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.

 

 

2



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)

 

 

 

 

 

3



 

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)

 

 

 

 

 

4



 

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)

 

 

 

 

 

5



 

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)

 

 

 

 

 

6



 

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)

 

 

 

 

 

7



 

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.

 

8



 

(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.

 

9



 

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

 

15,500,000

 

 

 

and stainless steel

 

(13.0%, Due 1/2013)

 

 

 

 

 

 

 

 

 

Common Stock Warrants (8)

 

109,124

 

222,777

 

 

10



 

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)