Edgar Filing: BRANTLEY CAPITAL CORP

BRANTLEY CAPITAL CORPORATION

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 QUARTERLY PERIOD ENDED MARCH 31, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 814-00127

BRANTLEY CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)


Maryland		34-1838462

(State or other Jurisdiction of		(I.R.S. Employer Identification Number)
Incorporation or Organization)

3201 Enterprise Parkway, Suite 350, Cleveland, Ohio 44122

(Address of principal executive offices including zip code)

(216) 464-8400

(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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ].

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X].

The number of shares of common stock, $.01 par value, outstanding as of March 31, 2003 was 3,810,535.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		BALANCE SHEETS
		STATEMENTS OF OPERATIONS
		STATEMENTS OF CHANGES IN NET ASSETS
		STATEMENTS OF CASH FLOWS
		STATEMENT OF INVESTMENTS -- (Unaudited)
		NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Items 2.-5.
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EX-99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
EX-99.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements	2
		Balance Sheets	2
		Statements of Operations	3
		Statements of Changes in Net Assets	4
		Statements of Cash Flows	5
		Statements of Investments	6
		Notes to the Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
	Item 4.	Control and Procedures	18
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	18
	Items 2.-5.		19
	Item 6.	Exhibits and Reports on Form 8-K	20
Signatures			21

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

BRANTLEY CAPITAL CORPORATION

BALANCE SHEETS


			March 31,		December 31,
			2003		2002
			(Unaudited)		(Audited)

ASSETS
Investments, at fair value
	Companies 5% to 25% owned		$	64,718,530	$	59,602,279
	Companies less than 5% owned			2,481,556		2,481,556
Cash and cash equivalents				633,389		237,154
Restricted cash				6,000,000		6,000,000
Dividends and interest receivable				5,423,207		5,426,694
Other assets				202,278		—

		Total Assets	$	79,458,960	$	73,747,683

LIABILITIES AND STOCKHOLDERS’ EQUITY
Note payable			$	7,500,000	$	6,000,000
Advisory fee payable				461,057		477,860
Accrued professional fees				1,133,723		1,095,505
Other liabilities				347,689		273,990

		Total Liabilities		9,442,469		7,847,355

Stockholders’ Equity:
Common Stock, $0.01 par value; 25,000,000 shares authorized and 3,810,535 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively				38,105		38,105
Additional paid in capital				34,506,838		34,506,838
Retained earnings				35,471,548		31,355,385

		Total Stockholders’ Equity		70,016,491		65,900,328

		Total Liabilities and Stockholders’ Equity	$	79,458,960	$	73,747,683

Net Asset Value Per Share			$	18.37	$	17.29

The accompanying notes to the financial statements are an integral part of these statements.

BRANTLEY CAPITAL CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)


			For the quarter			For the quarter
			ended			ended
			March 31,			March 31,
			2003			2002

Investment Income (Loss):
	Interest and Dividends
		Companies owned 5% to 25%	$	510,994		$	477,940
		Companies less than 5% owned		—			—
		Write off of Interest and Dividends Receivable		(517,886	)		—

	Total investment (loss) income			(6,892	)		477,940

Operating Expenses:
	Advisory fees			466,122			488,124
	Administration fees			18,493			18,493
	Professional fees			38,218			45,616
	Interest and other expense			217,519			204,003

	Total operating expenses			740,352			756,236
Investment Loss, net				(747,244	)		(278,296	)
Net Realized and Unrealized Gains (Losses) on Investments:
	Net realized losses on investments			—			(441,234	)
	Net unrealized gains on investments			4,863,407			733,538

Net realized and unrealized gains on investment transactions				4,863,407			292,304

Net increase in net assets resulting from operations			$	4,116,163		$	14,008

Net increase in net assets from operations per share, basic and diluted			$	1.08		$	—

Weighted average number of shares outstanding, basic and diluted				3,810,535			3,810,535

The accompanying notes to the financial statements are an integral part of these statements.

BRANTLEY CAPITAL CORPORATION

STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


			Additional						Total
	Common		Paid in			Retained			Stockholders
	Stock		Capital			Earnings			Equity

Balance at December 31, 2000	$	38,105	$	37,484,895		$	14,420,019		$	51,943,019

Net increase in net assets from operations:
Net investment loss		—		—			(1,207,676	)		(1,207,676	)
Net realized gain		—		—			1,155,843			1,155,843
Net unrealized gain		—		—			16,851,583			16,851,583
Distributions from:
Net investment income		—		—			—			—
Net realized gains		—		—			(736,455	)		(736,455	)

Balance at December 31, 2001	$	38,105	$	37,484,895		$	30,483,314		$	68,006,314

Net decrease in net assets from operations:
Net investment loss		—		(2,978,057	)		819,660			(2,158,397	)
Net realized loss		—		—			(402,012	)		(402,012	)
Net unrealized gain		—		—			454,423			454,423

Balance at December 31, 2002	$	38,105	$	34,506,838		$	31,355,385		$	65,900,328

Net increase in net assets from operations:
Net investment loss		—		—			(747,244	)		(747,244	)
Net unrealized gain		—		—			4,863,407			4,863,407

Balance at March 31, 2003	$	38,105	$	34,506,838		$	35,471,548		$	70,016,491

The accompanying notes to the financial statements are an integral part of these statements.

BRANTLEY CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)


				For the quarter			For the quarter
				ended March 31,			ended March 31,
				2003			2002

Cash Flows from Operating Activities:
	Net change in net assets resulting from operations:			$	4,116,163		$	14,008
	Adjustments to reconcile net change in net assets resulting from operations to net cash used for operations:
		Net realized losses from investments			—			441,234
		Net unrealized gains on investments			(4,863,407	)		(733,538	)
		Changes in assets and liabilities:
			Dividend and interest receivable		3,487			(456,574	)
			Other assets		(202,278	)		2,189
			Advisory fee payable		(16,803	)		103,193
			Accrued professional fees		38,218			68,656
			Distributions payable		—			(736,455	)
			Other liabilities		73,699			57,706
			Purchases of investment securities		(252,844	)		(5,945,482	)
			Sales/ Maturities of investment securities		—			1,815,718

	Net cash used for operating activities				(1,103,765	)		(5,369,345	)

Cash Flows from Financing Activities:
		Proceeds from notes payable			1,500,000			—

	Net cash provided by financing activities				1,500,000			—

Net change in cash and cash equivalents for the period					396,235			(5,369,345	)
Cash and cash equivalents, beginning of period					237,154			5,369,345

Cash and cash equivalents, end of the period				$	633,389		$	—

The accompanying notes to the financial statements are an integral part of these statements.

BRANTLEY CAPITAL CORPORATION

STATEMENT OF INVESTMENTS — (Unaudited)

March 31, 2003


Name of Issuer and Title of Issue		Shares/Par		Value

Avionics
	Flight Options International Inc. Preferred Stock and Warrants*#@		3,342,060	$	32,500,000

Business Services
	Disposable Products Company, LLC Subordinated Debt with Warrants#		2,662,201		2,655,541
	The Holland Group, Inc. Convertible Preferred Stock#@		282,530		2,125,000
	International Total Services, Inc. Common Stock		104,250		104
	Prime Office Products, Inc. Convertible Preferred Stock#@		750,000		1,500,000

					6,280,645

Drugs & Health Care
	Integrated Physician Solutions, Inc. Convertible Preferred Stock#@		793,000		3,172,000
	Integrated Physician Solutions, Subordinated Debt with Warrants#		297,448		292,348
	Health Care Solutions, Subordinated Debt with Warrants*#		3,677,572		3,578,401
	National Rehabilitation Partners, Inc. Convertible Preferred Stock#@		2,218,375		1,454,285
	National Rehabilitation Partners, Inc. Subordinated Debt#		27,228		27,228

					8,524,262

Miscellaneous
	Streamline Foods, Inc. Convertible Preferred Stock#@		897,572		700,000
	Streamline Foods, Inc. Subordinated Debt with Warrants#		122,500		95,000
	Value Creation Partners, Inc. Convertible Preferred Stock#@		304,989		2,225,960
	Waterlink, Inc. Warrants		53,550		—

					3,020,960

Oil
	Petroleum Partners, Inc. Convertible Preferred Stock#@		850,000		0
	Petroleum Partners, Inc. Subordinated Debt with Warrants#		1,953,125		1,874,219

					1,874,219

Retail Trade
	Fitness Quest, Inc. Convertible Preferred Stock#@*		788,961		7,174,372
	Fitness Quest, Inc. Common Stock#@*		679,641		6,180,276
	Fitness Quest, Inc. Warrants#@		181,172		1,645,352

					15,000,000

Total Investments — (Cost $30,499,890)				$	67,200,086

All investments are U.S. companies


*	Represents 5% or more of total stockholders equity.

#	Represents privately held securities which are considered illiquid.

@ Represents more than 5% but less than 25% of the voting class of securities.

The accompanying notes to the financial statements are an integral part of these statements.

BRANTLEY CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

1. Significant Accounting Policies


	The interim financial statements have been prepared by Brantley Capital Corporation (“the Company”) pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements and related notes and schedules included in the Company’s 2002 Annual Report filed on Form 10-K dated December 31, 2002.

	The unaudited financial statements reflect, in the opinion of management, all adjustments, all of which are of a normal recurring nature, necessary to present fairly the financial position of the Company as of March 31, 2003, the results of its operations for the quarters ended March 31, 2003 and 2002, and its cash flows for the quarters ended March 31, 2003 and 2002. Interim results are not necessarily indicative of results to be expected for a full fiscal year.

	Privately placed securities are carried at fair value as determined in good faith by or under the direction of the Board of Directors. Generally, the fair value of each security will initially be based primarily upon its original cost to the Company. Cost will be the primary factor used to determine fair value on an ongoing basis until significant developments or other factors affecting the investment (such as results of the portfolio company’s operations, changes in the general market conditions, subsequent financings or the availability of market quotations) provide a basis for value other than cost valuation.

	Portfolio investments listed on an exchange or traded on NASDAQ National Market are valued at the closing price listed on their respective exchange or system on the date of valuation. Securities traded in the over-the-counter market will be valued on the average of the closing bid and asked prices on the day of valuation.

	Debt securities with 60 days or less remaining to maturity will be valued at amortized cost.

2. Investments, Cash and Cash Equivalents


	As of March 30, 2003 and December 31, 2002, the identified costs of investments were $30,499,890 and $30,274,890, respectively.

	Cash equivalents consist of highly liquid investments with insignificant interest rate risk and original maturities of three months or less at acquisition date. Cash and cash equivalents consisted of the following:


	March 31,		December 31,
	2003		2002
	(Unaudited)		(Audited)

Cash	$	633,389	$	237,154

Restricted Cash	$	6,000,000	$	6,000,000

3. Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with Brantley Capital Management, L.L.C. (the “Investment Adviser”) under which the Investment Adviser is entitled to an annual management fee of 2.85% of the Company’s net assets, determined at the end of each calendar quarter, and payable quarterly in arrears throughout the term of the Investment Advisory Agreement. For the three months ended March 31, 2003, the Investment Adviser earned $466,122 under the Investment Advisory Agreement. Certain officers of the Company are also officers of the Investment Adviser. No officer of the Investment Adviser receives any compensation from the Company for serving as officer of the Company. (See Note 5).

BRANTLEY CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

4. Financial Highlights


			For the quarter			For the quarter
			ended			ended
			March 31, 2003			March 31, 2002

Net Asset Value, Beginning of the Period			$	17.29		$	17.85

Income (loss) from investment operations:
	Net investment loss			(0.20	)		(0.07	)
	Net realized and unrealized gain on investments			1.28			0.07

		Total from investment operations		1.08			0.00

Net Asset Value, End of Period			$	18.37		$	17.85

Market Value, End of Period			$	8.35		$	10.34

		Total return, at Market Value		8.44	%(1)		(5.05	)%(1)

		Total return, at Net Asset Value		6.25	%(1)		0.00	%(1)

		Total Expenses/ Average net assets		4.36	%(2)		4.45	%(2)

		Net Investment Income/ Average net assets		(4.40	)%(2)		(1.64	)%(2)


(1)	Not annualized.

(2)	Annualized.

5. Recent Developments

On March 19, 2003, we entered into a Memorandum of Understanding with Phillip Goldstein, a director of the Company, pursuant to which Mr. Goldstein agreed to dismiss the lawsuit he filed against us in September 2002, subject to compliance with the Investment Company Act of 1940. See “Item 3. Legal Proceedings.” Under the memorandum, we agreed, among other things:


	•	that Mr. Bryan would resign from the board of directors and to appoint Mr. Gerald Hellerman to serve on the board of directors and that if Mr. Hellerman resigns or is unable to serve that a representative of Mr. Goldstein’s choosing will be appointed to the board;

	•	to pursue a plan to orderly dispose of assets and distribute proceeds to stockholders, or, in the alternative, to pursue a merger or a sale of assets of the Company;

	•	that Mr. Goldstein will not engage in a proxy contest against the Company;

	•	to enter into a new investment advisory agreement that would:


	•	reduce the fee payable to our adviser from 2.85% of our net assets to 2.5%;

	•	entitle our adviser to receive a fee of 20% of the proceeds distributed to stockholders in excess of $10.00 per share, provided that none of this amount shall be paid until distributions of at least $13.00 per share have been made;


	•	to terminate all currently outstanding stock options and not to grant any further stock options;

	•	that the parties will refrain from disparaging each other; and

	•	to reimburse Mr. Goldstein for expenses not to exceed $275,000 (such expenses are to be reimbursed before any further advisory fees are paid). The Company has accrued such expenses at December 31, 2002, however payment will be subject to compliance with the Investment Company Act of 1940.

BRANTLEY CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

On March 18, 2003, our Board of Directors approved the transaction contemplated by the Memorandum of Understanding. Upon the resignation of Mr. Bryan on March 19, 2003, Mr. Hellerman was appointed to the board of directors. In order to consummate the transactions contemplated by the Memorandum of Understanding, we intend to seek stockholder approval at the 2003 Annual Meeting of Stockholders and receive an exemptive order from the Securities and Exchange Commission.

If we receive all necessary government and stockholder approvals, the effect of the Memorandum of Understanding will be that we intend to make only follow-on investments, and any remaining proceeds we receive from liquidity events are intended to be distributed to shareholders after retaining sufficient cash for operations.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Overview

We are a non-diversified investment company that is regulated as a business development company under the Investment Company Act of 1940. We provide equity and long-term debt financing to small and medium-sized private companies in a variety of industries throughout the United States. Our investment objective is to achieve long-term capital appreciation in the value of our investments and to provide current income primarily from interest, dividends and fees paid by our portfolio companies.

Historically, we have focused our investing activities on private equity securities. We generally structure our private equity investments as participating preferred stock with an 8% to 10% dividend yield that accumulates and is paid upon a liquidity event. Our private equity investments typically range from $1 million to $5 million, and we generally expect these investments to achieve liquidity within three to five years. We typically do not receive a cash return on our private equity investments until a liquidity event occurs, but instead seek to achieve long-term capital appreciation in net asset value through such investments.


	•	that Mr. Bryan would resign from the board of directors and to appoint Mr. Gerald Hellerman to serve on the board of directors and that if Mr. Hellerman resigns or is unable to serve that a representative of Mr. Goldstein’s choosing will be appointed to the board;

	•	to pursue a plan to orderly dispose of assets and distribute proceeds to stockholders, or, in the alternative, to pursue a merger or a sale of assets of the Company;

	•	that Mr. Goldstein will not engage in a proxy contest against the Company;

	•	to enter into a new investment advisory agreement that would:


	•	reduce the fee payable to our adviser from 2.85% of our net assets to 2.5%;

	•	entitle our adviser to receive a fee of 20% of the proceeds distributed to stockholders in excess of $10.00 per share, provided that none of this amount shall be paid until distributions of at least $13.00 per share have been made;


	•	to terminate all currently outstanding stock options and not to grant any further stock options;

	•	that the parties will refrain from disparaging each other; and

	•	to reimburse Mr. Goldstein for expenses not to exceed $275,000 (such expenses are to be reimbursed before any further advisory fees are paid). The Company has accrued such expenses at December 31, 2002, however payment will be subject to compliance with the Investment Company Act of 1940.

Critical Accounting Policies and Estimates

Privately placed equity and mezzanine securities are carried at fair value as determined in good faith by our board of directors. Initially, the fair value of each such security is based upon its original cost. Cost is also the primary factor used to determine fair value on an ongoing basis until significant developments or other factors affecting the investment (such as results of subsequent financings, the availability of market quotations, the portfolio company’s operations and changes in general market conditions) provide a basis for value other than cost.

Portfolio investments listed on a securities exchange or traded on the Nasdaq Stock Market are valued at the closing price listed on the relevant exchange or quotation system on the date of valuation. Securities traded in the over-the-counter market are valued based on the average of the closing bid and asked prices on the date of valuation. Interest income is recorded on mezzanine investments when the payment is contractually due unless a loan is more than 30 days past due. Interest is not accrued on any loans that are more than 30 days past due. Dividend income is recorded on cumulative preferred equity securities on an accrual basis to the extent that such amounts are expected to be collected and on common equity securities on the record date for private companies or on the ex-dividend date for publicly traded companies. We assess the collectibility of dividends and interest income receivables in connection with our determination of the fair value of the related security. To the extent that there are adverse future developments, previously recognized dividend and interest income may not be realized.

We account for our operations utilizing accounting principles generally accepted in the United States for investment companies. On this basis, the principal measure of our financial performance is captioned “Net change in net assets resulting from operations,” which is the sum of two elements. The first element is “Investment income (loss), net,” which is the difference between (1) our income from interest, dividends and fees, and (2) our operating expenses. The second element is “Net gain (loss) on investments,” which is the sum of (1) the difference between the proceeds received from our dispositions of portfolio securities and their stated cost (“Net realized gain (loss) on investments”), and (2) the net change in the fair value of our investment portfolio (“Net unrealized gain (loss) on investments”). “Net realized gain (loss) on investments” and “Net unrealized gain (loss) on investments” are directly related. For example, in the period during which a security is sold to realize a gain, net unrealized gain on investments decreases, and net realized gain on investments increases.

Historically, we have focused our investing activities on private equity securities. We began making such investments in 1997 and are now entering into a phase of the business plan which emphasizes positioning our more mature portfolio companies for appropriate liquidity events. As a result, we are continuously monitoring portfolio company results and evaluating opportunities to maximize the valuation of our investments. In that regard, we periodically evaluate potential acquisitions, financing transactions, initial public offerings, strategic alliances, and sale opportunities involving our portfolio companies. Any such transaction could have an impact on the valuation of our investments. These transactions and activities are generally not disclosed to our stockholders and the investing public until such time as the transactions are publicly announced or completed, as the case may be.

Results of Operations

Dividend and Interest Income

Dividend and interest income on investments for the three months ended March 31, 2003, and 2002 were $510,994, and $477,940, respectively. The increase in interest and dividend income during the three months ended March 31, 2003 was primarily due to the private equity portfolio being fully invested during 2003 thereby generating additional dividend income. Dividend and interest income for the three months ending March 31, 2003 was offset by the $517,886 write-off of accrued interest and dividends relating to our investment in Petroleum Partners, Inc. as more fully described below.

Operating Expenses

Total operating expenses during the three months ended March 31, 2003, and 2002 were $740,352 and $756,236, respectively. A significant component of total operating expenses was advisory fees of $466,122 and

$488,124 earned by our investment adviser during the three months ended March 31, 2003 and 2002, respectively. The second significant component of total operating expenses was interest and other expenses of $217,519 and $204,003 during the three months ended March 31, 2003 and 2002 respectively. The increase in interest and other expenses during 2003 reflect the increased interest costs associated with the increased note payable balance and increased directors and officer liability insurance costs.

Net Realized and Unrealized Gains on Investment Transactions

During the three months ended March 31, 2003 and 2002, valuation of our equity and mezzanine investments resulted in net realized and unrealized gains on investments of $4,863,407 and $292,304, respectively. At March 31, 2003 and December 31, 2002, we had investments in eleven privately-held companies which are subject to general stock market and business conditions. The unrealized gains (losses) during such periods were significantly influenced by general business conditions, as well as the March 31, 2003 revaluations of Fitness Quest, Inc. and Petroleum Partners, Inc. as more fully discussed below.

Financial Condition, Liquidity and Capital Resources

At March 31, 2003 and December 31, 2002, we had $633,389 and $237,154, respectively, in cash and cash equivalents which were primarily invested in United States Treasury securities. Restricted cash is held under direction of the lender and is not readily available to fund investments or pay operating expenses.

Our management generally believes that our cash and cash equivalents, together with proceeds from our investments, will provide us with the liquidity necessary to pay our operating expenses and make follow-on investments as necessary. However, because of the inherent uncertainty with respect to the timing of liquidity events, the Company entered into a $1.5 million short-term note arrangement with Huntington National Bank in March 2003 for the purpose of paying operating expenses pending potential liquidity events. The note is unsecured and carries an interest rate of prime plus 1% (5.25% at March 31, 2003). As of March 31, 2003, $1.5 million has been drawn down on the note.

At March 31, 2003 and December 31, 2002, we had stockholders’ equity of $70,016,491 and $65,900,328, respectively, resulting in a net asset value per share of $18.37 and $17.29, respectively. At March 31, 2003 and December 31, 2002, we had $7,500,000 and $6,000,000 of outstanding indebtedness, respectively. For the three months ended March 31, 2003, the weighted average interest rate on this indebtedness was 4.85%.

Brantley Venture Partners II, L.P., Brantley Venture Partners III, L.P. and Brantley Partners IV, L.P. hold, in the aggregate, approximately $156 million of private equity investments. These partnerships are related to our investment adviser in a manner that required the receipt, from the Securities and Exchange Commission, of an exemption from certain provisions of the Investment Company Act of 1940 in order to permit us, under certain circumstances, to invest in the same portfolio companies as the other private investment funds managed by our investment adviser.

We intend to use our cash to fund operations, make follow on investments in our existing portfolio companies, and distribute any remaining proceeds from liquidity events to stockholders (see “overview”).

At March 31, 2003 and December 31, 2002, the aggregate cost of the investments we made to date was $30.5 million and $30.3 million, respectively, and their aggregate market value was $67.2 million and $62.1 million, respectively, for an aggregate fair value appreciation of 120% and 105%, respectively. Our management believes that our portfolio companies have significant potential for long-term growth in sales and earnings.

Private Portfolio Company Investments

The following is a list of the private companies in which we had an investment and the cost and fair value of such securities at March 31, 2003.


Name of Company	Nature of its Principal Business	Cost		Fair Value

Disposable Products Company, LLC	Non-Woven Paper Products Manufacturer		2,662,201		2,655,541
Fitness Quest, Inc.	Fitness Products Direct Marketer		3,846,358		15,000,000
Flight Options International, Inc.	Private Air Travel Services		5,562,500		32,500,000
Health Care Solutions, Inc.	Home Health Care Provider		3,549,000		3,578,401
The Holland Group, Inc.	Temporary Staffing		2,125,000		2,125,000
National Rehab Partners, Inc.	Rehabilitation Services		1,481,513		1,481,513
Integrated Physician Solutions, Inc.	Pediatric Physician Practice Management Group		3,439,448		3,464,348
Petroleum Partners, Inc.	Petroleum Distribution Maintenance Services		3,325,000		1,874,219
Prime Office Products, Inc.	Office Products Distributor		1,500,000		1,500,000
Streamline Foods, Inc.	Food Products Manufacturer and Distributor		795,000		795,000
Value Creation Partners, Inc.	Food Products Manufacturer and Distributor		2,145,460		2,225,960
International Total Services, Inc.	Security		68,410		104

	Total	$	30,499,890	$	67,200,086

Our individually significant equity and mezzanine investments at March 31, 2003 are described below:

Disposable Products Company, LLC

On August 10, 1998, we entered into an investment led by Banc One Capital to provide $1.0 million of a $3.0 million subordinated debt facility with warrants for Disposable Products Company, LLC. Disposable Products is an acquisition strategy company in the business of manufacturing and converting paper and non-woven materials into wiping products for sale to commercial, institutional, industrial and government markets. In addition, Disposable Products is a converter and reseller of other safety and industrial/janitorial products. Proceeds of the transaction were used to complete Disposable Products’ first acquisition. The terms of the debt facility call for a 12% interest rate per annum with a final maturity in 2003. We also received a detachable capital stock purchase warrant exercisable for 5% of the fully-diluted capital stock of Disposable Products at the time of exercise at a nominal exercise price. On January 26, 2001, we funded a $166,667 12% promissory note from Disposable Products. In addition, through March 31, 2003 we funded additional 12% promissory notes of $1,495,534 from Disposable Products.

Fitness Quest, Inc

On December 16, 1997, we funded a $1.35 million commitment to invest with Brantley Venture Partners III, L.P. in a $3.85 million preferred stock issue for Fitness Quest, Inc. As a result, we purchased approximately 788,961 shares of Fitness Quest Series A 10% Convertible Preferred Stock at $1.71 per share. Fitness Quest is a direct marketing and distribution company. The proceeds were used by Fitness Quest for a management buy-out of the company from its previous owner, The Time Warner Music Group, a 100% wholly owned subsidiary of Time Warner, Inc., and for other acquisitions. Fitness Quest has been in the fitness promotional products business since 1994. Fitness Quest operates in a highly competitive industry and is dependent on the management talent and efforts of key personnel for its success. We do not believe that Fitness Quest is dependent on a single or small number of customers, possesses significant intellectual property, or is operating in an unusually regulated industry.

During 1997, Fitness Quest increased its revenue and improved its operating margins and profits. After a complete evaluation, our board of directors re-valued our Fitness Quest investment to $5,440,000, resulting in a

1997 unrealized gain of $4,090,000. This evaluation was based on price to earnings ratios, cash flow multiples and other appropriate financial measurements of similar private companies. In addition to the above Series A 10% Convertible Preferred Stock, we funded $1,751,300 to invest with Brantley Venture Partners III, L.P. in a $3.5 million 10% senior subordinated debt investment in Fitness Quest in 2000. In addition, we received a warrant to purchase 181,172 shares of Fitness Quest common stock for $0.01 per share. The proceeds of the most recent investment were used to fund Fitness Quest’s working capital needs. During the fourth quarter of 2000, we exchanged the senior subordinated debt investment and related unpaid interest for 679,641 shares of Fitness Quest common stock.

Through March 31, 2003, Fitness Quest has continued to increase its revenues, improve its operating margins, and reduce its debt. As a result, the Board of Directors re-valued the investment to $15,000,000 resulting in an unrealized gain of $6,341,959 for the quarter.

Flight Options International, Inc. (Formerly Corporate Wings, Inc.)

On December 23, 1997, we funded $2.1 million to invest with Brantley Venture Partners III, L.P. in a $6.0 million preferred stock issue for Flight Options International, Inc. Our investment consists of approximately 2,576,000 shares of Flight Options Series A 8% Convertible Preferred Stock at $0.8152 per share. Flight Options provides complete private air travel service through the sale of fractional interests in pre-owned jet aircraft. The proceeds of the transaction were used by Flight Options to continue to execute an acquisition strategy. We believe Flight Options is one of the top five providers of fractional interests in aircraft in the United States, a highly competitive industry and is dependent on the management talent and efforts of key personnel for its success. Flight Options is subject to certain regulations of the Federal Aviation Administration. We do not believe it is dependent on a single or small number of customers or possesses significant intellectual property.

On December 29, 1998, we completed a second private equity investment in Flight Options. In this investment, we purchased $962,500 of a $5.5 million preferred stock transaction led by The Provident Bank. Our purchase represents approximately 260,135 shares of Class A 8% Convertible Preferred Stock at $3.70 per share. The proceeds were used by Flight Options to fund the expansion of its fractional ownership program and to continue to execute its acquisition strategy. During 1998, Flight Options completed the acquisition of Miller Aviation. Based upon the price of this subsequent financing and the operating performance of Flight Options during 1998, the fair value of our original investment was increased to $9,531,760, resulting in an unrealized gain of $7,431,760. This valuation was based on the $3.70 per share price negotiated by The Provident Bank and was approved by our board of directors.

On August 31, 1999, Flight Options sold $20 million of Series B 8% Preferred Stock to a third party private equity group at $4.365 per share. Consistent with our investment valuation guidelines, this transaction resulted in a valuation increase on our Flight Options investment of $1,886,030 or $0.50 per share.

On July 11, 2000, we guaranteed a portion of Flight Options’ third-party borrowings. As a result, we were issued a warrant to purchase 36,000 shares of Flight Options common stock at a price of $0.01 per share. This guarantee was terminated prior to December 12, 2000.

On December 12, 2000 we purchased 469,925 shares of Flight Options Class C 8% Preferred Stock at $5.32 per share for a total investment of $2.5 million. The proceeds of the transaction were used by Flight Options to fund the continued expansion of its fractional ownership program.

On June 30, 2001, Flight Options received offers from institutional investors to purchase convertible preferred stock or subordinated debt securities of Flight Options which support the valuation used to complete the December 12, 2000 Class C 8% Preferred Stock transaction described in the preceding paragraph. As a result, and consistent with our investment valuation guidelines, our board of directors approved a valuation increase on the Flight Options investment which resulted in our reporting an unrealized gain of $2,742,889 or $0.72 per share for the quarter ended June 30, 2001.

On December 21, 2001, Flight Options, Inc. and Raytheon Travel Air, a Wichita, Kansas-based unit of Raytheon Company, a Lexington, Mass. based defense contractor, agreed to combine operations into one fractional aircraft ownership program to be known as Flight Options. Under the terms of the transaction, Flight

Options, Inc. holds 50.1% ownership of the new business with Raytheon holding 49.9%. The transaction was completed during the quarter ended March 31, 2002.

As a result of the transaction described above, our board of directors met to review the terms of the transaction including, among other things, a valuation review prepared by an investment banking firm working on the transaction. Consistent with our valuation guidelines, the board used a private market method to value our investment in Flight Options, Inc. and approved an increase in the value of our investment in Flight Options, Inc. to $32.5 million. At March 31, 2003, the financial statement value of our investment in Flight Options represents an increase of more than 484% from its original purchase price. The commentary above reflects a four-for-one stock split executed in 2000. All share and per share amounts have been adjusted to reflect such stock split.

Health Care Solutions, Inc.

On September 30, 1997, we funded a $1.5 million convertible junior subordinated promissory note facility for Health Care Solutions, Inc. Health Care Solutions is an acquisition strategy company in the home healthcare services market with a strong presence in the Midwest and Great Lakes regions. The terms of the notes called for an 18% interest rate per annum during the first year and 12% per annum thereafter, with final maturity two years from the closing. After the first year, the notes were convertible into common stock at a price of $3.50 per share. In connection with our commitment to provide this facility, we received warrants to purchase up to $450,000 of common stock valued at an exercise price of 10% of an initial public offering price completed during the term of the notes, or at $3.50 per share should the warrants be exercised other than in connection with an initial public offering. The warrants are currently exercisable. The proceeds of the notes were used by Health Care Solutions to help finance acquisitions.

In 2000, Health Care Solutions completed a re-capitalization plan, including a two-for-one reverse stock split. As a result, we agreed to exchange our convertible junior subordinated promissory note and accrued interest thereon for 246,994 shares of Series C 8% Convertible Preferred Stock at an exchange rate of $7.50 per share. The warrants to purchase up to $450,000 of common stock at an exercise price of 10% of an initial public offering price or at $3.50 per share remain outstanding and have been adjusted to reflect the reverse stock split.

In addition to the above Series C 8% Convertible Preferred Stock, we funded $500,000 and $299,000 12% Convertible Subordinated Notes from Health Care Solutions in 2000. As part of this transaction, we received a warrant to purchase up to $50,000 of Health Care Solutions common stock at an exercise price equal to the lower of the price determined by an initial public offering or $7.50 per share. On March 7, 2001, we agreed to exchange the $500,000 Convertible Subordinated Note for 71,880 shares of Series D Convertible Preferred Stock. On January 29, 2002, we funded a $1,250,000 12% Convertible Subordinated Note from Health Care Solutions.

On May 1, 2003, Health Care Solutions sold its respiratory division assets. As a result of this transaction, we will receive approximately $3,130,000 in proceeds. The remaining assets of Health Care Solutions are presently being marketed for a projected sale. The current valuation is expected to approximate the total proceeds expected to be received from these sales.

The Holland Group, Inc.

On July 13, 2000, we funded a $2.1 million commitment to invest with Brantley Partners IV, L.P. in a $8.5 million preferred stock issue of The Holland Group, Inc. The Holland Group is a provider of temporary staffing and human resource management services that currently operates 35 branches in five states. In this transaction, we purchased 282,530 shares of The Holland Group’s Series A 8% Convertible Preferred Stock. In February 2002 we purchased a $50,000 12% convertible subordinated note from The Holland Group which was repaid with interest in December 2002.

National Rehab Partners, Inc.

On August 10, 1999, we funded $1.4 million of a $1.5 million commitment to invest with Brantley Partners IV, L.P. and a third party equity group in a $12.0 million preferred stock issue for National Rehab Partners, Inc. Pursuant to this commitment, we purchased 2.2 million shares of Class A 8% Convertible Preferred Stock. The proceeds of this transaction were used to complete the acquisition of a group of rehabilitation management service providers. The remainder of the commitment has been funded upon the successful closing of additional

acquisitions. National Rehab Partners is a Brentwood, Tennessee rehabilitation management service company providing rehabilitation services through acute care hospitals and hospital systems throughout the United States. National Rehab Partners is the only national rehabilitation company focused exclusively on helping hospitals develop their outpatient rehabilitation services.

On January 10, 2001, we funded a $26,126 10% promissory note from National Rehab Partners. On June 13, 2001, the $26,126 note and the related accrued interest were cancelled and replaced with a $27,228 10% promissory note.

Integrated Physician Solutions, Inc. (Formerly Pediatric Physicians Alliance, Inc.)

On January 28, 1999, we funded a $3.2 million commitment to invest with Brantley Venture Partners III, L.P. in a $7.9 million preferred stock issue for Integrated Physician Solutions, Inc. Pursuant to our commitment, we purchased 793,000 shares of Class A-2 10% Convertible Preferred Stock. Integrated Physician Solutions is a physician practice management systems provider. Their objective is to develop the leading integrated physician practice management system in the United States. Integrated Physician Solutions is dependent on the management talent and effort of key personnel for its success in this highly competitive industry. We do not believe it is dependent on a single or small number of customers, possesses significant intellectual property or that it is subject to significant regulations. The proceeds of the transaction were used to complete the acquisition of a number of physician practices.

In addition to the above Class A-2 10% Convertible Preferred Stock, in 2000 we funded $267,448 to invest with Brantley Venture Partners III, L.P. in $668,619 of promissory notes, with detachable warrants, in Integrated Physician Solutions. The detachable warrants are for the purchase of 30,000 shares of Integrated Physician Solutions common stock at $4.00 per share.

Petroleum Partners, Inc.

On June 7, 2001, we entered into a $2.7 million commitment to invest with Brantley Partners IV, L.P. in a $15.0 million preferred stock and subordinated debt issue for Petroleum Partners, Inc. In connection with this commitment, we purchased 250,000 shares of Class A 8% Convertible Preferred Stock at $1.00 per share, 600,000 shares of Class B 8% Convertible Preferred Stock at $2.00 per share, and funded a $1,250,000 10% Convertible Subordinated Note with a detachable warrant for the purchase of 78,125 shares of common stock at $0.01 per share. Petroleum Partners, based in Cleveland, Ohio, is a provider of outsourced maintenance services to the petroleum industry’s retailers and refineries. The proceeds from the transaction were used to acquire a company which is a leading provider of petroleum and petrochemical handling equipment and outsourced facilities maintenance services to providers of fuel delivery systems such as gasoline retailers and refineries. The equipment distributed by the company includes petroleum storage tanks, pumps, fuel dispensers, flexible piping, tank valves, leak detection gauges, canopies, air compressors and service station lighting equipment.

In addition to the above investment, we funded $1,875,000 of 10% Convertible Subordinated Notes through December 31, 2002. The proceeds of the notes were used for operating purposes.

As a result of adverse operating performance, the Board of Directors approved a valuation reduction of our investment to $1,874,219 thereby generating a $1,450,781 unrealized loss the quarter ended March 31, 2003. In addition, the Board of Directors approved a write-off of all interest and dividends receivable relating to this investment of $517,886.

Prime Office Products, Inc. (Formerly Business Essentials, Inc.)

On April 22, 1999, we entered into a $1.7 million commitment to invest with Brantley Partners IV, L.P. and Massey Burch Capital Corp. in a $10.0 million preferred stock issue for Prime Office Products, Inc. Pursuant to our commitment, we purchased 510,000 shares of Class A 8% Convertible Preferred Stock at $2.00 per share. Prime Office Products is an office products marketing and distribution company based in Nashville, Tennessee. The first part of the commitment was funded to launch an acquisition strategy focused on office distribution companies serving primarily commercial and industrial customers. The remainder of the commitment is being

funded upon the closing of additional acquisitions. On January 8, 2002, we purchased an additional 200,000 shares of Class A 8% Convertible Preferred Stock at $2.00 per share. On July 31, 2002, we purchased an additional 40,000 shares of Class A 8% Convertible Preferred Stock at $2.00 per share.

Streamline Foods, Inc.

On February 7, 2002 we funded a $795,000 commitment to invest with Brantley Partners IV, L.P. in a $7,950,000 preferred stock and subordinated debt issue for Streamline Foods, Inc. Pursuant to our commitment we purchased approximately 898,000 shares of Series A 8% Convertible Preferred Stock at $0.78 per share and a $95,000 13% Convertible Subordinated Note with warrants to purchase 27,500 shares of common stock at $0.01 per share. The proceeds were used by Streamline Foods for a buy-out of the Company from its previous owner. Streamline Foods, Inc. sources, blends, packages and distributes high sugar content food products for branded multi-national food companies and private label manufacturers.

Value Creation Partners, Inc.

On June 14, 2000, we completed a $2.1 million commitment to invest with Brantley Partners IV, L.P. and several other private equity investors in a $23.8 million preferred stock issue for Value Creation Partners, Inc. Pursuant to this commitment, we purchased approximately 35,000 shares and 269,989 shares of 8% Convertible Preferred Stock at $5.00 and $7.30 per share, respectively. Value Creation Partners is an acquisition strategy company in the food industry. The proceeds of the transaction were used to complete the acquisition of Best Brands, Inc., one of the six largest manufacturers and distributors of a complete line of premium ingredients, mixes and products, including equipment, for all segments of the baking industry. Their products are sold primarily to retail bakeries, bakery distributors, supermarket in-store bakeries, food wholesalers and food service establishments.

Impact of Inflation

We do not believe that our business is materially affected by inflation, other than the impact that inflation may have on the securities markets, the valuations of business enterprises and the relationship of such valuations to underlying earnings, all of which will influence the value of our investments.

Disclosure Regarding Forward-Looking Statements

Information contained in this Quarterly Report on Form 10-Q may contain “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate” or “continue” or the negative thereof or other variations or similar words or phrases. The matters described throughout this Quarterly Report on Form 10-Q and in any exhibits of which this Quarterly Report is a part constitute cautionary statements identifying important factors with respect to any such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those in such forward-looking statements.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

We invest in small and medium-sized companies, and our investments are considered speculative in nature. Our investments often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. As a result, we are subject to risk of loss which may prevent our stockholders from achieving price appreciation and dividend distributions. The portion of our portfolio consisting of investments in private companies is also subject to valuation risk. We value our privately held investments based on a determination of their fair value made in good faith by our board of directors on a quarterly basis in accordance with our established guidelines. In the absence of a readily ascertainable market value, the estimated values of our investments may differ significantly from the values that would exist if a ready market for these securities existed. Any changes in valuation are recorded in our consolidated statements of operations as “Net unrealized gain (loss) on investments.”

We consider the management of equity price risk essential to conducting our business and maintaining our profitability. Our portfolio consists of investments in private companies. We anticipate no impact on these investments from modest changes in public market equity prices. However, should significant changes in market

prices occur, there could be a long-term effect on valuations of private companies, which could affect the carrying value and the amount and timing of gains realized on these investments. This could also affect our ability to generate cash through the sale of private equity investments, since there may not be realistic initial public offering opportunities.


Item 4.	Controls and Procedures

(a) Within the 90-day period prior to the filing date of this quarterly report, the Company’s chief executive officer and chief financial officer conducted an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934). Based upon this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them of any material information relating to the Company that is required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934.

(b) There have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

On September 25, 2002, Phillip Goldstein, a director and shareholder of the Company filed a lawsuit in the District Court for the Northern District of Ohio against us, Robert Pinkas, James Oliver, Benjamin Bryan and IVS Associates, Inc. alleging, among other things, that the Company engaged in wrongdoing and that the individual defendants breached their fiduciary duties during the Annual Meeting of Stockholders held on September 17, 2002. Mr. Goldstein alleges that the Company’s actions surrounding the closing of the polls disenfranchised certain shareholders. Mr. Goldstein sought to have votes for which he had proxies, which were submitted after the polls were closed, counted. He also sought an order declaring his nominees to be directors of the Company. The Company also asserted a counterclaim against Mr. Goldstein alleging violations of the proxy rules and the failure to disclose his participation in a group as required by Regulation 13D. Mr. Goldstein denied the allegations of the counterclaims. Mr. Goldstein’s motion for a temporary restraining order was denied, and a hearing for a preliminary injunction was held on November 18-21, 2002. On December 18, 2002, Magistrate Jack B. Streepy issued a report and recommendation that Mr. Goldstein’s motion for a preliminary injunction be granted. Both parties filed objections to the Magistrate’s report. No order has been issued by the Court to date. On February 13, 2003, the judge set a trial date of March 19, 2003, and on March 19, 2003, the judge issued a 60 day stay of the proceeding.

On March 19, 2003, we entered into a Memorandum of Understanding with Phillip Goldstein, a director of the Company, pursuant to which Mr. Goldstein agreed to dismiss the lawsuit he filed against us in September 2002, subject to compliance with the Investment Company Act of 1940. Under the memorandum, we agreed, among other things:


	•	that Mr. Bryan would resign from the board of directors and to appoint Mr. Gerald Hellerman to serve on the board of directors and that if Mr. Hellerman resigns or is unable to serve that a representative of Mr. Goldstein’s choosing will be appointed to the board;

	•	to pursue a plan to orderly dispose of assets and distribute proceeds to stockholders, or, in the alternative, to pursue a merger or a sale of assets of the Company;

	•	that Mr. Goldstein will not engage in a proxy contest against the Company;

	•	to enter into a new investment advisory agreement that would:


	•	reduce the fee payable to our adviser from 2.85% of our net assets to 2.5%;


	•	entitle our adviser to receive a fee of 20% of the proceeds distributed to stockholders in excess of $10.00 per share, provided that none of this amount shall be paid until distributions of at least $13.00 per share have been made;


	•	to terminate all currently outstanding stock options and not to grant any further stock options;

	•	that the parties will refrain from disparaging each other; and

	•	to reimburse Mr. Goldstein for expenses not to exceed $275,000 (such expenses are to be reimbursed before any further advisory fees are paid). The Company has accrued such expenses at December 31, 2002, however payment will be subject to compliance with the Investment Company Act of 1940.

On March 18, 2003, our Board of Directors approved the transaction contemplated by the Memorandum of Understanding. Upon the resignation of Mr. Bryan, Mr. Hellerman was appointed to the board of directors. In order to consummate the transactions contemplated by the Memorandum of Understanding, we intend to seek stockholder approval at the 2003 Annual Meeting of Stockholders.

As a result of the Memorandum of Understanding, we intend to make only follow-on investments in our portfolio companies. Otherwise, we will seek to orderly dispose of our assets and distribute any proceeds to our stockholders.

On October 8, 2002, Thomas Kornfeld and Robert Strougo filed a purported class action lawsuit against the Company, the directors of the Company excluding Phillip Goldstein, IVS Associates, Inc. and JMP Securities LLC, alleging a series of derivative and direct claims that the directors have breached their fiduciary duties and that the Company engaged in wrongdoing with respect to the Annual Meeting of Stockholders held on September 17, 2002. The factual allegations are substantially similar to the complaint filed by Mr. Goldstein and also include allegations of conversion of corporate funds. The complaint seeks, among other things, an order declaring Mr. Goldstein’s nominees to be directors of the Company, an order declaring that the investment advisory agreement be terminated and damages for breach of fiduciary duty. On January 12, 2003, the plaintiffs filed a motion to consolidate this lawsuit with the lawsuit by Goldstein discussed above, which was subsequently denied.

On October 4, 2002, the Company received notice from the Midwest Regional Office (“MRO”) of the SEC that they were inquiring into activities involving the Annual Meeting. The Company has and will cooperate with the inquiry. The letter from the MRO states that the inquiry should not be construed as an indication by the staff of that office that any violation of law has occurred, or as a reflection upon any person or entity that may be involved.

Items 2.-5.

Not Applicable


Item 6.	Exhibits and Reports on Form 8-K

a. Exhibits


	Exhibit 3			Articles of Incorporation and By-laws
	(1)			Articles of Amendment and Restatement of the Charter of the Company (Exhibit 3.1 to the Annual Report on Form 10-K filed on March 31, 1999, which exhibit is incorporated herein by reference)
	(2)			Amended and Restated Bylaws of the Company (Exhibit 3.2 to the Annual Report on Form 10-K filed on March 31, 1999, which exhibit is incorporated herein by reference)
	(3)			Amendment to the Charter of the Company (Exhibit 3.3 to the Registration Statement filed on October 26, 2001, which exhibit is incorporated herein by reference)
	Exhibit 4			Form of Share Certificate (Exhibit 2.d to amendment No. 1 to the Registration Statement filed on October 31, 1996, which exhibit is incorporated herein by reference)
	Exhibit 10			Material Contracts
	(1)			Dividend Reinvestment and Cash Purchase Plan (Exhibit 2.e to Amendment No. 3 to the Registration Statement filed on November 26, 1996, which exhibit is incorporated herein by reference)
	(2)			Form of Investment Advisory Agreement between the Company and the Investment Adviser (Exhibit 2.g to Amendment No. 3 to the Registration Statement filed on November 26, 1996, which exhibit is incorporated herein by reference)
	(3)			Stock Option Plan and Form of Option Grants (Exhibit 2.i.1 to Amendment No. 2 to the Registration Statement filed on November 22, 1996, which exhibit is incorporated herein by reference)
	(4)			Disinterested Director Option Plan and Form of Option Grants (Exhibit 2.i.2 to Amendment No. 2 to the Registration Statement filed on November 22, 1996, which exhibit is incorporated herein by reference)
	(5)			Form of Custodian Contract (Exhibit 2.j to Amendment No. 2 to the Registration Statement filed on November 22, 1996, which exhibit is incorporated herein by reference)
	(6)			Form of Registrar, Transfer Agency and Service Agreement (Exhibit 2.k.1 to Amendment No. 2 to the Registration Statement filed on November 22, 1996, which exhibit is incorporated herein by reference)
	(7)			Form of Administration Agreement (Exhibit 2.k.2 to Amendment No. 2 to the Registration Statement filed on November 22, 1996, which exhibit is incorporated herein by reference)
	(8)			Form of Indemnification Agreement for Directors and Officers (Exhibit 2.s to Amendment No. 2 to the Registration Statement filed on November 22, 1996, which exhibit is incorporated herein by reference)
	(9)			Memorandum of Understanding dated March 19, 2003 (Exhibit 99.1 to Form 80K filed March 20, 2003.
	Exhibit 99			Other
	(1)			Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	(2)			Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b. Reports on Form 8-K


				A Form 8-K was filed on March 20, 2003 which announced that on March 19, 2003, Brantley Capital Corporation (the “Company”), Robert P. Pinkas, Benjamin F. Bryan, James P. Oliver and Phillip Goldstein entered into a Memorandum of Understanding with respect to Goldstein v. Brantley Capital Corp. et al., a civil action pending in the United States District Court for the Northern District of Ohio (1:02CV1903).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BRANTLEY CAPITAL CORPORATION



Date: May 15, 2003		By: /s/ ROBERT P. PINKAS Robert P. Pinkas Chairman of the Board and Chief Executive Officer

Date: May 15, 2003		By: /s/ TAB A. KEPLINGER Tab A. Keplinger Vice President and Chief Financial Officer

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Robert P. Pinkas, Chief Executive Officer, certify that:


	1.	I have reviewed this quarterly report on Form 10-Q of Brantley Capital Corporation;

	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


	a)	all significant deficiencies in the design or operation of internal controls which could aversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


	6.	The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003


	/s/ ROBERT P. PINKAS

	Robert P. Pinkas
	Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Tab A. Keplinger, Chief Financial Officer, certify that:


	1.	I have reviewed this quarterly report on Form 10-Q of Brantley Capital Corporation;

	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


	a)	all significant deficiencies in the design or operation of internal controls which could aversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


	6.	The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003


	/s/ TAB A. KEPLINGER

	Tab A. Keplinger
	Chief Financial Officer

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