our qualification as a RIC under Subchapter M of the Code for federal income tax purposes. As a RIC, we generally are not subject to federal income tax on the portion of our taxable income and gains distributed to our stockholders. To maintain our qualification as a RIC, we must maintain our status as a BDC and meet certain source-of-income and asset diversification requirements. In addition, in order to qualify to be taxed as a RIC, we must distribute to stockholders at least 90% of our Investment Company Taxable Income, determined without regard to the dividends paid deduction. Our policy generally is to make distributions to our stockholders in an amount up to 100% of our Investment Company Taxable Income. We may retain some or all of our net long-term capital gains, if any, and designate them as deemed distributions, or distribute such gains to stockholders in cash.
To avoid a 4% federal excise tax on undistributed amounts of income, we must distribute to stockholders, during each calendar year, an amount at least equal to the sum of: (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gain net income (both long-term and short-term) for the one-year period ending on October 31 of the calendar year, and (3) any income realized, but not distributed, in the preceding year (to the extent that income tax was not imposed on such amounts) less certain over-distributions in prior years. Under the RIC Modernization Act, we are permitted to carryforward any capital losses that we may incur for an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses.
Recent Accounting Pronouncements
Refer to Note 2Summary of Significant Accounting Policies in the notes to our accompanying Consolidated Financial Statements included elsewhere in this Quarterly Report for a description of recent accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies whose securities are owned by us; conditions affecting the general economy, including public health emergencies, such as COVID-19; overall market changes; local, regional or global political, social or economic instability; interest rate fluctuations; and inflation.
The primary risk we believe we are exposed to is interest rate risk. Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We use a combination of debt and equity capital to finance our investing activities. We may use interest rate risk management techniques from time to time to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.
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All of our variable-rate debt investments have rates generally associated with either the current LIBOR or prime rate. As of March 31, 2022, our portfolio of debt investments on a principal basis consisted of the following:
Variable rates
90.9 %
Fixed rates
9.1 %
Total:
100.0 %
To illustrate the potential impact of changes in market interest rates on our net increase in net assets resulting from operations, we have performed the following hypothetical analysis, which assumes that our balance sheet and contractual interest rates remain constant as of March 31, 2022 and no further actions are taken to alter our existing interest rate sensitivity.

Basis Point ChangeIncrease (Decrease) in Interest IncomeIncrease (Decrease) in Interest Expense
Net Increase (Decrease) in Net Assets Resulting from Operations
Up 200 basis points$5,522 $348 $5,174 
Up 100 basis points1,442 174 1,268 
Up 50 basis points61 87 (26)
Up 25 basis points30 44 (14)
Down 45 basis points(43)(18)(25)

Although management believes that this analysis is indicative of our existing interest rate sensitivity, it does not adjust for potential changes in credit quality, size and composition of our loan portfolio on the balance sheet and other business developments, including any replacement of LIBOR, that could affect net increase in net assets resulting from operations or otherwise impact our results or operations. Accordingly, actual results could differ significantly from those in the hypothetical analysis in the table above.

We may also experience risk associated with investing in securities of companies with foreign operations. Some of our portfolio companies have operations located outside the U.S. These risks include fluctuations in foreign currency exchange rates, imposition of foreign taxes, changes in exportation regulations and political and social instability.
ITEM 4. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures
As of March 31, 2022 (the end of the period covered by this report), our management, including our chief executive officer and chief financial officer, evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level in timely alerting management, including the chief executive officer and chief financial officer, of material information about us required to be included in periodic SEC filings. However, in evaluation of the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
b) Changes in Internal Control over Financial Reporting
There were no changes in internal controls for the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Table of Contents
PART II–OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become involved in various investigation, claims and legal proceedings that arise in the ordinary course of our business. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While we do not expect that the resolution of these matters, if they arise, would materially affect our business, financial condition, results of operations or cash flows, resolution of these matters will be subject to various uncertainties and could result in the expenditure of significant financial and managerial resources. Neither we, nor any of our subsidiaries are currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding pending or threatened against us or any of our subsidiaries.
ITEM 1A. RISK FACTORS.
Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities.  For a discussion of these risks, please refer to the section captioned “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as filed with the SEC on November 15, 2021. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Securities
Not applicable.
Issuer Purchases of Equity Securities
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.

ITEM 6. EXHIBITS.
Exhibit
Description
3.1
3.2
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3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
31.1
31.2
32.1
32.2
______________________
* Filed herewith
+ Furnished herewith
All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instruction or are inapplicable and therefore have been omitted.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GLADSTONE CAPITAL CORPORATION
By:
/s/ Nicole Schaltenbrand
Nicole Schaltenbrand
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
Date: May 3, 2022
63


 


 


 


 


 


 


 


 

Exhibit 31.1
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David Gladstone, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gladstone Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 3, 2022
/s/ David Gladstone
David Gladstone
Chief Executive Officer and
Chairman of the Board of Directors
1

Exhibit 31.2
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Nicole Schaltenbrand, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gladstone Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 3, 2022
/s/ Nicole Schaltenbrand
Nicole Schaltenbrand
Chief Financial Officer and Treasurer


Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive Officer and Chairman of the Board of Gladstone Capital Corporation (the “Company”), hereby certifies on the date hereof, pursuant to 18 U.S.C. §1350(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (“Form 10-Q”), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 3, 2022
/s/ David Gladstone
David Gladstone
Chief Executive Officer and
Chairman of the Board of Directors


Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Financial Officer of Gladstone Capital Corporation (the “Company”), hereby certifies on the date hereof, pursuant to 18 U.S.C. §1350(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (“Form 10-Q”), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 3, 2022
/s/ Nicole Schaltenbrand
Nicole Schaltenbrand
Chief Financial Officer and Treasurer