GLADSTONE INVESTMENT CORPORATION MANAGEMENT REPORT OF FINANCIAL CONDITION AND OPERATING RESULTS (Form 10-K)

The following analysis of our financial condition and results of operations
should be read in conjunction with our accompanying Consolidated Financial
Statements and the notes thereto contained elsewhere in this 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, results of operations or percentage
relationships for any future periods. Except per share amounts, dollar amounts
included herein are in thousands unless otherwise indicated.

PREVIEW

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 BDC under the 1940 Act. For U.S. federal income tax purposes, we have elected
to be treated as a RIC under Subchapter M of 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.

We were established for the purpose of investing in debt and equity securities
of established private businesses operating in the U.S. Our investment
objectives are to: (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 $70 million, although investment
size may vary, depending upon our total assets or available capital at the time
of investment. We expect that our investment portfolio over time will consist of
approximately 75% in debt securities and 25% in equity securities, at cost. As
of March 31, 2022, our investment portfolio was comprised of 76.3% in debt
securities and 23.7% in equity securities, at cost.

We focus on investing in Lower Middle Market businesses 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 management buyouts
and/or growth capital to finance acquisitions, 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, and 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.

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  Table of Content    s

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 year
ended March 31, 2022, we invested in two new portfolio companies, exited three
portfolio companies, merged two existing portfolio companies into a new
portfolio company and dissolved one portfolio company. From our initial public
offering in June 2005 through March 31, 2022, we invested in 55 companies,
excluding investments in syndicated loans, for a total of approximately $1.5
billion, before giving effect to principal repayments and divestitures.

The majority of the debt securities in our portfolio have a success fee
component, which enhances the yield on our debt investments. 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 March 31, 2022, we had
unrecognized, contractual success fees of $50.5 million, or $1.52 per common
share. Consistent with GAAP, we generally have not recognized success fee
receivables and related income in our accompanying Consolidated Financial
Statements until earned.

From inception through March 31, 2022, we completed sales of 27 portfolio
companies that we acquired under our buyout strategy (which excludes investments
in syndicated loans). In the aggregate, these sales have generated $262.8
million in net realized gains and $36.4 million in other income upon exit, for a
total increase to our net assets of $299.2 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
27 liquidity events have offset any realized losses since inception, which were
primarily incurred during the 2008-2009 recession in connection with the sale of
performing syndicated loans at a realized loss to pay off a former lender. The
successful exits, in part, enabled us to increase the monthly distribution by
87.5% from March 2011 through March 31, 2022 and allowed us to declare and pay
15 supplemental distributions to common stockholders through March 31, 2022.

Capital raising efforts

We have been able to meet our capital needs through extensions of and increases
to the Credit Facility and by accessing the capital markets in the form of
public offerings of unsecured notes, as well as common and preferred stock. We
have successfully extended the Credit Facility's revolving period multiple
times, most recently to February 2024, and currently have a total commitment
amount of $180.0 million (with a potential total commitment of $300.0 million
through additional commitments from new or existing lenders). During the year
ended March 31, 2022, we issued our 2028 Notes for gross proceeds of $134.6
million. During the year ended March 31, 2021, we issued our 2026 Notes for
gross proceeds of $127.9 million, and sold 155,560 shares of our common stock
under our at-the-market program (the "Common Stock ATM Program") for gross
proceeds of approximately $1.8 million, and 784,853 shares of our Series E Term
Preferred Stock under our preferred stock at-the-market program (the "Series E
ATM Program") for gross proceeds of approximately $19.3 million. Refer to
"Liquidity and Capital Resources."

Although we have been able to access the capital markets historically, market
conditions, including the impact of COVID-19, 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 March 31, 2022, the closing market
price of our common stock was $16.13 per share, representing a 20.1% premium to
our NAV of $13.43 per share as of March 31, 2022. 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.

Regulatory conformity

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) of at least 150% on each of our senior
securities representing indebtedness and our senior securities that are stock
(such as our previously outstanding series of term preferred stock).

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On April 10, 2018, our Board of Directors, including a "required majority" (as
such term is defined in Section 57(o) of the 1940 Act) thereof, approved the
modified asset coverage requirements set forth in Section 61(a)(2) of the 1940
Act. As a result, our 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.

From March 31, 2022our asset coverage ratio on our senior debt securities was 252.9%.

Investment Highlights

Investing activity

During the year ended March 31, 2022the following major transactions took place:

•In May 2021we dissolved our investment in Canal Technologies Group, LLC
(“CTG”) and recorded a realized loss of $1.8 million.

•In June 2021, we invested $10.0 million in a new portfolio company, Nocturne
Villa Rentals, Inc. ("Nocturne"), through a combination of secured first lien
debt and preferred equity. Nocturne, headquartered in Telluride, Colorado, is a
luxury vacation rental manager.

•In June 2021we invested extra $6.5 million in JR Hobbs Co. – Atlanta, LLC (“JR Hobbs”) in the form of a secured second lien debt. As part of the investment, our junior secured debt was converted into senior secured debt.

•In June 2021, we sold our investment in Head Country, Inc. ("Head Country"),
which resulted in success fee income of $2.0 million and a realized gain of $3.6
million. In connection with the sale, we received net cash proceeds of $16.7
million, including the repayment of our debt investment of $9.1 million at par.

•In July 2021we invested extra $5.9 million in the form of senior debt secured in Nocturne to finance an additional acquisition.

•In July 2021, we invested $24.3 million in a new portfolio company, Utah
Pacific Bridge & Steel, Ltd. ("Utah Pacific"), through a combination of secured
first lien debt and preferred equity. Utah Pacific, headquartered in Lindon,
Utah, is a manufacturer of large steel components used in bridge replacement,
rehabilitation, and construction.

•In September 2021, one of our portfolio companies, D.P.M.S., Inc. ("Danco"),
merged with another of our portfolio companies, Galaxy Technologies, Inc.
("Galaxy"), into a newly formed portfolio company, Galaxy Technologies Holdings,
Inc. ("Galaxy Technologies Holdings"). Our debt investments in Danco, which
totaled $12.3 million at principal and cost, and Galaxy, which totaled $13.0
million at principal and cost, were converted into two second lien term loans
with an aggregate cost and principal of $25.3 million to Galaxy Technologies
Holdings. Our common equity investment in Danco, with a cost basis of $0.0
million, and our preferred and common equity investments in Galaxy, with an
aggregate cost basis of $11.5 million, were converted into a common equity
investment in Galaxy Technologies Holdings with a combined cost basis of $11.5
million.

•In October 2021we invested extra $10.5 million in Bassett Creek Services, Inc.in the form of senior secured debt to finance an additional acquisition.

•In December 2021we invested extra $19.0 million in the form of senior debt secured in Nocturne to finance an additional acquisition.

•In December 2021we invested extra $6.4 million in the form of a senior debt secured in Schylling, Inc. to finance an additional acquisition.

•In December 2021, we sold our investment in Pioneer Square Brands, Inc.
("Pioneer"), which resulted in success fee income of $0.5 million and a realized
gain of $21.9 million. In connection with the sale, we received net cash
proceeds of $50.6 million, including the repayment of our debt investment of
$23.1 million at par.

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•In December 2021, we sold our investment in SOG Specialty Knives & Tools, LLC
("SOG"), which resulted in success fee income of $2.9 million. In connection
with the sale, we received net cash proceeds of $23.3 million, including the
repayment of our debt investment of $8.9 million at par, and retained a common
stock investment in the intermediary entity, Gladstone SOG Investments, Inc.,
which maintains a cost basis of $0.6 million.

•In January 2022, we invested $5.0 million in SBS Industries Holdings, Inc.
("SBS"), through a combination of secured second lien debt and preferred equity
to fund an add-on acquisition. As part of the additional investment, SBS was
renamed SFEG Holdings, Inc ("SFEG").

•In March 2022, we entered into a new $26.0 million secured first lien term loan
with J.R. Hobbs, replacing our previously outstanding first lien term loan with
a total cost basis of $36.0 million, which resulted in a realized loss of
$10.0 million. The new term loan has a stated interest rate of LIBOR + 10.3% and
matures October 1, 2024.

•In March 2022we invested extra $2.4 million in the form of a senior debt secured in J.R. Hobbs.

RECENT DEVELOPMENTS

Distributions and dividends

In April 2022our board of directors has declared the following monthly and additional cash distributions to common stockholders:

  Record Date             Payment Date            Distribution per Common Share
 April 22, 2022          April 29, 2022          $                        0.075
  May 20, 2022            May 31, 2022                                    0.075
  June 6, 2022            June 15, 2022                                   0.120   (A)
 June 22, 2022            June 30, 2022                                   0.075
                     Total for the Quarter:      $                        0.345

(A) Represents an additional distribution to ordinary shareholders.

LIBOR Transition

In general, our investments in debt securities have a term of five years, accrue
interest at variable rates (based on the one-month LIBOR) and, to a lesser
extent, at fixed rates. Most U.S. dollar LIBOR are currently anticipated to be
phased out in June 2023. LIBOR may transition to a new standard rate, SOFR,
which will incorporate certain overnight repo market data collected from
multiple data sets. To attain an equivalent one-month rate, we currently intend
to adjust the SOFR to minimize the difference between the interest that a
borrower would be paying using LIBOR versus what it will be paying using
SOFR. We are currently monitoring the transition and cannot assure you whether
SOFR will become a standard rate for variable rate debt. We have amended all
outstanding loan agreements with our portfolio companies to include fallback
language providing a mechanism for the parties to negotiate a new reference
interest rate in the event that LIBOR ceases to exist. 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.

Impact of COVID-19

We continue to closely monitor and work with our portfolio companies to navigate
the significant challenges created by the continuing COVID-19 pandemic, and
remain focused on ensuring the safety of the Adviser's and Administrator's
personnel and of the employees of our portfolio companies, while also managing
our ongoing business activities. While we are closely monitoring all of our
portfolio companies, our portfolio continues to be diverse from a geographic and
industry perspective. Through proactive measures and continued diligence, the
management teams of our portfolio companies have demonstrated their ability to
respond effectively and efficiently to the challenges posed by COVID-19,
including its variants, related orders imposed by state and local governments,
including paused or reversed reopening orders, and operating challenges,
including but not limited to, labor shortages, supply chain delays and increased
material costs. We believe we have sufficient levels of liquidity to support our
existing portfolio companies, as necessary, and continue our buyout strategy by
deploying capital in new investment opportunities.

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Impact of inflation

We believe the effects of inflation, if any, on our historical results of
operations and financial condition have been immaterial. During the fiscal year
ended March 31, 2022, general inflationary pressures and certain commodity price
volatility have impacted our portfolio companies to varying degrees; however,
the broad based impact of these pricing changes have largely been mitigated by
price adjustments without adverse sales implications, and thus, have not
materially impacted our portfolio companies' ability to service their
indebtedness, including our loans. Notwithstanding the results to date, we do
expect that the cumulative effect of these inflationary pressures may impact the
profit margins or sales of certain portfolio companies and their ability to
service their debts. We continue to monitor the current inflationary environment
to anticipate any impact on our portfolio companies including their availability
to pay interest on our loans. We cannot assure you that our results of
operations and financial condition or that of our portfolio companies will not
be materially impacted by inflation in the future. Refer to "Risk Factors -
Risks Related to the Economy - We may experience fluctuations in our quarterly
and annual results based on the impact of inflation in the U.S."

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RESULTS OF OPERATIONS

Comparison of the Fiscal Year Ended March 31, 2022 to the Fiscal Year Ended
March 31, 2021

                                            For the Fiscal Years Ended March
                                                           31,
                                                 2022                2021             $ Change              % Change
INVESTMENT INCOME
Interest income                             $    59,649          $  47,164          $  12,485                     26.5  %
Dividend and success fee income                  12,903              9,463                 3,440                  36.4  %
Total investment income                          72,552             56,627                15,925                  28.1  %

EXPENSES
Base management fee                              14,113             12,115                 1,998                  16.5  %
Loan servicing fee                                7,178              7,082                    96                   1.4  %
Incentive fee                                    26,360              8,778                17,582                 200.3  %
Administration fee                                1,806              1,619                   187                  11.6  %
Interest and dividend expense                    15,384             13,114                 2,270                  17.3  %
Amortization of deferred financing costs
and discounts                                     1,803              1,750                    53                   3.0  %
Other                                             4,593              4,262                   331                   7.8  %
Expenses before credits from Adviser             71,237             48,720                22,517                  46.2  %
Credits to fees from Adviser                    (13,675)           (10,031)              (3,644)                  36.3  %
Total expenses, net of credits to fees           57,562             38,689                18,873                  48.8  %
NET INVESTMENT INCOME                            14,990             17,938               (2,948)                 (16.4) %

REALIZED AND UNREALIZED GAIN (LOSS), NET OF
TAXES
Net realized gain on investments                 14,442             11,374                 3,068                  27.0  %
Net realized loss on other                       (1,998)              (782)              (1,216)                (155.5) %
Net unrealized appreciation of investments       74,882             13,924                60,958                 437.8  %
Net realized and unrealized gain, net of
taxes on deemed distribution of long-term
capital gains                                    87,326             24,516                62,810                 256.2  %

NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                                  $   102,316          $  42,454          $  59,862                    141.0  %

BASIC AND DILUTED PER COMMON SHARE:
Net investment income                       $      0.45          $    0.54          $   (0.09)                   (16.7) %
Net increase in net assets resulting from
operations                                  $      3.08          $    1.28          $    1.80                    140.6  %


Investment Income

Total investment income increased by 28.1% for the year ended March 31, 2022, as
compared to the prior year. This increase was primarily due to an increase in
interest income, as well as an increase in dividend and success fee income.

Interest income from our investments in debt securities increased 26.5% for the
year ended March 31, 2022, as compared to the prior year. 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.

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The weighted-average principal balance of our interest-bearing investment
portfolio during the year ended March 31, 2022 was $442.8 million, compared to
$398.1 million during the prior year. This increase was primarily due to the
origination of $54.2 million of new debt investments, $85.9 million of follow-on
debt investments to existing portfolio companies, and $79.5 million of loans
placed back on accrual status, partially offset by the pay-off, restructuring,
or write-off of $72.1 million of debt investments and $64.2 million of existing
loans placed on non-accrual status after March 31, 2020, and their respective
impact on the weighted-average principal balance when considering the timing of
new investments, pay-offs, restructurings, write-offs, and accrual status
changes, as applicable.

The weighted-average yield on our interest-bearing investments, excluding cash
and cash equivalents and receipts recorded as other income, was 13.5% and 11.9%
for the years ended March 31, 2022 and 2021, respectively. The weighted-average
yield may vary from period to period, based on the current stated interest rate
on interest-bearing investments, coupled with any collection of past due
interest during the period. During the year ended March 31, 2022, we collected
$7.3 million in past due interest from portfolio companies that were previously
on non-accrual status, including $3.4 million from Horizon Facilities Services,
Inc. ("Horizon"), $2.8 million from B+T Group Acquisition, Inc. ("B+T"), $1.0
million from SOG Speciality Knives & Tools, LLC and $0.1 million from PSI Molded
Plastics, Inc. We had no collections of past due interest during the year ended
March 31, 2021.

As of March 31, 2022, our loans to J.R. Hobbs, The Mountain Corporation ("The
Mountain"), and SFEG were on non-accrual status, with an aggregate debt cost
basis of $77.2 million. As of March 31, 2021, our loans to B+T, Horizon and The
Mountain were on non-accrual status, with an aggregate debt cost basis of $61.1
million.

Dividend and success fee income for the year ended March 31, 2022 increased
36.4% from the prior year. During the year ended March 31, 2022, dividend and
success fee income consisted of $10.3 million of success fee income and $2.6
million of dividend income. During the year ended March 31, 2021, dividend and
success fee income consisted of $7.1 million of dividend income and $2.4 million
of success fee income.

From March 31, 2022 and 2021, no investment represented more than 10% of our total investment portfolio at fair value.

Expenses

Total expenses, net of any non-contractual, unconditional, and irrevocable
credits from the Adviser, increased 48.8% for the year ended March 31, 2022, as
compared to the prior year, primarily due to an increase in the capital
gains-based incentive fee, income-based incentive fee, interest and dividend
expense, and base management fee, partially offset by an increase in credits to
fees from Adviser.

In accordance with GAAP, we recorded a capital gains-based incentive fee of
$18.3 million during the year ended March 31, 2022, compared to a capital
gains-based incentive fee of $5.0 million during the year ended March 31, 2021.
The capital gains-based incentive fee is a result of the net impact of net
realized gains (losses) and net unrealized appreciation (depreciation) on
investments during the respective periods. The income-based incentive fee
increased during the year ended March 31, 2022, as compared to the prior year,
as the increase in pre-incentive fee net investment income more than offset the
increase in net assets, which drives the hurdle rate.

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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:

                                                             Year Ended 

March, 31st,

                                                             2022           

2021

Average total assets subject to base management fees(A) $705,650 $605,750
Multiplied by a base annual management fee of 2.0%

               2.0  %          2.0  %
Base management fee(B)                                      14,113          

12,115

Credits to fees from Adviser - other(B)                     (6,497)         (2,949)
Net base management fee                                  $   7,616       $   9,166

Loan servicing fee(B)                                    $   7,178       $   7,082
Credits to base management fee - loan servicing fee(B)      (7,178)         (7,082)
Net loan servicing fee                                   $       -       $       -

Incentive fee - income-based                             $   8,074       $   3,746
Incentive fee - capital gains-based(C)                      18,286          

5,032

Total incentive fee(B)                                      26,360          

8,778

Credits to fees from Adviser - other(B)                          -               -
Net total incentive fee                                  $  26,360       $   8,778


(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 fees are recorded in accordance with GAAP
and do not necessarily reflect amounts contractually due under the terms of the
Advisory Agreement.

Interest and dividend expense increased 17.3% during the year ended March 31,
2022, as compared to the prior year, primarily due to the issuance of the 2028
Notes in August 2021 as well as the 2026 Notes issued in March 2021, partially
offset by a lower weighted-average balance outstanding on the Credit Facility
and the redemption of the Series E Term Preferred Stock in the current year. The
weighted-average balance outstanding on the Credit Facility during the year
ended March 31, 2022 was $18.1 million, as compared to $82.6 million in the
prior year. The effective interest rate on the Credit Facility, excluding the
impact of deferred financing costs, during the year ended March 31, 2022 was
12.5%, as compared to 4.3% in the prior year. This increase in the effective
interest rate on the Credit Facility was primarily a result of the increase in
unused commitment fee on the undrawn portion of the Credit Facility.

Other expenses increased 7.8% during the year ended March 31, 2022, as compared
to the prior year, primarily due to an increase in bad debt expense and tax
expense, partially offset by a decrease in professional expenses and shareholder
expenses.

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Realized and unrealized gain (loss), net of tax

The realized gains (losses) and unrealized appreciation (depreciation) across
our investments for the years ended March 31, 2022 and 2021 were as follows:

                                                                              Year Ended March 31, 2022
                                                                                                    Reversal of
                                                    Realized                Unrealized               Unrealized
                                                 Gain (Loss) on            Appreciation            (Appreciation)           Net Gain
Portfolio Company                                  Investments            (Depreciation)            Depreciation             (Loss)
Brunswick Bowling Products, Inc.                $            -          $        20,470          $             -          $  20,470
Bassett Creek Serivces, Inc.                                 -                   17,994                        -             17,994
Old World Christmas, Inc.                                    -                   17,594                        -             17,594
B+T Group Acquisition, Inc.                                  -                   16,885                        -             16,885
Horizon Facilities Services, Inc.                            -                   14,144                        -             14,144
Schylling, Inc.                                              -                    9,883                        -              9,883
SOG Specialty Knives & Tools, LLC                            -                    8,197                        -              8,197
Educators Resource, Inc.                                     -                    8,058                        -              8,058
ImageWorks Display and Marketing Group,
Inc.                                                         -                    6,586                        -              6,586
Counsel Press, Inc.                                          -                    4,027                        -              4,027
PSI Molded Plastics, Inc.                                    -                    3,633                        -              3,633
Nocturne Villa Rentals, Inc.                                 -                    3,623                        -              3,623
Head Country, Inc.                                       3,627                        -                   (2,469)             1,158
Channel Technologies Group, LLC                         (1,841)                       -                    1,841                  -
The Maids International, LLC                                 -                     (881)                       -               (881)
The Mountain Corporation                                     -                   (1,045)                       -             (1,045)
Mason West, LLC                                              -                   (2,221)                       -             (2,221)
Pioneer Square Brands, Inc.                             21,939                   (1,245)                 (25,425)            (4,731)
Ginsey Home Solutions, Inc.                                  -                   (5,287)                       -             (5,287)
SFEG Holdings, Inc.(A)                                       -                   (5,376)                       -             (5,376)
Galaxy Technologies Holdings, Inc. (B)                       -                   (9,587)                       -             (9,587)
J.R. Hobbs Co. - Atlanta, LLC                          (10,000)                  (4,709)                     800            (13,909)
Other, net (<$1.0 million, net )                           717                     (661)                      53                109
Total                                           $       14,442          $       100,082          $       (25,200)         $  89,324


(A)In January 2022, SBS Industries Holdings, Inc. was renamed SFEG Holdings,
Inc.
(B)In conjunction with the September 2021 merger of Danco and Galaxy into the
newly formed Galaxy Technologies Holdings, total unrealized depreciation for the
year ended March 31, 2022 includes the net unrealized appreciation
(depreciation) for Danco and Galaxy prior to the merger.

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Year ended March 31, 2021

                                                                                                     Reversal of
                                                     Realized                Unrealized               Unrealized
                                                  Gain (Loss) on            Appreciation            (Appreciation)           Net Gain
Portfolio Company                                   Investments            (Depreciation)            Depreciation             (Loss)
Pioneer Square Brands, Inc.                      $            -          $        26,410          $             -          $  26,410
Old World Christmas, Inc.                                 3,544                    6,840                        -             10,384
SOG Specialty Knives & Tools, LLC                             -                    6,364                        -              6,364
Educators Resource, Inc.                                      -                    5,631                        -              5,631
Frontier Packaging, Inc.                                 14,321                    2,534                  (11,869)             4,986
Schylling, Inc.                                               -                    3,604                        -              3,604
Head Country, Inc.                                            -                    2,974                        -              2,974
Ginsey Home Solutions, Inc.                                   -                    2,131                        -              2,131
Diligent Delivery Systems                                     -                    1,877                        -              1,877
ImageWorks Display and Marketing Group,
Inc.                                                          -                    1,554                        -              1,554
Horizon Facilities Services, Inc.                             -                      963                        -                963
Cambridge Sound Management, Inc.                            739                        -                        -                739
Alloy Die Casting Co.                                       576                        -                        -                576
Mason West, LLC                                               -                   (1,432)                       -             (1,432)
Galaxy Tool Holding Corporation                               -                   (1,528)                       -             (1,528)
PSI Molded Plastics, Inc.                                     -                   (1,752)                       -             (1,752)
The Maids International, LLC                                  -                   (1,779)                       -             (1,779)
The Mountain Corporation                                      -                   (1,986)                       -             (1,986)
Nth Degree Investment Group, LLC                            113                   (3,649)                       -             (3,536)
D.P.M.S., Inc.                                                -                   (5,045)                       -             (5,045)
SBS Industries Holdings, Inc. (A)                        (8,470)                   2,463                        -             (6,007)
Brunswick Bowling Products, Inc.                              -                  (20,542)                       -            (20,542)
Other, net (<$1.0 million, net )                            551                      172                      (11)               712
Total                                            $       11,374          $        25,804          $       (11,880)         $  25,298

(Has in January 2022, SBS Industries Holdings, Inc. was renamed SFEG Holdings, Inc.

Net realized gain (loss) on investments

During the year ended March 31, 2022, we recorded net realized gains on
investments of $14.4 million, primarily due to a $21.9 million realized gain
from the exit of Pioneer, a $3.6 million realized gain from the exit of Head
Country and $0.7 million realized gains related to prior period exits, partially
offset by a $10.0 million realized loss recognized on the restructuring of the
first lien term loan to J.R. Hobbs and a $1.8 million realized loss from the
dissolution of CTG. During the year ended March 31, 2021, we recorded net
realized gains on investments of $11.4 million, primarily related to a $14.3
million realized gain from the exit of Frontier, a $3.5 million realized gain
from the recapitalization of Old World, and gains from previous exits, partially
offset by an $8.5 million realized loss related to the partial write-off of a
debt investment in SBS Industries.

Net unrealized appreciation (depreciation) of investments

Net unrealized appreciation of investments of $74.9 million for the year ended
March 31, 2022 was primarily due to increased performance of certain of our
portfolio companies, driven partially by the reversal of the impact of COVID-19
on certain of our portfolio companies and the markets in which they operate,
increased comparable multiples used to estimate the fair value of certain of our
portfolio companies and the reversal of previously recorded unrealized
depreciation of our investments in CTG upon its dissolution. These amounts were
partially offset by the reversal of previously recorded unrealized appreciation
of our investment in Pioneer and Head Country upon exit and the decreased
performance of certain of our portfolio companies. In part, the performance of
certain of our portfolio companies was driven by the impact COVID-19, and its
variants, has had or is expected to have on our portfolio companies and the
markets in which they operate, including government restrictions on the
portfolio companies' ability to operate under historical conditions, current and
future shutdowns and reopening restrictions, operating challenges, including but
not limited to, labor shortages, supply chain delays, increased material costs
and demand for their products, and general economic outlook, or the reversal of
such impact towards pre-COVID-19 levels.

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Net unrealized appreciation of investments of $13.9 million for the year ended
March 31, 2021 was primarily due to increased performance of certain of our
portfolio companies and an increase in comparable multiples used to estimate the
fair value of a majority of our portfolio companies, partially offset by the
reversal of previously recorded unrealized appreciation upon the exit of
Frontier and a decrease in performance of certain of our other portfolio
companies. The decrease in the performance of a limited number of our portfolio
companies was driven by the continued impact COVID-19, and its variants, has had
or is expected to have on those portfolio companies and the markets in which
they operate, including government restrictions on the portfolio companies'
ability to operate under historical conditions, shutdowns, demand for products,
and general economic outlook.

Across our entire investment portfolio, we recorded $70.3 million of net
unrealized appreciation on our equity investments and $4.6 million of net
unrealized appreciation on our debt investments for the year ended March 31,
2022. At March 31, 2022, the fair value of our investment portfolio was more
than our cost basis by $45.1 million, compared to March 31, 2021, when the fair
value of our investment portfolio was less than our cost basis by $29.7 million.
This resulted in net unrealized appreciation of $74.9 million for the year ended
March 31, 2022. Our entire portfolio was fair valued at 106.7% of cost as of
March 31, 2022.

Net realized gain (loss) on other

During the year ended March 31, 2022, we recorded a net realized loss on other
of $2.0 million which primarily related to unamortized deferred issuance costs
written off upon the redemption of our Series E Term Preferred Stock in August
2021. During the year ended March 31, 2021, we recorded a net realized loss on
other of $0.8 million which primarily related to unamortized deferred issuance
costs written off upon the redemption of our Series D Term Preferred Stock in
March 2021.

The comparison of the fiscal year ended March 31, 2021 to the fiscal year ended
March 31, 2020 can be found in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2021 located within Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, which is incorporated
by reference herein.

CASH AND CAPITAL RESOURCES

Operational activities

Cash inflows from operating activities are primarily generated from cash
collections of interest and other income from our portfolio companies, as well
as from cash proceeds received from repayments of debt investments and from
sales of equity investments. These cash collections are principally used to fund
new investments, pay distributions to our common stockholders, make interest
payments on our Credit Facility, 2026 Notes and 2028 Notes, pay management and
incentive fees to the Adviser and other operating expenses. We may also use cash
inflows from operating activities to repay outstanding borrowings under the
Credit Facility.

Net cash provided by operating activities for the year ended March 31, 2022 was
$36.6 million, as compared to net cash used in operating activities of $29.7
million for the year ended March 31, 2021. This change was primarily due to
increases in principal repayments of investments and net proceeds from the sale
of investments and a decline in purchase of new investments. Purchases of
investments totaled $92.7 million during the year ended March 31, 2022, compared
to $95.3 million during the year ended March 31, 2021. Repayments and net
proceeds from the sale of investments totaled $101.4 million during the year
ended March 31, 2022, compared to $51.8 million during the year ended March 31,
2021.

Net cash used in operating activities for the year ended March 31, 2021 was
$29.7 million, as compared to net cash provided by operating activities of $35.3
million for the year ended March 31, 2020. This change was primarily due to
decreases in principal repayments of investments and net proceeds from the sale
of investments and a decline in Other liabilities, principally due to $13.3
million of tax payments made related to prior year deemed distributions,
partially offset by a decline in purchases of investments, and an increase in
Fees due to Adviser related to the prior year payment of $8.1 million of capital
gains-based incentive fees that were contractually due period over period.
Purchases of investments totaled $95.3 million during the year ended March 31,
2021, compared to $145.4 million during the year ended March 31, 2020.
Repayments and net proceeds from the sale of investments totaled $51.8 million
during the year ended March 31, 2021, compared to $169.9 million during the year
ended March 31, 2020.

As of March 31, 2022, we had equity investments in, or loans to, 26 companies
with an aggregate cost basis of $669.2 million. As of March 31, 2021, we had
equity investments in, or loans to, 28 companies with an aggregate cost basis of

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$663.6 million. The following table summarizes all of our portfolio investment activities for the years ended March 31, 2022 and 2021:

Completed exercises March, 31st,

                                                                        2022                 2021
Beginning investment portfolio, at fair value                      $    633,829          $  565,924
New investments                                                          34,200              46,902
Disbursements to existing portfolio companies                            58,538              48,370
Unscheduled principal repayments                                        (51,398)            (20,734)
Net proceeds from sales of investments                                  (49,419)            (29,689)
Net realized gain on investments                                         13,746               9,114
Net unrealized appreciation (depreciation) of investments               100,083              25,805
Reversal of net unrealized appreciation of investments                  (25,201)            (11,881)
Amortization of premiums, discounts, and acquisition costs, net              18                  18
Ending investment portfolio, at fair value                         $    

714 396 $633,829


The following table summarizes the contractual principal repayment and maturity
of our investment portfolio by fiscal year, assuming no voluntary prepayments,
as of March 31, 2022:

                                                                                        Amount

For exercises ending March, 31st:

            2023                                                                $            92,888
            2024                                                                             97,418
            2025                                                                            169,334
            2026                                                                             78,231
            2027                                                                             71,245
            Thereafter                                                                        1,500
            Total contractual repayments                                        $           510,616
            Adjustments to cost basis of debt investments                                       (12)
            Investments in equity securities                                                158,644
            Total cost basis of investments held as of March 31, 2022:          $           669,248


Financing Activities

Net cash used in financing activities for the year ended March 31, 2022 was
$24.5 million, which consisted primarily of the redemption of our Series E Term
Preferred Stock of $94.4 million, $38.9 million in distributions to common
stockholders, $22.4 million of net repayments on our Credit Facility, and $3.4
million of deferred financing and offering costs, partially offset by $134.6
million in gross proceeds from the issuance of our 2028 Notes.

Net cash provided by financing activities for the year ended March 31, 2021 was
$28.1 million, which consisted primarily of the $127.9 million in gross proceeds
from the issuance of our 2026 Notes, $19.3 million of gross proceeds from the
issuance of mandatorily redeemable preferred stock under the Series E ATM
program, and $1.7 million of net proceeds from the issuance of common stock
under the Common Stock ATM Program, partially offset by the redemption of our
Series D Term Preferred Stock of $57.5 million, $30.9 million in distributions
to common stockholders, $26.8 million of net repayments on our Credit Facility,
and $5.7 million of deferred financing and offering costs.

Distributions and dividends to shareholders

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 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

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accordance with these requirements, our Board of Directors declared, and we
paid, monthly cash distributions of $0.07 per common share for each of the six
months from April 2021 through September 2021, monthly cash distributions of
$0.075 per common share for each of the six months from October 2021 through
March 2022, and supplemental distributions of $0.06, $0.03, $0.09, and $0.12 per
common share in June 2021, September 2021, December 2021 and February 2022,
respectively. See also "Recent Developments - Distributions and Dividends" for a
discussion of cash distributions to common stockholders declared by our Board of
Directors in April 2022.

For each of the fiscal years ended March 31, 2022 and 2021, Investment Company
Taxable Income exceeded distributions declared and paid, and, in accordance with
Section 855(a) of the Code, we elected to treat $13.9 million and $16.1 million,
respectively, of the first distributions paid subsequent to fiscal year-end as
having been paid in the prior year. In addition, for each of the fiscal years
ended March 31, 2022 and 2021, net capital gains exceeded distributions declared
and paid, and, in accordance with Section 855(a) of the Code, we elected to
treat $15.7 million and $8.5 million, respectively, of the first distributions
paid subsequent to fiscal year-end as having been paid in the prior year. For
the year ended March 31, 2022, we recorded $2.8 million of net adjustments for
estimated permanent book-tax differences to reflect tax character, which
decreased Capital in excess of par value and Underdistributed net investment
income and increased Accumulated net realized gain in excess of distributions.
For the year ended March 31, 2021, we recorded $2.0 million of net adjustments
for estimated 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 Underdistributed net investment income.

Dividends on preferred shares

Our Board of Directors declared and we paid monthly cash dividends of $0.1328125
per share to holders of our Series E Term Preferred Stock per month from April
2021 through July 2021 and $0.07968750 per share of our Series E Term Preferred
Stock for the period from August 1, 2021 up to, but excluding, the redemption
date of August 19, 2021. In accordance with GAAP, we treated 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.

Registration statement

On September 3, 2021, we filed a registration statement on Form N-2 (File No.
333-259302), which the SEC declared effective on October 15, 2021. 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 the date of this report, we have
the ability to issue up to $300.0 million of the securities registered under the
registration statement.

Equity

Common Stock

In December 2019, we entered into equity distribution agreements with Wedbush
Securities, Inc., Cantor Fitzgerald & Co., and Ladenburg Thalmann & Co., Inc.
(each, a "Common Stock ATM Sales Agent"), under which we had the ability to
issue and sell shares of our common stock, from time to time, through the Common
Stock Sales Agents, up to an aggregate offering price of $35.0 million in the
Common Stock ATM Program. On August 11, 2021, we terminated the equity
distribution agreements with each of the Common Stock ATM Sales Agents.

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We did not sell any shares of our common stock under the Common Stock ATM
Program during the year ended March 31, 2022. During the year ended March 31,
2021, we sold 155,560 shares of our common stock under the Common Stock ATM
Program at a weighted-average gross price of $11.39 per share and raised
approximately $1.8 million of gross proceeds. The weighted-average net price per
share, after deducting commissions and offering costs borne by us, was $11.17
and resulted in total net proceeds of approximately $1.7 million. These sales
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 March 31, 2022,
the closing market price of our common stock was $16.13 per share, representing
a 20.1% premium to our NAV of $13.43 per share as of March 31, 2022.

Term Preferred Shares

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 accompanying
Consolidated Statements of Assets and Liabilities and were amortized over the
period ending August 31, 2025, the mandatory redemption date, prior to
redemption in August 2021. Prior to actual redemption in August 2021, the Series
E Term Preferred Stock provided for a fixed dividend equal to 6.375% per year,
payable monthly.

In May 2020, we entered into sales agreements with Wedbush Securities, Inc. and
Virtu Americas LLC (each a "Series E ATM Sales Agent"), under which we had the
ability to issue and sell shares of our Series E Term Preferred Stock, from time
to time, through the Series E ATM Sales Agents, up to $50.0 million aggregate
liquidation preference in the Series E ATM Program. On August 10, 2021, we
terminated our sales agreements with each of the Series E ATM Sales Agents.

We did not sell any shares of our Series E Term Preferred Stock under the Series
E ATM Program during the year ended March 31, 2022. During the year ended March
31, 2021, we sold 784,853 shares of our Series E Term Preferred Stock under the
Series E ATM Program with an aggregate liquidation preference of $19.6 million.
The weighted-average gross price per share net of discounts was $24.56 and
resulted in gross proceeds of approximately $19.3 million. After deducting
commissions and offering costs borne by us, net proceeds totaled approximately
$19.1 million.

In March 2021, we used a portion of the proceeds from the issuance of our 2026
Notes, to voluntarily redeem all outstanding shares of our Series D Term
Preferred Stock, which had a liquidation preference of $25.00 per share. In
connection with the voluntary redemption, we incurred a loss on extinguishment
of debt of $0.8 million, which was recorded in Realized loss on other in our
accompanying Consolidated Statements of Operations and which was primarily
comprised of unamortized deferred issuance costs at the time of redemption.
Prior to redemption in March 2021, the Series D Term Preferred Stock provided
for a fixed dividend equal to 6.25% per year, payable monthly.

In August 2021, we used a portion of the proceeds from the issuance of our 2028
Notes to voluntarily redeem all outstanding shares of our Series E Term
Preferred Stock, which had a liquidation preference of $25.00 per share. In
connection with the voluntary redemption, we incurred a loss on extinguishment
of debt of $2.0 million, which was recorded in Realized loss on other in our
accompanying Consolidated Statements of Operations and which was primarily
comprised of unamortized deferred issuance costs at the time of redemption.

Revolving line of credit

On March 8, 2021, we, through our wholly-owned subsidiary, Business Investment,
entered into Amendment No. 6 to the Fifth Amended and Restated Credit Agreement,
originally entered into on April 30, 2013, 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 February 29, 2024, and if not renewed or extended by such
date, all principal and interest will be due and payable on February 28, 2026
(two years after the revolving period end date). As of March 31, 2022, the
Credit Facility provided a one-year extension option that may be

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exercised on or before the second anniversary of March 8, 2021, subject to
approval by all lenders. Additionally, as part of this amendment, the COVID-19
Relief Period (described below) was extended to September 30, 2021. We incurred
fees of approximately $1.0 million in connection with this amendment.

On August 10, 2020, we, through Business Investment, entered into Amendment No.
5 to the Credit Facility. Among other things, Amendment No. 5 amended the Credit
Facility to (i) add LIBOR replacement language; (ii) implement a 0.5% LIBOR
floor; (iii) reduce the facility size from $200.0 million to $180.0 million,
which may be expanded to $300.0 million through additional commitments; and (iv)
provide certain other changes to existing terms and covenants.In addition,
Amendment No. 5 provided for certain temporary changes during the COVID-19
Relief Period (initially August 10, 2020 until March 31, 2021) including: (i)
amending the definition of "Effective Advance Rate," provided that during such
period the overall effective advance rate does not exceed 55%; and (ii) removing
or changing certain "Excess Concentration Limits" (as defined in the Credit
Facility).

Advances under the Credit Facility generally bear interest at 30-day LIBOR,
subject to a floor of 0.5%, plus 2.85% per annum until February 29, 2024, with
the margin then increasing to 3.10% for the period from February 29, 2024 to
February 28, 2025, 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.

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 guarantee that
requires the Company to maintain (i) a minimum net worth 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 $286.3 million as of March 31, 2022, (ii)
asset coverage with respect to senior securities representing indebtedness of at
least 150% (or such percentage as may be set forth in Section 18 of the 1940
Act, as modified by Section 61 of the 1940 Act); and (iii) our status as a BDC
under the 1940 Act and as a RIC under the Code. As of March 31, 2022, and as
defined in the performance guaranty of the Credit Facility, we had a net worth
of $701.2 million, asset coverage on our senior securities representing
indebtedness of 252.9%, 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
March 31, 2022, we had availability, after adjustments for various constraints
based on collateral quality, of $180.0 million under the Credit Facility and
were in compliance with all covenants under the Credit Facility.

Notes payable

5.00% bonds due 2026

In March 2021, we completed a public offering of the 2026 Notes with an
aggregate principal amount of $127.9 million, which resulted in net proceeds of
approximately $123.8 million after deducting underwriting discounts, commissions
and offering costs borne by us. The 2026 Notes are traded under the ticker
symbol "GAINN" on Nasdaq. The 2026 Notes will mature on May 1, 2026 and may be
redeemed in whole or in part at any time or from time to time at the Company's
option

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on or after May 1, 2023. The 2026 Notes bear interest at a rate of 5.00% per
year (which equates to $6.4 million per year), payable quarterly in arrears.

The indenture relating to the 2026 Notes contains certain covenants, including
(i) an inability to incur additional debt or issue additional debt or preferred
securities unless the Company's asset coverage meets the threshold specified in
the 1940 Act after such borrowing, (ii) an inability to declare any dividend or
distribution (except a dividend payable in our stock) on a class of our capital
stock or to purchase shares of our capital stock unless the Company's asset
coverage meets the threshold specified in the 1940 Act at the time of (and
giving effect to) such declaration or purchase, and (iii) if, at any time, we
are not subject to the reporting requirements of the Exchange Act, we will
provide the holders of the 2026 Notes, as applicable, and the trustee with
audited annual consolidated financial statements and unaudited interim
consolidated financial statements.

The 2026 Notes are recorded at the aggregate principal amount, less underwriting
discounts, commissions, and offering costs, on our accompanying Consolidated
Statements of Assets and Liabilities. Total underwriting discounts, commissions,
and offering costs related to this offering were $4.1 million, which have been
recorded as discounts to the aggregate principal amount on our
accompanying Consolidated Statements of Assets and Liabilities and are being
amortized over the period ending May 1, 2026, the maturity date.

4.875% Notes Due 2028

In August 2021, we completed a public offering of the 2028 Notes with an
aggregate principal amount of $134.6 million, which resulted in net proceeds of
approximately $131.3 million after deducting underwriting discounts, commissions
and offering costs borne by us. The 2028 Notes are traded under the ticker
symbol "GAINZ" on Nasdaq. The 2028 Notes will mature on November 1, 2028 and may
be redeemed in whole or in part at any time or from time to time at the
Company's option on or after November 1, 2023. The 2028 Notes bear interest at a
rate of 4.875% per year (which equates to $6.6 million per year), payable
quarterly in arrears.

The indenture relating to the 2028 Notes contains certain covenants, including
(i) an inability to incur additional debt or issue additional debt or preferred
securities unless the Company's asset coverage meets the threshold specified in
the 1940 Act after such borrowing, (ii) an inability to declare any dividend or
distribution (except a dividend payable in our stock) on a class of our capital
stock or to purchase shares of our capital stock unless the Company's asset
coverage meets the threshold specified in the 1940 Act at the time of (and
giving effect to) such declaration or purchase, and (iii) if, at any time, we
are not subject to the reporting requirements of the Exchange Act, we will
provide the holders of the 2028 Notes, as applicable, and the trustee with
audited annual consolidated financial statements and unaudited interim
consolidated financial statements.

The 2028 Notes are recorded at the aggregate principal amount, less underwriting
discounts, commissions, and offering costs, on our accompanying Consolidated
Statements of Assets and Liabilities. Total underwriting discounts, commissions,
and offering costs related to this offering were $3.3 million, which have been
recorded as discounts to the aggregate principal amount on our accompanying
Consolidated Statements of Assets and Liabilities and are being amortized over
the period ending November 1, 2028, the maturity date.

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 March 31,
2022 and 2021, we had unrecognized, contractual off-balance sheet success fee
receivables of $50.5 million and $46.2 million (or approximately $1.52 and $1.39
per common share), respectively, on our debt investments. Consistent with GAAP,
we have not recognized success fee receivables and related income in our
accompanying Consolidated Financial Statements until earned.

CONTRACTUAL OBLIGATIONS

We have line of credit and delayed draw term loan commitments to certain of our
portfolio companies that have not been fully drawn. Since these line of credit
and delayed draw term loan commitments have expiration dates and we expect many
will never be fully drawn, the total line of credit and delayed draw term loan
commitment amounts do not necessarily represent future cash requirements. We
estimate the fair value of the combined unused line of credit and delayed draw
term loan commitments as of March 31, 2022 to be immaterial.

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In February 2022, we extended a guaranty on behalf of one of our portfolio
companies, J.R. Hobbs, whereby we have guaranteed 50% of their obligations with
another lender, with a maximum amount of $9.3 million. In addition, as of
March 31, 2022, we also have a guaranty on behalf of our portfolio company
Country Club Enterprises, LLC, whereby we have guaranteed $1.0 million of
obligations. As of March 31, 2022, we have not been required to make payments on
these or any previous guaranties, and we consider the credit risks to be remote
and the fair value of these guaranties to be immaterial.

The following table presents our contractual obligations as of March 31, 2022at cost/liquidation preference:

Payments due by period

                                                           Less than                                                 More than
  Contractual Obligations(A)             Total              1 Year             1-3 Years          3-5 Years           5 Years
Credit Facility(B)                    $       -          $        -          $        -          $       -          $       -
Notes payable                           262,488                   -                   -            127,938            134,550
Secured borrowing                         5,096                   -               5,096                  -                  -
Interest payments on
obligations(C)                           79,437              15,143              30,205             20,079             14,010
Total                                 $ 347,021          $   15,143          $   35,301          $ 148,017          $ 148,560


(A)Excludes unused line of credit and delayed draw term loan commitments and
guaranties to our portfolio companies in the aggregate principal amount of $14.5
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, 2026 Notes, 2028
Notes, and secured borrowing, as applicable. The amount of interest payments
calculated for purposes of this table was based upon rates and outstanding
balances as of March 31, 2022.

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 accompanying Notes
to Consolidated Financial Statements included elsewhere in this Annual Report.
Additionally, refer to Note 3 - Investments in the accompanying Notes to
Consolidated Financial Statements included elsewhere in this Annual 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 accompanying Notes
to Consolidated Financial Statements included elsewhere in this Annual Report.

Investment appraisal

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 a
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

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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 the risk ratings of all loans in our portfolio at
March 31, 2022 and 2021:

                           As of March 31,
Rating                   2022             2021
Highest                  9.0              9.0
Average                  6.5              6.2
Weighted-average         7.0              6.6
Lowest                   3.0              4.0


Tax Status

We intend to continue to maintain our qualification as a RIC under Subchapter M
of the Code for U.S. federal income tax purposes. As a RIC, we generally are not
subject to U.S. 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, 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. See "Business - Material U.S.
Federal Income Tax Considerations" and "- Liquidity and Capital Resources -
Distributions and Dividends to Stockholders."

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 March 31, 2022 and 2021.

Recent accounting pronouncements

Refer to Note 2 - Summary of Significant Accounting Policies in the accompanying
Notes to Consolidated Financial Statements included elsewhere in this Annual
Report for a description of recent accounting pronouncements.

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