<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998 COMMISSION FILE NUMBER: 814-00127
BRANTLEY CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
------------------------------------------------------
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
34-1838462
------------------------------------------------------
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
20600 CHAGRIN BOULEVARD, SUITE 1150, CLEVELAND, OHIO 44122
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(216) 283-4800
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 [ ]
The number of shares of common stock outstanding as of September 30, 1998
was 3,810,535.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRANTLEY CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 DECEMBER 31,
(UNAUDITED) 1997
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents (Note 2).......................... $23,255,702 $24,691,345
Investments, at market (Note 2)............................. 17,894,541 18,791,178
Dividends and interest receivable........................... 296,884 70,722
Other assets................................................ 168,603 271,490
----------- -----------
TOTAL ASSETS...................................... $41,615,730 $43,824,735
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Advisory fee payable (Note 3)............................... $ 307,379 $ 284,111
Administration fee payable.................................. 26,149 30,750
Professional fee payable.................................... 49,406 120,088
Distributions payable....................................... -- 342,948
Organization and offering costs payable..................... 68,117 93,117
Other liabilities........................................... 23,547 42,106
----------- -----------
TOTAL LIABILITIES................................. $ 474,598 $ 913,120
=========== ===========
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value; 25,000,000 shares
authorized and 3,810,535 outstanding................... $ 38,105 $ 38,105
Additional paid in capital................................ 37,611,421 37,611,421
Retained earnings......................................... 3,491,606 5,262,089
----------- -----------
TOTAL STOCKHOLDERS' EQUITY........................ 41,141,132 42,911,615
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $41,615,730 $43,824,735
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
2
<PAGE> 3
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest and dividend income.............................. $ 527,119 $ 409,442
----------- ----------
OPERATING EXPENSES:
Advisory fees............................................. 384,479 311,600
Administration fees....................................... 29,941 30,247
Professional fees......................................... 19,532 66,402
Other..................................................... 63,817 91,675
----------- ----------
TOTAL EXPENSES............................................ 497,769 499,924
----------- ----------
NET INVESTMENT INCOME (LOSS)................................ 29,350 (90,482)
----------- ----------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment transactions.... (4,679) 511,681
Net unrealized appreciation (depreciation) on
investments........................................... (3,528,453) 584,537
----------- ----------
NET GAIN (LOSS) ON INVESTMENTS.............................. (3,533,132) 1,096,218
----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $(3,503,782) $1,005,736
=========== ==========
INCOME (LOSS) PER SHARE..................................... $ (0.92) $ 0.27
=========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING............... 3,810,535 3,810,535
=========== ==========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest and dividend income.............................. $ 1,384,884 $1,267,303
----------- ----------
OPERATING EXPENSES:
Advisory fees............................................. 976,341 845,642
Administration fees....................................... 89,397 89,754
Professional fees......................................... 68,455 123,557
Other..................................................... 173,995 228,612
----------- ----------
TOTAL EXPENSES............................................ 1,308,188 1,287,565
----------- ----------
NET INVESTMENT INCOME (LOSS)................................ 76,696 (20,262)
----------- ----------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS
Net realized gain on investment transactions........... 70,000 411,472
Net unrealized appreciation (depreciation) on
investments........................................... (1,879,074) 2,497,283
----------- ----------
NET GAIN (LOSS) ON INVESTMENTS.............................. (1,809,074) 2,908,755
----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $(1,732,378) $2,888,493
=========== ==========
INCOME (LOSS) PER SHARE..................................... $ (0.45) $ 0.76
=========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING............... 3,810,535 3,802,293
=========== ==========
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE> 5
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS:....... $ (1,732,378) 2,888,493
Adjustments to reconcile net change in net assets
resulting from operations to net cash (used for)
operations:
Purchases of investment securities................... $(4,514,795,417) $(13,070,554)
Sales/maturities of investment securities............ 4,513,882,980 5,213,953
Net realized (gain) from investments................. (70,000) (411,472)
Change in unrealized (appreciation) depreciation..... 1,879,074 (2,497,283)
Changes in assets and liabilities:
Other assets...................................... 102,887 (84,947)
Payable for investments purchased................. -- 1,500,100
Advisory fee payable.............................. 23,268 206,200
Administration fee payable........................ (4,601) --
Professional fee payable.......................... (70,682) --
Distributions payable............................. (342,948) --
Organization and offering costs payable........... (25,000) (61,340)
Payable to related party.......................... -- (88,436)
Dividend and interest receivable.................. (226,162) (646)
Other liabilities................................. (18,559) 54,539
--------------- ------------
NET CASH (USED FOR) OPERATING ACTIVITIES.......... (1,397,538) (6,351,393)
--------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares issued subsequent to initial
public offering................................... -- 1,500,000
Distribution from net investment income.............. (38,105) (63,000)
--------------- ------------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES...................................... (38,105) 1,437,000
--------------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD...... (1,435,643) (4,914,393)
--------------- ------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 24,691,345 36,329,220
--------------- ------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD................ $ 23,255,702 $ 31,414,827
=============== ============
</TABLE>
The Company paid no interest or federal income tax during the period.
See accompanying notes to the financial statements.
5
<PAGE> 6
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL RETAINED
COMMON PAID IN EARNINGS STOCKHOLDERS
STOCK CAPITAL (DEFICIT) EQUITY
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997.............. $36,605 $36,112,921 $ (7,222) $36,142,304
Net increase in net assets from
operations............................ -- -- 5,713,364 5,713,364
Distributions from :
Net investment income................... -- -- (23,084) (23,084)
Realized gains.......................... -- -- (420,969) (420,969)
Issuance of 150,000 shares subsequent to
initial public offering............... 1,500 1,498,500 -- 1,500,000
------- ----------- ----------- -----------
Balance At December 31, 1997............ $38,105 $37,611,421 $ 5,262,089 $42,911,615
------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations....................... -- -- (1,732,378) (1,732,378)
Distributions from net investment
income................................ -- -- (38,105) (38,105)
------- ----------- ----------- -----------
Balance at September 30, 1998........... $38,105 $37,611,421 $ 3,491,606 $41,141,132
======= =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
6
<PAGE> 7
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 generally accepted
accounting principles 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 1997
Annual Report filed on Form 10-K dated March 31, 1998.
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 September 30,
1998, the results of its operations for the nine month period ended September
30, 1998, the results of its operations for the three month period ended
September 30, 1998, and its cash flows for the nine month period ended
September 30, 1998. Interim results are not necessarily indicative of results
to be expected for a full fiscal year.
2. INVESTMENTS, CASH AND CASH EQUIVALENTS
As of September 30, 1998 and December 31, 1997, the identified costs of
investments were $14,440,768 and 13,530,220, 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:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
------------- ------------
<S> <C> <C>
Cash........................................................ $ 21,135 $ 1,568
United States Treasury Bill
3.90% 11/5/98............................................. 23,234,567
1.00% 1/22/98............................................. 24,689,777
----------- -----------
$23,255,702 $24,691,345
=========== ===========
</TABLE>
3. INVESTMENT ADVISORY AGREEMENT
The Company has entered into an investment advisory agreement (the
"Advisory Agreement") with Brantley Capital Management, L.L.C. (the
"Adviser") under which the 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 Advisory
Agreement. For the nine months ended September 30, 1998 the Adviser earned
$976,341 under the Advisory Agreement. Certain officers of the Company are
also officers of the Adviser. No officer of the Adviser receives any
compensation from the Company for serving as officer of the Company.
7
<PAGE> 8
BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
4. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
FOR THE PERIODS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
--------------------- ------------------ ------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................ $ 11.26 $ 9.87
Income from investment operations:
Net increase (decrease) in Net Assets resulting from
operations............................................ (0.45) 0.76
Distributions from Net Investment Income................ (0.01) (0.02)
------- ------
Total from investment operations........................ (0.46) 0.74
------- ------
Issuance of Shares Subsequent to Initial Public Offering
at $10 per Share...................................... -- 0.01
------- ------
Net Asset Value, End of the Period...................... $ 10.80 $10.62
======= ======
Market Value, End of the Period......................... $ 6.88 $ 9.25
======= ======
Total Return, At Market Value........................... (28.49)% (7.35)%
Total Return, At NAV.................................... (3.99)% 7.78%
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Brantley Capital Corporation (the "Company") is a closed end,
non-diversified investment company that has elected to be treated as a "business
development company" under the Investment Company Act of 1940, as amended (the
"Act"). The Company invests primarily in the equity and equity-linked debt
securities of private companies. The Company's principal investment objective is
the realization of long-term appreciation in the value of its investments.
This Quarterly Report on Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company and its investment portfolio companies. Such
statements are only predictions and the actual events or results may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those relating to investment capital demand, pricing, market acceptance, the
effect of economic conditions, litigation and the effect of regulatory
proceedings, competitive forces, the results of financing and investing efforts,
the ability to complete transactions and other risks identified below or in the
Company's filings with the Securities and Exchange Commission. The following
analysis of the financial condition and results of operation of the Company
should be read in conjunction with the Financial Statements, the Notes thereto
and the other financial information included elsewhere in this report.
RESULTS OF OPERATIONS
The Company began operations upon the completion of an initial public
offering on December 3, 1996. Its principal investment objective is the
realization of long-term capital appreciation from investing primarily in the
equity and equity-linked debt securities of private companies. In addition, the
Company can invest a portion of its assets in post-venture small-cap public
companies.
Pending the completion of equity and equity-linked debt securities that
meet the Company's investment objectives, available funds are invested in
short-term securities. In addition, as more fully described below, the Company
has entered into several investments in equity and equity-linked debt securities
of private companies which earn regular dividends and interest. Dividend and
interest income on investments was $527,119 and $1,384,884, respectively, for
the quarter and nine months ended September 30, 1998 compared to $409,442 and
$1,267,303, respectively, for the quarter and nine months ended September 30,
1997. The significant components of total operating expenses for the quarter and
nine months ended September 30, 1998 were fees of $384,479 and $976,341,
respectively, to Brantley Capital Management, L.L.C., the Company's Investment
Adviser (the "Adviser").
The Company's equity and equity-linked debt security investments resulted
in net realized and unrealized gains(losses) on investment transactions for the
quarter and nine months ended September 30, 1998 of ($3,533,132) and
($1,809,074), respectively, and $1,096,218 and $2,908,755 for the quarter and
nine months ended September 30, 1997. Beginning in the second quarter of 1997,
the Company invested in a number of small capitalization public stocks which are
subject to general stock market conditions. During the quarter ended September
30, 1998, the small cap public stock markets experienced overall declines as
measured by the Russell 2000 Index which lost 31% of its value between July 17,
1998 and October 9, 1998. Since then, the markets have rebounded, increasing 23%
from October 9, 1998 to November 4, 1998. The unrealized gains (losses) for the
quarter ended September 30, 1998 were significantly influenced by these general
market conditions.
Like other business development companies, mutual funds, financial and
business organizations and individuals around the world, the Company could be
adversely affected if the computer systems used by the Adviser, third party
administrator, custodian and transfer agent do not properly process and
calculate date-related information from and after January 1, 2000. Significant
accounting and custodial services of the fund are provided by State Street Bank
& Trust Company. In addition, transfer agency services are provided by Boston
Equiserv. The Company has made inquiries to the Adviser, State Street Bank &
Trust Company, and Boston Equiserv regarding whether they expect to have their
computer systems year 2000 compliant. Reports describing the progress State
Street Bank & Trust Company and Boston Equiserv are making in preparation for
January 1, 2000 are reviewed on a regular basis. While there can be no
assurances that the steps being taken by these service providers will be
sufficient to avoid any adverse impact on the Company, all of these service
providers have
9
<PAGE> 10
reported that they expect their systems to be in compliance with year 2000
requirements prior to that time. While all of the company's service providers
are reporting an appropriate state of readiness, the risk of a service provider
failing to be year 2000 compliant could mean many things based upon the specific
conditions of non-compliance. As such the Company is regularly monitoring the
projected readiness of its service providers to establish optimal time frames in
which to invoke contingency efforts should a year 2000 transition plan fail.
These contingency efforts may involve the development of alternative operational
procedures or, in a worse case scenario, requests for proposals to identify
alternative service providers prior to January 1, 2000. Because the Company uses
third parties for nearly all of its operating and administrative activities, it
has no material computer systems to maintain itself, and as such, the cost of
complying with the year 2000 issue is expected to be minimal.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company completed an initial public offering of common stock of $36.5
million on December 3, 1996 and a related over-allotment option of $1.5 million
on January 15, 1997. The Company believes that the net proceeds of this offering
will be adequate to fund the growth of the Company's investment portfolio
through 1999.
At September 30, 1998, the Company had $23,255,702 in cash and cash
equivalents. The Company invested the proceeds of the initial public offering on
a short-term basis pending completion of investments in equity and equity-linked
debt securities of private companies and post-venture small-cap public
companies. At September 30, 1998, the cash was primarily invested in a United
States Treasury security.
At September 30, 1998, the cost of equity and equity-linked debt security
investments was $14,440,768 and their aggregate market value was $17,894,541.
Original equity and equity-linked debt security investments that individually
represent more than 3% of the total assets of the Company at September 30, 1998
were comprised of the following transactions:
Waterlink, Inc.
On April 21, 1997, in connection with the Company's commitment to provide
$2.1 million of a $10 million senior subordinated note facility for Waterlink,
Inc. ("Waterlink"), the Company received warrants to purchase 26, 250 shares of
Waterlink common stock at an exercise price of $4.50 per share (the "Waterlink
Warrants"). Waterlink is a consolidation strategy company in the industrial
water and wastewater treatment market. On June 27, 1997, Waterlink completed its
initial public offering of common stock pursuant to which Waterlink sold
4,500,000 shares at an $11.00 per share price. Following the Waterlink initial
public offering, Waterlink terminated its senior subordinated note facility. At
its termination, the facility had not been drawn down and no notes were issued
to the Company. The Company still holds the Waterlink Warrants. At September 30,
1998, the market price of Waterlink common Stock (NYSE:WLK) closed at $2.75.
Health Care Solutions, Inc.
On September 30, 1997, the Company entered into a $1.5 million convertible
junior subordinated promissory note facility for Health Care Solutions, Inc.
("Health Care Solutions"). Health Care Solutions is an acquisition strategy
company in the home healthcare services market and is currently at a $50 million
annual sales rate level with a strong presence in the Midwest and Great Lakes
States region. The terms of the notes call 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 are convertible into
common stock at a price of $3.50 per share. In connection with its commitment to
provide this facility, the Company received warrants to purchase up to $450,000
of common stock valued at an exercise price of 10% of an initial public offering
("IPO") 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 IPO. The
proceeds of the notes will be used by Health Care Solutions to help finance
current and future acquisitions.
10
<PAGE> 11
Fitness Quest, Inc.
On December 16, 1997, the Company 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. ("Fitness Quest"). As a result the Company
purchased 788,961 shares of Fitness Quest Series A Convertible Preferred Stock
at $1.71 per share. Fitness Quest is a direct marketing and distribution company
launching an acquisition strategy. A portion of 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 the remainder will be used for potential acquisitions. Fitness Quest
has been in the fitness promotional products business since 1994. The terms of
the Preferred Stock provide for payment of a 10% dividend, payable quarterly.
During 1997, Fitness Quest grew to $120 million in sales and improved its
operating margins and profits. In addition, it is planning for 1998 sales growth
rates of approximately 40% with continued improvement in operating margins and
profits. The Company's Board of Directors, after a complete evaluation, made a
determination to increase the Company's market value in its Fitness Quest
investment in 1997 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.
During September 1998, the Company funded a $701,300 commitment to invest
with Brantley Venture Partners III, L.P. in a $2.0 million senior subordinated
debt investment in Fitness Quest. The note matures on March 31, 1999 and calls
for a 10% interest rate per annum. In addition the Company will receive a
warrant to purchase 72,550 shares of Fitness Quest stock for $.01 per share. The
proceeds of the investment will be used to fund Fitness Quest's working capital
needs as it prepares for the upcoming holiday season.
Corporate Wings, Inc.
On December 23, 1997, the Company funded a $2.1 million commitment to
invest with Brantley Venture Partners III, L.P. in a $6.0 million preferred
stock issue for Corporate Wings, Inc. ("Corporate Wings"). The Company's
investment consists of approximately 644,000 shares of Corporate Wings Series A
Convertible Preferred Stock at $3.26 per share. The terms of the transaction
provide for an 8% dividend, payable quarterly. Corporate Wings' businesses
include fixed base operations, related flight management services and inertial
navigation systems repair services for private and commercial aircraft from six
locations. Corporate Wings has been in business since 1978 and had approximately
$40 million in sales in 1997. Recently the Company completed the acquisition of
a $60 million fixed based operator in the northeastern United States putting the
Company over the $100 million revenue level.
Disposable Products Company, LLC.
On August 10, 1998, The Company entered into an investment led by Banc One
Capital to provide $1.0 million of a $3.0 million Subordinated Debt Facility
with Warrants to Disposable Products Company, LLC. ("DPC"). DPC is an
acquisition strategy company in the business of manufacturing and converting of
paper and nonwoven materials into wiping products for sale to commercial,
institutional, industrial and government markets. In addition the company is a
converter and reseller of other safety and industrial/janitorial products. Upon
completion of a pending acquisition, the company will have revenues of
approximately $25.0 million. The terms of the debt facility calls for a 12%
interest rate per annum with a final maturity five years from the closing.
Brantley will also receive a detachable common stock purchase warrant
exercisable into 5% of the fully-diluted common stock of the company at the time
of exercise at a nominal exercise price. The proceeds of the facility will be
used to finance current and future acquisitions.
At September 30, 1998, the Company had stockholders' equity of $41,141,132,
resulting in a net asset value per share of $10.80.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The deadline for stockholders to submit proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 for inclusion in the Company's proxy
statement for its 1999 Annual Meeting of Stockholders is December 15, 1998. Any
proposals submitted other than pursuant to Rule 14a-8 must be received by the
Company no later than March 19, 1999 or such proposals will be considered
untimely, in which case the Company's proxy for its 1999 Annual Meeting of
Stockholders may confer discretionary voting authority regarding such matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Reference is made to the Exhibit Index that is found on page 14 of this
Form 10-Q.
b. Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
Form 10-Q is filed
12
<PAGE> 13
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
<TABLE>
<S> <C>
Date: November 13, 1998 By: /s/ ROBERT P. PINKAS
--------------------------------------------------------
Robert P. Pinkas
Chief Executive Officer
Date: November 13, 1998 By: /s/ TAB A. KEPLINGER
--------------------------------------------------------
Tab A. Keplinger
Chief Financial Officer
</TABLE>
13
<PAGE> 14
EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated
herein by reference to a prior filing, in accordance with Rule 12b-32 under the
Securities Exchange Act of 1934. (Asterisk denotes exhibits filed with this
report.)
<TABLE>
<C> <S>
EXHIBIT 3 Articles of Incorporation and By-laws
(1) Articles of Incorporation and Articles of Amendment and
Restatement of the Charter of Company (Exhibit 2.a.1 to the
Company's Registration Statement on Form N-2 (Reg. No.
333-10785) filed on August 23, 1996 (the "Registration
Statement") and Exhibit 2.a.2 to Amendment No. 2 to the
Registration Statement filed on November 22, 1996, which
exhibits are incorporated herein by reference)
(2) Bylaws of the Company (Exhibit 2.b.2 to Amendment No. 2 to
the Registration Statement filed on November 22, 1996, 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 30, 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 exhibits are incorporated herein by
reference)
(2) Form of Investment Advisory Agreement between the Registrant
and the Investment Advisor (Exhibit 2.g to Amendment No. 3
to the Registration Statement filed on November 26, 1996,
which exhibits are 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 exhibits are 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 exhibits are
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 exhibits are 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 exhibits are
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 exhibits are 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 exhibits are
incorporated herein by reference)
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 14,440,768
<INVESTMENTS-AT-VALUE> 17,894,541
<RECEIVABLES> 296,884
<ASSETS-OTHER> 168,603
<OTHER-ITEMS-ASSETS> 23,255,702
<TOTAL-ASSETS> 41,615,730
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 474,598
<TOTAL-LIABILITIES> 474,598
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,649,526
<SHARES-COMMON-STOCK> 3,810,535
<SHARES-COMMON-PRIOR> 3,810,535
<ACCUMULATED-NII-CURRENT> 38,591
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 70,000
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,879,074)
<NET-ASSETS> 41,141,132
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,384,884
<OTHER-INCOME> 0
<EXPENSES-NET> 1,308,188
<NET-INVESTMENT-INCOME> 76,696
<REALIZED-GAINS-CURRENT> 70,000
<APPREC-INCREASE-CURRENT> (1,879,074)
<NET-CHANGE-FROM-OPS> (1,732,378)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 38,105
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,209,005)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 976,341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,308,188
<AVERAGE-NET-ASSETS> 42,720,233
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.47)
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> .031
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
