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 DECEMBER 31, 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 February 5, 2008 was 20,637,574.

GLADSTONE CAPITAL CORPORATION

TABLE OF CONTENTS

PART I.		FINANCIAL INFORMATION

Item 1.		Financial Statements (Unaudited)

		Consolidated Statements of Assets and Liabilities as of December 31, 2007 and September 30, 2007
		Consolidated Schedules of Investments as of December 31, 2007 and September 30, 2007
		Consolidated Statements of Operations for the three months ended December 31, 2007 and 2006
		Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2007 and 2006
		Consolidated Statements of Cash Flows for the three months ended December 31, 2007 and 2006
		Financial Highlights for the three months ended December 31, 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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(Unaudited)

	December 31, 2007			September 30, 2007
ASSETS
Non-Control/Non-Affiliate investments (Cost 12/31/07: $423,933,339; 9/30/07: $354,835,652)	$	412,712,262		$	348,920,982
Control investments (Cost 12/31/07: $1,036,861; 9/30/07: $923,548)	945,428			923,548
Total investments at fair value (Cost 12/31/07: $424,970,200; 9/30/07 $355,759,200)	413,657,690			349,844,530
Cash and cash equivalents	5,530,949			8,838,658
U.S. Treasury bill	2,484,464			2,484,464
Interest receivable – investments in debt securities	2,272,634			2,425,555
Interest receivable – employees	—			21,417
Due from custodian	4,816,186			3,230,385
Deferred financing fees	132,292			186,270
Prepaid assets	405,643			337,106
Other assets	284,058			360,753
TOTAL ASSETS	$	429,583,916		$	367,729,138

LIABILITIES
Accounts payable	$	7,257		$	6,013
Interest payable	595,335			587,514
Administration fee due to Administrator (Refer to Note 4)	211,675			237,510
Fees due to Adviser (Refer to Note 4)	11,054			708,517
Borrowings under lines of credit	161,831,000			144,440,000
Accrued expenses and deferred liabilities	738,140			790,849
Funds held in escrow	157,268			—
TOTAL LIABILITIES	163,551,729			146,770,403
NET ASSETS	$	266,032,187		$	220,958,735

ANALYSIS OF NET ASSETS
Common stock, $0.001 par value, 50,000,000 shares authorized and 17,637,574 and 14,762,574 shares issued and outstanding, respectively	$	17,638		$	14,763
Capital in excess of par value	286,425,698			235,906,665
Notes receivable – employees	(9,224,176		)	(9,230,502		)
Net unrealized depreciation on investments	(11,312,511		)	(5,914,670		)
Unrealized depreciation on derivative	(302,239		)	(291,686		)
Accumulated undistributed net investment income	427,777			474,165
TOTAL NET ASSETS	$	266,032,187		$	220,958,735
NET ASSETS PER SHARE	$	15.08		$	14.97

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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 2007

(UNAUDITED)

Company	Industry	Investment (1)	Cost		Fair Value

NON-CONTROL/NON-AFFILIATE INVESTMENTS

Access Television Network, Inc. (2)	Service-cable airtime	Senior Term Debt (6)	$	2,487,458	$	2,401,437
	(infomercials)	(11.3% Due 3/2009)

ActivStyle Acquisition Co. (2)	Service-medical products	Line of Credit (6) (9)	600,000		594,750
	distribution	(9.5%, Due 7/2009)
		Senior Term Debt (6)	5,113,875		5,069,129
		(9.5%, Due 9/2012)
		Senior Term Debt (3) (6)	4,435,000		4,390,650
		(12.1%, Due 9/2012)

Allison Publications, LLC (2)	Service-publisher of consumer	Line of Credit (10)	—		—
	oriented magazines	(9.3%, Due 12/2010)
		Senior Term Debt (6)	11,080,085		10,917,500
		(9.3%, Due 12/2011)

Anitox Acquisition Company (2)	Manufacturing-preservatives for	Senior Real Estate Term Debt	3,107,161		3,060,000
	animal feed	(8.8%, Due 1/2012)
		Line of Credit (11)	—		—
		(9.5%, Due 1/2010)
		Senior Term Debt (6)	2,750,000		2,729,375
		(9.5%, Due 1/2012)
		Senior Term Debt (3) (6)	2,750,000		2,725,938
		(11.8%, Due 1/2012)

Badanco Acquisition Corp.	Service-luggage design and	Senior Subordinated Term Debt (6)	9,603,750		9,531,722
	distribution	(12.0%, Due 7/2012)

Bresnan Communications, LLC	Service-telecommunications	Senior Term Debt (7)	3,001,724		2,872,500
		(7.1%, Due 9/2013)
		Senior Subordinated Term Debt (7)	1,509,619		1,470,000
		(9.4%, Due 3/2014)

CCS, LLC	Service-cable tv franchise owner	Senior Term Debt (6)	3,426,892		3,341,220
		(11.3%, Due 3/2008)

CHG Companies, Inc. (2)	Service-healthcare staffing	Letter of Credit (6) (7)	400,000		380,000
		(7.2%, Due 12/2012)
		Senior Term Debt (6) (7)	1,588,000		1,508,600
		(7.7%, Due 12/2012)
		Senior Subordinated Term Debt (6) (7)	500,000		470,000
		(11.2%, Due 12/2012)

Chinese Yellow Pages Company	Service-publisher of Chinese	Line of Credit (6) (12)	430,071		425,770
	language directories	(11.3%, Due 9/2010)
		Senior Term Debt (6)	840,030		820,154
		(11.3%, Due 9/2010)

Company	Industry	Investment (1)	Cost		Fair Value

Clinton Holdings, LLC (2)	Distribution-aluminum sheets	Senior Subordinated Term Debt	$	15,500,000	$	15,779,000
	and stainless steel	(13)(12.5%, Due 1/2013)
		Common Stock Warrants (8)	109,124		—

CMI Acquisition, LLC (2)	Service-recycling	Senior Subordinated Term Debt (6)	6,500,000		6,386,250
		(11.9%, Due 11/2012)

Community Media Corporation	Service-publisher of free	Senior Term Debt (6)	2,985,889		2,931,519
	weekly newspapers	(9.3%, Due 8/2012)

Country Road Communications LLC	Service-telecommunications	Senior Subordinated Term Debt (7)	5,968,659		5,910,000
(2)		(12.6%, Due 7/2013)


Defiance Acquisition Corporation	Manufacturing-trucking parts	Senior Term Debt (3) (6)	6,325,000		6,008,750
		(13.2%, Due 4/2010)

Doe & Ingalls Management LLC (2)	Distributor-specialty chemicals	Senior Term Debt (6)	3,700,000		3,690,750
		(8.7%, Due 11/2010)
		Senior Term Debt (3) (6)	4,443,750		4,421,531
		(9.7%, Due 11/2010)

Emdeon Business Services, Inc.	Service-healthcare technology	Senior Term Debt (6) (7)	2,377,974		2,256,879
	solutions	(6.8%, Due 11/2013)
		Senior Subordinated Term Debt (6) (7)	2,012,476		1,920,000
		(9.8%, Due 5/2014)

Express Courier International, Inc.	Service-ground delivery and logistics	Line of Credit (6) (14)	700,000		695,625
		(9.5%, Due 6/2009)
		Senior Term Debt (6)	3,877,500		3,853,266
		(9.5%, Due 6/2011)
		Senior Term Debt (3) (6)	3,950,000		3,910,500
		(11.7%, Due 6/2011)

Finn Corporation	Manufacturing-landscape equipment	Common Stock Warrants (8)	37,000		3,034,551

GFRC Holdings LLC	Manufacturing-glass-fiber	Line of Credit (5) (15)	—		—
	reinforced concrete	(9.5%, Due 12/2010)
		Senior Term Debt (5)	7,750,000		7,750,000
		(9.7%, Due 12/2012)
		Senior Subordinated Term Debt (3) (5)	6,750,000		6,750,000
		(12.2%, Due 12/2012)

Global Materials Technologies, Inc.	Manufacturing-steel wool products	Senior Term Debt (3) (6)	5,050,000		4,816,438
	and metal fibers	(14.2%, Due 11/2009)

Company	Industry	Investment (1)	Cost		Fair Value

GTM Holdings, Inc. (2)	Manufacturing-socks	Senior Term Debt (7)	$	495,000	$	465,300
		(7.7%, Due 10/2013)
		Senior Subordinated Term Debt (7)	500,000		485,000
		(11.0%, Due 4/2014)

Greatwide Logistics Services, Inc.	Service - logistics and transportation	Senior Term Debt (7)	3,960,000		3,326,400
		(8.3%, Due 12/2013)
		Senior Subordinated Term Debt (7)	4,000,000		2,800,000
		(11.3%, Due 6/2014)

GS Maritime Intermediate Holdings	Service-cargo transport	Senior Subordinated Term Debt (7)	1,000,000		1,000,000
LLC		(12.8%, Due 12/2013)

Harrington Holdings, Inc. (2)	Service - healthcare products	Senior Term Debt (7)	2,481,250		2,382,000
	distribution	(7.0%, Due 1/2014)
		Senior Subordinated Term Debt (7)	5,000,000		4,825,000
		(10.8%, Due 1/2014)

Heartland Communications Group,	Service-radio station operator	Line of Credit (6) (16)	9,856		8,871
LLC (2)		(10.8%, Due 5/2008)
		Senior Term Debt (6)	4,761,113		4,241,569
		(10.8%, Due 5/2011)

Interfilm Holdings, Inc.	Service-slitter and distributor of plastic	Senior Term Debt (6)	5,000,000		4,962,500
	films	(11.7%, Due 10/2012)

IJGT Acquisition Company	Service-golf training	Line of Credit (6) (17)	—		—
		(9.5%, Due 5/2010)
		Senior Term Debt (6)	2,650,000		2,626,813
		(9.5%, Due 5/2012)
		Senior Term Debt (3) (6)	2,500,000		2,468,750
		(11.7%, Due 5/2012)

It’s Just Lunch International, LLC	Service-dating service	Line of Credit (6) (18)	550,000		467,500
		(9.2%, Due 6/2009)
		Senior Term Debt (6)	3,300,000		2,805,000
		(9.5%, Due 6/2011)
		Senior Term Debt (3) (6) (18)	500,000		425,000
		(11.7%, Due 6/2011)

John Henry Holdings, Inc. (2)	Manufacturing-packaging products	Senior Subordinated Term Debt (7)	8,000,000		7,760,000
		(11.6%, Due 6/2011)

Kinetek Acquisition Corp.	Manufacturing-custom engineered	Senior Term Debt (7)	1,490,262		1,440,450
	motors & controls	(7.3%, Due 11/2013)
		Senior Subordinated Term Debt (7)	1,508,531		1,410,000
		(10.3%, Due 5/2014)

KMBQ Corporation	Service-AM/FM radio broadcaster	Line of Credit (19)	152,000		150,480
		(12.3%, Due 3/2010)
		Senior Term Debt (6)	1,811,305		1,776,546
		(12.3%, Due 3/2010)

Company	Industry	Investment (1)	Cost		Fair Value

Lindmark Outdoor Advertising LLC	Service-advertising	Senior Subordinated Term Debt (6)	$	10,000,000	$	9,950,000
		(11.3%, Due 10/2012)

LocalTel, Inc.	Service-yellow pages publishing	Line of Credit (6) (20) (29)	1,170,000		819,000
		(non-accrual, Due 6/2009)
		Senior Term Debt (6) (29)	2,687,500		1,881,250
		(non-accrual, Due 6/2011)
		Senior Term Debt (3) (6) (29)	2,750,000		1,925,000
		(non-accrual, Due 6/2011)

Macfadden Performing Arts	Service-magazine publisher	Line of Credit (6) (21)	1,015,979		1,002,010
Media, LLC		(9.8%, Due 6/2009)
		Senior Term Debt (6)	6,594,503		6,442,678
		(9.8%, Due 6/2009)

Meteor Holding Corporation (2)	Manufacturing-bar code scanning and	Senior Term Debt (7)	2,342,300		2,201,762
	data capture	(7.8%, Due 12/2013)
		Senior Subordinated Term Debt (7)	1,500,000		1,380,000
		(11.0%, Due 12/2013)

Multi-Ag Media LLC (2)	Service-dairy magazine publisher/	Senior Term Debt (6)	2,442,735		2,396,213
	information database	(11.3%, Due 12/2009)

Newhall Holdings, Inc.(2)	Service-distributor of personal care	Line of Credit (6) (22)	—		—
	products and supplements	(8.7%, Due 5/2010)
		Senior Term Debt (3) (6)	4,410,000		4,376,925
		(9.0%, Due 5/2012)
		Senior Term Debt (3) (6)	4,500,000		4,455,000
		(11.3%, Due 5/2012)

Northern Contours, Inc. (2)	Manufacturing-veneer and laminate	Senior Subordinated Term Debt (6)	7,000,000		6,912,500
	components	(12.2%, Due 5/2010)

Pinnacle Treatment Centers, Inc.	Service-Addiction treatment centers	Line of Credit (23)	—		—
		(9.5%, Due 12/2009)
		Senior Term Debt (6)	2,500,000		2,475,000
		(9.5%, Due 12/2011)
		Senior Term Debt (3) (6)	4,500,000		4,432,500
		(12.2%, Due 12/2011)

Precision Acquisition Group	Manufacturing-consumable	Equipment Note (6) (24)	671,850		671,850
Holdings, Inc. (2)	components for the aluminum	(9.7%, Due 10/2011)
	industry	Senior Term Debt (6)	5,000,000		5,000,000
		(9.7%, Due 10/2010)
		Senior Term Debt (3) (6)	4,200,000		4,200,000
		(11.7%, Due 10/2010)

PROFITSystems	Service-design and develop	Line of Credit (25)	—		—
Acquisition Co. (2)	ERP software	(9.5%, Due 7/2009)
		Senior Term Debt (6)	2,650,000		2,630,125
		(9.5%, Due 7/2011)
		Senior Term Debt (3) (6)	2,900,000		2,871,000
		(11.7%, Due 7/2011)

Company	Industry	Investment (1)	Cost		Fair Value

Puerto Rico Cable	Service-telecommunications	Senior Subordinated Term Debt (6) (7)	$	7,794,854	$	7,117,580
Acquisition Company, Inc.		(12.4%, Due 1/2012)

RCS Management Holding Co.	Service-healthcare supplies	Senior Term Debt (3) (6)	3,000,000		2,835,000
		(9.7%, Due 1/2011)
		Senior Term Debt (4) (6)	3,000,000		2,775,000
		(12.2%, Due 1/2011)

Reading Broadcasting, Inc.	Service-television station operator	Senior Term Debt (6)	7,529,715		7,489,875
		(11.8%, Due 3/2008)

RedPrairie Holding, Inc. (2)	Service-design and develop supply	Senior Term Debt (7)	4,435,000		4,257,600
	chain software	(8.0%, Due 7/2012)
		Senior Subordinated Term Debt (7)	3,000,000		2,880,000
		(11.4%, Due 1/2013)

Reliable Biopharmaceutical Holdings,	Manufacturing-pharmaceutical and	Line of Credit (5) (26)	—		—
Inc.	biochemical intermediates	(8.7%, Due 10/2010)
		Mortgage Note (5)	7,453,881		7,453,881
		(9.5%, Due 10/2014)
		Senior Term Debt (5)	1,800,000		1,800,000
		(9.2%, Due 10/2012)
		Senior Term Debt (3) (5)	12,023,500		12,023,500
		(11.2%, Due 10/2012)
		Senior Subordinated Term Debt (5)	6,000,000		6,000,000
		(12%, Due 10/2013)
		Common Stock Warrants (5) (8)	208,675		208,675

RiskMetrics Group Holdings, LLC	Service - develop risk and wealth	Senior Term Debt (7)	1,985,000		1,935,375
	management solutions	(7.0%, Due 1/2014)
		Senior Subordinated Term Debt (7)	500,000		485,000
		(10.3%, Due 7/2014)

SCI Cable, Inc.	Service-cable, internet, voice provider	Senior Term Debt (6)	2,727,090		2,574,500
		(13.3%, Due 10/2008)

SCS Acquisition Corp. (2)	Service-chemically treated equipment	Senior Term Debt (6)	3,954,811		3,944,924
	distribution	(9.2%, Due 12/2011)
		Senior Term Debt (3) (6)	6,475,000		6,442,625
		(11.2%, Due 12/2011)

Sunburst Media - Louisiana, LLC	Service-radio station operator	Senior Term Debt (6)	7,872,831		7,683,000
		(11.0%, Due 6/2011)

Sunshine Media Holdings	Service-publisher regional B2B trade	Credit Facility (6) (27)	700,000		692,125
	magazines	(9.2%, Due 5/2010)
		Senior Term Debt (6)	17,000,000		16,808,750
		(9.2%, Due 5/2012)
		Senior Term Debt (3) (6)	10,000,000		9,800,000
		(12.7%, Due 5/2012)

Thibaut Acquisition Co.	Service-design and disbribute	Credit Facility (6) (28)	1,000,000		995,000
	wall covering	(9.7%, Due 1/2011)
		Senior Term Debt (6)	2,537,500		2,524,813
		(9.7%, Due 1/2011)
		Senior Term Debt (3) (6)	3,000,000		2,973,750
		(12.2%, Due 1/2011)

Company	Industry	Investment (1)	Cost		Fair Value

U.S. HealthCare Communications,	Service-magazine publisher/operator	Senior Term Debt (6) (29)	$	2,432,869	$	1,684,140
LLC		(non-accrual, Due 4/2011)

Viapack, Inc. (2)	Manufacturing-polyethylene film	Senior Real Estate Term Debt (9.7%, Due 3/2011)	925,000		925,000
		Senior Term Debt (3) (6)	4,170,313		4,118,184
		(11.3%, Due 3/2011)

Visual Edge Technology, Inc. (2)	Service-office equipment distribution	Senior Subordinated Term Debt (6) (13.2%, Due 8/2011)	5,000,000		3,250,000

Wesco Holdings, Inc. (2)	Service-aerospace parts and distribution	Senior Term Debt (7) (7.0%, Due 9/2013)	2,453,450		2,388,703
		Senior Subordinated Term Debt (7)	2,269,886		2,238,750
		(11.6%, Due 3/2014)

West Coast Yellow Pages, Inc.	Service-directory publisher	Senior Term Debt (6)	1,538,743		1,399,716
		(12.8%, Due 8/2010)

Westlake Hardware, Inc. (2)	Retail-hardware and variety	Senior Subordinated Term Debt (6)	15,000,000		14,850,000
		(11.7%, Due 1/2011)
		Senior Subordinated Term Debt (6)	10,000,000		9,850,000
		(13.6%, Due 1/2011)

Winchester Electronics	Manufacturing-high bandwidth connectors and cables	Senior Term Debt (6) (8.9%, Due 5/2013)	1,995,000		1,975,050
		Senior Subordinated Term Debt (6)	10,000,000		9,862,500
		(12.2%, Due 4/2013)

WP Evenflo Group Holdings Inc. (2)	Manufacturing-infant and juvenile products	Senior Term Debt (7) (7.6%, Due 2/2013)	1,985,000		1,925,450
		Senior Subordinated Term Debt (7)	2,000,000		1,870,000
		(11.0%, Due 2/2014)
Total Non-Control/Non-Affiliate Investments			$	423,933,339	$	412,712,262

CONTROL INVESTMENTS

BERTL, Inc.	Service-web-based evaluator of digital imaging products	Line of Credit (30) (31) (11.5%, Due 10/2009)	613,313		613,313
		Common Stock (5) (8)	423,548		332,115
Total Control Investments			$	1,036,861	$	945,428

Total Investments			$	424,970,200	$	413,657,690

(1) Percentage represents interest rates in effect at December 31, 2007 and due date represents the contractual maturity date.

(2) Certain of the listed securities are issued by affiliate(s) of the indicated portfolio company.

(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) Investment valued at cost due to recent acquisition.

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

(7) Marketable securities, such as syndicated loans, are valued based on the indicative bid price, as of December 31, 2007, from the respective originating syndication agent’s trading desk.

(8) Security is non-income producing.

(9) Availability under the ActivStyle credit facility totals $1,500,000. Borrowings of $600,000 were outstanding at December 31, 2007.

(10) Availability under the Allison credit facility totals $4,000,000. There were no borrowings outstanding at December 31, 2007.

(11) Availability under the Anitox credit facility totals $3,000,000. There were no borrowings outstanding at December 31, 2007.

(12) Availability under the Chinese Yellow Pages credit facility totals $700,000. Borrowings of $430,071 were outstanding at December 31, 2007.

(13) Clinton includes a success fee with a fair value of $279,000.

(14) Availability under the Express Courier credit facility totals $1,500,000. Borrowings of $700,000 were outstanding at December 31, 2007.

(15) Availability under the GFRC credit facility totals $3,000,000. There were no borrowings outstanding at December 31, 2007.

(16) Availability under the Heartland credit facility totals $500,000. Borrowings of $9,856 were outstanding at December 31, 2007.

(17) Availability under the International Junior Golf credit facility totals $1,500,000. There were no borrowings outstanding at December 31, 2007.

(18) Availability under the It’s Just Lunch revolving credit facility totals $750,000, borrowings of $550,000 were outstanding at December 31, 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 December 31, 2007.

(19) Availability under the KMBQ credit facility totals $200,000. Borrowings of $152,000 were outstanding at December 31, 2007.

(20) Availability under the LocalTel credit facility totals $3,000,000. Borrowings of $1,170,000 were outstanding at December 31, 2007.

(21) Availability under the MacFadden credit facility totals $1,400,000. Borrowings of $1,015,979 were outstanding at December 31, 2007.

(22) Availability under the Newhall credit facility totals $4,000,000. There were no borrowings outstanding as of December 31, 2007.

(23) Availability under the Pinnacle credit facility totals $500,000. There were no borrowings outstanding at December 31, 2007.

(24) Precision may borrow up to $1,000,000 for purposes of acquiring equipment. Borrowings of $671,850 were outstanding at December 31, 2007.

(25) Availability under the ProfitSystems credit facility totals $1,250,000. There were no borrowings outstanding at December 31, 2007.

(26) Availability under the Reliable credit facility totals $5,000,000. There were no borrowings outstanding at December 31, 2007.

(27) Availability under the Sunshine credit facility totals $3,000,000. Borrowings of $700,000 were outstanding at December 31, 2007.

(28) Availability under the Thibaut credit facility totals $1,000,000. The facility was fully drawn at December 31, 2007.

(29) LocalTel and US Healthcare Communications are currently past due on interest payments and are on non-accrual.

(30) Availability under the BERTL credit facility totals $700,000. Borrowings of $613,313 were outstanding at December 31, 2007.

(31) BERTL interest is currently being capitalized as Paid in Kind (“PIK”) interest. Please refer to Note 2 “Summary of Significant Accounting Policies”.

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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF SEPTEMBER 30, 2007

Company

Industry

Investment (1)

Cost

Fair Value

NON-CONTROL/NON-AFFILIATE INVESTMENTS

Access Television

Service-cable airtime

Line of Credit (9)

—

Network, Inc. (2)

(infomercials)

(11.8% Due 3/2009)

Senior Term Debt (6)

2,616,283

2,557,844

(11.8% Due 3/2009)

ActivStyle Acquisition Co. (2)

Service-medical products

Line of Credit (6) (10)

600,000

597,000

distribution

(10.0%, Due 7/2009)

Senior Term Debt (6)

5,245,000

5,218,775

(10.0%, Due 9/2012)

Senior Term Debt (3) (6)

4,435,000

4,407,281

(12.6%, Due 9/2012)

Allison Publications, LLC (2)

Service-publisher of consumer

Senior Term Debt (6)

7,884,092

7,779,503

oriented magazines

(9.8%, Due 12/2011)

Anitox Acquisition Company (2)

Manufacturing-preservatives for

Senior Real Estate Term Debt

3,110,050

3,060,000

animal feed

(8.8%, Due 1/2012)

Line of Credit (11)

—

(10.0%, Due 1/2010)

Senior Term Debt (6)

2,750,000

2,736,250

(10.0%, Due 1/2012)

Senior Term Debt (3) (6)

2,750,000

2,736,250

(12.3%, Due 1/2012)

Badanco Acquisition Corp.

Service-luggage design and

Senior Subordinated Term Debt (6)

9,652,500

9,628,369

distribution

(12.4%, Due 7/2012)

Bresnan Communications, LLC

Service-telecommunications

Senior Term Debt (7)

3,001,802

2,910,000

(7.4%, Due 9/2013)

Senior Subordinated Term Debt (7)

1,510,006

1,485,000

(9.9%, Due 3/2014)

CCS, LLC

Service-cable tv franchise owner

Senior Term Debt (6)

3,432,830

3,416,330

(11.8%, Due 10/2007)

CHG Companies, Inc. (2)

Service-healthcare staffing

Letter of Credit (6) (7)

400,000

385,000

(7.1%, Due 12/2012)

Senior Term Debt (6) (7)

1,588,000

1,528,450

(7.9%, Due 12/2012)

Senior Subordinated Term Debt (6) (7)

500,000

480,000

(11.9%, Due 12/2012)

Chinese Yellow Pages Company

Service-publisher of Chinese

Line of Credit (6) (12)

230,071

228,633

language directories

(11.8%, Due 9/2010)

Senior Term Debt (6)

1,070,643

1,051,383

(11.8%, Due 9/2010)

Clinton Holdings, LLC (2)

Distribution-aluminum sheets

Senior Subordinated Term Debt

15,500,000

and stainless steel

(13.0%, Due 1/2013)

Common Stock Warrants (8)

109,124

222,777

Company	Industry	Investment (1)	Cost		Fair Value

CMI Acquisition, LLC (2)	Service-recycling	Senior Subordinated Term Debt (6)	$	6,500,000	$	6,451,250
		(12.4%, Due 11/2012)

Community Media Corporation	Service-publisher of free weekly	Senior Term Debt (6)	2,510,974		2,481,780
	newspapers	(9.8%, Due 8/2012)

Country Road	Service-telecommunications	Senior Subordinated Term Debt (6) (7)	5,967,246		5,880,000
Communications LLC (2)		(13.1%, Due 7/2013)