##### Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549   FORM 10-Q   (Mark One) ☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR  ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
 to Commission file number: 814-00704   GLADSTONE INVESTMENT CORPORATION (Exact name of registrant as specified in its charter)    DELAWARE

83-0423116(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)  1521 WESTBRANCH DRIVE, SUITE 100 MCLEAN, VIRGINIA

22102(Address of principal executive offices)

(Zip Code) (703) 287-5800 (Registrants telephone number, including area code) Not Applicable (Former
name, former address and former fiscal year, if changed since last report) Securities registered pursuant to
Section 12(b) of the Act:  Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value per share

GAIN

Nasdaq Global Select Market6.250% Series D Cumulative Term Preferred Stock, $0.001 par value per share

GAINM

Nasdaq Global Select Market6.375% Series E Cumulative Term Preferred Stock, $0.001 par value per share

GAINL

Nasdaq Global Select Market   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  ☒    No  ☐ 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  ☐    No  ☐ 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

☐

Accelerated filer

☒Non-accelerated filer

☐

Smaller reporting company

☐Emerging growth company

☐ 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.  ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes  ☐    No  ☒ The number of shares of the
issuers Common Stock, $0.001 par value per share, outstanding as of July 30, 2019 was 32,822,459.




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION TABLE OF CONTENTS  PART I.

FINANCIAL INFORMATION:Item 1.

Financial Statements (Unaudited)Consolidated Statements of Assets and Liabilities as of June 
30, 2019 and March 31, 2019


3Consolidated Statements of Operations for the three months ended June 
30, 2019 and 2018


5Consolidated Statements of Changes in Net Assets for the three months ended June 30,
 2019 and 2018


6Consolidated Statements of Cash Flows for the three months ended June 
30, 2019 and 2018


7Consolidated Schedules of Investments as of June 
30, 2019 and March 31, 2019


8Notes to Consolidated Financial Statements


20Item 2.

Managements Discussion and Analysis of Financial Condition and Results of
OperationsOverview


43Results of Operations


48Liquidity and Capital Resources


52Item 3.

Quantitative and Qualitative Disclosures About Market Risk


59Item 4.

Controls and Procedures


59PART II.

OTHER INFORMATION:Item 1.

Legal Proceedings


60Item 1A.

Risk Factors


60Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


60Item 3.

Defaults Upon Senior Securities


60Item 4.

Mine Safety Disclosures


60Item 5.

Other Information


60Item 6.

Exhibits


61SIGNATURES


62




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GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)  June 30,2019


March 31,2019ASSETSInvestments at fair valueNon-Control/Non-Affiliate
investments (Cost of $268,383 and $254,002, respectively)

$
327,365


$
313,750Affiliate investments (Cost of $309,855 and $314,175, respectively)


293,292



297,113Control investments (Cost of $21,512 and $21,512 respectively)


10,529



13,309Cash and cash equivalents


1,960



1,702Restricted cash and cash equivalents


2,058



1,903Interest receivable


2,758



2,808Due from administrative agent


900



1,285Deferred financing costs, net


1,602



1,730Other assets, net


1,482



1,500TOTAL ASSETS

$
641,946


$
635,100LIABILITIESBorrowings:Line of credit at fair value (Cost of $73,500 and $53,000, respectively)

$
73,795


$
53,000Secured borrowing


5,096



5,096Total borrowings


78,891



58,096Mandatorily redeemable preferred stock, $0.001 par value per share, $25 liquidation preference
per share; 6,500,000 shares authorized; 5,290,000 shares issued and outstanding, net


128,652



128,482Accounts payable and accrued expenses


766



892Fees due to Adviser(A)


24,594



24,724Fee due to Administrator(A)


314



344Other liabilities


5,223



15,452TOTAL LIABILITIES

$
238,440


$
227,990Commitments and contingencies(B)NET ASSETS

$
403,506


$
407,110ANALYSIS OF NET ASSETSCommon stock, $0.001 par value per share, 100,000,000 shares authorized,
32,822,459 shares issued and outstanding

$
33


$
33Capital in excess of par value


366,083



366,422Cumulative net unrealized appreciation of investments


31,436



34,483Cumulative net unrealized appreciation of other


(295
)


Overdistributed net investment income


(3,151
)


(7,343
)Accumulated net realized gain in excess of distributions


9,400



13,515Total distributable earnings


37,390



40,655TOTAL NET ASSETS

$
403,506


$
407,110NET ASSET VALUE PER SHARE AT END OF PERIOD

$
12.29


$
12.40  (A)
Refer to Note 4  Related Party Transactions in the accompanying Notes to Consolidated
Financial Statements for additional information. (B)
Refer to Note 10  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.  3




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GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)  Three Months EndedJune 30,2019


2018INVESTMENT INCOMEInterest incomeNon-Control/Non-Affiliate
investments

$
5,840


$
6,266Affiliate investments


5,809



6,829Control investments


214



209Cash and cash equivalents


12



10Total interest income


11,875



13,314Dividend incomeNon-Control/Non-Affiliate
investments


2,115



66Affiliate investments


3,080



Total dividend income


5,195



66Success fee incomeNon-Control/Non-Affiliate
investments


240



124Control investments






2,000Total success fee income


240



2,124Total investment income


17,310



15,504EXPENSESBase management fee(A)


3,171



3,111Loan servicing fee(A)


1,752



1,740Incentive fee(A)


1,569



7,586Administration fee(A)


314



285Interest expense on borrowings


1,059



1,742Dividends on mandatorily redeemable preferred stock


2,090



2,251Amortization of deferred financing costs and discounts


373



367Professional fees


504



411Other general and administrative expenses


597



653Expenses before credits from Adviser


11,429



18,146Credits to base management fee  loan servicing fee(A)


(1,752
)


(1,740
)Credits to fees from Adviser 
other(A)


(1,222
)


(960
)Total expenses, net of credits to fees


8,455



15,446NET INVESTMENT INCOME

$
8,855


$
58REALIZED AND UNREALIZED (LOSS) GAINNet realized (loss) gain:Non-Control/Non-Affiliate
investments


530



13,786Affiliate investments


3



322Total net realized gain


533



14,108Net unrealized (depreciation) appreciation:Non-Control/Non-Affiliate
investments


(766
)


(3,741
)Affiliate investments


499



18,571Control investments


(2,780
)


3,238Other


(295
)


93Total net unrealized (depreciation) appreciation


(3,342
)


18,161Net realized and unrealized (loss) gain


(2,809
)


32,269NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$
6,046


$
32,327  (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.  4




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)  BASIC AND DILUTED PER COMMON SHARE:Net investment income

$
0.27


$
Net increase in net assets resulting from operations

$
0.18


$
0.99WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING:Basic and diluted


32,822,459



32,762,848 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  5




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GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) (UNAUDITED)  2019


2018NET ASSETS, MARCH 31

$
407,110


$
354,200OPERATIONSNet investment income


8,855



58Net realized gain on investments


533



14,108Net unrealized (depreciation) appreciation of investments


(3,047
)


18,068Net unrealized (appreciation) depreciation of other


(295
)


93Net increase in net assets from operations


6,046



32,327DISTRIBUTIONS(A)Distributions to common stockholders from net investment income ($0.20 per share)


(6,523
)


(6,914
)Distributions to common stockholders from realized gains ($0.09 and $0.06 per share,
respectively)


(3,127
)


(1,641
)Net decrease in net assets from distributions


(9,650
)


(8,555
)CAPITAL ACTIVITYIssuance of common stock






1,873Discounts, commissions, and offering costs for issuance of common stock






(37
)Net increase in net assets from capital activity






1,836NET (DECREASE) INCREASE IN NET ASSETS


(3,604
)


25,608NET ASSETS, JUNE 30

$
403,506


$
379,808  (A)
Refer to Note 9  Distributions to Common Stockholders in the accompanying Notes to
Consolidated Financial Statements for additional information. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.  6




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GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)  Three MonthsEnded June 30,2019


2018CASH FLOWS FROM OPERATING ACTIVITIESNet increase in net assets resulting from operations

$
6,046


$
32,327Adjustments to reconcile net increase in net assets resulting from operations to net cash (used
in) provided by operating activities:Purchase of investments


(51,230
)


(30,052
)Principal repayments of investments


32,986



14,514Net proceeds from the sale of investments


8,494



17,548Net realized (gain) loss on investments


(533
)


(14,108
)Net unrealized depreciation (appreciation) of investments


3,047



(18,068
)Net unrealized appreciation (depreciation) of other


295



(93
)Amortization of premiums, discounts, and acquisition costs, net


(5
)


(5
)Amortization of deferred financing costs and discounts


373



367Bad debt expense, net of recoveries


103



251Changes in assets and liabilities:(Increase) decrease in interest receivable


(292
)


367Decrease in due from administrative agent


386



584Decrease in other assets, net


549



166Decrease in accounts payable and accrued expenses


(143
)


(127
)(Decrease) increase in fees due to
Adviser(A)


(130
)


6,115Decrease in fee due to
Administrator(A)


(30
)


(32
)(Decrease) increase in other liabilities


(10,228
)


929Net cash (used in) provided by operating activities


(10,312
)


10,683CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock






1,873Discounts, commissions, and offering costs for issuance of common stock






(28
)Proceeds from line of credit


74,500



37,900Repayments on line of credit


(54,000
)


(42,400
)Deferred financing and offering costs


(125
)


(126
)Distributions paid to common stockholders


(9,650
)


(8,555
)Net cash provided by (used in) financing activities


10,725



(11,336
)NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH
EQUIVALENTS


413



(653
)CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT BEGINNING OF
PERIOD


3,605



3,967CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT END OF
PERIOD

$
4,018


$
3,314CASH PAID FOR INTEREST

$
703


$
1,743  (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.  7




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS JUNE 30, 2019 (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValueNON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  81.3%Secured First Lien Debt  42.0%Containers, Packaging, and Glass  2.4%Frontier Packaging, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 3/2021)(L)

$
9,500


$
9,500


$
9,500Diversified/Conglomerate Services  23.5%Bassett Creek Restoration, Inc.  Term Debt (L+10.0%, 12.4% Cash, Due 4/2023)(L)


29,000



29,000



29,000Counsel Press, Inc.  Term Debt (L+11.8%, 14.1% Cash, Due 3/2020)(L)


18,000



18,000



18,000Counsel Press, Inc.  Term Debt (L+13.0%, 15.4% Cash, Due 3/2020)(L)


5,500



5,500



5,500Horizon Facilities Services, Inc.  Line of Credit, $2,000 available (L+7.0%, 10.0% Cash, Due
6/2020)(L)


1,000



1,000



1,000Horizon Facilities Services, Inc.  Term Debt (L+9.5%, 12.0% Cash, Due 6/2024)(L)


27,700



27,700



27,700Nth Degree, Inc.  Term Debt (L+11.5%, 13.9% Cash, Due 3/2023)(L)


13,290



13,290



13,29094,490



94,490Healthcare, Education, and Childcare  5.0%Educators Resource, Inc.  Term Debt (L+10.5%, 13.0% Cash, Due 11/2023)(L)


20,000



20,000



20,000Leisure, Amusement, Motion Pictures, and Entertainment  6.1%Schylling, Inc.  Term Debt (L+11.0%, 13.4% Cash, Due 8/2024)(L)


13,081



13,081



13,081Schylling, Inc.  Term Debt (L+11.0%, 13.4% Cash, Due 8/2024)(L)


8,500



8,500



8,500Schylling, Inc.  Term Debt (L+11.0%, 13.4% Cash, Due 8/2024)(L)


3,000



3,000



3,00024,581



24,581Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  5.0%SBS Industries, LLC  Term Debt (L+12.0%, 14.4% Cash, Due 6/2020)(L)


19,957



19,957



19,957Total Secured First Lien Debt





$
168,528


$
168,528Secured Second Lien Debt  7.5%Automobile  0.9%Country Club Enterprises, LLC  Term Debt (L+8.0%, 10.4% Cash, Due 2/2022)(K)

$
4,000


$
4,000


$
3,820Country Club Enterprises, LLC  Guaranty ($1,000)(T)










4,000



3,820Cargo Transport  3.3%Diligent Delivery Systems  Term Debt (L+9.0%, 11.4% Cash, Due 11/2022)(K)


13,000



12,938



13,260Home and Office Furnishings, Housewares, and Durable Consumer Products  3.3%Ginsey Home Solutions, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 1/2021)(H)(L)


13,300



13,300



13,300Total Secured Second Lien Debt





$
30,238


$
30,380  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  8




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) JUNE 30, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValuePreferred Equity  27.5%Containers, Packaging, and Glass  0.4%Frontier Packaging, Inc.  Preferred
Stock(C)(L)


1,373


$
1,373


$
1,456Diversified/Conglomerate Services  19.5%Bassett Creek Restoration, Inc.  Preferred Stock(C)(L)


4,900



4,900



Counsel Press, Inc.  Preferred
Stock(C)(L)


6,995



6,995



18,124Horizon Facilities Services, Inc.  Preferred Stock(C)(L)


10,080



10,080



10,080Nth Degree, Inc.  Preferred
Stock(C)(L)


5,660



5,660



50,39427,635



78,598Healthcare, Education, and Childcare  2.1%Educators Resource, Inc.  Preferred
Stock(C)(L)


8,560



8,560



8,636Home and Office Furnishings, Housewares, and Durable Consumer Products  3.7%Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)


19,280



9,583



15,008Leisure, Amusement, Motion Pictures, and Entertainment  0.7%Schylling, Inc.  Preferred
Stock(C)(L)


4,000



4,000



2,797Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  1.1%SBS Industries, LLC  Preferred
Stock(C)(L)


27,705



2,771



4,546Personal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Preferred Stock(C)(L)


2,500



14,399



Total Preferred Equity





$
68,321


$
111,041Common Equity/Equivalents  4.3%Cargo Transport  0.7%Diligent Delivery Systems  Common Stock Warrants(C)(L)


8
%

$
500


$
2,792Containers, Packaging, and Glass  2.6%Frontier Packaging, Inc.  Common
Stock(C)(L)


153



153



10,633Home and Office Furnishings, Housewares, and Durable Consumer Products  0.0%Ginsey Home Solutions, Inc.  Common
Stock(C)(L)


63,747



8



Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.9%SBS Industries, LLC  Common
Stock(C)(L)


221,500



222



3,604Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%Funko Acquisition Holdings, LLC(M) 
Common Units(C)(S)


23,487



113



387  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  9




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) JUNE 30, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValuePersonal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Common Stock(C)(L)


2,500


$
300


$
Total Common Equity





$
1,296


$
17,416Total
Non-Control/Non-Affiliate Investments





$
268,383


$
327,365AFFILIATE INVESTMENTS(O) 
72.8%Secured First Lien Debt  42.2%Automobile  1.2%Meridian Rack & Pinion, Inc.(M)
 Term Debt (L+11.5%, 13.9% Cash, Due 6/2019)(G)(K)(U)

$
9,660


$
9,660


$
4,830Beverage, Food, and Tobacco  2.2%Head Country, Inc.  Term Debt (L+10.5%, 12.9% Cash, Due 2/2021)(L)


9,050



9,050



9,050Diversified/Conglomerate Manufacturing  5.0%D.P.M.S., Inc.  Line of Credit, $750 available (L+6.5%, 9.0% Cash, (0.5% Unused Fee), Due
10/2021)(L)


250



250



250D.P.M.S., Inc.  Term Debt (10.0% Cash, Due 10/2021)(I)(L)


10,796



10,796



8,066Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+10.5%, 12.9% Cash, Due 2/2022)(K)


9,300



9,300



8,835Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+11.8%, 14.1% Cash, Due 2/2022)(K)


3,000



3,000



2,86523,346



20,016Diversified/Conglomerate Services  16.9%ImageWorks Display and Marketing Group, Inc.  Term Debt (L+11.0%, 13.4% Cash, Due 11/2022)(L)


22,000



22,000



22,000J.R. Hobbs Co.  Atlanta, LLC  Line of Credit, $0 available (L+10.3%, 12.6% Cash, Due
10/2019)(L)


10,000



10,000



10,000J.R. Hobbs Co.  Atlanta, LLC  Term Debt (L+10.3%, 12.6% Cash, Due 10/2023)(L)


36,000



36,000



36,00068,000



68,000Home and Office Furnishings, Housewares, and Durable Consumer Products  4.4%Brunswick Bowling Products, Inc.  Term Debt (L+10.0%, 12.4% Cash, Due 1/2023)(L)


17,700



17,700



17,700Leisure, Amusement, Motion Pictures, and Entertainment  2.2%SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)


538



538



538SOG Specialty Knives & Tools, LLC  Term Debt (L+4.0%, 6.4% Cash, Due 8/2022)(G)(L)


8,399



8,399



8,3998,937



8,937Personal and Non-Durable Consumer Products
(Manufacturing Only)  6.3%The Mountain Corporation  Line of Credit, $400 available (L+5.0%, 9.0% Cash,Due 4/2020)(L)


2,500



2,500



2,500Pioneer Square Brands, Inc.  Term Debt (L+12.0%, 14.4% Cash, Due 8/2022)(L)


23,100



23,100



23,10025,600



25,600Telecommunications  4.0%B+T Group Acquisition, Inc.(M)  Line of
Credit, $875 available (L+11.0%, 13.4% Cash, Due 12/2021)(L)


1,925



1,925



1,925B+T Group Acquisition, Inc.(M)  Term
Debt (L+11.0%, 13.5% Cash, Due 12/2021)(L)


14,000



14,000



14,00015,925



15,925Total Secured First Lien Debt





$
178,218


$
170,058  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  10




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) JUNE 30, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValueSecured Second Lien Debt  8.9%Chemicals, Plastics, and Rubber  4.4%PSI Molded Plastics, Inc.  Term Debt (L+12.0%, 14.4% Cash, Due 1/2024)(G)(L)

$
26,618


$
26,618


$
17,921Diversified/Conglomerate Manufacturing  3.3%Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.4% Cash, Due 4/2021)(K)


12,215



12,215



12,154Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.4% Cash, Due 4/2021)(K)


175



175



174Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.4% Cash, Due 4/2021)(K)


910



910



90513,300



13,233Personal and Non-Durable Consumer Products
(Manufacturing Only)  1.2%The Mountain Corporation  Term Debt (L+4.0%, 7.0% Cash, Due 4/2024)(G)(L)


11,700



11,700



4,941Total Secured Second Lien Debt





$
51,618


$
36,095Preferred Equity  19.2%Automobile  0.0%Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)


3,381


$
3,381


$
Beverage, Food, and Tobacco  1.1%Head Country, Inc.  Preferred
Stock(C)(L)


4,000



4,000



4,310Chemicals, Plastics, and Rubber  0.0%PSI Molded Plastics, Inc.  Preferred
Stock(C)(L)


58,598



9,730



Diversified/Conglomerate Manufacturing  1.9%Alloy Die Casting Co.(M)  Preferred
Stock(C)(L)


5,114



5,114



7,786Channel Technologies Group, LLC  Preferred Stock(C)(L)


2,279



1,841



Edge Adhesives Holdings, Inc.(M) 
Preferred Stock(C)(L)


3,774



3,774



10,729



7,786Diversified/Conglomerate Services  4.3%ImageWorks Display and Marketing Group, Inc.  Preferred Stock(C)(L)


67,490



6,749



7,785J.R. Hobbs Co.  Atlanta, LLC  Preferred Stock(C)(L)


5,920



5,920



9,53012,669



17,315Home and Office Furnishings, Housewares, and Durable Consumer Products  9.5%Brunswick Bowling Products, Inc.  Preferred Stock(C)(L)


4,943



4,943



23,079Old World Christmas, Inc.  Preferred
Stock(C)(L)


6,180



6,180



15,10711,123



38,186Leisure, Amusement, Motion Pictures, and Entertainment  0.0%SOG Specialty Knives & Tools, LLC  Preferred Stock(C)(L)


11,749



11,749



136Personal and Non-Durable Consumer Products
(Manufacturing Only)  2.4%The Mountain Corporation  Preferred
Stock(C)(L)


6,899



6,899



Pioneer Square Brands, Inc.  Preferred
Stock(C)(L)


5,502



5,500



9,33612,399



9,336Telecommunications  0.0%B+T Group Acquisition, Inc.(M) 
Preferred Stock(C)(L)


12,841



4,196



Total Preferred Equity





$
79,976


$
77,069  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  11




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) JUNE 30, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValueCommon Equity  2.5%Diversified/Conglomerate Manufacturing  2.5%Alloy Die Casting Co.(M)  Common Stock(C)(L)


630


$
41


$
10,070Channel Technologies Group, LLC  Common
Stock(C)(L)


2,319,184







D.P.M.S., Inc.  Common
Stock(C)(L)


627



1



42



10,070Telecommunications  0.0%B+T Group Acquisition, Inc.(M)  Common
Stock Warrant(C)(L)(M)


3.5
%






Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%The Mountain Corporation  Common
Stock(C)(L)


751



1



Total Common Equity





$
43


$
10,070Total Affiliate Investments





$
309,855


$
293,292CONTROL INVESTMENTS(P) 
2.5%:Secured Second Lien Debt  2.4%Aerospace and Defense  2.4%Galaxy Tool Holding Corporation  Line of Credit, $0 available (L+4.5%, 7.0% Cash (1.0%
Unused Fee), Due 8/2019)(L)

$
5,000


$
5,000


$
5,000Galaxy Tool Holding Corporation  Term Debt (L+6.0%, 10.0% Cash, Due 8/2019)(L)


5,000



5,000



5,000$
10,000


$
10,000Preferred Equity  0.1%Aerospace and Defense  0.1%Galaxy Tool Holding Corporation  Preferred Stock(C)(L)


5,517,444


$
11,464


$
529Common Equity  0.0%Aerospace and Defense  0.0%Galaxy Tool Holding Corporation  Common Stock(C)(L)


88,843


$
48


$
Total Control Investments





$
21,512


$
10,529TOTAL INVESTMENTS  156.6%





$
599,750


$
631,186  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  12




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) JUNE 30, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  (A)
Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The
majority of the securities listed, totaling $559.8 million at fair value, are pledged as collateral to our revolving line of credit, as described further in Note 5  Borrowings in the accompanying Notes to Consolidated
Financial Statements. Additionally, under Section 55 of 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 June 30, 2019, our investment in Funko Acquisition Holdings, LLC (Funko) is considered a non-qualifying
asset under Section 55 of the 1940 Act and represents less than 0.1% of total investments, at fair value. (B)
Unless indicated otherwise, all cash interest rates are indexed to
30-day London Interbank Offered Rate (LIBOR or L), which was 2.4% as of June 30, 2019. If applicable,
paid-in-kind 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 30-day LIBOR plus a spread. Due dates represent the contractual maturity date. (C)
Security is non-income producing. (D)
Category percentages represent the fair value of each category and subcategory as a percentage of net assets as
of June 30, 2019. (E)
Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the Financial
Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820) fair value hierarchy. Refer to Note 3 
Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (F)
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. (G)
Debt security is on non-accrual status. (H)
$5.1 million of the debt security was participated to a third party, but is accounted for as collateral
for a secured borrowing under accounting principles generally accepted in the U.S. and presented as Secured borrowing on our accompanying Consolidated Statements of Assets and Liabilitiesas of June 30, 2019. (I)
Debt security has a fixed interest rate. (J)
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. (K)
Fair value was based on internal yield analysis or on estimates of value submitted by ICE Data Pricing and
Reference Data, LLC. Refer to Note 3  Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (L)
Fair value was based on the total enterprise value of the portfolio company, which is generally allocated to
the portfolio companys securities in order of their relative priority in the capital structure. Refer to Note 3  Investments in the accompanyingNotes to Consolidated Financial Statements for additional information. (M)
One of our affiliated funds, Gladstone Capital Corporation, co-invested
with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission. (N)
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. (O)
Affiliate investments, as defined by the 1940 Act, are those that are not Control investments and 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. (P)
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. (Q)
Reserved. (R)
Debt security does not have a stated current interest rate. (S)
Our investment in Funko was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Our
common units in Funko are convertible into 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 Stock Market under the trading symbol FNKO. Refer to Note 3  Investments in the accompanying Notes to Consolidated Financial Statements for additional
information. (T)
Refer to Note 10  Commitments and Contingencies in the accompanyingNotes to
Consolidated Financial Statements for additional information regarding this guaranty. (U)
Subsequent to June 30, 2019, the investment maturity date was extended to December 2019.  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  13




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS MARCH 31, 2019 (DOLLAR AMOUNTS IN THOUSANDS)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValueNON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  77.2%Secured First Lien Debt  38.4%Containers, Packaging, and Glass  2.3%Frontier Packaging, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 3/2021)(L)

$
9,500


$
9,500


$
9,500Diversified/Conglomerate Services  16.0%Bassett Creek Restoration, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 4/2023)(L)


28,000



28,000



28,000Counsel Press, Inc.  Term Debt (L+11.8%, 14.2% Cash, Due 3/2020)(L)


18,000



18,000



18,000Counsel Press, Inc.  Term Debt (L+13.0%, 15.5% Cash, Due 3/2020)(L)


5,500



5,500



5,500Nth Degree, Inc.  Term Debt (L+11.5%, 14.0% Cash, Due 3/2023)(L)


13,290



13,290



13,29064,790



64,790Farming and Agriculture  2.7%Jackrabbit, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 12/2020)(Q)(T)


11,000



11,000



11,000Healthcare, Education, and Childcare  4.9%Educators Resource, Inc.  Term Debt (L+10.5%, 13.0% Cash, Due 11/2023(L)


20,000



20,000



20,000Leisure, Amusement, Motion Pictures, and Entertainment  6.8%Schylling, Inc.  Term Debt (L+11.0%, 13.5% Cash, Due 8/2019)(L)


13,081



13,081



13,081Schylling, Inc.  Term Debt (L+11.0%, 13.5% Cash, Due 8/2019)(L)


8,500



8,500



8,500Schylling, Inc.  Term Debt (L+11.0%, 13.5% Cash, Due 8/2019)(L)


6,000



6,000



6,00027,581



27,581Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  4.9%SBS Industries, LLC  Term Debt (L+12.0%, 14.5% Cash, Due 6/2020)(L)


19,957



19,957



19,957Oil and Gas  0.8%Tread Corporation  Line of Credit, $634 available (L+10.0%, 12.5% Cash, Due 3/2021)(Q)(T)


3,216



3,216



3,216Personal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Line of Credit, $50 available (L+0.3%,
2.7% Cash (0.8% Unused Fee), Due 12/2019)(G)(L)


4,600



4,600



B-Dry, LLC  Term Debt (L+0.3%, 2.7% Cash, Due
12/2019)(G)(L)


6,443



6,443



B-Dry, LLC  Term Debt (L+0.3%, 2.7% Cash, Due
12/2019)(G)(L)


840



840



11,883



Total Secured First Lien Debt





$
167,927


$
156,044Secured Second Lien Debt  7.5%Automobile  1.0%Country Club Enterprises, LLC  Term Debt (L+8.0%, 10.5% Cash, Due 2/2022)(K)

$
4,000


$
4,000


$
3,920Country Club Enterprises, LLC  Guaranty ($1,000)(U)










4,000



3,920Cargo Transport  3.2%Diligent Delivery Systems  Term Debt (L+9.0%, 11.5% Cash, Due 11/2022)(K)


13,000



12,933



13,163Home and Office Furnishings, Housewares, and Durable Consumer Products 
3.3%Ginsey Home Solutions, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 1/2021)(H)(L)


13,300



13,300



13,300Total Secured Second Lien Debt





$
30,233


$
30,383  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  14




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) MARCH 31, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValuePreferred Equity  26.2%Containers, Packaging, and Glass  0.4%Frontier Packaging, Inc.  Preferred
Stock(C)(L)


1,373


$
1,373


$
1,428Diversified/Conglomerate Services  15.6%Bassett Creek Restoration, Inc.  Preferred Stock(C)(L)


4,900



4,900



Counsel Press, Inc.  Preferred
Stock(C)(L)


6,995



6,995



16,720Nth Degree, Inc.  Preferred
Stock(C)(L)


5,660



5,660



46,95817,555



63,678Farming and Agriculture  1.4%Jackrabbit, Inc.  Preferred
Stock(Q)(T)


3,556



3,556



5,632Healthcare, Education, and Childcare  2.5%Educators Resource, Inc.  Preferred
Stock(C)(L)


8,560



8,560



10,023Home and Office Furnishings, Housewares, and Durable Consumer Products  3.9%Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)


19,280



9,583



15,845Leisure, Amusement, Motion Pictures, and Entertainment  1.0%Schylling, Inc.  Preferred
Stock(C)(L)


4,000



4,000



4,255Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  1.1%SBS Industries, LLC  Preferred
Stock(C)(L)


27,705



2,771



4,461Oil and Gas  0.3%Tread Corporation  Preferred
Stock(C)(Q)(T)


12,998,639



3,768



1,140Personal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Preferred Stock(C)(L)


2,500



2,516



Total Preferred Equity





$
53,682


$
106,462Common Equity/Equivalents  5.1%Cargo Transport  0.6%Diligent Delivery Systems  Common Stock Warrants(C)(L)


8
%

$
500


$
2,327Containers, Packaging, and Glass  2.7%Frontier Packaging, Inc.  Common
Stock(C)(L)


152



152



11,081Farming and Agriculture  0.6%Jackrabbit, Inc.  Common
Stock(C)(Q)(T)


548



94



2,565Home and Office Furnishings, Housewares, and Durable Consumer Products  0.0%Ginsey Home Solutions, Inc.  Common
Stock(C)(L)


63,747



8



Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  1.1%SBS Industries, LLC  Common
Stock(C)(L)


221,500



222



4,487Oil and Gas  0.0%Tread Corporation  Common
Stock(C)(Q)(T)


10,089,048



753



Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%Funko Acquisition Holdings, LLC(M) 
Common Units(C)(S)


27,188



131



401  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  15




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) MARCH 31, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValuePersonal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Common Stock(C)(L)


2,500


$
300


$
Total Common Equity





$
2,160


$
20,861Total
Non-Control/Non-Affiliate Investments





$
254,002


$
313,750AFFILIATE INVESTMENTS(O) 
72.8%Secured First Lien Debt  42.8%Automobile  1.4%Meridian Rack & Pinion, Inc.(M)
 Term Debt (L+11.5%, 14.0% Cash, Due 6/2019)(G)(K)

$
9,660


$
9,660


$
5,796Beverage, Food, and Tobacco  2.2%Head Country, Inc.  Term Debt (L+10.5%, 13.0% Cash, Due 2/2021)(L)


9,050



9,050



9,050Diversified/Conglomerate Manufacturing  4.6%D.P.M.S., Inc.  Term Debt (10.0% Cash, Due 10/2021)(I)(L)


10,796



10,796



7,115Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+10.5%, 13.0% Cash, Due 2/2022)(K)


9,300



9,300



8,951Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+11.8%, 14.2% Cash, Due 2/2022)(K)


3,000



3,000



2,90223,096



18,968Diversified/Conglomerate Services  14.2%ImageWorks Display and Marketing Group, Inc.  Term Debt (L+11.0%, 13.5% Cash, Due 11/2022)(L)


22,000



22,000



22,000J.R. Hobbs Co.  Atlanta, LLC  Term Debt (L+10.3%, 12.7% Cash, Due 10/2023)(L)


36,000



36,000



36,00058,000



58,000Home and Office Furnishings, Housewares, and Durable Consumer Products  8.2%Brunswick Bowling Products, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 1/2023)(L)


17,700



17,700



17,700Old World Christmas, Inc.  Term Debt (L+11.3%, 13.7% Cash, Due 10/2019)(L)


15,770



15,770



15,77033,470



33,470Leisure, Amusement, Motion Pictures, and Entertainment  2.2%SOG Specialty Knives & Tools, LLC  Term Debt (L+4.0%, 6.5% Cash, Due 8/2022)(G)(L)


8,399



8,399



8,399SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)


538



538



5388,937



8,937Personal and Non-Durable Consumer Products
(Manufacturing Only)  6.3%The Mountain Corporation  Line of Credit, $400 available (L+5.0%, 9.0% Cash, Due 4/2020)(L)


2,500



2,500



2,500Pioneer Square Brands, Inc.  Term Debt (L+12.0%, 14.5% Cash, Due 8/2022)(L)


23,100



23,100



23,10025,600



25,600Telecommunications  3.7%B+T Group Acquisition, Inc.(M)  Line of
Credit, $175 available (L+11.0%, 13.5% Cash, Due 12/2021)(L)


1,225



1,225



1,225B+T Group Acquisition, Inc.(M)  Term
Debt (L+11.0%, 13.5% Cash, Due 12/2021)(L)


14,000



14,000



14,00015,225



15,225Total Secured First Lien Debt





$
183,038


$
175,046  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  16




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) MARCH 31, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValueSecured Second Lien Debt  8.6%Chemicals, Plastics, and Rubber  4.1%PSI Molded Plastics, Inc.  Term Debt (L+12.0%, 14.5% Cash, Due 1/2024)(G)(L)

$
26,618


$
26,618


$
16,641Diversified/Conglomerate Manufacturing  3.2%Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.5% Cash, Due 4/2021)(K)


12,215



12,215



12,032Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.5% Cash, Due 4/2021)(K)


175



175



172Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.5% Cash, Due 4/2021)(K)


910



910



89613,300



13,100Personal and Non-Durable Consumer Products (Manufacturing
Only)  1.3%The Mountain Corporation  Term Debt (L+4.0%, 7.0% Cash, Due 4/2024)(G)(L)


11,700



11,700



5,169Total Secured Second Lien Debt





$
51,618


$
34,910Preferred Equity  21.0%Automobile  0.0%Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)


3,381


$
3,381


$
Beverage, Food, and Tobacco  0.7%Head Country, Inc.  Preferred
Stock(C)(L)


4,000



4,000



2,887Chemicals, Plastics, and Rubber  0.0%PSI Molded Plastics, Inc.  Preferred
Stock(C)(L)


58,598



9,730



Diversified/Conglomerate Manufacturing  1.9%Alloy Die Casting Co.(M)  Preferred
Stock(C)(L)


5,114



5,114



7,616Channel Technologies Group, LLC  Preferred Stock(C)(L)


2,279



1,841



Edge Adhesives Holdings, Inc.(M) 
Preferred Stock(C)(L)


3,774



3,774



10,729



7,616Diversified/Conglomerate Services  6.5%ImageWorks Display and Marketing Group, Inc.  Preferred Stock(C)(L)


67,490



6,749



8,526J.R. Hobbs Co.  Atlanta, LLC  Preferred Stock(C)(L)


5,920



5,920



17,82212,669



26,348Home and Office Furnishings, Housewares, and Durable Consumer Products  9.7%Brunswick Bowling Products, Inc.  Preferred Stock(C)(L)


4,943



4,943



23,747Old World Christmas, Inc.  Preferred
Stock(C)(L)


6,180



6,180



15,90911,123



39,656Leisure, Amusement, Motion Pictures, and Entertainment  0.0%SOG Specialty Knives & Tools, LLC  Preferred Stock(C)(L)


11,249



11,249



139Personal and Non-Durable Consumer Products
(Manufacturing Only)  2.2%The Mountain Corporation  Preferred
Stock(C)(L)


6,899



6,899



Pioneer Square Brands, Inc.  Preferred
Stock(C)(L)


5,502



5,500



8,96012,399



8,960Telecommunications  0.0%B+T Group Acquisition, Inc.(M) 
Preferred Stock(C)(L)


12,841



4,196



Total Preferred Equity





$
79,476


$
85,606  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  17




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) MARCH 31, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  Company and Investment(A)(B)(D)(E)

Principal/Shares/Units(F)(J)


Cost


Fair ValueCommon Equity  0.4%Diversified/Conglomerate Manufacturing  0.4%Alloy Die Casting Co.(M)  Common Stock(C)(L)


630


$
41


$
1,551Channel Technologies Group, LLC  Common
Stock(C)(L)


2,319,184







D.P.M.S., Inc.  Common
Stock(C)(L)


627



1



42



1,551Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%The Mountain Corporation  Common
Stock(C)(L)


751



1



Total Common Equity





$
43


$
1,551Total Affiliate Investments





$
314,175


$
297,113CONTROL INVESTMENTS(P) 
3.2%:Secured Second Lien Debt  2.4%Aerospace and Defense  2.4%Galaxy Tool Holding Corporation  Line of Credit, $0 available (L+4.5%, 7.0% Cash (1.0%
Unused Fee), Due 8/2019)(L)

$
5,000


$
5,000


$
5,000Galaxy Tool Holding Corporation  Term Debt (L+6.0%, 10.0% Cash, Due 8/2019)(L)


5,000



5,000



5,000$
10,000


$
10,000Preferred Equity  0.8%Aerospace and Defense  0.8%Galaxy Tool Holding Corporation  Preferred Stock(C)(L)


5,517,444


$
11,464


$
3,309Common Equity  0.0%Aerospace and Defense  0.0%Galaxy Tool Holding Corporation  Common Stock(C)(L)


88,843


$
48


$
Total Control Investments





$
21,512


$
13,309TOTAL INVESTMENTS 
153.2%(V)





$
589,689


$
624,172  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  18




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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) MARCH 31, 2019 (DOLLAR
AMOUNTS IN THOUSANDS) (UNAUDITED)  (A)
Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The
majority of the securities listed, totaling $536.3 million at fair value, are pledged as collateral to our revolving line of credit, as described further in Note 5  Borrowings in the accompanying Notes to
Consolidated Financial Statements. Additionally, under Section 55 of 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, 2019, our investment in Funko is considered a non-qualifying asset under Section 55
of the 1940 Act and represents less than 0.1% of total investments, at fair value. (B)
Unless indicated otherwise, all cash interest rates are indexed to
30-day LIBOR, which was 2.5% as of March 31, 2019. If applicable, paid-in-kind 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 30-day LIBOR plus a spread. Due dates represent the contractual maturity
date. (C)
Security is non-income producing. (D)
Category percentages represent the fair value of each category and subcategory as a percentage of net assets as
of March 31, 2019. (E)
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. (F)
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. (G)
Debt security is on non-accrual status. (H)
$5.1 million of the debt security was participated to a third party, but is accounted for as collateral
for a secured borrowing under accounting principles generally accepted in the U.S. and presented as Secured borrowing on our accompanying Consolidated Statements of Assets and Liabilitiesas of March 31, 2019. (I)
Debt security has a fixed interest rate. (J)
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. (K)
Fair value was based on internal yield analysis or on estimates of value submitted by ICE Data Pricing and
Reference Data, LLC. Refer to Note 3 Investments in the accompanying Notes to Consolidated Financial Statements for additional information. (L)
Fair value was based on the total enterprise value of the portfolio company, which is generally allocated to
the portfolio companys securities in order of their relative priority in the capital structure. Refer to Note 3 Investments in the accompanyingNotes to Consolidated Financial Statements for additional
information. (M)
One of our affiliated funds, Gladstone Capital Corporation, co-invested
with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission. (N)
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. (O)
Affiliate investments, as defined by the 1940 Act, are those that are not Control investments and 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. (P)
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. (Q)
Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to
occur imminently. (R)
Debt security does not have a stated current interest rate. (S)
Our investment in Funko was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Our
common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of
marketability. Funko, Inc. is traded on the Nasdaq Stock Market under the trading symbol FNKO. Refer to Note 3 Investments in the accompanying Notes to Consolidated Financial Statements for additional
information. (T)
Security was sold subsequent to March 31, 2019. Refer to Note 3 Investments in the
accompanyingNotes to Consolidated Financial Statements for additional information. (U)
Refer to Note 10 Commitments and Contingencies in the accompanyingNotes to
Consolidated Financial Statements for additional information regarding this guaranty. (V)
Cumulative gross unrealized depreciation for federal income tax purposes is $98.8 million; cumulative
gross unrealized appreciation for federal income tax purposes is $133.2 million. Cumulative net unrealized appreciation is $34.4 million, based on a tax cost of $589.8 million.  THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  19




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GLADSTONE INVESTMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2019 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND AS OTHERWISE INDICATED) (UNAUDITED) NOTE 1. ORGANIZATION Gladstone Investment Corporation (Gladstone Investment) was incorporated under the General Corporation Law of the State of Delaware on
February 18, 2005, and completed an initial public offering on June 22, 2005. The terms the Company, we, our and us all refer to Gladstone Investment and its consolidated subsidiaries. We are
an externally advised, 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 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 in the United States (U.S.). Debt investments primarily take the form of two types of loans: secured
first lien loans and secured second lien loans. Equity investments primarily take the form of preferred or common equity (or warrants or options to acquire the foregoing), often in connection with buyouts and other recapitalizations. Our investment
objectives are to: (i) achieve and grow current income by investing in debt securities of established 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 (ii) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses, generally in
combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains. We intend that our investment portfolio over time will consist of approximately 75.0% in debt
investments and 25.0% in equity investments, at cost. Gladstone Business Investment, LLC (Business Investment), a wholly-owned subsidiary of
ours, was established on August 11, 2006 for the sole purpose of holding certain investments pledged as collateral under our line of credit. The financial statements of Business Investment are consolidated with those of Gladstone Investment. We
also have significant subsidiaries (as defined under Rule 1-02(w) of the U.S. Securities and Exchange Commissions (SEC) Regulation S-X) whose financial
statements are not consolidated with ours. Refer to Note 12  Unconsolidated Significant Subsidiaries for additional information regarding our unconsolidated significant subsidiaries. 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 agreement and management agreement (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 more 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 SEC 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 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 (AICPA) Audit and Accounting Guide for Investment Companies, codified in ASC 946, we are precluded from consolidating any entity other than another
investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries. In our opinion, all adjustments,
consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim periods have been included. The results of operations for the three months ended June 30, 2019 are not necessarily
indicative of results that ultimately may be achieved for the fiscal year ending March 31, 2020 or any future interim period. 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 March 31, 2019, as filed with the SEC on May 13, 2019.  20




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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. Reclassifications Certain prior period amounts have been
reclassified to conform to the current period presentation in the Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements. Reclassifications did not impact net increase in net assets resulting
from operations, total assets, total liabilities, or total net assets, or Consolidated Statements of Changes in Net Assets and Consolidated Statements of Cash Flows classifications. 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 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, presented by the chief valuation officer.
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 debt investments. The Valuation Team generally assigns ICEs estimates of fair value to our debt investments where we do not have the ability to
effectuate a sale of the applicable portfolio company. The Valuation Team corroborates ICEs estimates of fair value using one or more of the valuation techniques discussed below. The Valuation Teams estimate of value on a specific debt
investment may significantly differ from ICEs. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation Team has followed the Policy and whether the Valuation Teams recommended fair value is
reasonable in light of the Policy and other facts and circumstances before determining fair value. We may engage other independent valuation firms to
provide earnings multiple ranges, as well as other information, and evaluate such information for incorporation into the total enterprise value (TEV) of certain of our investments. Generally, at least once per year, we engage an
independent valuation firm to value or review the valuation of each of our significant equity investments, which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including
review of all inputs provided by the independent valuation firm. The Valuation Team then makes a recommendation to our  21




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Valuation Committee and Board of Directors as to the fair value. Our Board of Directors reviews the recommended fair value and whether it is reasonable in light of the Policy and other
relevant facts and circumstances before determining fair value. Valuation Techniques In accordance with ASC 820, the Valuation Team uses the following techniques when valuing our investment portfolio:  

Total Enterprise Value  In determining the fair value using a TEV, the Valuation Team first
calculates the TEV of the portfolio company by incorporating some or all of the following factors: the portfolio companys ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the
trailing or projected twelve month revenue or earnings before interest, taxes, depreciation and amortization (EBITDA)); EBITDA obtained from our indexing methodology whereby the original transaction EBITDA at the time of our closing is
indexed to a general subset of comparable disclosed transactions and EBITDA 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; however, TEV may also be calculated using 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, among other things, 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 explained above). In addition, the Valuation Team assesses trading activity for similar investments and
evaluates variances in quotations and other market insights to determine if any available quoted prices are reliable. Typically, the Valuation Team uses the lower indicative bid price (IBP) in the bid-to-ask price range obtained from the respective originating syndication agents trading desk on or near the valuation date. The Valuation Team may take further steps to consider additional
information to validate that price in accordance with the Policy. For securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date. For restricted securities that
are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date less a discount for the restriction, which includes consideration of the nature and term to expiration of the
restriction.  

Investments in Funds  For equity investments in other funds for which we cannot effectuate a sale of
the fund, the Valuation Team generally determines the fair value of our invested capital at the Net Asset Value (NAV) provided by the fund. Any invested capital that is not yet reflected in the NAV provided by the fund is valued at par
value. The Valuation Team may also determine fair value of our investments in other investment funds based on the capital accounts of the underlying entity. In addition to the valuation techniques listed above, the Valuation Team may also consider other factors when determining the fair value of our investments,
including: the nature and realizable value of the collateral, including external parties guaranties, any relevant offers or letters of intent to acquire the portfolio company, timing of expected loan repayments, and the markets in which the
portfolio company operates.  22




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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, adjusted for amortization of premiums, amendment fees and acquisition costs and the accretion of discounts, 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 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, the interest income is deemed to be collectible. As of June 30, 2019, certain of our loans to Meridian Rack & Pinion, Inc. (Meridian), The Mountain Corporation (The Mountain), PSI Molded Plastics,
Inc. (PSI), and SOG Specialty Knives & Tools, LLC (SOG) were on non-accrual status, with an aggregate debt cost basis of $56.4 million, or 12.9% of the cost basis of all
debt investments in our portfolio, and an aggregate fair value of $36.1 million, or 8.7% of the fair value of all debt investments in our portfolio. As of March 31, 2019, certain of our loans to
B-Dry, LLC, Meridian, The Mountain, PSI, and SOG were on non-accrual status, with an aggregate debt cost basis of $68.3 million, or 15.4% of the cost basis of all
debt investments in our portfolio, and an aggregate fair value of $21.9 million, or 5.4% of the fair value of all debt investments in our portfolio. Paid-in-kind (PIK) interest, computed at the contractual rate
specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income. As of June 30, 2019 and March 31, 2019, we did not have any loans with a PIK interest component. 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. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents are generally cash and cash equivalents held in escrow received as part of an investment exit. Restricted cash and cash
equivalents are carried at cost, which approximates fair value. Deferred Financing and Offering Costs Deferred financing and offering costs consist of costs incurred to obtain financing, including lender fees and legal fees. Certain costs associated with our
revolving line of credit are deferred and amortized using the straight-line method, which approximates the effective interest method, over the term of the revolving line of credit. Costs associated with the issuance of our mandatorily redeemable
preferred stock are presented as discounts to the liquidation value of the mandatorily redeemable preferred stock and are amortized using the straight-line method, which approximates the effective interest method, over the term of the respective
series of preferred stock. Refer to Note 5  BorrowingsandNote 6  Mandatorily Redeemable Preferred Stock for further discussion.  23




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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 the Fifth Amended and Restated Credit Agreement dated April 30, 2013, as amended (the Credit Facility). We are also party to
the Administration Agreement with the Administrator, which is owned and controlled by our chairman and chief executive officer, whereby we pay separately for administrative services. Refer to Note 4  Related Party Transactionsfor additional information regarding these related party fees and agreements. Recent Accounting Pronouncements In July 2019, the FASB
issued Accounting Standards Update 2019-07, Codification Updates to SEC Sections  Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and
33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update) (ASU 2019-07). ASU 2019-07 aligns the guidance in various SEC sections of the Codification with the requirements of certain SEC final
rules. ASU 2019-07 is effective immediately. The adoption of ASU 2019-07 did not have a material impact on our financial position, results of operations or cash flows. In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820):
Disclosure Framework  Changes to the Disclosure Requirements for Fair Value (ASU 2018-13), which modifies the disclosure requirements in ASC 820. We are currently
assessing the impact of ASU 2018-13 and do not anticipate a material impact on our disclosures. ASU 2018-13 is effective for annual reporting periods beginning after
December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. NOTE 3. INVESTMENTS Fair Value In accordance with ASC 820, we determine the
fair value of our investments 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.  

Level1  inputs to the valuation methodology are quoted prices (unadjusted) for
identical financial instruments in active markets;  

Level2  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  

Level3  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. As of June 30, 2019 and March 31, 2019, all of our investments were valued using Level 3 inputs within the ASC 820
fair value hierarchy, except for our investment in Funko Acquisition Holdings, LLC (Funko), which was valued using Level 2 inputs. 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. There
were no transfers in or out of Level 1, 2 and 3 during the three months ended June 30, 2019 and June 30, 2018, respectively.  24




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As of June 30, 2019 and March 31, 2019, our investments, by security type, at fair value were
categorized as follows within the ASC 820 fair value hierarchy:  Fair Value MeasurementsFair Value


Quoted Prices inActive Marketsfor IdenticalAssets(Level 1)


SignificantOtherObservableInputs(Level 2)


SignificantUnobservableInputs(Level 3)As of June 30, 2019:Secured first lien debt

$
338,586


$



$



$
338,586Secured second lien debt


76,475











76,475Preferred equity


188,639











188,639Common equity/equivalents


27,486







387
(A)


27,099Total Investments at June 30, 2019

$
631,186


$



$
387


$
630,799  Fair Value MeasurementsFair Value


Quoted Prices inActive Marketsfor IdenticalAssets(Level 1)


SignificantOtherObservableInputs(Level 2)


SignificantUnobservableInputs(Level 3)As of March 31, 2019:Secured first lien debt

$
331,090


$



$



$
331,090Secured second lien debt


75,293











75,293Preferred equity


195,377











195,377Common equity/equivalents


22,412







401
(A)


22,011Total Investments at March 31, 2019

$
624,172


$



$
401


$
623,771  (A)
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.  25




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The following table presents our investments, valued using Level 3 inputs within the ASC 820 fair value
hierarchy, and carried at fair value as of June 30, 2019 and March 31, 2019, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:  Total Recurring Fair ValueMeasurements ReportedinConsolidated Statementsof Assets and LiabilitiesValued
Using Level 3InputsJune 30,2019


March 31,2019Non-Control/Non-Affiliate
InvestmentsSecured first lien debt

$
168,528


$
156,044Secured second lien debt


30,380



30,383Preferred equity


111,041



106,462Common equity/equivalents(A)


17,029



20,460Total
Non-Control/Non-Affiliate Investments


326,978



313,349Affiliate InvestmentsSecured first lien debt


170,058



175,046Secured second lien debt


36,095



34,910Preferred equity


77,069



85,606Common equity/equivalents


10,070



1,551Total Affiliate Investments


293,292



297,113Control InvestmentsSecured first lien debt






Secured second lien debt


10,000



10,000Preferred equity


529



3,309Common equity/equivalents






Total Control Investments


10,529



13,309Total investments at fair value using Level 3 inputs

$
630,799


$
623,771  (A)
Excludes our investment in Funko with a fair value of $0.4 million as of both June 30, 2019 and
March 31, 2019, which was valued using Level 2 inputs.  26




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##### Table of Contents

In accordance with ASC 820, the following table provides quantitative information about our investments
valued using Level 3 fair value measurements as of June 30, 2019 and March 31, 2019. The table below is not intended to be all-inclusive, but rather provides information on the significant
Level 3 inputs as they relate to our fair value measurements. The weighted-average calculations in the table below are based on the principal balances for all debt-related calculations and on the cost basis for all equity-related calculations
for the particular input.  Quantitative Information about Level 3 Fair Value MeasurementsFair Value as of


ValuationTechnique/Methodology

UnobservableInput

Range / Weighted- Average as ofJune 30,2019


March 31,2019


June 30, 2019

March 31, 2019Secured first lien debt(A)


$322,056



$313,440


TEV

EBITDA multiple

5.3x 8.4x /6.2x

5.0x  8.6x / 6.4xEBITDA

$1,558 $22,205 /$7,217

$1,303  $20,691 /$7,355Revenue multiple

0.6x  0.8x / 0.7x

0.6x  1.0x / 0.8xRevenue

$16,423  $24,092 / $22,415

$12,574 $24,857 / $17,78516,530



17,650


YieldAnalysis

Discount
Rate

15.2%  20.9% / 17.8%

14.6%  23.1% / 18.5%Secured second lien debt


46,161



45,110


TEV

EBITDA multiple

5.8x  6.8x / 6.5x

5.9x  6.9x / 6.6xEBITDA

$3,265  $6,016 / $5,193

$4,156  $6,059 / $5,258Revenue multiple

0.8x  0.8x / 0.8x

0.8x  0.8x / 0.8xRevenue

$16,423  $16,423 / $16,423

$16,717  $16,717 / $16,71730,314



30,183


YieldAnalysis

Discount Rate

6.7%  11.1% / 9.0%

7.3%  11.4% / 9.5%Preferred equity(B)


188,639



195,377


TEV

EBITDA multiple

5.5x  8.4x / 6.6x

5.0x  8.6x / 7.3xEBITDA

$1,782  $22,205 / $6,305

$2,382 $20,691 / $7,183Revenue multiple

0.6x  0.8x / 0.7x

0.6x  1.0x / 0.7xRevenue

$16,423  $24,092 / $21,255

$12,574  $24,857 / $20,103Common equity/equivalents(C)(D)


27,099



22,011


TEV

EBITDA multiple

5.3x  7.9x / 6.9x

5.5x  8.1x / 7.0xEBITDA

$1,558  $18,433 / $12,019

$1,303  $17,310 / $11,459Revenue multiple

0.8x  0.8x / 0.8x

0.8x  0.8x / 0.8xRevenue

$16,423  $16,423 / $16,423

$16,717  $16,717 / $16,717Total


$630,799



$623,771  (A)
Fair value as of March 31, 2019 includes two proprietary debt investments for a combined
$14.2 million, which were valued at the expected payoff amount as the unobservable input. (B)
Fair value as of March 31, 2019 includes two proprietary equity investments for a combined
$6.8 million, which were valued at the expected payoff amount as the unobservable input. (C)
Fair value as of March 31, 2019 includes two proprietary equity investments for a combined
$2.6 million, which were valued at the expected payoff amount as the unobservable input. (D)
Fair value as of both June 30, 2019 and March 31, 2019 excludes our investment in Funko with a fair
value of $0.4 million, which was valued using Level 2 inputs. 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 discount rates or
a (decrease)/increase in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a (decrease)/increase in the fair value of certain of our investments.  27




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##### Table of Contents

Changes in Level 3 Fair Value Measurements of Investments The following tables provide our portfolios changes in fair value, broken out by security type, during the three months ended June 30, 2019 and 2018
for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs. Fair Value Measurements Using
Significant Unobservable Inputs (Level 3)  SecuredFirst LienDebt


SecuredSecond LienDebt


PreferredEquity


CommonEquity/Equivalents


TotalThree months ended June 30, 2019:Fair value as of March 31, 2019

$
331,090


$
75,293


$
195,377


$
22,011


$
623,771Total gain (loss):Net realized gain (loss)(A)










(1,252
)


1,719



467Net unrealized appreciation
(depreciation)(B)


(168
)


1,177



(10,546
)


7,653



(1,884
)Reversal of previously recorded (appreciation) depreciation upon realization(B)










552



(1,719
)


(1,167
)New investments, repayments and
settlements(C):Issuances / originations


40,650



5



10,580







51,235Settlements / repayments


(32,986
)














(32,986
)Sales










(6,072
)


(2,565
)


(8,637
)Transfers(D)


















Fair value as of June 30, 2019

$
338,586


$
76,475


$
188,639


$
27,099


$
630,799  SecuredFirst LienDebt


SecuredSecond LienDebt


PreferredEquity


CommonEquity/Equivalents


TotalThree months ended June 30, 2018:Fair value as of March 31, 2018

$
305,856


$
97,339


$
167,150


$
28,608


$
598,953Total gain (loss):Net realized gain (loss)(A)














13,786



13,786Net unrealized appreciation
(depreciation)(B)


155



(568
)


31,578



1,140



32,305Reversal of previously recorded (appreciation) depreciation upon realization(B)


(74
)










(14,681
)


(14,755
)New investments, repayments and
settlements(C):Issuances / originations


24,902



255



4,900







30,057Settlements / repayments


(14,514
)














(14,514
)Sales










(3,376
)


(13,850
)


(17,226
)Transfers


















Fair value as of June 30, 2018

$
316,325


$
97,026


$
200,252


$
15,003


$
628,606  (A)
Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of
Operations for the respective periods ended June 30, 2019 and 2018. (B)
Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated
Statements of Operations for the respective periods ended June 30, 2019 and 2018. (C)
Includes increases in the cost basis of investments resulting from new portfolio investments, the amortization
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. (D)
Transfer represents secured first lien debt of B-Dry, LLC with a cost
basis of $11.9 million and a fair value of $0, which was converted into equity during the three months ended June 30, 2019 with a cost basis of $11.9 million and a fair value of $0.  28




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##### Table of Contents

Investment Activity During the three months ended June 30, 2019, the following significant transactions occurred:  

In April 2019, we sold our investment in Tread Corporation which resulted in a realized loss of
$2.7 million. In connection with the sale, we received net cash proceeds of $4.9 million, including the repayment of our debt investment of $3.2 million at par.  

In April 2019, we sold our investment in Jackrabbit Inc. which resulted in dividend income of $2.1 million
and a realized gain of $3.2 million. In connection with the sale, we received net cash proceeds of $19.8 million, including the repayment of our debt investment of $11.0 million at par.  

In April and May 2019, we extended a line of credit to J.R. Hobbs Co.  Atlanta, LLC (J.R.
Hobbs) with a total commitment amount of $10.0 million, which matures in October 2019.  

In May 2019, our $15.8 million debt investment in Old World Christmas, Inc. was repaid at par. In connection
with the repayment, we received success fee income of $0.2 million.  

In June 2019, we invested $38.8 million in Horizon Facilities Services, Inc. (Horizon) through a
combination of secured first lien debt and preferred equity. Horizon, headquartered in Allentown, Pennsylvania, is a leading provider of outsourced services to the rental car industry. Investment Concentrations As of June 30, 2019, our
investment portfolio consisted of investments in 29 portfolio companies located in 16 states across 14 different industries with an aggregate fair value of $631.2 million. Our investments in Nth Degree, Inc., J.R. Hobbs, Counsel Press, Inc.,
Brunswick Bowling Products, Inc., and Horizon represented our five largest portfolio investments at fair value as of June 30, 2019, and collectively comprised $240.4 million, or 38.1%, of our total investment portfolio at fair value. The following table summarizes our investments by security type as of June 30, 2019 and March 31, 2019:  June 30, 2019


March 31, 2019Cost


Fair Value


Cost


Fair ValueSecured first lien debt

$
346,746



57.8
%

$
338,586



53.6
%

$
350,965



59.5
%

$
331,090



53.0
%Secured second lien debt


91,856



15.3



76,475



12.1



91,851



15.6



75,293



12.1Total debt


438,602



73.1



415,061



65.7



442,816



75.1



406,383



65.1Preferred equity


159,761



26.7



188,639



29.9



144,622



24.5



195,377



31.3Common equity/equivalents


1,387



0.2



27,486



4.4



2,251



0.4



22,412



3.6Total equity/equivalents


161,148



26.9



216,125



34.3



146,873



24.9



217,789



34.9Total investments

$
599,750



100.0
%

$
631,186



100.0
%

$
589,689



100.0
%

$
624,172



100.0
%  29




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##### Table of Contents

Investments at fair value consisted of the following industry classifications as of June 30, 2019 and
March 31, 2019:  June 30, 2019


March 31, 2019Fair Value


Percentage ofTotal Investments


Fair Value


Percentage ofTotal InvestmentsDiversified/Conglomerate Services

$
258,403



40.9
%

$
212,817



34.1
%Home and Office Furnishings, Housewares, and Durable Consumer Products


84,194



13.3



102,271



16.4Diversified/Conglomerate Manufacturing


51,105



8.1



41,235



6.6Personal and Non-Durable Consumer Products
(Manufacturing Only)


40,264



6.4



40,130



6.4Leisure, Amusement, Motion Pictures, and Entertainment


36,451



5.8



40,912



6.6Healthcare, Education, and Childcare


28,636



4.5



30,022



4.8Machinery (Non-agriculture, Non-construction, and Non-electronic)


28,107



4.5



28,905



4.6Containers, Packaging, and Glass


21,589



3.4



22,009



3.5Chemicals, Plastics, and Rubber


17,921



2.8



16,641



2.7Cargo Transport


16,052



2.6



15,490



2.5Telecommunications


15,925



2.5



15,225



2.4Beverage, Food, and Tobacco


13,360



2.1



11,937



1.9Aerospace and Defense


10,529



1.7



13,309



2.1Automobile


8,650



1.4



9,716



1.6Farming and Agriculture










19,197



3.1Other < 2.0%










4,356



0.7Total investments

$
631,186



100.0
%

$
624,172



100.0
% Investments at fair value were included in the following geographic regions of the U.S. as of June 30, 2019 and
March 31, 2019:  June 30, 2019


March 31, 2019Location

Fair Value


Percentage ofTotal Investments


Fair Value


Percentage ofTotal InvestmentsSouth

$
262,778



41.6
%

$
262,386



42.0
%West


165,273



26.2



177,599



28.5Northeast


151,827



24.1



129,430



20.7Midwest


51,308



8.1



54,757



8.8Total investments

$
631,186



100.0
%

$
624,172



100.0
% The geographic region indicates the location of the headquarters for our portfolio companies. A portfolio company may have
additional business locations in other geographic regions. 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 June 30, 2019:  AmountFor the remaining nine months ending March 31:

2020

$
53,160For the fiscal years ending March 31:

2021


55,8462022


56,5712023


97,4892024


111,618Thereafter


63,980Total contractual repayments

$
438,664Adjustments to cost basis of debt investments


(62
)Investments in equity securities


161,148Total cost basis of investments held as of June 30, 2019:

$
599,750  30




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##### Table of Contents

Receivables from Portfolio Companies Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies.
Such receivables, net of any allowance for uncollectible receivables, are included in Other assets, net 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 June 30, 2019 and March 31, 2019, we had gross receivables from portfolio
companies of $1.1 million and $1.3 million, respectively. The allowance for uncollectible receivables was $0.6 million and $0.8 million as of June 30, 2019 and March 31, 2019, respectively. NOTE 4. RELATED PARTY TRANSACTIONS Transactions
with the Adviser We pay the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee,
as provided for in the Advisory Agreement, and a loan servicing fee for the Advisers role as servicer pursuant to the Credit Facility, each as described below. On July 9, 2019, our Board of Directors, including a majority of the directors
who are not parties to the Advisory Agreement or interested persons of either party, approved the annual renewal of the Advisory Agreement through August 31, 2020. Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief operating
officer) serve as directors and executive officers of the Adviser, which is 100% indirectly owned and controlled by Mr. Gladstone. David Dullum (our president) is also an executive managing director of the Adviser. The following table summarizes the base management fees, loan servicing fees, incentive fees, and associated
non-contractual, unconditional, and irrevocable credits reflected in our accompanying Consolidated Statements of Operations:  Three MonthsEnded June 30,2019


2018Average total assets subject to base management fee(A)

$
634,200


$
622,200Multiplied by prorated annual base management fee of 2.0%


0.5
%


0.5
%Base management fee(B)


3,171



3,111Credits to fees from Adviser 
other(B)


(1,222
)


(960
)Net base management fee

$
1,949


$
2,151Loan servicing fee(B)


1,752



1,740Credits to base management fee  loan servicing fee(B)


(1,752
)


(1,740
)Net loan servicing fee

$



$
Incentive fee  income-based

$
2,081


$
1,078Incentive fee  capital
gains-based(C)


(512
)


6,508Total incentive fee(B)

$
1,569


$
7,586Credits to fees from Adviser 
other(B)






Net incentive fee

$
1,569


$
7,586  (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 applicable quarters within the respective periods and adjusted appropriately for any share
issuances or repurchases during the periods. (B)
Reflected as a line item on our accompanying Consolidated Statement of Operations. (C)
The capital gains-based incentive fee is not yet contractually due under the terms of the Advisory Agreement. 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 2.0%, computed on the basis of the value of our average gross 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, valued at the end of the applicable quarters within the
respective period and adjusted appropriately for any share issuances or repurchases during the period.  31




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##### Table of Contents

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) 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
received 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 $50 and $71 during
the three month periods ended June 30, 2019 and 2018, respectively, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily related to the valuation of portfolio companies. Loan Servicing Fee The Adviser also services the
loans held by our wholly-owned subsidiary, Business Investment (the borrower under the Credit Facility), in return for which the Adviser receives a 2.0% annual fee based on the monthly aggregate outstanding balance of loans pledged under the Credit
Facility. Since Business Investment is a consolidated subsidiary of ours, coupled with the fact that the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 2.0% of total assets (less any uninvested cash or
cash equivalents resulting from borrowings) during any given calendar year, 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 payable to the Adviser
under our Advisory Agreement 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% 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 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% 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% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter. The second part of the incentive fee is a capital gains-based incentive fee that is determined and payable in arrears as of the end of each fiscal year (or
upon termination of the Advisory Agreement, as of the termination date), and equals 20.0% of our realized capital gains, less any realized capital losses and unrealized depreciation, calculated as of the end of the preceding calendar year. The
capital gains-based incentive fee payable to the Adviser is calculated based on (i) cumulative aggregate realized capital gains since our inception, less (ii) cumulative aggregate realized capital losses since our inception, less
(iii) the entire portfolios aggregate unrealized capital depreciation, if any, as of the date of the calculation. If this number is positive at the applicable calculation date, 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. For calculation purposes, cumulative aggregate realized capital gains, if any, equals the sum of
the excess between the net sales price of each investment, when sold, and the original cost of such investment since our inception. Cumulative aggregate realized capital losses equals the sum of the deficit between the net sales price of each
investment, when sold, and the original cost of such investment since our inception. The entire portfolios aggregate unrealized capital depreciation, if any, equals the sum of the deficit between the fair value of each investment security as
of the applicable calculation date and the original cost of such investment security. We have not incurred capital gains-based incentive fees from inception through June 30, 2019, as aggregate unrealized capital depreciation has exceeded
cumulative realized capital gains net of cumulative realized capital losses.  32




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##### Table of Contents

In accordance with GAAP, accrual of the capital gains-based incentive fee is determined as if our
investments had been liquidated at their fair values as of the end of the reporting period. Therefore, GAAP requires that the capital gains-based incentive fee accrual consider the 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 any such unrealized capital appreciation will be realized in the future. Accordingly, a GAAP accrual is
calculated at the end of the reporting period based on (i) cumulative aggregate realized capital gains since our inception, plus (ii) the entire portfolios aggregate unrealized capital appreciation, if any, less (iii) cumulative
aggregate realized capital losses since our inception, less (iv) the entire portfolios aggregate unrealized capital depreciation, if any. If such amount is positive at the end of a reporting period, a capital gains-based incentive fee
equal to 20.0% of such amount, less the aggregate amount of capital gains-based incentive fees accrued in all prior years, is recorded, regardless of whether such amount is contractually due under the terms of the Advisory Agreement. If such amount
is negative, then there is no accrual for such period. During the three months ended June 30, 2019 and 2018, we recorded a $0.5 million reversal of previously accrued capital gains-based incentive fees. During the three months ended
June 30, 2018, we recorded capital gains-based incentive fees of $6.5 million. Such amounts are not yet contractually due under the terms of the Advisory Agreement. Transactions with the Administrator We pay the
Administrator pursuant to the Administration Agreement for our allocable portion of the Administrators expenses incurred while performing services to us, which are primarily rent and salaries and benefits expenses of the Administrators
employees, including: our chief financial officer and treasurer, chief valuation officer, chief compliance officer, and general counsel and secretary (who also serves as the Administrators president, general counsel, and secretary), and their
respective staffs. Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief operating officer) serve as members of the board of managers and executive officers of
the Administrator, which is 100% indirectly owned and controlled by Mr. Gladstone. 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 9, 2019, 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
annual renewal of the Administration Agreement through August 31, 2020. Other Transactions Gladstone Securities, LLC (Gladstone Securities), which is 100% indirectly owned and controlled by Mr. Gladstone, our chairman and chief
executive officer, is a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. From time to time, Gladstone Securities provides other services, such as
investment banking and due diligence services, to certain of our portfolio companies, for which it 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. The fees received by Gladstone Securities from portfolio companies totaled $0.4 million and $0.3 million during the
three months ended June 30, 2019 and 2018, respectively. Related Party Fees Due Amounts due to related parties on our accompanying Consolidated Statements of Assets and Liabilities were as follows:  As ofJune 30,


As ofMarch 31,2019


2019Base management and loan servicing fee due to Adviser, net of credits

$
711


$
1,143Incentive fee due to Adviser(A)


23,808



23,548Other due to Adviser


75



33Total fees due to Adviser

$
24,594


$
24,724Fee due to Administrator

$
314


$
344Total related party fees due

$
24,908


$
25,068  (A)
Includes a capital gains-based incentive fee of $21.7 million and $22.2 million as of June 30,
2019 and March 31, 2019, respectively, recorded in accordance with GAAP requirements and which is not contractually due under the terms of the Advisory Agreement. Refer to Note 4  Related Party Transactions Transactions
with the Adviser Incentive Fee for additional information.  33




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##### Table of Contents

Net expenses receivable from Gladstone Capital Corporation, one of our affiliated funds, for reimbursement
purposes, which includes certain co-investment expenses, totaled $26 and $12 as of June 30, 2019 and March 31, 2019, respectively. These amounts are generally settled in the quarter subsequent to
being incurred and have been included in Other Assets, net on the accompanying Consolidated Statements of Assets and Liabilitiesas of June 30, 2019 and March 31, 2019, respectively. NOTE 5. BORROWINGS Revolving Line of Credit On August 22, 2018, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 4 to the Fifth Amended and
Restated Credit Agreement, originally entered into on April 30, 2013 and as previously amended, with KeyBank National Association (KeyBank) as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer,
and certain other lenders party thereto. The revolving period was extended to August 22, 2021, and if not renewed or extended by such date, all principal and interest will be due and payable on August 22, 2023 (two years after the
revolving period end date). As of June 30, 2019, the Credit Facility provided two one-year extension options that may be exercised on or before the first and second anniversary of the August 22, 2018
amendment date, subject to approval by all lenders. Additionally, the Credit Facility commitment amount was increased from $165.0 million to $200.0 million and, subject to certain terms and conditions, can be expanded to a total facility
amount of $300.0 million through additional commitments from existing or new lenders. The amendment also reduced the Companys minimum asset
coverage with respect to senior securities representing indebtedness from 200% to 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). Advances under the Credit Facility generally bear interest at 30-day London Interbank Offered Rate (LIBOR)
plus 2.85% per annum until August 21, 2021, with the margin then increasing to 3.10% for the period from August 22, 2021 to August 21, 2022, and increasing further to 3.35% thereafter. The Credit Facility has an unused commitment fee
on the daily unused commitment amount of 0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the average unused commitment amount for the period is
greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment amount. The following tables summarize noteworthy information related to the Credit Facility:  As ofJune 30,2019


As ofMarch 31,2019Commitment amount

$
200,000


$
200,000Borrowings outstanding at cost


73,500



53,000Availability(A)


126,500



147,000  For the Three MonthsEnded June 30,2019


2018Weighted-average borrowings outstanding

$
42,670


$
123,275Effective interest rate(B)


9.1
%


5.4
%Commitment (unused) fees incurred

$
398


$
53  (A)
Availability is subject to various constraints, characteristics and applicable advance rates based on
collateral quality under the Credit Facility, which equated to an adjusted availability of $120.5 million and $137.5 million as of June 30, 2019 and March 31, 2019, respectively. (B)
Excludes the impact of deferred financing costs and includes unused commitment fees. Among other things, the Credit Facility contains a performance guaranty that requires us to maintain (i) a minimum net worth (defined in the Credit
Facility to include our mandatory redeemable term preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired
after November 16, 2016, which equated to $218.7 million as of June 30, 2019, (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 June 30, 2019, and as defined in the performance guaranty of the Credit Facility, we had
a net worth of $530.6 million, asset coverage on our senior securities representing indebtedness of 763.7%, calculated in compliance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. As of
June 30, 2019, we were in compliance with all covenants under the Credit Facility.  34




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##### Table of Contents

Secured Borrowing In August 2012, we entered into a participation agreement with a third-party related to $5.0 million of our secured second lien term debt investment in
Ginsey Home Solutions, Inc. (Ginsey). In May 2014, we amended the agreement with the third-party to include an additional $0.1 million. ASC Topic 860, Transfers and Servicing requires us to treat the participation
as a financing-type transaction. Specifically, the third-party has a senior claim to our remaining investment in the event of default by Ginsey which, in part, resulted in the loan participation bearing a rate of interest lower than the contractual
rate established at origination. Therefore, our accompanying Consolidated Statements of Assets and Liabilities reflects the entire secured second lien term debt investment in Ginsey and a corresponding $5.1 million secured borrowing
liability. The secured borrowing has a stated fixed interest rate of 7.0% and a maturity date of January 3, 2021. Fair Value We elected to apply the fair value option of ASC Topic 825, Financial Instruments, to the Credit Facility, which was consistent with our
application of ASC 820 to our investments. Generally, the fair value of the Credit Facility is determined using a yield analysis, which includes a DCF calculation and also takes into account the assumptions 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 June 30, 2019, the discount rate used to determine
the fair value of our Credit Facility was 30-day LIBOR, plus 2.65% per annum, plus a 0.75% unused commitment fee. As of March 31, 2019, the discount rate used to determine the fair value of our Credit
Facility was 30-day LIBOR, plus 2.85% per annum, plus a 1.0% 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 the Credit Facility. At each of June 30, 2019 and March 31, 2019, the Credit Facility was valued using Level 3 inputs and any changes in its fair value are recorded in Net unrealized
depreciation of other on our accompanying Consolidated Statements of Operations. The following tables provide relevant information and disclosures
about the Credit Facility as of June 30, 2019 and March 31, 2019, and for the three months ended June 30, 2019 and 2018, as required by ASC 820:  Level 3  BorrowingsRecurring Fair Value MeasurementsReported inConsolidatedStatements of Assets and LiabilitiesUsing SignificantUnobservable Inputs (Level 3)June 30, 2019


March 31, 2019Credit Facility

$
73,795


$
53,000  Fair Value Measurements of Borrowings Using
Significant Unobservable Inputs (Level 3) Reported in
Consolidated Statements of Assets and LiabilitiesCreditFacilityThree months ended June 30, 2019:Fair value at March 31, 2019

$
53,000Borrowings


74,500Repayments


(54,000
)Unrealized appreciation


295Fair value at June 30, 2019

$
73,795Three months ended June 30, 2018:Fair value at March 31, 2018

$
107,500Borrowings


37,900Repayments


(42,400
)Unrealized depreciation


(93
)Fair value at June 30, 2018

$
102,907 The fair value of the collateral under the Credit Facility was $559.8 million and $536.3 million as of June 30,
2019 and March 31, 2019, respectively.  35




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##### Table of Contents

NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK The following tables summarize our 6.250% Series D Cumulative Term Preferred Stock (our Series D Term Preferred Stock or Series D), and
our 6.375% Series E Cumulative Term Preferred Stock (our Series E Term Preferred Stock or Series E) outstanding as of June 30, 2019 and March 31, 2019: As of June30, 2019:  Class of TermPreferred
Stock

Ticker Symbol

Date Issued

MandatoryRedemptionDate(A)

Interest Rate

SharesOutstanding

LiquidationPreference perShare

Total LiquidationPreferenceSeries D

GAINM

September 26, 2016

September 30,
2023

6.250%

2,300,000

$25.00

$57,500Series E

GAINL

August 22,2018

August 31,
2025

6.375%

2,990,000

25.00

74,750Term preferred stock,
gross(A)

5,290,000

$25.00

$132,250Less: Discounts





(3,598)Term preferred stock,
net(B)





$128,652 As of March31, 2019:  Class of TermPreferred
Stock

Ticker Symbol

Date Issued

MandatoryRedemptionDate(A)

Interest Rate

SharesOutstanding

LiquidationPreference perShare

Total LiquidationPreferenceSeries D

GAINM

September 26, 2016

September 30,
2023

6.250%

2,300,000

$25.00

$57,500Series E

GAINL

August 22,2018

August 31,
2025

6.375%

2,990,000

25.00

74,750Term preferred stock,
gross(A)

5,290,000

$25.00

$132,250Less: Discounts





(3,768)Term preferred stock,
net(B)





$128,482  (A)
As of June 30, 2019 and March 31, 2019, asset coverage on our senior securities that are
stock, calculated pursuant to Sections 18 and 61 of the 1940 Act, was 287.5% and 309.1%, respectively. (B)
Reflected as a line item on our accompanying Consolidated Statement of Assets and Liabilitiespursuant to the adoption of Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs. The following tables summarize dividends declared by our Board of Directors and paid by us on our 6.750% Series B Cumulative Term Preferred Stock (our
Series B Term Preferred Stock or Series B), our 6.500% Series C Cumulative Term Preferred Stock (our Series C Term Preferred Stock or Series C), our Series D Term Preferred Stock and our Series E Term
Preferred Stock during the three months ended June 30, 2019 and 2018: For the Three Months Ended June30, 2019:  Declaration Date

RecordDate

Payment
Date

Dividend per
Share of Series D
TermPreferred Stock

Dividend per
Share of Series E
TermPreferred Stock(A)April 9, 2019

April 22, 2019

April 30, 2019

$0.13020833

$0.13281250April 9, 2019

May 22, 2019

May 31, 2019

0.13020833

0.13281250April 9, 2019

June 19, 2019

June 28, 2019

0.13020833

0.13281250Total

$0.39062499

$0.39843750  36




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##### Table of Contents

For the Three Months Ended June30, 2018:  Declaration Date

Record Date

Payment Date

Dividend per
Share ofSeries B TermPreferredStock(B)

Dividend per
Share ofSeries C TermPreferredStock(B)

Dividend per
Share ofSeries D TermPreferredStockApril 10, 2018

April 20, 2018

April 30, 2018

$0.140625

$0.135417

$0.13020833April 10, 2018

May 22, 2018

May 31, 2018

0.140625

0.135417

0.13020833April 10, 2018

June 20, 2018

June 29, 2018

0.140625

0.135417

0.13020833Total

$0.421875

$0.406251

$0.39062499  (A)
We issued our Series E Term Preferred Stock on August 22, 2018. (B)
We voluntarily redeemed all outstanding shares of our Series B Term Preferred Stock and Series C Term Preferred
Stock on August 31, 2018. The federal income tax characteristics of dividends paid to our preferred stockholders generally
constitute ordinary income or capital gains to the extent of our current and accumulated earnings and profits and is reported after the end of the calendar year based on tax information for the full fiscal year. Estimates of tax characterization
made on a quarterly basis may not be representative of the actual tax characterization of dividends for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date. If we determined the tax characterization of
dividends paid to preferred stockholders in the current calendar year as of June 30, 2019, 27.2% would be from ordinary income and 72.8% would be from capital gains. In accordance with ASC Topic 480, Distinguishing Liabilities from Equity, mandatorily redeemable financial instruments should be classified
as liabilities on the balance sheet. Our mandatorily redeemable preferred stock is recorded at the liquidation preference, less discounts, on our accompanyingConsolidated Statements of Assets and Liabilities as of June 30, 2019 and
March 31, 2019. The related dividend payments to preferred stockholders are treated as dividend expense on our accompanyingConsolidated Statements of Operations on the ex-dividend date. The following table summarizes the fair value of each of our series of mandatorily redeemable preferred stock based on the last reported closing sale price as
of June 30, 2019 and March 31, 2019, each of which we consider to be a Level 1 input within the fair value hierarchy:  Fair Value as ofJune 30,2019


March 31,2019Series D Term Preferred Stock

$
58,535


$
58,535Series E Term Preferred Stock


78,099



76,395Total

$
136,634


$
134,930 NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS Registration Statement On June 14, 2019, we filed a
registration statement on Form N-2 (File No. 333-232124), which the SEC declared effective on July 24, 2019. The 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,
including through concurrent, separate offerings of such securities.As of July 24, 2019, we had the ability to issue up to an additional $300.0 million in securities under the registration statement. Common Equity Offering In February 2018, we entered into
equity distribution agreements with Cantor Fitzgerald & Co. (Cantor), Ladenburg Thalmann & Co., Inc., and Wedbush Securities, Inc. (each a Sales Agent), under which we have the ability to issue and sell
shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of $35.0 million in what is commonly referred to as an
at-the-market (ATM) program. As of June 30, 2019, we had remaining capacity to sell up to an additional $31.8 million of common stock
under the ATM program.  37




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##### Table of Contents

During the three months ended June 30, 2018, we sold 168,824 shares of our common stock under the ATM
program with Cantor at a weighted-average gross price of $11.09 per share and raised approximately $1.9 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $10.87
and resulted in total net proceeds of approximately $1.8 million. Certain of these sales were below our then-current estimated NAV per share during the sales period, with a discount of $0.002 per share, when comparing the sales price per share,
after deducting commissions, to the then-current estimated NAV per share; however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result of the small number of shares sold at
a slight discount to NAV per share and resulting rounding. In aggregate, the sales during the three months ended June 30, 2018 were above our then-current estimated NAV per share. NOTE 8. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER WEIGHTED-AVERAGE COMMON SHARE The following table sets forth the computation of basic and diluted Net increase in net assets resulting from operations per weighted-average common share for
the three months ended June 30, 2019 and 2018:  Three Months Ended June 30,2019


2018Numerator: net increase in net assets resulting from operations

$
6,046


$
32,327Denominator: basic and diluted weighted-average common shares


32,822,459



32,762,848Basic and diluted net increase in net assets resulting from operations per weighted-average
common share

$
0.18


$
0.99 NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS To qualify to be taxed as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our
taxable ordinary income plus the excess of our net short-term capital gains over net long-term capital losses (Investment Company Taxable Income). The amount to be paid out as distributions to our common stockholders is determined by our
Board of Directors quarterly and is based upon managements estimate of Investment Company Taxable Income and net long-term capital gains. Based on that estimate, our Board of Directors declares monthly distributions, and supplemental
distributions, as appropriate, to common stockholders each quarter and deemed distributions of long-term capital gains annually as of the end of the fiscal year, as applicable. The U.S. federal income tax characteristics of distributions paid to our common stockholders generally are reported to stockholders on 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 distributions for the full year. Estimates made on a quarterly basis are updated as of each
interim reporting date. If we determined the tax characterization of distributions paid to common stockholders in the current calendar year as of June 30, 2019, 67.6% would be from ordinary income and 32.4% would be from capital gains.  38




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##### Table of Contents

We paid the following monthly cash distributions to our common stockholders for the three months ended
June 30, 2019 and 2018:  Fiscal Year

Declaration Date

Record Date

Payment Date

Distributionper Common Share2020

April 9, 2019

April 22, 2019

April 30, 2019

$0.068April 9, 2019

May 22, 2019

May 31, 2019

0.068April 9, 2019

June 5, 2019

June 14, 2019

0.090(A)April 9, 2019

June 19, 2019

June 28, 2019

0.068Three months ended June 30, 2019:

$0.294  Fiscal Year

Declaration Date

Record Date

Payment Date

Distributionper Common Share2019

April 10, 2018

April 20, 2018

April 30, 2018

$0.067April 10, 2018

May 22, 2018

May 31, 2018

0.067April 10, 2018

June 6, 2018

June 15, 2018

0.060(A)April 10, 2018

June 20, 2018

June 29, 2018

0.067Three months ended June 30, 2018:

$0.261  (A)
Represents a supplemental distribution to common stockholders. Aggregate cash distributions to our common stockholders declared quarterly and paid were $9.7 million and $8.6 million for the three months ended
June 30, 2019 and 2018, respectively, and were declared based on estimates of Investment Company Taxable Income and net long-term capital gains for the respective periods. For the three months ended June 30, 2019, we recorded $0.3 million of net estimated adjustments for permanent
book-tax differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of distributions and increased Overdistributed net investment income on
our accompanying Consolidated Statements of Assets and Liabilities. For the fiscal year ended March 31, 2019, Investment Company Taxable Income exceeded distributions declared and paid and, in accordance with Section 855(a) of the
Code, we elected to treat $16.0 million of the first distributions paid to common stockholders in fiscal year 2019, as having been paid in the prior year. In addition, for the fiscal year ended March 31, 2019, net capital gains exceeded
distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $13.2 million of the first distributions paid to common stockholders in fiscal year 2019 as having been paid in the prior year. We may distribute our net long-term capital gains, if any, in cash or elect to retain some or all of such gains, pay taxes at the U.S. federal corporate-level
income tax rate on the amount retained, and designate the retained amount as a deemed distribution. If we elect to retain net long-term capital gains and deem them distributed, each U.S. common stockholder will be treated as if they
received a distribution of their pro rata share of the retained net long-term capital gain and the U.S. federal income tax paid. As a result, each U.S. common stockholder will (i) be required to report their pro rata share of the retained gain
on their tax return as long-term capital gain, (ii) receive a refundable tax credit for their pro rata share of federal tax paid by us on the retained gain, and (iii) increase the tax basis of their shares of common stock by an amount
equal to the deemed distribution less the tax credit. In order to use the deemed distribution approach, we must provide written notice to our common stockholders prior to the expiration of 60 days after the close of the relevant taxable year. For
the year ended March 31, 2019, we elected to retain $50.0 million, or $1.52 per common share, of long-term capital gains and to treat them as deemed distributions to common stockholders. We incurred $10.5 million, or $0.32 per common
share, of federal taxes on behalf of common stockholders, which was included in Taxes on deemed distribution of long-term capital gains on our Consolidated Statements of Operations for the year ended March 31, 2019 and in Other
Liabilities on our accompanying Consolidated Statements of Assets and Liabilities as of March 31, 2019. In addition, we recorded a reserve
for uncertain tax positions related to potential Virginia state tax exposure related to the deemed distribution of $3.0 million for the year ended March 31, 2019, which was included in Taxes on deemed distribution of long-term capital
gains on our Consolidated Statements of Operations for the year ended March 31, 2019 and in Other Liabilities on our accompanyingConsolidated Statements of Assets and Liabilitiesas of June 30, 2019 and March 31, 2019.
We have requested clarification of the treatment of deemed distributions with respect to Virginia state taxes from the Virginia Department of Revenue. We expect to obtain such clarification during our fiscal year ending March 31, 2020.  39




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##### Table of Contents

NOTE 10. 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 operation 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 June 30, 2019 and March 31, 2019, 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 $2.4 million and $1.7 million as of June 30, 2019 and March 31,
2019, respectively. Financial Commitments and Obligations We have lines of credit commitments to certain of our portfolio companies that have not been fully drawn. Since these line of credit commitments have
expiration dates and we expect many will never be fully drawn, the total line of credit commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the unused line of credit commitments as of June 30,
2019 and March 31, 2019 to be immaterial. We have also extended a guaranty on behalf of one of our portfolio companies. As of June 30, 2019, we
have not been required to make any payments on this guaranty, or any guaranties that existed in previous periods, and we consider the credit risk to be remote and the fair value of the guaranty as of June 30, 2019 and March 31, 2019 to be
immaterial. As of June 30, 2019, the following guaranty was outstanding:  

A $1.0 million continuing guaranty of a wholesale financing facility agreement (the Floor Plan
Facility) between DLL Finance LLC (f/k/a Agricredit Acceptance, LLC) and Country Club Enterprises, LLC (CCE). The Floor Plan Facility provides CCE with financing to bridge the time and cash flow gap between the order and delivery
of golf carts to customers. The following table summarizes the principal balances of unused line of credit commitments and guaranties
as of June 30, 2019 and March 31, 2019, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and Liabilities:  June 30,2019


March 31,2019Unused line of credit commitments

$
4,025


$
1,259Guaranties


1,000



1,000Total

$
5,025


$
2,259  40




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##### Table of Contents

NOTE 11. FINANCIAL HIGHLIGHTS  Three Months Ended June 30,2019


2018Per Common Share Data:Net asset value at beginning of
period(A)

$
12.40


$
10.85Income from investment
operations(B)Net investment income


0.27



Net realized gain on investments


0.01



0.43Net unrealized (depreciation) appreciation of investments and other


(0.10
)


0.56Total from investment operations


0.18



0.99Effect of equity capital
activity(B)Cash distributions to common stockholders from net investment income(C)


(0.20
)


(0.21
)Cash distributions to common stockholders from realized gains(C)


(0.09
)


(0.05
)Net dilutive effect of equity
offering(D)






Total from equity capital activity


(0.29
)


(0.26
)Other, net(B)(E)






(0.01
)Net asset value at end of
period(A)

$
12.29


$
11.57Per common share market value at beginning of period

$
11.60


$
10.10Per common share market value at end of period


11.23



11.77Total investment return(F)


(0.72
)%


19.19
%Common stock outstanding at end of
period(A)


32,822,459



32,822,459Statement of Assets and Liabilities Data:Net assets at end of period

$
403,506


$
379,808Average net assets(G)


407,887



364,228Senior Securities Data:Total borrowings, at cost

$
78,596


$
107,596Mandatorily redeemable preferred stock(H)


132,250



139,150Ratios/Supplemental Data:Ratio of net expenses to average net assets  annualized(I)


8.29
%


16.96
%Ratio of net investment income to average net assets  annualized(J)


8.68



0.06  (A)
Based on actual shares of common stock outstanding at the beginning or end of the corresponding period, as
appropriate. (B)
Based on weighted-average basic common share data for the corresponding period. (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. For further information on the estimated character of our distributions to common stockholders, including changes in estimates, as applicable, refer to Note 9 
Distributions to Common Stockholders. (D)
During the three months ended June 30, 2018, the net dilutive effect of issuing common shares was $0.00
per common share as a result of the small number of shares sold at a slight discount to NAV per share and resulting rounding. (E)
Represents the impact of the different share amounts (weighted-average basic common shares outstanding for the
corresponding period and actual common shares outstanding at the end of the period) in the Per Common Share Data calculations and rounding impacts. (F)
Total return equals the change in the market value of our common stock from the beginning of the period, taking
into account dividends 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, including changes in estimates, as applicable, refer to Note 9  Distributions to Common Stockholders. (G)
Calculated using the average balance of net assets at the end of each month of the reporting period. (H)
Represents the total liquidation preference of our mandatorily redeemable preferred stock. (I)
Ratio of net expenses to average net assets is computed using total expenses, net of any non-contractual, unconditional, and irrevocable credits of fees from the Adviser. Had we not received any non-contractual, unconditional, and irrevocable credits of fees due
to the Adviser, the ratio of expenses to average net assets  annualized would have been 11.21% and 19.93% for the three months ended June 30, 2019 and 2018, respectively. (J)
Had we not received any non-contractual, unconditional, and irrevocable
credits of fees from the Adviser, the ratio of net investment income (loss) to average net assetsannualized would have been 5.77% and (2.90)% for the three months ended June 30, 2019 and 2018, respectively.  41




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##### Table of Contents

NOTE 12. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES In accordance with the SECs Regulation S-X, we do not consolidate portfolio company investments. Further, in
accordance with ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to
the investment company or its consolidated subsidiaries. We had one unconsolidated subsidiary, Galaxy Tool Holding Corporation (Galaxy),
which met at least one of the significance conditions under Rule 1-02(w) of the SECs Regulation S-X as of or during at least one of the three month periods ended
June 30, 2019 and 2018. Accordingly, summarized, comparative financial information, pursuant to Rule 10-01(b), is presented below for Galaxy, which is a designer and manufacturer of precision tools for
the business jet industry and of injection and blow molds for the plastics industry.  For the ThreeMonths EndedJune 30,Income Statement

2019


2018Net sales

$
6,862


$
6,212Gross profit


1,556



1,427Net profit (loss)


425



(1,480
) NOTE 13. SUBSEQUENT EVENTS Distributions and Dividends In July 2019, our Board of
Directors declared the following monthly and supplemental distributions to common stockholders and monthly dividends to holders of our Series D Term Preferred Stock and Series E Term Preferred Stock:  Record Date

Payment Date

Distribution perCommon Share


Dividend per
Share of
Series D Term
Preferred Stock

Dividend per
Share of Series E
Term Preferred StockJuly 22, 2019

July 31, 2019


$0.068


$0.13020833

$0.13281250August 20, 2019

August 30, 2019


0.068


0.13020833

0.13281250September 4, 2019

September 13, 2019


0.030
(A)



September 17, 2019

September 30, 2019


0.068


0.13020833

0.13281250Total for the Quarter:


$0.234


$0.39062499

$0.39843750  (A)
Represents a supplemental distribution to common stockholders.  42




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##### Table of Contents

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) 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; (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, David Dullum, or Terry Lee Brubaker;
(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, regulation
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 and as a business development company; and (12) those factors described in Item 1A.Risk Factorsherein and the Risk Factors sections of our Annual Report on Form 10-K for the fiscal year ended
March 31, 2019, filed with the U.S. Securities and Exchange Commission (SEC) on May 13, 2019 (the Annual Report). 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
Quarterly Report on Form 10-Q (the Quarterly 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. 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, including subsequent 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
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. In this Quarterly Report, the Company, we, us, and our refer to Gladstone Investment Corporation and its
wholly-owned subsidiaries unless the context otherwise indicates. Dollar amounts, except per share amounts, are in thousands, unless otherwise indicated. The following analysis of our financial condition and results of operations should be read in conjunction with our accompanyingConsolidated
Financial Statementsand the notes thereto contained elsewhere in this Quarterly Report 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. OVERVIEW General We were incorporated under the General Corporation Law of the State of Delaware on February 18, 2005. On June 22, 2005, we completed our
initial public offering and commenced operations. We operate as an externally managed, closed-end, non-diversified management investment company and have elected to be
treated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). For U.S. federal income tax purposes, we have elected to be treated as a regulated investment company
(RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). To continue to qualify as a RIC for U.S. federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain
requirements, including certain minimum distribution requirements. From our initial public offering in 2005 through June 30, 2019, we made 168 consecutive monthly distributions to common stockholders.  43




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##### Table of Contents

We are externally managed by the Adviser, an affiliate of ours and an SEC registered investment adviser,
pursuant to an investment advisory and management agreement (the Advisory Agreement). We have also entered into an administration agreement (the Administration Agreement) with Gladstone Administration, LLC (the
Administrator), an affiliate of ours and the Adviser. Each of the Adviser and the Administrator are privately-held companies that are indirectly owned and controlled by David Gladstone, our chairman and chief executive officer. 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 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. For additional information refer to Note 4  Related Party Transactions in the accompanying Notes to
Consolidated Financial Statements. 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: (i) achieve and grow current income by investing in debt securities of established 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 our stockholders that grow over time; and (ii) provide our stockholders with long-term capital appreciation in the value of our assets by
investing in equity securities of established businesses, generally in combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains. To achieve our objectives,
our investment strategy is to invest in several categories of debt and equity securities, with individual investments generally totaling up to $30 million, although investment size may vary depending upon our total assets or available capital
at the time of investment. We intend that our investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost. As of June 30, 2019, our investment portfolio was made up of 73.1% in debt
securities and 26.9% in equity securities, at cost. We focus on investing in lower middle market private businesses (which we generally define as
companies with annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $3 million to $20 million) (Lower Middle Market) in the U.S. that meet certain criteria, including: 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 portfolio company, reasonable capitalization of the portfolio
company, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and the potential to realize appreciation and gain liquidity in our equity position, if any. We anticipate that liquidity in our equity
position will be achieved through a merger or acquisition of the portfolio company, a public offering of the portfolio companys stock, or, to a lesser extent, by exercising our right to require the portfolio company to repurchase our warrants,
though there can be no assurance that we will always have these rights. We invest in portfolio companies that need funds for growth capital or to finance acquisitions or recapitalize or, to a lesser extent, refinance their existing debt facilities.
We seek to avoid investing in high-risk, early-stage enterprises. 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 Capital Corporation (Gladstone Capital) and any future business development company 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 Capital 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, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone. Our shares of common stock, 6.25% Series D Cumulative Term Preferred Stock (Series D Term Preferred Stock), and 6.375% Series E Cumulative Term
Preferred Stock (Series E Term Preferred Stock) are traded on the Nasdaq Global Select Market under the trading symbols GAIN, GAINM, and GAINL, respectively. Business Portfolio Activity While the business environment remains competitive, we continue to see new investment opportunities consistent with our investment strategy of providing a
combination of debt and equity in support of management and independent sponsor-led buyouts of Lower Middle Market companies in the U.S. During the three months ended June 30, 2019, we exited two
portfolio companies with a combined fair value prior to their exits of $23.5 million and invested $38.8 million in one new portfolio company, resulting in a net reduction of one company in our portfolio, which was comprised of 29 companies
as of June 30, 2019. From our initial public offering in June 2005 through June 30, 2019, we made investments in 50 companies, excluding investments in syndicated loans, for a total of approximately $1 billion, before giving effect to
principal repayments and divestitures.  44




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##### Table of Contents

The majority of the debt securities in our portfolio have a success fee component, which enhances the yield
on our debt investments. Unlike paid-in-kind (PIK) income, we generally do not recognize success fees as income until payment has been received. Due to the
contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of June 30, 2019, we had unrecognized, contractual success
fees of $31.7 million, or $0.97 per common share. Consistent with accounting principles generally accepted in the U.S. (GAAP), we generally have not recognized success fee receivables and related income in our Consolidated
Financial Statements until earned. From inception through June 30, 2019, we completed sales of 18 portfolio companies that we acquired under our
buyout strategy (which excludes investments in syndicated loans). In the aggregate, these sales have generated $186.4 million in net realized gains and $25.5 million in other income upon exit, for a total increase to our net assets of
$211.9 million. We believe, in aggregate, these transactions were equity-oriented investment successes and exemplify our investment strategy of striving to achieve returns through current income on the debt portion of our investments and
capital gains from the equity portion. The 18 liquidity events have offset any realized losses since inception, which were primarily incurred during the recession in connection with the sale of performing syndicated loans at a realized loss to pay
off a former lender. These successful exits, in part, enabled us to increase the monthly distribution by 70.0% from March 2011 through June 30, 2019, and allowed us to declare and pay a $0.03 per common share supplemental distribution in fiscal
year 2012, a $0.05 per common share supplemental distribution in November 2013, a $0.05 per common share supplemental distribution in December 2014, a $0.06 per common share supplemental distribution in each of June 2017, December 2017, June 2018,
and December 2018, and a $0.09 per common share supplemental distribution in June 2019. Capital Raising Efforts We have been able to meet our capital needs through extensions of and increases to the Fifth Amended and Restated Credit Agreement dated April 30, 2013,
as amended (the Credit Facility), and by accessing the capital markets in the form of public offerings of common and preferred stock. We have successfully extended the Credit Facilitys revolving period multiple times, most recently
to August 2021, and currently have a total commitment amount of $200.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders). During the year ended March 31, 2019, we
sold 168,842 shares of our common stock under our at-the-market program for gross proceeds of approximately $1.9 million. Additionally, we issued 3.0 million
shares of our Series E Term Preferred Stock for gross proceeds of $74.8 million in August 2018. Refer to Liquidity and Capital Resources  Revolving Line of Credit for further discussion of the Credit Facility,
Liquidity and Capital Resources  Equity  Common Stock and Liquidity and Capital Resources  Equity  Term Preferred Stock for further discussion of our common stock and mandatorily
redeemable preferred stock. Although we have been able to access the capital markets historically, market conditions may continue to affect the trading
price of our common stock and thus our ability to finance new investments through the issuance of common equity. On June 30, 2019, the closing market price of our common stock was $11.23 per share, representing an 8.6% discount to our net asset
value (NAV) of $12.29 per share as of June 30, 2019. When our common stock trades below NAV, our ability to issue additional equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our
common stock at an issuance price below the then-current NAV per share without stockholder approval, other than through sales to our then-existing stockholders pursuant to a rights offering. At our 2018 Annual Meeting of Stockholders held on August 9, 2018, our stockholders approved a proposal authorizing us to issue and sell shares of our
common stock at a price below our then-current NAV per share, subject to certain limitations, including that the number of common shares issued and sold pursuant to such authority does not exceed 25.0% of our then-outstanding common stock
immediately prior to each such sale, provided that our board of directors (Board of Directors) makes certain determinations prior to any such sale. This August 2018 stockholder authorization is in effect for one year from the date of
stockholder approval. We sought and obtained stockholder approval concerning similar proposals at each Annual Meeting of Stockholders since 2008, and with our Board of Directors subsequent approval, we issued shares of our common stock in
three offerings at a price below the then-current NAV per share, once in May 2017, once in March 2015, and once in October 2012. Certain sales under the at-the-market
program in March and April 2018 were also below the then-current estimated NAV per share. The resulting proceeds, in part, have allowed us to (i) grow our portfolio by making new investments, (ii) generate additional income through these
new investments, (iii) ensure continued compliance with regulatory tests and (iv) increase our debt capital while still complying with our applicable
debt-to-equity ratios. Refer to Liquidity and Capital Resources  Equity  Common Stock for further discussion of our common stock.  45




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##### Table of Contents

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 asset coverage (as defined in Sections 18 and 61 of the 1940 Act, as amended), of at least 150% on each of our senior securities representing indebtedness and our senior securities that are stock
(such as our two series of term preferred 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 amended by the Small Business Credit Availability Act. As a result, the
Companys asset coverage requirements for senior securities changed from 200% to 150%, effective as of April 10, 2019, one year after the date of the Board of Directors approval. Under the 200% asset coverage standard in effect prior
to April 10, 2019, we were able to borrow debt or issue senior securities in the amount of $1.00 for every $1.00 of equity in the Company. Starting April 10, 2019, under the 150% asset coverage standard, we may borrow debt or issue senior
securities in the amount of $2.00 for every $1.00 of equity in the Company. Notwithstanding the modified asset coverage requirement under the 1940 Act described above, we are separately subject to a minimum asset coverage requirement of 200% with
respect to our Series D Term Preferred Stock. As of June 30, 2019, our asset coverage ratio on our senior securities representing indebtedness was
763.7% and our asset coverage on our senior securities that are stock was 287.5%. Investment Highlights During the three months ended June 30, 2019, and inclusive of non-cash transactions, we invested
$38.8 million in one new portfolio company, received $41.5 million in proceeds from repayments and sales, and extended $12.5 million of follow-on investments to existing portfolio companies
through revolver draws, term loans, and preferred equity. Investment Activity During the three months ended June 30, 2019, the following significant transactions occurred:  

In April 2019, we sold our investment in Tread Corporation (Tread) which resulted in a realized loss
of $2.7 million. In connection with the sale, we received net cash proceeds of $4.9 million, including the repayment of our debt investment of $3.2 million at par.  

In April 2019, we sold our investment in Jackrabbit Inc. (Jackrabbit) which resulted in dividend
income of $2.1 million and a realized gain of $3.2 million. In connection with the sale, we received net cash proceeds of $19.8 million, including the repayment of our debt investment of $11.0 million at par.  

In April and May 2019, we extended a line of credit to J.R. Hobbs Co.  Atlanta, LLC with a total commitment
amount of $10.0 million, which matures in October 2019.  

In May 2019, our $15.8 million debt investment in Old World Christmas, Inc. was repaid at par. In connection
with the repayment, we received success fee income of $0.2 million.  

In June 2019, we invested $38.8 million in Horizon Facilities Services, Inc. (Horizon) through a
combination of secured first lien debt and preferred equity. Horizon, headquartered in Allentown, Pennsylvania, is a leading provider of outsourced services to the rental car industry.  46




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##### Table of Contents

Recent Developments Distributions and Dividends In July 2019, our
Board of Directors declared the following monthly and supplemental distributions to common stockholders and monthly dividends to holders of our Series D Term Preferred Stock and Series E Term Preferred Stock:  Record Date

Payment Date

Distribution perCommon Share


Dividend per
Share of
Series D Term
Preferred Stock

Dividend per
Share of Series E
Term Preferred StockJuly 22, 2019

July 31, 2019


$0.068


$0.13020833

$0.13281250August 20, 2019

August 30, 2019


0.068


0.13020833

0.13281250September 4, 2019

September 13, 2019


0.030
(A)



September 17, 2019

September 30, 2019


0.068


0.13020833

0.13281250Total for the Quarter:


$0.234


$0.39062499

$0.39843750  (A)
Represents a supplemental distribution to common stockholders. 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 London Interbank Offered Rate (LIBOR)) and, to a lesser extent, at fixed rates. LIBOR is
currently anticipated to be phased out during late 2021. 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. However, 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 replace LIBOR with the new standard that is established. 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.  47




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##### Table of Contents

RESULTS OF OPERATIONS Comparison of the Three Months Ended June 30, 2019 to the Three Months Ended June 30, 2018  For the Three Months Ended June 30,2019


2018


$ Change


% ChangeINVESTMENT INCOMEInterest income

$
11,875


$
13,314


$
(1,439
)


(10.8
)%Dividend, success fee, and other income


5,435



2,190



3,245



148.2Total investment income


17,310



15,504



1,806



11.6EXPENSESBase management fee


3,171



3,111



60



1.9Loan servicing fee


1,752



1,740



12



0.7Incentive fee


1,569



7,586



(6,017
)


(79.3
)Administration fee


314



285



29



10.2Interest and dividend expense


3,149



3,993



(844
)


(21.1
)Amortization of deferred financing costs and discounts


373



367



6



1.6Other


1,101



1,064



37



3.5Expenses before credits from Adviser


11,429



18,146



(6,717
)


(37.0
)Credits to fees from Adviser


(2,974
)


(2,700
)


(274
)


10.1Total expenses, net of credits to fees


8,455



15,446



(6,991
)


(45.3
)NET INVESTMENT INCOME


8,855



58



8,797



NMREALIZED AND UNREALIZED GAIN (LOSS)Net realized gain on investments


533



14,108



(13,575
)


(96.2
)Net unrealized (depreciation) appreciation of investments


(3,047
)


18,068



(21,115
)


(116.9
)Net unrealized (appreciation) depreciation of other


(295
)


93



(388
)


NMNet realized and unrealized (loss) gain


(2,809
)


32,269



(35,078
)


(108.7
)NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$
6,046


$
32,327


$
(26,281
)


(81.3
)BASIC AND DILUTED PER COMMON SHARE:Net investment income

$
0.27


$



$
0.27



NMNet increase in net assets resulting from operations

$
0.18


$
0.99


$
(0.81
)


(81.8
) NM = Not Meaningful Investment Income Total investment income increased
11.6% for the three months ended June 30, 2019, as compared to the prior year period. The increase was primarily due to an increase in dividend, success fee, and other income, partially offset by a decrease in interest income. Interest income from our investments in debt securities decreased 10.8% for the three months ended June 30, 2019, 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 during the three months ended June 30, 2019 was $363.8 million, compared to $409.9 million for the prior year period. This decrease was primarily due to the pay-off or restructure of $83.8 million of debt investments and $42.6 million of loans placed on non-accrual status, partially offset by the origination of
$48.7 million of new debt investments and $63.0 million of follow-on debt investments to existing portfolio companies and their respective impact on the weighted-average principal balance when
considering timing of new investments, pay-offs, restructures, and non-accruals, as applicable. The weighted-average yield on our interest-bearing investments, excluding
cash and cash equivalents and receipts recorded as dividend, success fee, and other income, was 13.1% for the three months ended June 30, 2019, compared to 13.0% for the prior year period. The weighted-average yield may vary from period to
period, based on the current stated interest rate on interest-bearing investments. At June 30, 2019, certain of our loans to four portfolio
companies, Meridian Rack & Pinion, Inc., The Mountain Corporation (The Mountain), PSI Molded Plastics, Inc. (PSI Molded), and SOG Specialty Knives & Tools, LLC (SOG), were on non-accrual status, with an aggregate debt cost basis of $56.4 million. At June 30, 2018, certain of our loans to three portfolio companies, B-Dry, LLC, The
Mountain, and PSI Molded, were on non-accrual status, with an aggregate debt cost basis of $55.1 million.  48




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##### Table of Contents

Dividend, success fee, and other income for the three months ended June 30, 2019 increased 148.2% from
the prior year period. During the three months ended June 30, 2019, dividend, success fee, and other income consisted of $5.2 million of dividend income and $0.2 million of success fee income. During the three months ended
June 30, 2018, dividend, success fee, and other income consisted primarily of $2.1 million of success fee income. As of June 30, 2019, Nth
Degree, Inc. represented 10.1% of the total investment portfolio at fair value. As of March 31, 2019, no single investment represented greater than 10% of the total investment portfolio at fair value. Expenses Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, decreased 45.3% during the three months ended June 30, 2019, as compared to the prior year period, primarily due to a decrease in the
capital gains-based incentive fee and interest expense, partially offset by an increase in the income based incentive fee. In accordance with GAAP, we
recorded a $0.5 million reversal of the capital gains-based incentive fee during the three months ended June 30, 2019, compared to a capital gains-based incentive fee of $6.5 million during the three months ended June 30, 2018.
The capital gains-based incentive fee was a result of the net impact of net realized gains (losses) and net unrealized appreciation (depreciation) on investments during the respective period. Such amounts are not yet contractually due under the
terms of the Advisory Agreement. The income-based incentive fee increased by $1.0 million for the three months ended June 30, 2019, as compared to the prior year period, as the increase in
pre-incentive fee net investment income exceeded the increase in net assets, which drives the hurdle rate. The
base management fee, loan servicing fee, incentive fee, and their related non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under Transactions with the
Adviserin Note 4  Related Party Transactions in the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:  Three Months EndedJune 30,2019


2018Average total assets subject to base management fee(A)

$
634,200


$
622,200Multiplied by prorated annual base management fee of 2.0%


0.5
%


0.5
%Base management fee(B)


3,171



3,111Credits to fees from Adviser 
other(B)


(1,222
)


(960
)Net base management fee

$
1,949


$
2,151Loan servicing fee(B)


1,752



1,740Credits to base management fee  loan servicing fee(B)


(1,752
)


(1,740
)Net loan servicing fee

$



$
Incentive fee  income-based

$
2,081


$
1,078Incentive fee  capital
gains-based(C)


(512
)


6,508Total incentive fee(B)

$
1,569


$
7,586Credits to fees from Adviser 
other(B)






Net incentive fee

$
1,569


$
7,586  (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 applicable quarters within the respective periods and adjusted appropriately for any share
issuances or repurchases during the periods. (B)
Reflected as a line item on our Consolidated Statement of Operations. (C)
The capital gains-based incentive fee is not yet contractually due under the terms of the Advisory Agreement. Interest and dividend expense decreased 21.1% during the three months ended June 30, 2019, as compared to the prior year period,
due to a lower weighted-average balance outstanding on the Credit Facility. The weighted-average balance outstanding on the Credit Facility during the three months ended June 30, 2019 was $42.7 million, as compared to $123.3 million
in the prior year period. The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the three months ended June 30, 2019 was 9.1%, as compared to 5.4% in the prior year period. This increase in
the effective interest rate on the Credit Facility was primarily a result of the unused fee on the undrawn portion of the Credit Facility. Refer to Liquidity and Capital Resources  Revolving Line of Credit for further
discussion of the Credit Facility. Refer to Liquidity and Capital Resources  Equity  Term Preferred Stock for further discussion of the mandatorily redeemable preferred stock.  49




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##### Table of Contents

Realized and Unrealized Gain (Loss) Net Realized Gain on Investments During the three months
ended June 30, 2019, we recorded net realized gains on investments of $0.5 million, primarily related to a $3.2 million realized gain from the exit of Jackrabbit, which was partially offset by a $2.7 million realized loss from
the exit of Tread. During the three months ended June 30, 2018, we recorded net realized gains on investments of $14.1 million, primarily related to a $13.8 million realized gain from the exit of Drew Foam Companies, Inc (Drew
Foam). Net Unrealized Appreciation (Depreciation) of Investments During the three months ended June 30, 2019, we recorded net unrealized depreciation of investments of $3.0 million. The realized gains (losses) and
unrealized appreciation (depreciation) across our investments for the three months ended June 30, 2019 were as follows:  Three Months Ended June 30, 2019Portfolio Company

RealizedGain(Loss)


UnrealizedAppreciation(Depreciation)


Reversal ofUnrealized(Appreciation)Depreciation


Net Gain(Loss)Alloy Die Casting Co.

$



$
8,823


$



$
8,823Nth Degree, Inc.






3,435







3,435Head Country, Inc.






1,423







1,423Counsel Press, Inc.






1,404







1,404PSI Molded Plastics, Inc.






1,281







1,281Tread Corporation


(2,726
)






3,380



654SBS Industries, LLC






(798
)






(798
)Old World Christmas, Inc.






(802
)






(802
)Ginsey Home Solutions, Inc.






(837
)






(837
)Meridian Rack & Pinion, Inc.






(966
)






(966
)Jackrabbit, Inc.


3,189







(4,547
)


(1,358
)Educators Resource, Inc.






(1,387
)






(1,387
)Schylling, Inc.






(1,457
)






(1,457
)Galaxy Tool Holding Corporation






(2,780
)






(2,780
)J.R. Hobbs Co.Atlanta, LLC






(8,292
)






(8,292
)Other, net (<$1.0 million, net)


70



(927
)






(857
)Total

$
533


$
(1,880
)

$
(1,167
)

$
(2,514
) The primary drivers of net unrealized depreciation of $3.0 million for the three months ended June 30, 2019 were the
reversal of previously recorded unrealized appreciation of our investment in Jackrabbit upon its exit and a decline in performance of certain of our other portfolio companies, which were partially offset by the reversal of previously recorded
unrealized depreciation of our investment in Tread upon its exit and increased performance of certain of our portfolio companies.  50




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##### Table of Contents

During the three months ended June 30, 2018, we recorded net unrealized appreciation of investments of
$18.1 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the three months ended June 30, 2018 were as follows:  Three Months Ended June 30, 2018Portfolio Company

RealizedGain(Loss)


UnrealizedAppreciation(Depreciation)


Reversal ofUnrealized(Appreciation)Depreciation


Net Gain(Loss)Cambridge Sound Management, Inc.

$



$
12,554


$



$
12,554Nth Degree, Inc.






4,592







4,592Brunswick Bowling Products, Inc.






3,935







3,935Galaxy Tool Holding Corporation






3,238







3,238Edge Adhesives Holdings, Inc.






2,327







2,327Schylling, Inc.






2,080







2,080Alloy Die Casting Co.






1,995







1,995Pioneer Square Brands, Inc.






1,809







1,809Star Seed, Inc.






1,650







1,650Counsel Press, Inc.






1,396







1,396Tread Corporation






1,215







1,215Jackrabbit, Inc.






886







886D.P.M.S., Inc.






816







816Logo Sportswear, Inc.






697







697Old World Christmas, Inc.






565







565J.R. Hobbs Co.Atlanta, LLC






551







551Funko Acquisition Holdings, LLC






518







518Behrens Manufacturing, LLC


322











322Ginsey Home Solutions, Inc.






289







289Country Club Enterprises, LLC






(223
)






(223
)Diligent Delivery Systems






(437
)






(437
)B-Dry, LLC






(837
)






(837
)Drew Foam Companies, Inc.


13,786







(14,755
)


(969
)Meridian Rack & Pinion, Inc.






(1,092
)






(1,092
)The Mountain Corporation






(2,559
)






(2,559
)PSI Molded Plastics, Inc.






(3,016
)






(3,016
)Other, net (<$250 Net)






(126
)






(126
)Total

$
14,108


$
32,823


$
(14,755
)

$
32,176 The primary drivers of net unrealized appreciation of $18.1 million for the three months ended June 30, 2018 were
increased performance of certain of our portfolio companies and an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, which were partially offset by the reversal of previously recorded unrealized
appreciation upon the exit of our investment in Drew Foam and a decline in performance of certain of our other portfolio companies. Across our entire
investment portfolio, we recorded $1.0 million of net unrealized appreciation on our debt positions and $4.0 million of net unrealized depreciation on our equity positions for the three months ended June 30, 2019. As of June 30,
2019, the fair value of our investment portfolio was greater than our cost basis by $31.5 million, as compared to $34.5 million as of March 31, 2019, representing net unrealized depreciation of $3.0 million for the three months
ended June 30, 2019. Our entire portfolio had a fair value of 105.2% of cost as of June 30, 2019. Net Unrealized (Appreciation) Depreciation
on Other During the three months ended June 30, 2019, we recorded net unrealized appreciation of other of $0.3 million related to the Credit
Facility recorded at fair value. During the three months ended June 30, 2018, we recorded net unrealized depreciation of other of $0.1 million related to the Credit Facility recorded at fair value.  51




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##### Table of Contents

LIQUIDITY AND CAPITAL RESOURCES Operating Activities Net cash used in operating
activities for the three months ended June 30, 2019 was $10.3 million, as compared to net cash provided by operating activities of $10.7 million for the three months ended June 30, 2018. This change was primarily due to higher
purchases of investments and a decrease in other liabilities partially offset by higher principal repayments on investments. Purchases of investments
were $51.2 million during the three months ended June 30, 2019, compared to $30.1 million during the three months ended June 30, 2018. Principal repayments and net proceeds from the sale of investments totaled $41.5 million
during the three months ended June 30, 2019, compared to $32.1 million during the three months ended June 30, 2018. As of June 30,
2019, we had equity investments in or loans to 29 portfolio companies with an aggregate cost basis of $599.7 million. As of June 30, 2018, we had equity investments in or loans to 33 portfolio companies with an aggregate cost basis of
$596.9 million. The following table summarizes our total portfolio investment activity during the three months ended June 30, 2019 and 2018:  Three Months EndedJune 30,2019


2018Beginning investment portfolio, at fair value

$
624,172


$
599,147New investments


38,780



29,202Disbursements to existing portfolio companies


12,450



850Unscheduled principal repayments


(32,986
)


(14,514
)Net proceeds from sales of investments


(8,494
)


(17,226
)Net realized gain on investments


306



13,786Net unrealized (depreciation) appreciation of investments


(1,880
)


32,823Reversal of net unrealized depreciation (appreciation) of investments


(1,167
)


(14,755
)Amortization of premiums, discounts, and acquisition costs, net


5



5Ending investment portfolio, at fair value

$
631,186


$
629,318 The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year,
assuming no voluntary prepayments, as of June 30, 2019:  AmountFor the remaining nine months ending March 31:

2020

$
53,160For the fiscal years ending March 31:

2021


55,8462022


56,5712023


97,4892024


111,618Thereafter


63,980Total contractual repayments

$
438,664Adjustments to cost basis of debt investments


(62
)Investments in equity securities


161,148Total cost basis of investments held as of June 30, 2019:

$
599,750 Financing Activities Net cash provided by financing activities for the three months ended June 30, 2019 was $10.7 million, which consisted primarily of $20.5 million
of net borrowings on the Credit Facility, partially offset by $9.7 million in distributions to common stockholders. Net cash used in financing
activities for the three months ended June 30, 2018 was $11.3 million, which consisted primarily of $4.5 million of net repayments on the Credit Facility and $8.6 million in distributions to common stockholders, partially offset
by $1.8 million of net proceeds from the issuance of common stock under the ATM program (as defined below).  52




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##### Table of Contents

Distributions and Dividends 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, among other requirements, to distribute to our stockholders on an annual basis 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), determined without regard to the dividends paid deduction. Additionally, the Credit Facility generally restricts
the amount of distributions to stockholders that we can pay out to be no greater than the sum of certain amounts, including our net investment income, plus net capital gains, plus amounts elected by the Company to be considered as having been paid
during the prior fiscal year in accordance with Section 855(a) of the Code. In accordance with these requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.068 per common share for each of the three months
from April through June 2019, and a supplemental distribution of $0.09 per common share in June 2019. For the year ended March 31, 2019,
distributions to common stockholders totaled $30.5 million and were less than our taxable income for the same year, after also taking into account spillover amounts under Section 855(a) of the Code with respect to the prior year. At
March 31, 2019, we elected to treat $16.0 million of the first distributions paid after fiscal year-end as having been paid in the prior fiscal year, in accordance with Section 855(a) of the
Code. In addition, for the fiscal year ended March 31, 2019, net capital gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $13.2 million of the first distributions
paid to common stockholders in fiscal year 2019 as having been paid in the prior year. In addition, for the year ended March 31, 2019, we recorded a $16.1 million adjustment for estimated book-tax
differences, which decreased Capital in excess of par value and increased Accumulated net realized gain in excess of distributions and (Overdistributed) underdistributed net investment income. For the three months ended June 30, 2019, we
recorded a $0.3 million adjustment for permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of distributions
and increased Overdistributed net investment income. Preferred Stock Dividends Our Board of Directors declared and we paid monthly cash dividends of (i) $0.13020833 per share to holders of our Series D Term Preferred Stock for each of the
three months from April through June 2019 and (ii) $0.1328125 per share to holders of our Series E Term Preferred Stock for each of the three months from April through June 2019. In accordance with GAAP, we treat these monthly dividends as an
operating expense. 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 not make such election will receive their distributions in cash. Any distributions reinvested under the plan will be taxable to a common stockholder to the same extent, and with the same
character, as if the common stockholder had received the distribution in cash. The common stockholder generally will have an adjusted basis in the additional common shares purchased through the plan equal to the dollar amount that would have been
received if the U.S. stockholder had received the dividend or distribution in cash. The additional common 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. The Computershare dividend reinvestment plan is not open to holders of our preferred stock. Equity Registration Statement On June 14, 2019, we filed a registration statement on Form N-2 (File
No. 333-232124), which the SEC declared effective on July 24, 2019. The 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, including through concurrent, separate offerings of such securities.As
of July 24, 2019, we had the ability to issue up to an additional $300.0 million in securities under the registration statement.  53




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##### Table of Contents

Common Stock In February 2018, we entered into equity distribution agreements with Cantor Fitzgerald & Co. (Cantor), Ladenburg Thalmann & Co.,
Inc., and Wedbush Securities, Inc. (each a Sales Agent), under which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of $35.0 million
in what is commonly referred to as an at-the-market (ATM) program. As of June 30, 2019, we had remaining capacity to sell up to an
additional $31.8 million of common stock under the ATM program. During the three months ended June 30, 2018, we sold 168,824 shares of our
common stock under the ATM program with Cantor at a weighted-average gross price of $11.09 per share and raised approximately $1.9 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering
costs borne by us, was $10.87 and resulted in total net proceeds of approximately $1.8 million. Certain of these sales were below our then-current estimated NAV per share during the sales period, with a discount of $0.002 per share, when
comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per share; however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result
of the small number of shares sold at a slight discount to NAV per share and resulting rounding. In aggregate, the sales during the three months ended June 30, 2018 were above our then-current estimated NAV per share. 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. When our common stock is trading at a price below NAV per share, the 1940 Act places regulatory constraints on our ability to obtain additional capital by
issuing common stock. Generally, the 1940 Act provides that we may not issue and sell our common stock at a price below our NAV per common share, other than to our then-existing common stockholders pursuant to a rights offering, without first
obtaining approval from our stockholders and our independent directors and meeting other stated requirements. On June 30, 2019, the closing market price of our common stock was $11.23 per share, representing an 8.6% discount to our NAV per
share of $12.29 as of June 30, 2019. At our 2019 Annual Meeting of Stockholders, scheduled to take place on August 1, 2019, our stockholders will vote on a similar proposal, which would be in effect for another year, if approved. Term Preferred Stock In August 2018, we completed
a public offering of 2,990,000 shares of our Series E Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled $74.8 million and net proceeds, after deducting underwriting discounts and offering costs borne by
us, were $72.1 million. Total underwriting discounts and offering costs related to this offering were $2.7 million, which have been recorded as discounts to the liquidation value on our Consolidated Statements of Assets and
Liabilities and are being amortized over the period ending August 31, 2025, the mandatory redemption date. Our Series E Term Preferred Stock is
not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.375% per year, payable monthly (which equates to $4.8 million per year). We are required to redeem all shares of our outstanding Series E
Term Preferred Stock on August 31, 2025, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential
mandatory redemption triggers are as follows: (1) upon the occurrence of certain events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series E Term Preferred Stock, and (2) if we
fail to maintain asset coverage as required by Sections 18 and 61 of the 1940 Act (which is currently 150%) and are unable to correct such failure within a specific amount of time, we are required to redeem a portion of our outstanding Series E Term
Preferred Stock or otherwise cure the asset coverage redemption trigger (we may also redeem additional securities to cause asset coverage to be up to 200%). We may also voluntarily redeem all or a portion of our Series E Term Preferred Stock at our
sole option at the redemption price at any time on or after August 31, 2020. In August 2018, we used the proceeds from the issuance of our Series E
Term Preferred Stock, along with borrowings under the Credit Facility, to voluntarily redeem all outstanding shares of our Series B Term Preferred Stock and our Series C Term Preferred Stock, each of which had a liquidation preference of $25.00 per
share. In connection with the voluntary redemption of our Series B Term Preferred Stock and Series C Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.7 million, which was recorded in Realized loss on other in our
Consolidated Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of redemption. In
September 2016, we completed a public offering of 2,300,000 shares of our Series D Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled $57.5 million and net proceeds, after deducting underwriting
discounts and offering costs borne by us, were $55.4 million. Total underwriting discounts and offering costs related to this offering were $2.1 million, which have been recorded as discounts to the liquidation value on our Consolidated
Statements of Assets and Liabilities and are being amortized over the period ending September 30, 2023, the mandatory redemption date.  54




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##### Table of Contents

Our Series D Term Preferred Stock is not convertible into our common stock or any other security. Our Series
D Term Preferred Stock provides for a fixed dividend equal to 6.25% per year, payable monthly (which equates to $3.6 million per year). We are required to redeem all shares of our outstanding Series D Term Preferred Stock on September 30,
2023, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential mandatory redemption triggers are as
follows: (1) upon the occurrence of certain events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series D Term Preferred Stock, and (2) if we fail to maintain asset coverage of at
least 200% and are unable to correct such failure within a specific amount of time, we are required to redeem a portion of our outstanding Series D Term Preferred Stock or otherwise cure the asset coverage redemption trigger (and we may also redeem
additional securities to cause the asset coverage to be 240%). We may also voluntarily redeem all or a portion of our Series D Term Preferred Stock at our sole option at the redemption price at any time on or after September 30, 2018. Each series of our mandatorily redeemable preferred stock has a preference over our common stock with respect to dividends, whereby no distributions are
payable on our common stock unless the stated dividends, including any accrued and unpaid dividends, on the mandatorily redeemable preferred stock have been paid in full. The Series D Term Preferred Stock and Series E Term Preferred Stock are
considered liabilities in accordance with GAAP and, as such, affect our asset coverage, exposing us to additional leverage risks. The asset coverage on our senior securities that are stock (our Series D Term Preferred Stock and Series E Term
Preferred Stock) as of June 30, 2019 was 287.5%, calculated pursuant to Sections 18 and 61 of the 1940 Act. Revolving Line of Credit On August 22, 2018, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 4 to the Fifth Amended and
Restated Credit Agreement, originally entered into on April 30, 2013 and as previously amended, with KeyBank National Association (KeyBank) as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer,
and certain other lenders party thereto. The revolving period was extended to August 22, 2021, and if not renewed or extended by such date, all principal and interest will be due and payable on August 22, 2023 (two years after the
revolving period end date). As of June 30, 2019, the Credit Facility provided two one-year extension options that may be exercised on or before the first and second anniversary of the August 22, 2018
amendment date, subject to approval by all lenders. Additionally, the Credit Facility commitment amount was increased from $165.0 million to $200.0 million and, subject to certain terms and conditions, can be expanded to a total facility
amount of $300.0 million through additional commitments from existing or new lenders. Advances under the Credit Facility generally bear interest at 30-day LIBOR plus 2.85% per annum until August 21, 2021, with the margin then increasing to 3.10% for the period from August 22, 2021 to August 21, 2022, and increasing further to 3.35% thereafter.
The Credit Facility has an unused commitment fee on the daily unused commitment amount of 0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the
average unused commitment amount for the period is greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment
amount. We incurred fees of approximately $1.6 million in connection with this amendment. Interest is payable monthly during the term of the Credit
Facility. Available borrowings are subject to various constraints and applicable advance rates, which are generally based on the size, characteristics, and quality of the collateral pledged by Business Investment. The Credit Facility also requires
that any interest and principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank. KeyBank is also the trustee of the account and generally remits the collected funds to us once a month. Among other things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit
certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict certain material changes to our credit and collection policies without the lenders consent. The Credit Facility also
generally seeks to restrict distributions to stockholders to the sum of (i) our net investment income, (ii) net capital gains, and (iii) amounts deemed by the Company to be considered as having been paid during the prior fiscal year
in accordance with Section 855(a) of the Code. Loans eligible to be pledged as collateral are subject to certain limitations, including, among other things, restrictions on geographic concentrations, industry concentrations, loan size, payment
frequency and status, average life, portfolio company leverage, and lien property. The Credit Facility also requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other
things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base. Additionally, the Credit Facility contains a performance guaranty that requires the Company to maintain
(i) a minimum net worth (defined in the Credit Facility to include our mandatory redeemable term preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any
equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $218.7 million as of June 30, 2019, (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  55




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##### Table of Contents

a BDC under the 1940 Act and as a RIC under the Code. As of June 30, 2019, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $530.6 million, asset
coverage on our senior securities representing indebtedness of 763.7%, calculated in accordance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. As of June 30, 2019, we had availability, after
adjustments for various constraints based on collateral quality, of $120.5 million under the Credit Facility and were in compliance with all covenants under the Credit Facility. OFF-BALANCE SHEET ARRANGEMENTS Unlike PIK income, we generally do not recognize success fees as income until payment has been received. Due to the contingent nature of success fees, there
are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of June 30, 2019 and March 31, 2019, we had unrecognized, contractual off-balance sheet success fee receivables of $31.7 million and $30.1 million (or approximately $0.97 and $0.92 per common share), respectively, on our debt investments. Consistent with GAAP, we have not
recognized success fee receivables and related income in our Consolidated Financial Statements until earned. CONTRACTUAL OBLIGATIONS We have line of credit commitments to certain of our portfolio companies that have not been fully drawn. Since these line of credit commitments have expiration
dates and we expect many will never be fully drawn, the total line of credit commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused line of credit commitments as of June 30,
2019 to be immaterial. As of June 30, 2019, we have also extended a guaranty on behalf of one of our portfolio companies, Country Club Enterprises,
LLC (CCE), whereby we have guaranteed $1.0 million of obligations of CCE. As of June 30, 2019, we have not been required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the
fair value of this guaranty to be immaterial.  56




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##### Table of Contents

The following table shows our contractual obligations as of June 30, 2019, at cost:  Payments Due by PeriodContractual
Obligations(A)

Total


Less than1 Year


1-3Years


3-5 Years


More than5 YearsCredit Facility(B)

$
73,500


$



$



$
73,500


$
Mandatorily redeemable preferred stock


132,250











57,500



74,750Secured borrowing


5,096







5,096







Interest payments on obligations(C)


66,749



13,929



27,290



19,970



5,560Total

$
277,595


$
13,929


$
32,386


$
150,970


$
80,310  (A)
Excludes unused line of credit commitments and guaranties to our portfolio companies in the aggregate principal
amount of $5.0 million. (B)
Principal balance of borrowings outstanding under the Credit Facility, based on the maturity date following the
current contractual revolving period end date. (C)
Includes interest payments due on the Credit Facility and secured borrowing and dividend obligations on each
series of our mandatorily redeemable preferred stock. The amount of interest payments calculated for purposes of this table was based upon rates and outstanding balances as of June 30, 2019. Dividend obligations on our mandatorily redeemable
preferred stock assume quarterly declarations and monthly dividend payments through the date of mandatory redemption of each series. Critical Accounting Policies 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 Notes to Consolidated Financial
Statements included elsewhere in this Quarterly Report. Additionally, refer to Note 3  Investments in the 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 the Notes to Consolidated Financial Statements included elsewhere in this Quarterly
Report.  57




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##### Table of Contents

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, are 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 equity securities. For 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 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 Lower Middle Market companies do
not exceed the grade of BBB on an NRSRO scale, so there would be no debt securities in the Lower 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 loans in our portfolio as of
June 30, 2019 and March 31, 2019:  Rating

June 30, 2019


March 31, 2019Highest


9.0



9.0Average


6.8



6.7Weighted-Average


7.0



7.2Lowest


3.0



1.0 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 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. In an effort to limit federal excise taxes, we have to distribute to stockholders, during each calendar year, an amount close to the sum of: (1) 98%
of our ordinary income for the calendar year, (2) 98.2% of our net capital gains (both long-term and short-term), if any, for the one-year period ending on October 31 of the calendar year, and
(3) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable. 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. Our capital loss carryforward balance was $0 as of both June 30, 2019
and March 31, 2019. Recent Accounting Pronouncements Refer to Note 2  Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements
included elsewhere in this Quarterly Report for a description of recent accounting pronouncements.  58




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##### Table of Contents

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; overall market changes; local, regional or global political, social or economic instability; and interest rate fluctuations. 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 rates at which we borrow funds, such as under the Credit Facility (which is variable) and our mandatorily redeemable preferred stock (which are fixed), and the rates 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 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. We target to have approximately 10% of the loans in our portfolio at fixed rates, with approximately 90% at variable rates or variables rates with a floor
mechanism. As of June 30, 2019, all of our variable-rate loans have rates associated with the current 30-day LIBOR rate and our total debt investment portfolio consisted of the following breakdown based
on the principal balance:  97.4
%

Variable rates with a floor2.6


Fixed rates100.0
%

Total There have been no material changes in the quantitative and qualitative market risk disclosures during the three months ended
June 30, 2019 from that disclosed in our Annual Report. ITEM 4. CONTROLS AND PROCEDURES. a) Evaluation of Disclosure Controls and Procedures As of
June 30, 2019 (the end of the period covered by this report), we, including our chief executive officer and acting principal financial officer, evaluated the effectiveness, design and operation of our disclosure controls and procedures. Based
on that evaluation, our management, including the chief executive officer and acting principal 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 acting principal 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 June 30, 2019 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.  59




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PART IIOTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. From time to time, we may become involved in various investigations, 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 will be subject to various uncertainties and could result in the expenditure of significant financial and managerial resources. Further, we are not named as a party to any
proceeding that involves a claim for damages that exceeds 10% of our consolidated current assets. 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 March 31, 2019, as filed with the SEC on May 13, 2019. 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. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. ITEM 5. OTHER
INFORMATION. Not applicable.  60




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ITEM 6. EXHIBITS See the exhibit index. EXHIBIT INDEX  Exhibit

Description3.1

Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 
A.2 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 
333-123699), filed May 13, 2005.3.1.a

Certificate of Designation of 6.25% Series D Cumulative Term Preferred Stock Due 2023, incorporated by reference to Exhibit 
3.5 to the Registration Statement on Form 8-A (File No. 001-34007), filed September 22, 2016.3.1.b

Certificate of Designation of 6.375% Series E Cumulative Term Preferred Stock Due 2025, incorporated by reference to Exhibit 
3.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 16, 2018.3.2

Amended and Restated Bylaws, incorporated by reference to Exhibit 
b.2 to the Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 
333-123699), filed June 21, 2005.3.3

First Amendment to Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 
99.1 to the Current Report on Form 8-K (File No. 814-00704) filed July 10, 2007.4.1

Specimen Stock Certificate, incorporated by reference to Exhibit 
d to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed June 
21, 2005.4.2

Specimen 6.25% Series D Cumulative Term Preferred Stock Due 2023 Stock Certificate, incorporated by reference to Exhibit 
4.5 to the Registration Statement on Form 8-A (File No. 001-34007), filed September 22, 2016.4.3

Specimen 6.375% Series E Cumulative Term Preferred Stock Due 2025 Stock Certificate incorporated by reference to Exhibit 
4.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 16, 2018.31.1*

Certification of Chief Executive Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.31.2*

Certification of Acting Principal Financial Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.32.1

Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.32.2

Certification of Acting Principal Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.  *
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.  61




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SIGNATURE 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 INVESTMENT CORPORATIONBy:

/s/ Nicole SchaltenbrandNicole Schaltenbrand Acting Principal
Financial Officer (principal financial and accounting officer)
 Date: July 31, 2019  62