UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

x                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTER ENDED JUNE 30, 2007

 

o                                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

COMMISSION FILE NUMBER: 814-00237

 

GLADSTONE CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

MARYLAND

54-2040781

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

1521 WESTBRANCH DRIVE, SUITE 200
MCLEAN, VIRGINIA 22102

(Address of principal executive office)

 

(703) 287-5800

(Registrant’s telephone number, including area code)

 

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 and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12 b-2 of the Exchange Act. (Check One):

Large accelerated filer o      Accelerated filer x      Non-accelerated filer o.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares of the issuer’s Common Stock, $0.001 par value, outstanding as of July 31, 2007 was 14,612,574.

 



GLADSTONE CAPITAL CORPORATION
TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Consolidated Statements of Assets and Liabilities as of June 30, 2007 and September 30, 2006

 

Consolidated Schedules of Investments as of June 30, 2007 and September 30, 2006

 

Consolidated Statements of Operations for the three months ended June 30, 2007 and 2006

 

Consolidated Statements of Operations for the nine months ended June 30, 2007 and 2006

 

Consolidated Statements of Changes in Net Assets for the nine months ended June 30, 2007 and 2006

 

Consolidated Statements of Cash Flows for the nine months ended June 30, 2007 and 2006

 

Financial Highlights for the three months ended June 30, 2007 and 2006

 

Financial Highlights for the nine months ended June 30, 2007 and 2006

 

Notes to Consolidated Financial Statements

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview

 

Results of Operations

 

Liquidity and Capital Resources

 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

 

 

Item 4.

Controls and Procedures

 

 

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

 

Item 1A.

Risk Factors

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

Item 3.

Defaults Upon Senior Securities

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

 

 

Item 5.

Other Information

 

 

Item 6.

Exhibits

 

 

SIGNATURES

 



PART I. FINANCIAL INFORMATION

GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)

 

 

June 30, 2007

 

September 30, 2006

 

ASSETS

 

 

 

 

 

Investments at fair value (Cost 6/30/2007: $369,975,398; 9/30/2006: $216,202,986)

 

$

368,949,247

 

$

217,642,750

 

Cash and cash equivalents

 

3,491,495

 

731,744

 

Interest receivable — investments in debt securities

 

2,221,606

 

1,394,942

 

Interest receivable — employees

 

32,739

 

37,396

 

Due from custodian

 

3,129,891

 

3,587,152

 

Deferred financing fees

 

246,333

 

145,691

 

Prepaid assets

 

186,643

 

226,747

 

Due from employees

 

—

 

1,803,283

 

Other assets

 

352,796

 

213,510

 

TOTAL ASSETS

 

$

378,610,750

 

$

225,783,215

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Accounts payable

 

$

5,160

 

$

4,072

 

Interest payable

 

516,780

 

247,530

 

Administration fee due to Administrator

 

186,895

 

—

 

Fees due to Adviser (Refer to Notes 4 and 5)

 

404,240

 

240,363

 

Borrowings under line of credit

 

161,188,000

 

49,993,000

 

Withholding taxes payable

 

—

 

1,803,283

 

Accrued expenses and deferred liabilities

 

854,322

 

721,287

 

Funds held in escrow

 

202,433

 

203,193

 

TOTAL LIABILITIES

 

163,357,830

 

53,212,728

 

NET ASSETS

 

$

215,252,920

 

$

172,570,487

 

 

 

 

 

 

 

ANALYSIS OF NET ASSETS

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized and 14,249,683 and 12,305,008 shares issued and outstanding, respectively

 

$

14,250

 

$

12,305

 

Capital in excess of par value

 

225,449,718

 

181,270,565

 

Notes receivable — employees

 

(9,947,366

)

(10,248,308

)

Net unrealized appreciation on investments

 

(1,026,151

)

1,439,764

 

Unrealized depreciation on derivative

 

(279,593

)

(253,716

)

Realized loss on sale of investments

 

(780,197

)

(861,695

)

Realized gain on settlement of derivative

 

46,212

 

15,014

 

Accumulated undistributed net investment income

 

1,776,047

 

1,196,558

 

TOTAL NET ASSETS

 

$

215,252,920

 

$

172,570,487

 

NET ASSETS PER SHARE

 

$

15.11

 

$

14.02

 

 

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

2



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 2007
(UNAUDITED)

Company(1)

 

Industry

 

Investment(2)

 

Cost

 

Fair Value

Access Television Network, Inc.

 

Service-cable airtime (infomercials)

 

Line of Credit (7)(8)

 

$

—

 

$

—

AccessTV PIN Acquisition LLC

 

 

 

(12.3% Due 3/2009)

 

 

 

 

Product Information Network

 

 

 

Senior Term Debt (7)

 

2,979,835

 

2,948,401

Venture

 

 

 

(12.3% Due 3/2009)

 

 

 

 

 

 

 

 

 

 

 

 

 

ActivStyle Acquisition Co. ActivStyle, Inc.

 

Service-medical products distribution

 

Line of Credit (5) (9)
(9.6%, Due 7/2009)

 

450,000

 

448,313

 

 

 

 

Senior Term Debt (5)
(9.6%, Due 7/2011)

 

2,960,000

 

2,956,300

 

 

 

 

Senior Term Debt (3) (5)
(11.8%, Due 7/2011)

 

2,500,000

 

2,496,875

 

 

 

 

 

 

 

 

Advanced Homecare Management, Inc.

 

Service-home health nursing services

 

Senior Subordinated Term Debt (5) (6)
(11.9%, Due 12/2013)

 

6,300,000

 

6,300,000

 

 

 

 

 

 

 

 

 

Allison Publications, LLC

 

Service-publisher of consumer

 

Senior Term Debt (7)

 

8,014,728

 

7,933,000

D. Magazine Partners, L.P.

 

oriented magazines

 

(10.3%, Due 12/2011)

 

 

 

 

Allison Media, Inc.

 

 

 

 

 

 

 

 

City Newspapers, LP

 

 

 

 

 

 

 

 

City Newspapers, Management, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anitox Acquisition Company

 

Manufacturing-preservatives for

 

Senior Real Estate Term Debt

 

3,412,939

 

3,360,000

Anitox Holding, Inc.

 

animal feed

 

(8.8%, Due 1/2012)

 

 

 

 

 

 

 

Line of Credit (10)

 

—

 

—

 

 

 

(9.6%, Due 1/2010)

 

 

 

 

 

 

 

Senior Term Debt (5)

 

2,750,000

 

2,746,563

 

 

 

(9.6%, Due 1/2012)

 

 

 

 

 

 

 

Senior Term Debt (3) (5)

 

2,750,000

 

2,746,563

 

 

 

(11.8%, Due 1/2012)

 

 

 

 

 

 

 

 

 

 

 

 

 

Badanco Acquisition Corp.

 

Service-luggage design and distribution

 

Senior Subordinated Term Debt (5)
(12.1%, Due 7/2012)

 

9,701,250

 

9,701,250

 

 

 

 

 

 

 

 

Bresnan Communications, LLC

 

Service-telecommunications

 

Senior Term Debt (6)
(7.3%, Due 9/2013)

 

3,001,880

 

2,992,500

 

 

 

Senior Subordinated Term Debt (6)
(9.9%, Due 3/2014)

 

1,510,393

 

1,505,625

 

 

 

 

 

 

 

 

 

CCS, LLC

 

Service-cable tv franchise owner

 

Senior Term Debt (7)
(12.3%, Due 7/2007)

 

3,455,580

 

3,424,146

 

 

 

 

 

 

 

 

CHG Companies, Inc.

 

Service-healthcare staffing

 

Letter of Credit (5) (6)

 

400,000

 

404,000

CHG Medical Staffing, Inc.

 

 

 

(7.9%, Due 12/2012)

 

 

 

 

 

 

 

Senior Term Debt (5) (6)
(7.8%, Due 12/2012)

 

1,596,000

 

1,605,975

 

 

 

Senior Subordinated Term Debt (5) (6)
(11.3%, Due 12/2012)

 

500,000

 

503,125

 

3



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2007
(UNAUDITED)

Company(1)

 

Industry

 

Investment(2)

 

Cost

 

Fair Value

Chinese Yellow Pages Company

 

Service-publisher of Chinese

 

Line of Credit (7)(11)

 

$

150,071

 

$

150,071

 

language directories

 

(12.3%, Due 9/2010)

 

 

 

 

 

 

 

Senior Term Debt (7)

 

1,235,008

 

1,222,435

 

 

 

(12.3%, Due 9/2010)

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinton Holdings, LLC

 

Distribution-aluminum sheets

 

Senior Subordinated Term Debt (5)

 

15,500,000

 

15,519,375

Clinton Aluminum Acquisition,

 

and stainless steel

 

(12.6%, Due 1/2013)

 

 

 

 

LLC

 

 

 

Common Stock Warrants

 

109,124

 

125,864

Metal Transportation, LLC

 

 

 

 

 

 

 

 

Clinton Distribution Center, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMI Acquisition, LLC
(d/b/a Triangle Metal Industries)

 

Service-recycling

 

Senior Subordinated Term Debt (7)
(12.3%, Due 11/2012)

 

6,500,000

 

6,500,000

TMC Acquisition, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Community Media Corporation

 

Service-publisher of free weekly newspapers

 

Senior Term Debt (7)
(10.8%, Due 7/2007)

 

2,572,497

 

2,547,350

 

 

 

 

 

 

 

 

Country Road

 

Service-telecommunications

 

Senior Subordinated Term Debt (5) (6)

 

5,965,833

 

6,030,000

Communications LLC

 

 

 

(13.2%, Due 7/2013)

 

 

 

 

Country Road Management, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defiance Acquisition Corporation

 

Manufacturing-trucking parts

 

Senior Term Debt (3) (5)
(13.3%, Due 4/2010)

 

6,325,000

 

6,317,094

 

 

 

 

 

 

 

 

Doe & Ingalls Management LLC

 

Distributor-specialty chemicals

 

Senior Term Debt (5)
(8.8%, Due 11/2010)

 

4,100,000

 

4,110,250

Doe & Ingalls of North Carolina Operating LLC

 

 

 

Senior Term Debt (3) (5)
(9.8%, Due 11/2010)

 

4,466,250

 

4,471,833

Doe & Ingalls of Florida Operating LLC

 

 

 

 

 

 

 

 

Doe & Ingalls of Virginia Operating LLC

 

 

 

 

 

 

 

 

Doe & Ingalls of Maryland Operating LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emdeon Business Services, Inc.

 

Service-healthcare technology solutions

 

Senior Term Debt (6)
(7.6%, Due 11/2013)

 

2,440,341

 

2,450,020

 

 

 

 

Senior Subordinated Term Debt (6)
(10.4%, Due 5/2014)

 

2,013,460

 

2,020,000

 

 

 

 

 

 

 

 

Express Courier International, Inc.

 

Service-ground delivery and logistics

 

Line of Credit (12)
(9.6%, Due 6/2009)

 

—

 

—

 

 

 

Senior Term Debt (5)
(9.6%, Due 6/2011)

 

4,347,500

 

4,347,500

 

 

 

Senior Term Debt (3) (5)
(11.8%, Due 6/2011)

 

3,950,000

 

3,950,000

 

4



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2007
(UNAUDITED)

Company(1)

 

Industry

 

Investment(2)

 

Cost

 

Fair Value

Finn Corporation

 

Manufacturing-landscape equipment

 

Common Stock Warrants

 

$

37,000

 

$

2,972,858

 

 

 

 

 

 

 

 

 

Florida Cable, Inc.

 

Service-cable and internet

 

Senior Term Debt (7)

 

5,906,391

 

5,849,810

Lakepointe Limited Partnership

 

system operator

 

(11.8%, Due 7/2010)

 

 

 

 

 

 

 

 

 

 

 

 

FR X Ohmstede Holdings, LLC

 

Service & Manufacturing-heat

 

Senior Term Debt (6)

 

2,739,130

 

2,756,250

FR X Ohmstede Acquisitions Co.

 

exchangers

 

(7.9%, Due 8/2013)

 

 

 

 

 

 

 

Senior Subordinated Term Debt (6)
(12.4%, Due 8/2014)

 

3,011,190

 

3,015,000

 

 

 

 

 

 

 

 

 

Global Materials Technologies, Inc.

 

Manufacturing-steel wool products and metal fibers

 

Senior Term Debt (3) (5)
(14.3%, Due 11/2009)

 

5,150,000

 

4,944,000

 

 

 

 

 

 

 

 

GTM Holdings, Inc.

 

Manufacturing-socks

 

Senior Term Debt (6)

 

497,500

 

499,988

Gold Toe Investment Corp.

 

 

 

(8.1%, Due 10/2013)

 

 

 

 

 

 

 

Senior Subordinated Term Debt (6)
(11.4%, Due 4/2014)

 

500,000

 

505,000

 

 

 

 

 

 

 

 

 

Greatwide Logistics Services, Inc.

 

Service - logistics and transportation

 

Senior Term Debt (6)
(8.6%, Due 12/2013)

 

3,980,000

 

3,880,500

 

 

 

 

Senior Subordinated Term Debt (6)
(11.9%, Due 6/2014)

 

4,000,000

 

3,840,000

 

 

 

 

 

 

 

 

Harrington Holdings, Inc.

 

Service - healthcare products

 

Senior Term Debt (6)

 

2,493,750

 

2,506,219

Harrington Acquisition Corp.

 

distribution

 

(7.8%, Due 1/2014)

 

 

 

 

 

 

 

Senior Subordinated Term Debt (6)
(11.4%, Due 1/2014)

 

5,000,000

 

5,025,000

 

 

 

 

 

 

 

 

 

Heartland Communications Group, LLC

 

Service-radio station operator

 

Line of Credit (7)(13)
(11.8%, Due 5/2008)

 

9,856

 

9,856

Heartland Comm. License, LLC

 

 

 

Senior Term Debt (7)

 

4,873,531

 

4,823,237

Heartland Comm. Houghton

 

 

 

(11.8%, Due 5/2011)

 

 

 

 

License, LLC

 

 

 

 

 

 

 

 

Tu-Mar Broadcasting, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Junior Golf

 

Service-golf training

 

Line of Credit (5) (14)
(9.6%, Due 5/2010)

 

500,000

 

499,375

 

 

 

Senior Term Debt (5)
(9.6%, Due 5/2012)

 

2,650,000

 

2,646,688

 

 

 

Senior Term Debt (3) (5)
(11.8%, Due 5/2012)

 

2,500,000

 

2,493,750

 

 

 

 

 

 

 

 

 

It’s Just Lunch International, LLC

 

Service-dating service

 

Line of Credit (5) (15)
(9.3%, Due 6/2009)

 

550,000

 

514,250

 

 

 

 

Senior Term Debt (5)
(9.6%, Due 6/2011)

 

3,300,000

 

3,085,500

 

 

 

 

Senior Term Debt (3) (5) (15)
(11.8%, Due 6/2011)

 

500,000

 

467,500

 

5



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2007
(UNAUDITED)

Company(1)

 

Industry

 

Investment(2)

 

Cost

 

Fair Value

John Henry Holdings, Inc. Multi Packaging Solutions, Inc.

 

Manufacturing-packaging products

 

Senior Subordinated Term Debt (6)
(12.3%, Due 6/2011)

 

$

8,000,000

 

$

8,000,000

 

 

 

 

 

 

 

 

 

Kinetek Acquisition Corp.

 

Manufacturing-custom engineered motors & controls

 

Senior Term Debt (6)
(7.8%, Due 11/2013)

 

1,498,218

 

1,492,500

 

 

 

 

Senior Subordinated Term Debt (6)
(10.8%, Due 5/2014)

 

1,509,209

 

1,507,500

 

 

 

 

 

 

 

 

KMBQ Corporation

 

Service-AM/FM radio broadcaster

 

Line of Credit (7) (16)
(13.3%, Due 3/2010)

 

150,000

 

150,000

 

 

 

Senior Term Debt (7)
(13.3%, Due 3/2010)

 

1,825,404

 

1,806,543

 

 

 

 

 

 

 

 

 

LocalTel, Inc.

 

Service-yellow pages publishing

 

Line of Credit (5) (17)
(9.8%, Due 6/2009)

 

1,275,000

 

1,096,500

 

 

 

 

Senior Term Debt (5)
(9.8%, Due 6/2011)

 

2,687,500

 

2,311,250

 

 

 

 

Senior Term Debt (3) (5)
(12.3%, Due 6/2011)

 

2,750,000

 

2,282,500

 

 

 

 

 

 

 

 

Macfadden Performing Arts Media, LLC

 

Service-magazine publisher

 

Line of Credit (7)
(11.3%, Due 6/2009)

 

515,979

 

515,979

 

 

 

Senior Term Debt (7)
(11.3%, Due 6/2009)

 

6,775,441

 

6,700,000

 

 

 

 

 

 

 

 

 

MCA Communications, LLC

 

Service-internet-based data

 

Line of Credit (7)

 

798,349

 

792,063

MCA Internet, LLC

 

publisher

 

(non-accrual, Due 9/2006)

 

 

 

 

 

 

 

 

 

 

 

 

Meteor Holding Corporation

 

Manufacturing-bar code scanning

 

Senior Term Debt (6)

 

2,354,100

 

2,364,281

Metrologic Instruments, Inc.

 

and data capture

 

(8.3%, Due 12/2013)

 

 

 

 

 

 

 

Senior Subordinated Term Debt (6)

 

1,500,000

 

1,509,375

 

 

 

(11.6%, Due 12/2013)

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-Ag Media LLC

 

Service-dairy magazine publisher/

 

Senior Term Debt (7)

 

2,643,911

 

2,618,764

HFW Communications, Inc.

 

information database

 

(12.3%, Due 12/2009)

 

 

 

 

Dairy Radio, LLC

 

 

 

 

 

 

 

 

DPW Publishing, Inc.

 

 

 

 

 

 

 

 

Phoenix Data Processing, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Newhall Holdings, Inc. (d/b/a Newhall Laboratories)

 

Service-distributor of personal care products and supplements

 

Line of Credit (7) (20)
(8.8%, Due 5/2010)

 

—

 

—

Golden Sun, Inc.

 

 

 

Senior Term Debt (3) (7)
(9.1%, Due 5/2012)

 

4,500,000

 

4,500,000

 

 

 

Senior Term Debt (3) (7)
(11.3%, Due 5/2012)

 

4,500,000

 

4,500,000

 

6



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2007
(UNAUDITED)

Company(1)

 

Industry

 

Investment(2)

 

Cost

 

Fair Value

Northern Contours

 

Manufacturing-veneer and

 

Senior Subordinated Term Debt (5)

 

$

7,000,000

 

$

7,008,750

Northern Contours of Kentucky, Inc.

 

laminate components

 

(12.3%, Due 5/2010)

 

 

 

 

Norcon Holding LLC

 

 

 

 

 

 

 

 

Norcon Lewis LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pinnacle Treatment Centers, Inc.

 

Service-Addiction treatment centers

 

Line of Credit (21)
(9.6%, Due 12/2009)

 

—

 

—

 

 

 

 

Senior Term Debt (5)
(9.6%, Due 12/2011)

 

2,500,000

 

2,496,875

 

 

 

 

Senior Term Debt (3)(5)
(12.3%, Due 12/2011)

 

4,500,000

 

4,494,375

 

 

 

 

 

 

 

 

Precision Acquisition Group

 

Manufacturing-consumable

 

Equipment Note (5) (22)

 

591,228

 

591,228

Holdings, Inc.

 

components for the aluminum

 

(9.8%, Due 10/2011)

 

 

 

 

Precision Asset Acquisition

 

industry

 

Senior Term Debt (5)

 

5,000,000

 

5,012,500

Company, LLC

 

 

 

(9.8%, Due 10/2010)

 

 

 

 

 

 

 

Senior Term Debt (3)(5)
(11.8%, Due 10/2010)

 

4,200,000

 

4,210,500

 

 

 

 

 

 

 

 

 

PROFITSystems Acquisition Co.

 

Service-design and develop

 

Line of Credit (23)

 

—

 

—

PROFITSystems, Inc.

 

ERP software

 

(9.6%, Due 7/2009)

 

 

 

 

 

 

 

 

Senior Term Debt (5)
(9.6%, Due 7/2011)

 

2,875,000

 

2,878,594

 

 

 

 

Senior Term Debt (3)(5)
(11.8%, Due 7/201)

 

2,900,000

 

2,903,625

 

 

 

 

 

 

 

 

Puerto Rico Cable Acquisition Company, Inc.

 

Service-telecommunications

 

Senior Subordinated Term Debt (5)(6)
(11.6%, Due 1/2012)

 

7,802,222

 

7,755,841

 

 

 

 

 

 

 

 

 

Reading Broadcasting, Inc.

 

Service-television station operator

 

Senior Term Debt (7)
(12.8%, Due 12/2011)

 

7,087,084

 

7,017,930

 

 

 

 

 

 

 

 

RCS Management Holding Co.

 

Service-healthcare supplies

 

Senior Term Debt (3) (5)
(9.8%, Due 1/2011)

 

3,000,000

 

2,910,000

 

 

 

Senior Term Debt (4) (5)
(12.3%, Due 1/2011)

 

3,000,000

 

2,895,000

 

 

 

 

 

 

 

 

 

RedPrairie Holding, Inc.

 

Service-design and develop

 

Senior Term Debt (6)

 

4,457,500

 

4,457,500

RedPrairie Corporation

 

supply chain software

 

(8.4%, Due 7/2012)

 

 

 

 

Blue Cube Software, Inc.

 

 

 

Senior Subordinated Term Debt (6)
(11.9%, Due 1/2013)

 

3,000,000

 

3,000,000

 

 

 

 

 

 

 

 

RiskMetrics Group Holdings, LLC

 

Service - develop risk and wealth management solutions

 

Senior Term Debt (6)
(7.6%, Due 1/2014)

 

1,995,000

 

1,999,988

 

 

 

Senior Subordinated Term Debt (6)
(10.9%, Due 7/2014)

 

500,000

 

505,000

 

 

 

 

 

 

 

 

 

SCI Cable, Inc.

 

Service-cable, internet, voice provider

 

Senior Term Debt (7) (14.3%, Due 10/2008)

 

2,485,032

 

2,459,885

 

7



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
AS OF JUNE 30, 2007
(UNAUDITED)

Company(1)

 

Industry

 

Investment(2)

 

Cost

 

Fair Value

SCS Acquisition Corp. (d/b/a Specialty Coatings Systems)

 

Service-chemically treated equipment distribution

 

Senior Term Debt (5) (17)
(9.3%, Due 12/2011)

 

$

5,442,311

 

$

5,442,311

 

 

 

Senior Term Debt (3) (5) (17)
(11.3%, Due 12/2011)

 

6,531,250

 

6,531,250

 

 

 

 

 

 

 

 

 

Sunburst Media - Louisiana, LLC

 

Service-radio station operator

 

Senior Term Debt (7)
(12.0%, Due 6/2011)

 

7,875,441

 

7,800,000

 

 

 

 

 

 

 

 

Sunshine Media Holdings

 

Service-publisher regional B2B trade magazines

 

Credit Facility (5) (24)
(9.3%, Due 5/2010)

 

600,000

 

598,500

 

 

 

Senior Term Debt (5)
(9.3%, Due 5/2012)

 

17,000,000

 

16,978,750

 

 

 

Senior Term Debt (3) (5)
(11.8%, Due 5/2012)

 

10,000,000

 

9,975,000

 

 

 

 

 

 

 

 

 

Thibaut Acquisition Co.

 

Service-design and disbribute wall covering

 

Credit Facility (5) (25)
(9.8%, Due 1/2011)

 

500,000

 

499,375

 

 

 

 

Senior Term Debt (5)
(9.8%, Due 1/2011)

 

2,887,500

 

2,887,500

 

 

 

 

Senior Term Debt (3) (5)
(12.3%, Due 1/2011)

 

3,000,000

 

3,000,000

 

 

 

 

 

 

 

 

U.S. HealthCare Communications, LLC

 

Service-magazine publisher/operator

 

Senior Term Debt (7)
(11.3%, Due 4/2011)

 

2,244,182

 

2,219,035

 

 

 

 

 

 

 

 

 

Viapack, Inc.

 

Manufacturing-polyethylene

 

Senior Real Estate Term Debt

 

975,000

 

975,000

P&O Packaging Acquisition LLC

 

film

 

(9.8%, Due 3/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (5) (19)
(11.3%, Due 3/2011)

 

4,223,438

 

4,202,320

 

 

 

 

 

 

 

 

Visual Edge Technology, Inc.

 

Service-office equipment

 

Senior Subordinated Term Debt (5)

 

5,000,000

 

3,625,000

Graphic Enterprises, Inc.

 

distribution

 

(13.3%, Due 8/2011)

 

 

 

 

Copeco, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wesco Holdings, Inc.

 

Service-aerospace parts and

 

Senior Term Debt (6)

 

2,478,317

 

2,466,436

Wesco Aircraft Hardware Corp.

 

distribution

 

(7.6%, Due 9/2013)

 

 

 

 

 

 

 

 

Senior Subordinated Term Debt (6)
(11.1%, Due 3/2014)

 

2,271,494

 

2,289,375

 

 

 

 

 

 

 

 

West Coast Yellow Pages, Inc.

 

Service-directory publisher

 

Senior Term Debt (7)
(13.8%, Due 8/2010)

 

1,624,251

 

1,605,390

 

 

 

 

 

 

 

 

 

Westlake Hardware, Inc.

 

Retail-hardware and variety

 

Senior Subordinated Term Debt (5)

 

15,000,000

 

14,925,000

WHI Holding Corp.

 

 

 

(12.6%, Due 1/2011)

 

 

 

 

 

 

 

 

 

 

 

 

Winchester Electronics

 

Manufacturing-high bandwidth connectors and cables

 

Senior Term Debt (5)
(9.1%, Due 6/2012)

 

2,000,000

 

2,002,500

 

 

 

Senior Subordinated Term Debt (5)
(12.3%, Due 6/2012)

 

10,000,000

 

10,012,500

 

 

 

 

 

 

 

 

 

WP Evenflo Group Holdings Inc.

 

Manufacturing-infant and

 

Senior Term Debt (6)

 

1,990,000

 

1,999,950

WP Evenflo Acquisition, Inc.

 

juvenile products

 

(7.8%, Due 2/2013)

 

 

 

 

 

 

 

 

Senior Subordinated Term Debt (6)
(11.3%, Due 2/2014)

 

2,000,000

 

2,000,000

Total:

 

 

 

 

 

$

369,975,398

 

$

368,949,247

8



(1)             We do not “Control,” and are not an “Affiliate” of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, we would “Control” a portfolio company if we owned 25% or more of its voting securities and would be an “Affiliate” of a portfolio company if we owned 5% or more of its voting securities.

(2)             Percentage represents interest rates in effect at June 30, 2007 and due date represents the contractual maturity date.

(3)             Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt.

(4)             Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt, however the debt is junior to another Last Out Tranche.

(5)             Fair value was based on opinions of value submitted by Standard & Poor’s Securities Evaluations, Inc.

(6)             Marketable securities, such as syndicated loans, are valued based on the indicative bid price, as of June 29, 2007, from the respective originating syndication agent’s trading desk.

(7)             Investment valued at cost due to recent acquisition.

(8)             Availability under the Access TV credit facility totals $500,000. There were no borrowings outstanding as of June 30, 2007.

(9)             Availability under the ActivStyle credit facility totals $1,500,000.  Borrowings of $450,000 were outstanding at June 30, 2007.

(10)       Availability under the Anitox credit facility totals $3,000,000.  There were no borrowings outstanding at June 30, 2007.

(11)       Availability under the Chinese Yellow Pages credit facility totals $950,000.  Borrowings of $150,071 were outstanding at June 30, 2007.

(12)       Availability under the Express Courier credit facility totals $1,500,000.  There were no borrowings outstanding at June 30, 2007.

(13)       Availability under the Heartland credit facility totals $500,000.  Borrowings of $9,856 were outstanding at June 30, 2007.

(14)       Availability under the International Junior Golf credit facility totals $1,000,000.  Borrowings of $500,000 were outstanding at June 30, 2007.

(15)       Remaining availability under the It’s Just Lunch revolving credit facility totals $200,000, borrowings of $550,000 were outstanding at June 30, 2007.  The company may borrow an additional $1,750,000 of the senior term debt facility, subject to certain conditions including Gladstone Capital’s approval, borrowings of $500,000 were outstanding at June 30, 2007.

(16)       Availability under the KMBQ credit facility totals $200,000.  Borrowings of $150,000 were outstanding at June 30, 2007.

(17)       Availability under the LocalTel credit facility totals $3,000,000.  Borrowings of $1,275,000 were outstanding at June 30, 2007.

(18)       Availability under the MacFadden credit facility totals $1,400,000.  Borrowings of $515,979 were outstanding at June 30, 2007.

(19)       The MCA credit facility was matured as of June 30, 2007.  The investment is currently not income producing.

(20)       Availability under the Newhall credit facility totals $4,000,000.  There were no borrowings outstanding as of June 30, 2007.

(21)       Availability under the Pinnacle credit facility totals $500,000.  There were no borrowings outstanding at June 30, 2007.

(22)       Precision may borrow up to $1,000,000 for purposes of acquiring equipment. Borrowings of $591,228 were outstanding at June 30, 2007.

(23)       Availability under the ProfitSystems credit facility totals $1,250,000.  There were no borrowings outstanding at June 30, 2007.

(24)       Availability under the Sunshine credit facility totals $3,000,000.  Borrowings of $600,000 were outstanding at June 30, 2007.

(25)       Availability under the Thibaut credit facility totals $500,000.  Borrowings of $500,000 were outstanding at June 30, 2007.

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

9



GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF SEPTEMBER 30, 2007

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

ActivStyle Acquisition Co.

 

Service-medical

 

Line of Credit (16)

 

$

—

 

$

—

 

ActivStyle, Inc.

 

products distribution

 

(9.6%, Due 7/2009)

 

 

 

 

 

 

 

 

Senior Term Debt (5)

 

3,200,000

 

3,200,000

 

 

 

 

(9.6%, Due 7/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (5)

 

2,500,000

 

2,500,000

 

 

 

 

(11.8%, Due 7/2011)

 

 

 

 

 

Advanced Homecare Management, Inc.

 

Service-home health

 

Senior Subordinated Term

 

 

 

 

 

 

 

nursing

 

Debt(5)(6)

 

5,000,000

 

5,000,000

 

 

 

services

 

(11.33%, Due 12/2013)

 

 

 

 

 

Allied Extruders, LLC
P&O Packaging Acquisition LLC

 

Manufacturing-polyethylene

 

Senior Real Estate Term Debt
(9.8%, Due 3/2011)

 

1,000,000

 

1,000,000

 

 

film

 

Senior Term Debt (3) (5)

 

8,000,000

 

8,030,000

 

 

 

 

(11.3%, Due 3/2011)

 

 

 

 

 

Badanco Acquisition Corp.

 

Manufacturing-luggage

 

Senior Term Debt (5)

 

5,145,019

 

5,157,881

 

 

 

 

 

(10.8%, Due 2/2010)

 

 

 

 

 

 

 

 

 

Senior Term Debt (3)(5)

 

8,585,125

 

8,628,051

 

 

 

 

 

(13.8%, Due 2/2010)

 

 

 

 

 

Benetech, Inc.

 

Service & Manufacturing-

 

Senior Term Debt (5)

 

2,112,500

 

2,144,187

 

 

dust management systems for the coal and electric

 

(10.3%, Due 5/2009)
Senior Term Debt (3) (5)

 

 

3,046,875

 

 

3,107,813

 

 

utility industries

 

(13.3%, Due 5/2009)

 

 

 

 

 

Bresnan Communications, LLC

 

Service-telecommunications

 

Senior Term Debt (6)
(7.2%, Due 9/2013)

 

1,002,115

 

997,500

 

 

 

 

 

Senior Subordinated Term Debt

 

1,511,554

 

1,533,750

 

 

 

 

 

(9.9%, Due 3/2014)

 

 

 

 

 

Consolidated Bedding, Inc.

 

Manufacturing-mattresses

 

Senior Subordinated Term
Debt (5)

 

2,438,359

 

2,306,991

 

 

 

 

(14.4%, Due 3/2009)

 

 

 

 

 

Country Road
Communications LLC

 

Service-telecommunications

 

Senior Subordinated Term
Debt (5) (6)

 

5,961,594

 

6,015,000

 

Country Road Management, Inc.

 

 

 

(13.3%, Due 7/2013)

 

 

 

 

 

Defiance Stamping Company

 

Manufacturing-trucking parts

 

Senior Term Debt (3) (5)
(13.3%, Due 4/2010)

 

6,325,000

 

6,332,906

 

Doe & Ingalls ManagementLLC
Doe & Ingalls of North

 

Distributor-specialty chemicals

 

Senior Term Debt (5)
(9.8%, Due 11/2010)

 

4,700,000

 

4,723,500

 

Carolina Operating LLC

 

 

 

Senior Term Debt (3) (5)

 

4,500,000

 

4,516,875

 

Doe & Ingalls of Florida

 

 

 

(13.3%, Due 11/2010)

 

 

 

 

 

Operating LLC

 

 

 

 

 

 

 

 

 

Doe & Ingalls of Virginia

 

 

 

 

 

 

 

 

 

Operating LLC

 

 

 

 

 

 

 

 

 

Express Courier International, Inc.

 

Service-ground delivery and logistics

 

Line of Credit (7)
(9.6%, Due 6/2009)

 

—

 

—

 

 

 

 

Senior Term Debt (5)

 

4,700,000

 

4,700,000

 

 

 

 

(9.6%, Due 6/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (5)

 

3,950,000

 

3,950,000

 

 

 

 

(11.8%, Due 6/2011)

 

 

 

 

 

Finn Corporation

 

Manufacturing-landscape

 

Common Stock Warrants

 

37,000

 

709,431

 

 

 

equipment

 

 

 

 

 

 

 

 

10



GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

AS OF SEPTEMBER 30, 2007

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

FR X Ohmstede Holdings, LLC

 

Service &

 

Senior Term Debt (6)

 

3,000,000

 

3,026,250

 

FR X Ohmstede Acquisitions Co.

 

Manufacuring-heat

 

(8.5%, Due 8/2013)

 

 

 

 

 

 

exchangers

 

Senior Subordinated Term
Debt (6)

 

3,012,369

 

3,030,000

 

 

 

 

(12.5%, Due 8/2014)

 

 

 

 

 

Global Materials

 

Manufacturing-steel wool

 

Senior Term Debt (3) (5)

 

5,300,000

 

5,233,750

 

Technologies, Inc.

 

products and metal fibers

 

(14.3%, Due 11/2009)

 

 

 

 

 

It’s Just Lunch International,

 

Service-dating service

 

Line of Credit (12) (5)

 

200,000

 

199,500

 

LLC

 

 

 

(9.2%, Due 6/2009)

 

 

 

 

 

 

 

 

Senior Term Debt (13) (5)

 

3,300,000

 

3,291,750

 

 

 

 

(9.6%, Due 6/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (14)

 

—

 

—

 

 

 

 

(11.8%, Due 6/2011)

 

 

 

 

 

John Henry Holdings, Inc.
Multi Packaging Solutions, Inc.

 

Manufacturing-packaging products

 

Senior Subordinated Term Debt (6)
(12.5%, Due 6/2011)

 

8,000,000

 

8,000,000

 

LocalTel, Inc.

 

Service-yellow pages

 

Line of Credit (5) (15)

 

350,000

 

343,000

 

 

publishing

 

(9.8%, Due 6/2009)

 

 

 

 

 

 

 

 

Senior Term Debt (5)

 

2,687,500

 

2,633,750

 

 

 

 

(9.8%, Due 6/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (5)

 

2,750,000

 

2,695,000

 

 

 

 

(12.3%, Due 6/2011)

 

 

 

 

 

Mistras Holdings Corp.

 

Service & Manufacturing

 

Senior Term Debt (3) (5)

 

9,499,999

 

9,737,499

 

 

 

nondestructive testing

 

(11.5%, Due 8/2008)

 

 

 

 

 

 

 

instruments, systems

 

Senior Term Debt (4) (5) (18)

 

5,250,001

 

5,620,124

 

 

 

and services

 

(12.5%, Due 8/2008)

 

 

 

 

 

Network Solutions LLC

 

Service-internet domain registry and host

 

Senior Term Debt (6)
(10.4%, Due 1/2012)

 

4,464,358

 

4,499,747

 

Northern Contours
Northern Contours

 

Manufacturing-veneer and
laminate components

 

Senior Subordinated Term Debt (5)
(12.3%, Due 5/2010)

 

7,000,000

 

7,017,500

 

of Kentucky, Inc.

 

 

 

 

 

 

 

 

 

Norcon Holding LLC

 

 

 

 

 

 

 

 

 

Norcon Lewis LLC

 

 

 

 

 

 

 

 

 

PROFITSystems Acquisition Co.
PROFITSystems, Inc.

 

Service-design and develop ERP

 

Line of Credit (17)
(9.6%, Due 7/2009)

 

—

 

—

 

 

software

 

Senior Term Debt (5)

 

3,100,000

 

3,100,000

 

 

 

 

(9.6%, Due 7/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (5)

 

2,900,000

 

2,900,000

 

 

 

 

(11.8%, Due 7/201) (3)

 

 

 

 

 

Puerto Rico Cable
Acquisition Company, Inc.

 

Service-telecommunications

 

Senior Subordinated Term Debt (5)(6)
(11.6%, Due 1/2012)

 

7,813,274

 

7,775,183

 

QCE, LLC (d/b/a Quiznos Corp.)

 

Service-restaurant franchisor

 

Senior Term Debt (6)
(7.6%, Due 5/2013)

 

3,010,713

 

2,977,538

 

 

 

 

Senior Term Debt (3) (6)

 

3,045,560

 

3,033,750

 

 

 

 

(11.1%, Due 11/2013)

 

 

 

 

 

 

11



GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

AS OF SEPTEMBER 30, 2007

Company (1)

 

Industry

 

Investment (2)

 

Cost

 

Fair Value

 

RCS Management Holding Co.

 

Service-healthcare

 

Senior Term Debt (3) (5)

 

3,000,000

 

3,003,750

 

 

supplies

 

(9.8%, Due 1/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (4) (5)

 

3,000,000

 

3,003,750

 

 

 

 

(12.3%, Due 1/2011)

 

 

 

 

 

RedPrairie Holding, Inc.
RedPrairie Corporation

 

Service-design and develop supply chain

 

Senior Term Debt (6)
(8.4%, Due 7/2012)

 

3,990,000

 

3,990,000

 

Blue Cube Software, Inc.

 

software

 

Senior Subordinated Term Debt (6)
(11.9%, Due 1/2013)

 

2,000,000

 

2,005,000

 

SCPH Holdings, Inc.
Sea Con Phoenix, Inc.

 

Manufacturing-underwater

 

Credit Facility (8)
(9.8%, Due 2/2007)

 

—

 

—

 

Phoenix Optix, Inc.

 

and harsh environment

 

Senior Term Debt (5)

 

2,625,000

 

2,631,563

 

 

components

 

(10.3%, Due 2/2010)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (5)

 

2,887,500

 

2,898,328

 

 

 

 

(13.3%, Due 2/2010)

 

 

 

 

 

SCS Acquisition Corp.

 

Service-chemically treated equipment

 

Senior Term Debt (3) (5) (9)
(9.3%, Due 12/2011)

 

6,250,000

 

6,257,812

 

 

 

distribution

 

Senior Term Debt (3) (5) (10)

 

6,568,750

 

6,576,961

 

 

 

 

 

(11.3%, Due 12/2011)

 

 

 

 

 

Thibaut Acquisition Co.

 

Design and

 

Credit Facility (11)

 

—

 

—

 

 

Disbtribution-wall

 

(9.8%, Due 1/2011)

 

 

 

 

 

 

coverings

 

Senior Term Debt (5)

 

3,325,000

 

3,325,000

 

 

 

 

(9.8%, Due 1/2011)

 

 

 

 

 

 

 

 

Senior Term Debt (3) (5)

 

3,000,000

 

3,000,000

 

 

 

 

(12.3%, Due 1/2011)

 

 

 

 

 

Visual Edge Technology, Inc.
Graphic Enterprises, Inc.

 

Service-office equipment distribution

 

Senior Subordinated Term Debt (5)
(13.3%, Due 8/2011)

 

5,000,000

 

4,987,500

 

Copeco, Inc.

 

 

 

 

 

 

 

 

 

Westlake Hardware, Inc.
WHI Holding Corp.

 

Retail-hardware and variety

 

Senior Subordinated Term Debt (5)
(12.6%, Due 1/2011)

 

15,000,000

 

14,981,250

 

Winchester Electronics

 

Manufacturing-high

 

Senior Term Debt (3) (5)

 

6,000,000

 

6,007,500

 

 

 

bandwidth connectors

 

(12.3%, Due 6/2012)

 

 

 

 

 

 

 

and cables

 

 

 

 

 

 

 

Xspedius Communications
LLC

 

Service-telecommunications

 

Senior Subordinated Term Debt (5)
(15.8%, Due 3/2010)

 

5,157,821

 

5,306,110

 

Total:

 

 

 

 

 

$

216,202,986

 

$

217,642,750

 

(1)             We do not “Control,” and are not an “Affiliate” of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, we would “Control” a portfolio company if we owned 25% or more of its voting securities and would be an “Affiliate” of a portfolio company if we owned 5% or more of its voting securities.

(2)             Percentage represents interest rates in effect at September 30, 2006 and due date represents the contractual maturity date.

(3)             Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt.

(4)             Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt, however the debt is junior to another Last Out Tranche.

(5)             Fair value was based on opinions of value submitted by Standard & Poor’s Securities Evaluations, Inc.

(6)             Marketable securities, such as syndicated loans, are valued based on the indicative bid price, as of September 30, 2006 from the respective originating syndication agent’s trading desk.

(7)             Availability under the credit facility totals $1,500,000.  There were no borrowings outstanding at September 30, 2006.

(8)             Availability under the credit facility totals $500,000.  There were no borrowings outstanding at September 30, 2006.

(9)             Availability under the debt facility totals $7,500,000. The outstanding balance of the debt facility was $6,250,000 at September 30, 2006.

(10)       Availability under the debt facility totals $7,500,000. The outstanding balance of the debt facility was $6,568,750 at September 30, 2006.

(11)       Availability under the credit facility totals $1,000,000.  There were no borrowings outstanding at September 30, 2006.

(12)       Availability under the credit facility totals $750,000.  Borrowings of $200,000 were outstanding at September 30, 2006.

12



(13)       The company may borrow an additional $500,000 under the senior term debt facility, subject to certain conditions including Gladstone Capital’s approval.

(14)       The company may borrow an additional $2,250,000 under the senior term debt facility, subject to certain conditions including Gladstone Capital’s approval.

(15)       Availability under the credit facility totals $3,000,000.  Borrowings of $350,000 were outstanding at September 30, 2006.

(16)       Availability under the credit facility totals $1,500,000.  There were no borrowings outstanding at September 30, 2006

(17)       Availability under the credit facility totals $1,250,000.  There were no borrowings outstanding at September 30, 2006

(18)       Includes a success fee with a fair value of $742,000 and no cost basis.

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

 

13



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 

 

Three Months Ended June 30,

 

 

 

2007

 

2006

 

INVESTMENT INCOME

 

 

 

 

 

Interest income — investments

 

$

8,911,643

 

$

5,775,522

 

Interest income — cash and cash equivalents

 

109,269

 

8,178

 

Interest income — notes receivable from employees

 

132,795

 

108,877

 

Prepayment fees and other income

 

47,572

 

630,239

 

Total investment income

 

9,201,279

 

6,522,816

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

Interest expense

 

1,762,249

 

702,449

 

Loan servicing (Refer to Notes 4 and 5)

 

897,634

 

693,965

 

Base management fee (Refer to Note 4)

 

727,259

 

334,814

 

Incentive fee (Refer to Note 4)

 

1,166,529

 

—

 

Administration fee (Refer to Note 4)

 

186,895

 

—

 

Professional fees

 

148,609

 

166,405

 

Amortization of deferred financing fees

 

72,133

 

36,036

 

Stockholder related costs

 

39,434

 

28,371

 

Directors fees

 

56,250

 

27,500

 

Insurance expense

 

66,246

 

50,589

 

Stock option compensation

 

—

 

202,296

 

Other expenses

 

82,062

 

35,083

 

Expenses before credit from Adviser

 

5,205,300

 

2,277,508

 

Credit to base management and incentive fees from Adviser (Refer to Note 4)

 

(1,708,888

)

(542,774

)

Total expenses net of credits to base management and incentive fees

 

3,496,412

 

1,734,734

 

NET INVESTMENT INCOME

 

5,704,867

 

4,788,082

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

 

 

 

 

 

Realized loss on sale of investments

 

(5,021

)

(100,850

)

Realized gain on settlement of derivative

 

8,405

 

1,367

 

Unrealized (depreciation) appreciation on derivative

 

(264

)

41,486

 

Net unrealized appreciation on investments

 

256,613

 

812,991

 

Net gain on investments

 

259,733

 

754,994

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

5,964,600

 

$

5,543,076

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE:

 

 

 

 

 

Basic

 

$

0.44

 

$

0.49

 

Diluted

 

$

0.44

 

$

0.48

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:

 

 

 

 

 

Basic

 

13,561,511

 

11,337,291

 

Diluted

 

13,561,511

 

11,570,425

 

 

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

14



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 

 

Nine Months Ended June 30,

 

 

 

2007

 

2006

 

INVESTMENT INCOME

 

 

 

 

 

Interest income — investments

 

$

25,064,702

 

$

18,497,893

 

Interest income — cash and cash equivalents

 

178,183

 

21,714

 

Interest income — notes receivable from employees

 

403,917

 

323,003

 

Prepayment fees and other income

 

431,973

 

711,225

 

Total investment income

 

26,078,775

 

19,553,835

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

Interest expense

 

4,693,525

 

2,302,693

 

Loan servicing (Refer to Notes 4 and 5)

 

2,377,409

 

2,144,024

 

Base management fee (Refer to Note 4)

 

1,806,075

 

955,894

 

Incentive fee (Refer to Note 4)

 

3,474,007

 

—

 

Administration fee (Refer to Note 4)

 

481,746

 

—

 

Professional fees

 

368,610

 

399,758

 

Amortization of deferred financing fees

 

198,633

 

94,572

 

Stockholder related costs

 

190,450

 

273,170

 

Directors fees

 

167,470

 

81,712

 

Insurance expense

 

191,338

 

151,956

 

Stock option compensation

 

—

 

279,618

 

Other expenses

 

219,522

 

151,663

 

Expenses before credit from Adviser

 

14,168,785

 

6,835,060

 

Credit to base management and incentive fees from Adviser (Refer to Note 4)

 

(4,682,160

)

(1,765,774

)

Total expenses net of credits to base management and incentive fees

 

9,486,625

 

5,069,286

 

 

 

 

 

 

 

NET INVESTMENT INCOME BEFORE INCOME TAXES

 

16,592,150

 

14,484,549

 

Income tax expense

 

—

 

50,237

 

NET INVESTMENT INCOME

 

16,592,150

 

14,434,312

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

 

 

 

 

 

Net realized gain (loss) on sale of investments

 

81,498

 

(903,945

)

Realized gain on settlement of derivative

 

31,198

 

1,367

 

Unrealized (depreciation) appreciation on derivative

 

(25,877

)

65,252

 

Net unrealized (depreciation) appreciation on investments

 

(2,465,915

)

5,769,820

 

Net (loss) gain on investments

 

(2,379,096

)

4,932,494

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

14,213,054

 

$

19,366,806

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE:

 

 

 

 

 

Basic

 

$

1.12

 

$

1.71

 

Diluted

 

$

1.12

 

$

1.68

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:

 

 

 

 

 

Basic

 

12,701,845

 

11,317,437

 

Diluted

 

12,701,845

 

11,549,054

 

 

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

15



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)

 

 

Nine Months Ended June 30,

 

 

 

2007

 

2006

 

Operations:

 

 

 

 

 

Net investment income

 

$

16,592,150

 

$

14,434,312

 

Net realized gain (loss) on sale of investments

 

81,498

 

(903,945

)

Realized gain on settlement of derivative

 

31,198

 

1,367

 

Unrealized (depreciation) appreciation on derivatives

 

(25,877

)

65,252

 

Net unrealized (depreciation) appreciation on investments

 

(2,465,915

)

5,769,820

 

Net increase in net assets from operations

 

14,213,054

 

19,366,806

 

 

 

 

 

 

 

Capital transactions:

 

 

 

 

 

Issuance of common stock under shelf offering

 

46,075,000

 

—

 

Distributions to stockholders

 

(16,012,661

)

(13,751,539

)

Shelf offering costs

 

(405,708

)

—

 

Repayment of principal on employee notes

 

300,941

 

129,943

 

Stock option compensation

 

—

 

279,618

 

Issuance of common stock under stock option plan

 

—

 

1,150,245

 

Stock surrendered in settlement of withholding tax

 

(1,488,193

)

—

 

Increase (decrease) in net assets from capital share transactions

 

28,469,379

 

(12,191,733

)

 

 

 

 

 

 

Total increase in net assets

 

42,682,433

 

7,175,073

 

Net assets at beginning of year

 

172,570,487

 

151,610,683

 

Net assets at end of period

 

$

215,252,920

 

$

158,785,756

 

 

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

16



GLADSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

 

Nine Months Ended June 30,

 

 

 

2007

 

2006

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

14,213,054

 

$

19,366,806

 

Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) provided by operating activities:

 

 

 

 

 

Purchase of investments

 

(253,727,829

)

(105,076,400

)

Principal repayments on investments

 

99,802,867

 

107,876,077

 

Net amortization of premiums and discounts

 

29,872

 

(144,501

)

Amortization of deferred financing fees

 

198,633

 

94,572

 

Stock compensation expense

 

—

 

279,618

 

Realized loss on investments

 

122,680

 

1,329,458

 

Unrealized depreciation (appreciation) on derivative

 

25,877

 

(65,252

)

Change in net unrealized depreciation (appreciation) on investments

 

2,465,915