##### Table of Contents



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
1934FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2003


OR

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

OF THE SECURITIES EXCHANGE ACT
OF 1934   FOR THE TRANSITION PERIOD
FROMTO


Commission File Number: 814-00127

BRANTLEY CAPITALCORPORATION






(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
September 30, 2003 was 3,810,535.





---

TABLE OF CONTENTS



|                               |                                                                                               |                                     |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------- |  |  |  |  |  | 
|PART 1. FINANCIAL INFORMATION 
|                               | Item 1. Financial Statements                                                                 
|                               |                                                                                               | BALANCE SHEETS                     
|                               |                                                                                               | STATEMENTS OF OPERATIONS           
|                               |                                                                                               | STATEMENTS OF CHANGES IN NET ASSETS
|                               |                                                                                               | STATEMENTS OF CASH FLOWS           
|                               |                                                                                               | STATEMENT OF INVESTMENTS           
|                               |                                                                                               | NOTES TO THE FINANCIAL STATEMENTS  
|                               | 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-31.1  CEO 302 CERTIFICATION
|EX-31.2  CFO 302 CERTIFICATION
|EX-32.1  906 CEO CERTIFICATION
|EX-32.2  906 CFO CERTIFICATION



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##### Table of Contents






PART 1. FINANCIAL INFORMATION




Item 1. Financial Statements




BRANTLEY CAPITAL CORPORATION
BALANCE SHEETS

|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |            |            | 
|------------------------------------ | ---------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ------------- | ---------- | ------------ | ---------- | ---------- | ---------- | 
|                                     |                              |                                                                                                                                                                   |                                            |            | September 30, |            | December 31,
|                                     |                              |                                                                                                                                                                   |                                            |            | 2003          |            | 2002        
|                                     |                              |                                                                                                                                                                   |                                            |            | (Unaudited)   |            | (Audited)   
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |             
|ASSETS                               |                              |                                                                                                                                                                   |                                            |            |               |            |              |           
|Investments, at fair value           |                              |                                                                                                                                                                   |                                            |            |               |            |              |           
|                                     | Companies 5% to 25% owned    |                                                                                                                                                                   | $                                          | 51,814,010 |               |            | $            | 56,074,862 |           
|                                     | Companies less than 5% owned |                                                                                                                                                                   |                                            | 9,601,302  |               |            |              | 6,008,973  |           
|Cash and cash equivalents            |                              |                                                                                                                                                                   | 6,176,767                                  |            |               |            | 237,154      |           
|Restricted cash                      |                              |                                                                                                                                                                   | 6,000,000                                  |            |               |            | 6,000,000    |           
|Dividends and interest receivable    |                              |                                                                                                                                                                   | 5,613,943                                  |            |               |            | 5,426,694    |           
|Other assets                         |                              |                                                                                                                                                                   | 60,760                                     |            |               |            |             |           
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           
|                                     |                              | Total Assets                                                                                                                                                      |                                            | $          | 79,266,782    |            |              | $          | 73,747,683 |           
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           
|LIABILITIES AND STOCKHOLDERS EQUITY |                              |                                                                                                                                                                   |                                            |            |               |            |              |           
|Notes payable                        |                              | $                                                                                                                                                                 | 7,500,000                                  |            |               | $          | 6,000,000    |           
|Advisory fee payable                 |                              |                                                                                                                                                                   | 504,381                                    |            |               |            | 477,860      |           
|Accrued professional fees            |                              |                                                                                                                                                                   | 707,357                                    |            |               |            | 1,095,505    |           
|Other liabilities                    |                              |                                                                                                                                                                   | 274,128                                    |            |               |            | 273,990      |           
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           
|                                     |                              | Total Liabilities                                                                                                                                                 |                                            |            | 8,985,866     |            |              |            | 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 September 30, 2003
and December 31, 2002, respectively |                                            |            | 38,105        |            |              |            | 38,105     |           
|                                     |                              | Additional paid in capital                                                                                                                                        |                                            |            | 34,506,838    |            |              |            | 34,506,838 |           
|                                     |                              | Retained earnings                                                                                                                                                 |                                            |            | 35,735,973    |            |              |            | 31,355,385 |           
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           
|                                     |                              |                                                                                                                                                                   | Total Stockholders Equity                 |            |               | 70,280,916 |              |            |            | 65,900,328 | 
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           
|                                     |                              |                                                                                                                                                                   | Total Liabilities and Stockholders Equity |            | $             | 79,266,782 |              |            | $          | 73,747,683 | 
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           
|Net Asset Value Per Share            |                              | $                                                                                                                                                                 | 18.44                                      |            |               | $          | 17.29        |           
|                                     |                              |                                                                                                                                                                   |                                            |            |               |            |              |            |           

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





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##### Table of Contents






BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|---------------------------------------------------------------------------------- | ------------------------------------------ | ---------------------------------------------- | --------- | ------------------- | --------- | ------------------- | ---------- | --------- | --------- | 
|                                                                                   |                                            |                                                |           | For the nine months |           | For the nine months
|                                                                                   |                                            |                                                |           | ended               |           | ended              
|                                                                                   |                                            |                                                |           | September 30,       |           | September 30,      
|                                                                                   |                                            |                                                |           | 2003                |           | 2002               
|                                                                                   |                                            |                                                |           |                     |           |                    
|Investment Income:                                                                 |                                            |                                                |           |                     |           |                     |            |          
|                                                                                   | Interest and Dividends                     |                                                |           |                     |           |                     |            |           |          
|                                                                                   |                                            | Companies owned 5% to 25%                      |           | $                   | 5,333,116 |                     |            | $         | 1,626,575 | 
|                                                                                   |                                            | Companies less than 5% owned                   |           |                     | 694,342   |                     |            |           | 61,327    | 
|                                                                                   |                                            | Write off of Interest and Dividends Receivable |           |                     | (517,886  | )                   |            |           |          | 
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|                                                                                   | Total investment income                    |                                                |           | 5,509,572           |           |                     |            | 1,687,902 |          
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|Operating Expenses:                                                                |                                            |                                                |           |                     |           |                     |            |          
|                                                                                   | Advisory fees                              |                                                |           | 1,479,334           |           |                     |            | 1,419,601 |          
|                                                                                   | Administration fees                        |                                                |           | 56,096              |           |                     |            | 56,096    |          
|                                                                                   | Professional fees                          |                                                |           | 215,929             |           |                     |            | 666,437   |          
|                                                                                   | Interest and other expenses                |                                                |           | 642,247             |           |                     |            | 550,685   |          
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|                                                                                   | Total operating expenses                   |                                                |           | 2,393,606           |           |                     |            | 2,692,819 |          
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|Investment Income (Loss), net                                                      |                                            |                                                | 3,115,966 |                     |           |                     | (1,004,917 | )        
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|Net Realized and Unrealized Gains (Losses) on
Investments:                         |                                            |                                                |           |                     |           |                     |            |          
|                                                                                   | Net realized gains (losses) on investments |                                                |           | 470,896             |           |                     |            | (318,939  | )        
|                                                                                   | Net unrealized gains on investments        |                                                |           | 793,726             |           |                     |            | 253,841   |          
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|Net
realized and unrealized gains (losses) on investment transactions              |                                            |                                                | 1,264,622 |                     |           |                     | (65,098    | )        
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|Net increase (decrease) in net assets resulting from operations                    |                                            | $                                              | 4,380,588 |                     |           | $                   | (1,070,015 | )        
|                                                                                   |                                            |                                                |           |                     |           |                     |            |           |           | 
|Net increase (decrease) in net assets from operations per
share, basic and diluted |                                            | $                                              | 1.15      |                     |           | $                   | (0.28      | )        
|                                                                                   |                                            |                                                |           |                     |           |                     |            |          
|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.





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##### Table of Contents



BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                                   |                                            |                              |            |                 |           |                 |           |           |         | 
|---------------------------------------------------------------------------------- | ------------------------------------------ | ---------------------------- | ---------- | --------------- | --------- | --------------- | --------- | --------- | ------- | 
|                                                                                   |                                            |                              |            | For the quarter |           | For the quarter
|                                                                                   |                                            |                              |            | ended           |           | ended          
|                                                                                   |                                            |                              |            | September 30,   |           | September 30,  
|                                                                                   |                                            |                              |            | 2003            |           | 2002           
|                                                                                   |                                            |                              |            |                 |           |                
|Investment Income:                                                                 |                                            |                              |            |                 |           |                 |           |          
|                                                                                   | Interest and Dividends                     |                              |            |                 |           |                 |           |           |        
|                                                                                   |                                            | Companies owned 5% to 25%    |            | $               | 4,861,673 |                 |           | $         | 531,419 | 
|                                                                                   |                                            | Companies less than 5% owned |            |                 | 231,158   |                 |           |           | 165,765 | 
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|                                                                                   | Total investment income                    |                              |            | 5,092,831       |           |                 |           | 697,184   |        
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|Operating Expenses:                                                                |                                            |                              |            |                 |           |                 |           |          
|                                                                                   | Advisory fees                              |                              |            | 544,880         |           |                 |           | 483,280   |        
|                                                                                   | Administration fees                        |                              |            | 18,904          |           |                 |           | 18,904    |        
|                                                                                   | Professional fees                          |                              |            | 39,067          |           |                 |           | 567,915   |        
|                                                                                   | Interest and other expense                 |                              |            | 241,084         |           |                 |           | 182,567   |        
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|                                                                                   | Total operating expenses                   |                              |            | 843,935         |           |                 |           | 1,252,666 |        
|Investment Income (Loss), net                                                      |                                            |                              | 4,248,896  |                 |           |                 | (555,482  | )        
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|Net Realized and Unrealized Gains (Losses) on Investments:                         |                                            |                              |            |                 |           |                 |           |          
|                                                                                   | Net realized gains (losses) on investments |                              |            | 470,896         |           |                 |           | (149,187  | )      
|                                                                                   | Net unrealized losses on investments       |                              |            | (2,194,822      | )         |                 |           | (123,769  | )      
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|Net
realized and unrealized losses on investment transactions                      |                                            |                              | (1,723,926 | )               |           |                 | (272,956  | )        
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|Net increase (decrease) in net assets resulting from operations                    |                                            | $                            | 2,524,970  |                 |           | $               | (828,438  | )        
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|Net increase (decrease) in net assets from operations per
share, basic and diluted |                                            | $                            | 0.66       |                 |           | $               | (0.22     | )        
|                                                                                   |                                            |                              |            |                 |           |                 |           |          
|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.





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##### Table of Contents






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 losses                         |  |        |       |         |  |            |           |              |  |   | (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 income                       |  |        |       |         |  |            |           |              |  |   | 3,115,966  |       |  |   | 3,115,966  |  
|Net realized gain                           |  |        |       |         |  |            |           |              |  |   | 470,896    |       |  |   | 470,896    |  
|Net unrealized gain                         |  |        |       |         |  |            |           |              |  |   | 793,726    |       |  |   | 793,726    |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Balance at September 30, 2003               |  | $      | 38,105 |         |  | $          | 34,506,838 |              |  | $ | 35,735,973 |       |  | $ | 70,280,916 |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  

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





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##### Table of Contents






BRANTLEY CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                       |                                                                                                              |                                              |                                    |           |                     |            |                     |            |          |            |  
|------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------ | -------------------------------------------- | ---------------------------------- | --------- | ------------------- | ---------- | ------------------- | ---------- | -------- | ---------- | -
|                                                       |                                                                                                              |                                              |                                    |           | For the nine months |            | For the nine months
|                                                       |                                                                                                              |                                              |                                    |           | ended September 30, |            | ended September 30,
|                                                       |                                                                                                              |                                              |                                    |           | 2003                |            | 2002               
|                                                       |                                                                                                              |                                              |                                    |           |                     |            |                    
|Cash Flows from Operating Activities:                  |                                                                                                              |                                              |                                    |           |                     |            |                     |           
|                                                       | Net change in net assets resulting from operations:                                                          |                                              | $                                  | 4,380,588 |                     |            | $                   | (1,070,015 | )       
|                                                       | Adjustments to reconcile net change in net assets resulting
from operations to net cash used for operations: |                                              |                                    |           |                     |            |                     |            |         
|                                                       |                                                                                                              | Net
realized (gains) losses from investments |                                    |           | (470,896            | )          |                     |            | 318,939  |           
|                                                       |                                                                                                              | Net unrealized gains on investments          |                                    |           | (793,726            | )          |                     |            | (253,841 | )         
|                                                       |                                                                                                              | Changes in assets and liabilities:           |                                    |           |                     |            |                     |            |          |           
|                                                       |                                                                                                              |                                              | Dividend and interest receivable   |           |                     | (187,249   | )                   |            |          | (1,351,590 | )
|                                                       |                                                                                                              |                                              | Receivable for investments sold    |           |                     |           |                     |            |          | (318,709   | )
|                                                       |                                                                                                              |                                              | Other assets                       |           |                     | (60,760    | )                   |            |          | (39,799    | )
|                                                       |                                                                                                              |                                              | Payable for investments purchased  |           |                     |           |                     |            |          | 85,853     |  
|                                                       |                                                                                                              |                                              | Advisory fee payable               |           |                     | 26,521     |                     |            |          | (9,197     | )
|                                                       |                                                                                                              |                                              | Accrued professional fees          |           |                     | (388,148   | )                   |            |          | 409,975    |  
|                                                       |                                                                                                              |                                              | Distributions payable              |           |                     |           |                     |            |          | (736,455   | )
|                                                       |                                                                                                              |                                              | Other liabilities                  |           |                     | 138        |                     |            |          | 49,390     |  
|                                                       |                                                                                                              |                                              | Purchases of investment securities |           |                     | (1,707,275 | )                   |            |          | (9,117,416 | )
|                                                       |                                                                                                              |                                              | Sales of investment securities     |           |                     | 3,640,420  |                     |            |          | 6,814,960  |  
|                                                       |                                                                                                              |                                              |                                    |           |                     |            |                     |            |         
|                                                       | Net cash provided by (used for) operating activities                                                         |                                              |                                    | 4,439,613 |                     |            |                     | (5,217,905 | )       
|                                                       |                                                                                                              |                                              |                                    |           |                     |            |                     |            |         
|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 |                                                                                                              |                                              | 5,939,613                          |           |                     |            | (5,217,905          | )         
|Cash and cash equivalents, beginning of period         |                                                                                                              |                                              | 237,154                            |           |                     |            | 11,369,345          |           
|                                                       |                                                                                                              |                                              |                                    |           |                     |            |                     |            |         
|Cash and cash equivalents, end of the period           |                                                                                                              | $                                            | 6,176,767                          |           |                     | $          | 6,151,440           |           
|                                                       |                                                                                                              |                                              |                                    |           |                     |            |                     |            |         

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





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##### Table of Contents






BRANTLEY CAPITAL CORPORATION
STATEMENT OF INVESTMENTS  (Unaudited)
September 30, 2003

|                                     |                                                                      |            |  |           |  |   |            |            | 
|------------------------------------ | -------------------------------------------------------------------- | ---------- |  | --------- |  | - | ---------- | ---------- | 
|Name of Issuer and Title of Issue    |                                                                      | Shares/Par |  | Value    
|                                     |                                                                      |            |  |          
|Aviation                             |                                                                      |            |  |           |  |   |            |           
|                                     | Flight
Options International Inc. Preferred Stock and Warrants *#@   |            |  | 3,342,060 |  |   | $          | 32,500,000 | 
|                                     |                                                                      |            |  |           |  |   |            |           
|Business Services                    |                                                                      |            |  |           |  |   |            |           
|                                     | Disposable Products Company, LLC Subordinated Debt with Warrants #   |            |  | 3,615,992 |  |   |            | 3,609,332  | 
|                                     | 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  | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 7,234,436  |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Drugs & Health Care                  |                                                                      |            |  |           |  |   |            |           
|                                     | Integrated Physician Solutions, Inc. Convertible Preferred Stock #   |            |  | 793,000   |  |   |            | 3,172,000  | 
|                                     | Integrated Physician Solutions, Subordinated Debt with Warrants #    |            |  | 697,448   |  |   |            | 692,348    | 
|                                     | Health Care Solutions, Subordinated Debt with Warrants #             |            |  | 2,098,117 |  |   |            | 2,127,518  | 
|                                     | National Rehabilitation Partners, Inc. Convertible Preferred Stock#@ |            |  | 2,218,375 |  |   |            | 1,454,284  | 
|                                     | National Rehabilitation Partners, Inc. Subordinated Debt #           |            |  | 27,228    |  |   |            | 27,228     | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 7,473,378  |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Miscellaneous                        |                                                                      |            |  |           |  |   |            |           
|                                     | Streamline Foods, Inc. Convertible Preferred Stock #@                |            |  | 898,568   |  |   |            | 699,726    | 
|                                     | Streamline Foods, Inc. Subordinated Debt with Warrants #             |            |  | 122,500   |  |   |            | 95,275     | 
|                                     | Value Creation Partners, Inc. Convertible Preferred Stock #@         |            |  | 304,989   |  |   |            | 2,225,960  | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 3,020,961  |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Oil                                  |                                                                      |            |  |           |  |   |            |           
|                                     | Petroleum Partners, Inc. Convertible Preferred Stock #@              |            |  | 850,000   |  |   |            |           | 
|                                     | Petroleum Partners, Inc. Subordinated Debt with Warrants #           |            |  | 1,953,125 |  |   |            |           | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   |           |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Retail Trade                         |                                                                      |            |  |           |  |   |            |           
|                                     | Fitness Quest, Inc. Convertible Preferred Stock *#@                  |            |  | 788,961   |  |   |            | 8,090,338  | 
|                                     | Fitness Quest, Inc. Common Stock #@                                  |            |  | 120,766   |  |   |            | 1,238,385  | 
|                                     | Fitness Quest, Inc. Warrants #@                                      |            |  | 181,172   |  |   |            | 1,857,814  | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 11,186,537 |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Total
Investments(Cost $28,783,163) |                                                                      |            |  |           |  | $ | 61,415,312 |           
|                                     |                                                                      |            |  |           |  |   |            |           



---

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.

7



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##### Table of Contents






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
September 30, 2003, the results of its operations for the quarters ended
September 30, 2003 and 2002, the results of its operations for the nine
months ended September 30, 2003 and 2002, and its cash flows for the nine
months ended September 30, 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, provided that it is anticipated that the debt
securities will be repaid in full upon maturity. Otherwise such
securities are reported at fair value.

The Company intends to comply with the requirements of the Internal Revenue Code of 1986, as amended, that are applicable to regulated investment
companies (RICs). As a RIC, the Company intends to annually distribute all of its taxable income to shareholders; therefore, the Company has made no provision for income taxes.

2. Investments, Cash and Cash Equivalents

As of September 30, 2003 and December 31, 2002, the identified costs
of investments for financial statement and tax reporting purposes
were $28,783,163, 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:

|                |  |               |           |              |  |   |           | 
|--------------- |  | ------------- | --------- | ------------ |  | - | --------- | 
|                |  | September 30, |           | December 31,
|                |  | 2003          |           | 2002        
|                |  | (Unaudited)   |           | (Audited)   
|                |  |               |           |             
|Cash            |  | $             | 6,176,767 |              |  | $ | 237,154   | 
|Restricted Cash |  | $             | 6,000,000 |              |  | $ | 6,000,000 | 
|                |  |               |           |              |  |   |           | 





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##### Table of Contents



BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS  (Unaudited)  (Continued)

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 nine months ended September 30,
2003, the Investment Adviser earned $1,479,334 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).

4. Financial Highlights

|                                         |                                                        |                                  |       |                     |      |                     |        |        |       |  
|---------------------------------------- | ------------------------------------------------------ | -------------------------------- | ----- | ------------------- | ---- | ------------------- | ------ | ------ | ----- | -
|                                         |                                                        |                                  |       | For the nine months |      | For the nine months
|                                         |                                                        |                                  |       | ended               |      | ended              
|                                         |                                                        |                                  |       | September 30, 2003  |      | September 30, 2002 
|                                         |                                                        |                                  |       |                     |      |                    
|Net Asset Value, Beginning of the Period |                                                        | $                                | 17.29 |                     |      | $                   | 17.85  |       
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Income from investment operations:       |                                                        |                                  |       |                     |      |                     |        |       
|                                         | Net investment income/(floss)                          |                                  |       | 0.82                |      |                     |        | (0.26  | )    
|                                         | Net realized and unrealized gain (loss) on investments |                                  |       | 0.33                |      |                     |        | (0.02  | )    
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|                                         |                                                        | Total from investment operations |       |                     | 1.15 |                     |        |        | (0.28 | )
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Net Asset Value, End of Period           |                                                        | $                                | 18.44 |                     |      | $                   | 17.57  |       
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Market Value, End of Period              |                                                        | $                                | 8.97  |                     |      | $                   | 8.76   |       
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Total return, at Market Value            |                                                        |                                  | 16.49 | % (1)               |      |                     | (19.56 | )% (1)
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Total return, at Net Asset Value         |                                                        |                                  | 6.65  | % (1)               |      |                     | (1.57  | )% (1)
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Total Expenses/Average net assets        |                                                        |                                  | 4.69  | % (2)               |      |                     | 5.32   | % (2) 
|                                         |                                                        |                                  |       |                     |      |                     |        |       
|Net Investment Income/Average net assets |                                                        |                                  | 6.10  | % (2)               |      |                     | (1.49  | )% (2)
|                                         |                                                        |                                  |       |                     |      |                     |        |       

|(1) |  | Not annualized.
|--- |  | ---------------
|   
|(2) |  | Annualized.    

5. Recent Developments

On March 19, 2003, the Company 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 the Company in September 2002, subject to
compliance with the Investment Company Act of 1940. On June 4, 2003, the Company filed
an application for exemptive relief from certain provisions of the 1940 Act in
order to effect the provisions of the Memorandum of Understanding. On June 18,
2003, the Company received comments on it's application from the staff of the Division of
Investment Management. On August 14, 2003 the Company responded to those comments. With
such response, the Company proposed a new Memorandum of Understanding
that was submitted to the staff of the Division of Investment
Management. On November 12, 2003, the Company received comments regarding it's August 14, 2003 response. The Company is in the process of responding to
these additional comments.





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##### Table of Contents



BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS  (Unaudited)  (Continued)

Pursuant to the proposed new Memorandum of Understanding the Company would agree, among
other things:



| |  |  | to cause there to be four (4) directors who are not interested
persons as defined under the 1940 Act and cause
the board to be exactly seven (7) directors in total;                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | if Mr. Goldstein or Gerald Hellerman is no longer a director of the
Company then whichever of Mr. Goldstein or
Mr. Hellerman remains on the board shall have the right to select a
nominee;
|
| |  |  | to not convert the Company from being an advised fund to an
internally managed fund unless a majority of the
independent directors agree;                                                  
|
| |  |  | to allow any independent director
to request independent counsel, subject to the approval of the board,
which cannot be unreasonably withheld; and                                         
|
| |  |  | to refrain from making defamatory remarks about any party to the agreement.                                                                                                                

In addition, the proposed new Memorandum of Understanding provides
that at the next Annual Meeting of Stockholders:



| |  |  | the Company would ask shareholders to approve a plan of orderly disposition
of the assets of the Company or a sale of the
assets with the goal of prompt cash distribution to shareholders;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the Company would ask shareholders to
approve a new investment advisory agreement pursuant to which,
prospectively:                                                                        

| |  |   |  |                                                                                                                                                                                                                                                
| |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | the advisors fees would be reduced from 2.85% to 2.5% of our net asset value;                                                                                                                                                                 
| |  |   |  |                                                                                                                                                                                                                                                
| |  |  |  | all stock options would be forfeited and cancelled; and                                                                                                                                                                                        
| |  |   |  |                                                                                                                                                                                                                                                
| |  |  |  | the advisor would be entitled to receive a fee equal to
20% of the aggregate distributions made by the
Company in excess of $10.00 per share; however, none of the amount
would be paid until aggregate
distributions totaled $12.50 per share.

The new proposed Memorandum of Understanding also includes provisions that
would require the parties to take all steps necessary to accomplish the goals
of the Memorandum, including voting their shares in favor of the proposals.
Under the new proposed memorandum, the Company would also be required to reimburse Mr.
Goldstein for certain expenses (not to exceed $275,000) he incurred in
connection with the proxy solicitation and litigation related to the Annual
Meeting of Stockholders on September 17, 2002. Mr. Goldstein would also agree
not to engage in, lead or fund a proxy contest while the agreement is in
effect. The term of the new proposed Memorandum of Understanding would run
until December 31, 2006.

The new proposed Memorandum of Understanding is subject to approval by the board of directors, the shareholders, and the receipt of exemptive relief from
the Securities and Exchange Commission. If the new proposed Memorandum of
Understanding becomes effective it would replace the previous Memorandum of
Understanding. There can be no assurances that this relief would be granted or
that it would not be subject to unfavorable terms and conditions that would
cause the Company to abandon the application and the new proposed Memorandum of
Understanding.





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##### Table of Contents






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.

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 Part
II, Item 1. Legal
Proceedings. On June 4, 2003, we filed an application for exemptive relief
from certain provisions of the 1940 Act in order to effect the provisions of
the Memorandum of Understanding. On June 18, 2003, we received comments on our
application from the staff of the Division of Investment Management.
On August 14, 2003 we responded to those comments. With our response, we proposed a new Memorandum of Understanding that was submitted to the staff
of the Division of Investment Management. On November 12, 2003, we
received comments regarding our August 14, 2003 response. We are
in the process of responding to these additional comments.

Pursuant to the proposed new Memorandum of Understanding, we would agree,
among other things:



| |  |  | To cause there to be four (4) directors who are not interested
persons as defined under the 1940 Act
and cause the board to be exactly seven (7) directors in total;                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If Mr. Goldstein or Gerald Hellerman is no longer director of the
Company then whichever of Mr.
Goldstein or Mr. Hellerman remains on the board shall have the right to
select a nominee;
|
| |  |  | To not convert the Company from being an advised fund to an
internally managed fund unless a
majority of the independent directors agree;                                                
|
| |  |  | To allow any independent director to request independent counsel, subject to approval of the board,
which cannot be unreasonably withheld; and                                           
|
| |  |  | To refrain from making defamatory remarks about any party to the agreement.                                                                                                              

In addition, the proposed new Memorandum of Understanding provides that at the
next Annual Meeting of Stockholders:



| |  | We would ask shareholders to approve a plan of orderly disposition of
the assets of the Company or a sale of the assets with the goal of prompt
cash distribution to shareholders;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents





| |  | We would ask shareholders to
approve a new investment advisory agreement pursuant to which,
prospectively:
|- |  | ----------------------------------------------------------------------------------------------------------



| |  |  | The advisors fees would be reduced from 2.85% to 2.5% of our net asset value;                                                                                                                                                                 
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | All stock options would be forfeited and cancelled; and                                                                                                                                                                                        
|
| |  |  | The advisor would be entitled to receive a fee equal to 20% of the
aggregate distributions made by
the Company in excess of $10.00 per share; however, none of the amount
would be paid until
aggregate distributions totaled $12.50 per share.

The new proposed Memorandum of Understanding also includes provisions that
would require the parties to take all steps necessary to accomplish the goals
of the Memorandum, including voting their shares in favor of the proposals.
Under the new proposed memorandum, we would also be required to reimburse Mr.
Goldstein for certain expenses (not to exceed $275,000) he incurred in
connection with the proxy solicitation and litigation related to the Annual
Meeting of Stockholders on September 17, 2002. Mr. Goldstein would also agree
not to engage in, lead or fund a proxy contest while the agreement is in
effect. The term of the new proposed Memorandum of Understanding would run
until December 31, 2006.

The new proposed Memorandum of Understanding is subject to approval by our
board of directors, our shareholders, and
the receipt of exemptive relief from the Securities and Exchange Commission. If
the new proposed Memorandum of Understanding becomes effective it would replace
the previous Memorandum of Understanding. There can be no assurances that this
relief would be granted or that it would not be subject to unfavorable terms
and conditions that would cause us to abandon the application and the new
proposed Memorandum of Understanding.

Proceeds we receive from liquidity events are intended to be distributed
to shareholders after retaining sufficient cash for operations including any
follow-on investments in accordance with the proposed memorandum of
understanding. The proceeds from the liquidity events will be held
in cash and short
term investments until such time as they may be distributed to shareholders.
Such distributions may not be made in accordance with such memorandum until we
receive both regulatory and shareholder approvals. There can be no assurance
when or in what amount any potential distributions will be made or when such
approvals may be received.

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





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##### Table of Contents



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
increase (decrease) 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 realized and unrealized gains (losses) 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 in 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 September 30, 2003, and
2002 were $5,092,831, and $697,184, respectively. Dividend and interest income on investments for the
nine months ended September 30, 2003, and 2002 were $5,509,572, and $1,687,902,
respectively. The
increase in interest and dividend income during the three months ended
September 30, 2003 was primarily
due to the July 31, 2003 recapitalization of Fitness Quest, Inc., as more fully
described below. The increase
in interest and dividend income during the nine months ended September 30, 2003
was primarily due to the
July 31, 2003 recapitalization of Fitness Quest, Inc., as more fully described
below, offset by the June
2003 write-off of our investment and related accrued interest receivable in
Petroleum Partners, Inc. as more
fully described below.

Operating Expenses

Total operating expenses during the three months ended September 30, 2003,
and 2002 were $843,935 and $1,252,666, respectively. Total operating expenses
during the three months ended September 30, 2003 and 2002 included
advisory fees of $544,880 and $483,280, respectively, professional fees of $39,067 and $567,915, respectively and interest and other
expenses of $241,084 and $182,567, respectively. The decrease in professional fees during 2003 was a
result of the one-time costs relating to the 2002 annual
meeting of shareholders. The increase in interest and other expenses during
2003 reflects the increased interest costs associated with the increased note
payable balance and increased directors and officer liability insurance costs.

Total operating expenses during the nine months ended September 30, 2003,
and 2002 were $2,393,606 and $2,692,819, respectively. Total operating expenses
during the nine months ended September 30, 2003 and 2002 included
advisory fees of $1,479,334 and $1,419,601, respectively, professional fees of $215,929 and $666,437, respectively and interest and other
expenses of $642,247 and $550,685, respectively. The





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##### Table of Contents



decrease in professional fees during 2003 was a result of the one-time costs
relating to the 2002 annual meeting of shareholders. The
increase in interest and other expenses during 2003 reflects the increased
interest costs associated with the increased note payable balance and increased
directors and officer liability insurance costs.

Net Realized and Unrealized Gains
(Losses) on Investment Transactions

During the nine months ended September 30, 2003 and 2002, valuation of our
equity and mezzanine investments resulted in net realized and unrealized gains
(losses) on investments of $1,264,622 and ($65,098), respectively. At September 30, 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 2003 were primarily due to an increase in the valuation of Fitness Quest, Inc. resulting from the July 31,
2003 recapitalization and a write-down in the valuation of Petroleum
Partners, Inc. as more fully discussed below.

Financial Condition, Liquidity and Capital Resources

At September 30, 2003 and December 31, 2002, we had $6,176,767 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. See Recent Developments.

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. In July 2003 Fitness Quest, Inc. and Health Care Solutions, Inc.
made cash distributions to the Company as more fully described below. 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% (5.00% at September 30, 2003). As of September
30, 2003, $1.5 million has been drawn down on the note. Subsequent to September
30, 2003, the note was repaid in full.

At September 30, 2003 and December 31, 2002, we had stockholders equity
of $70,280,916 and $65,900,328, respectively, resulting in a net asset value
per share of $18.44 and $17.29, respectively. At September 30, 2003 and
December 31, 2002, we had $7,500,000 and $6,000,000 of outstanding
indebtedness, respectively. For the nine months ended September 30, 2003, the
weighted average interest rate on this indebtedness was 4.22%.

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 September 30, 2003 and December 31, 2002, the aggregate cost of the
investments held was $28.8 million and $30.3 million, respectively,
and their aggregate market value was $61.4 million and $62.1 million,
respectively, for an aggregate fair value appreciation of $32.6
million and $31.8 million,
respectively.





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##### Table of Contents



Portfolio Company Investments

The following is a list of companies in which we had
an investment and the cost and fair value of such securities at
September
30, 2003.

|                                     |  |                                               |  |      |            |            |  |   |            | 
|------------------------------------ |  | --------------------------------------------- |  | ---- | ---------- | ---------- |  | - | ---------- | 
|Name of Company                      |  | Nature of its Principal Business              |  | Cost |            | Fair Value
|                                     |  |                                               |  |      |            |           
|Disposable Products
Company, LLC     |  | Non-Woven Paper Products
Manufacturer         |  |      | 3,615,993  |            |  |   | 3,609,332  | 
|Fitness Quest, Inc.                  |  | Fitness Products Direct
Marketer              |  |      | 2,225,620  |            |  |   | 11,186,537 | 
|Flight Options
International, Inc.   |  | Private Air Travel Services                   |  |      | 5,562,500  |            |  |   | 32,500,000 | 
|Health Care Solutions,
Inc.          |  | Home Health Care Provider                     |  |      | 2,098,117  |            |  |   | 2,127,518  | 
|The Holland Group, Inc.              |  | Temporary Staffing                            |  |      | 2,125,000  |            |  |   | 2,125,000  | 
|National Rehab Partners, Inc.        |  | Rehabilitation Services                       |  |      | 1,482,615  |            |  |   | 1,481,512  | 
|Integrated Physician
Solutions, Inc. |  | Pediatric Physician Practice
Management Group |  |      | 3,839,448  |            |  |   | 3,864,348  | 
|Petroleum Partners, Inc.             |  | Petroleum Distribution
Maintenance Services   |  |      | 3,325,000  |            |  |   | 0          | 
|Prime Office Products, Inc.          |  | Office Products Distributor                   |  |      | 1,500,000  |            |  |   | 1,500,000  | 
|Streamline Foods, Inc.               |  | Food Products Manufacturer
and Distributor    |  |      | 795,000    |            |  |   | 795,001    | 
|Value Creation Partners,
Inc.        |  | Food Products Manufacturer
and Distributor    |  |      | 2,145,460  |            |  |   | 2,225,960  | 
|International Total
Services, Inc.   |  | Security                                      |  |      | 68,410     |            |  |   | 104        | 
|                                     |  |                                               |  |      |            |            |  |   |            | 
|                                     |  | Total                                         |  | $    | 28,783,163 |            |  | $ | 61,415,312 | 
|                                     |  |                                               |  |      |            |            |  |   |            | 

Our individually significant equity and mezzanine investments at
September 30, 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. We also received a detachable capital
stock purchase warrant exercisable for 65% of the fully-diluted capital
stock





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of Disposable Products at the time of exercise at a nominal exercise price. In
addition, through September 30, 2003 we funded additional 12% promissory notes
of $2,615,993 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 increased the value of the investment to $15,000,000 resulting in
an unrealized gain of $6,341,959 for the quarter ending March 31, 2003.

On July 31, 2003, Fitness Quest successfully completed a recapitalization
of the company. As a result of this transaction, we received a distribution
from Fitness Quest of $7.3 million, including special and
ordinary dividends of $5,234,338, of which $567,000 was in repayment of
previously accrued preferred stock dividends. Subsequent to this transaction,
we maintain a 15.1% ownership interest in the company with an estimated fair
market value of $ 11.2 million.

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





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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. The transaction was completed during the quarter
ended March 31, 2002. During the second quarter of 2003, Raytheon Company
provided additional debt and equity financing to Flight Options.

As a result of the transactions described above, our board of directors
have met each quarter to review the terms of the then current transactions.
Consistent with our valuation guidelines, the board has used private market
methods to value our investment in Flight Options, Inc. and approved increases
in the value of our investment in Flight Options, Inc. to its current $32.5
million. At September 30, 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





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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. Through July 31, 2003, Health Care Solutions sold its remaining
operating assets. As a result of these transaction, we have received $1,540,000
in proceeds and expect to receive additional proceeds of approximately $2.0
million over the next 18 months. The remaining corporate assets of Health Care
Solutions are presently being marketed for a projected sale in 2004. The
current valuation approximates 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.





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In addition to the above Class A-2 10% Convertible Preferred Stock, in
2000 we funded $267,448 and $400,000 to invest in 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 for the quarter ended March 31, 2003.
At that time, the Board of Directors also approved a write-off of all interest
and dividends receivable relating to this investment of $517,886. For the
quarter ended June 30, 2003, the Board of Directors approved a second valuation
reduction in our investment by $1,874,219 thereby generating a year to date
unrealized loss of $3,325,000.

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.





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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) |  | As of the end of the period covered by this quarterly report on Form
10-Q, 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-15 and 15d-15 of the Securities
Exchange Act of 1934). Based upon this evaluation, the Companys chief
executive officer and chief financial
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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| |     |  | 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 been no changes in the Companys internal control over
financial reporting that
occurred during the quarter ended September 30, 2003, that have materially
affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.        




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 stay of the proceeding. A status hearing regarding this case has been set
for November 25, 2003.

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. On June 4, 2003, we filed an application for exemptive relief
from certain provisions of the 1940 Act in order to effect the provisions of
the Memorandum of Understanding. On June 18, 2003, we received comments on our
application from the staff of the Division of Investment Management.
On August 14, 2003 we responded to those comments. With our response,
we have proposed a new Memorandum of Understanding that was submitted to the
staff of the Division of Investment Management. On November 12, 2003,
we received comments regarding our August 14, 2003 response. We are
in the process of responding to these additional comments.

Pursuant to the proposed new Memorandum of Understanding, we would agreed,
among other things:



| |  |  | To cause there to be four (4) directors who are not interested
persons as defined under the 1940 Act
and cause the board to be exactly seven (7) directors in total;                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If Mr. Goldstein or Gerald Hellerman is no longer director of the
Company then whichever of Mr.
Goldstein or Mr. Hellerman remains on the board shall have the right to
select a nominee;
|
| |  |  | To not convert the Company from being an advised fund to an
internally managed fund unless a
majority of the independent directors agree;                                                
|
| |  |  | To allow any independent director to request independent counsel, subject to approval of the board,                                                                                      





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| |  | which cannot be unreasonably withheld; and  To refrain from
making defamatory remarks about any party to the agreement.
| |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | To refrain from
making defamatory remarks about any party to the agreement.
| |  | - | ---------------------------------------------------------------------------

In addition, the proposed new Memorandum of Understanding provides that at the
next Annual Meeting of Stockholders:



| |  | We would ask shareholders to approve a plan of orderly disposition of the
assets of the Company or a
sale of the assets with the goal of prompt cash distribution to shareholders;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | We would ask shareholders to
approve a new investment advisory agreement pursuant to which,
prospectively:                                                                        

|  |  |                                                                                                                                                                                                                                                
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The advisors fees would be reduced from 2.85% to 2.5% of our net asset value;                                                                                                                                                                 
|  |  |                                                                                                                                                                                                                                                
| |  | All stock options would be forfeited and cancelled; and                                                                                                                                                                                        
|  |  |                                                                                                                                                                                                                                                
| |  | The advisor would be entitled to receive a fee equal to 20% of the
aggregate distributions made by
the Company in excess of $10.00 per share; however, none of the amount
would be paid until
aggregate distributions totaled $12.50 per share.

The new proposed Memorandum of Understanding also includes provisions that
would require the parties to take all steps necessary to accomplish the goals
of the Memorandum, including voting their shares in favor of the proposals.
Under the new proposed memorandum, we would also be required to reimburse Mr.
Goldstein for certain expenses (not to exceed $275,000) he incurred in
connection with the proxy solicitation and litigation related to the Annual
Meeting of Stockholders on September 17, 2002. Mr. Goldstein would also agree
not to engage in, lead or fund a proxy contest while the agreement is in
effect. The term of the new proposed Memorandum of Understanding would run
until December 31, 2006.

The new proposed Memorandum of Understanding is subject to approval by our
board of directors, our shareholders, and the receipt of exemptive relief from
the Securities and Exchange Commission. If the new proposed Memorandum of
Understanding becomes effective it would replace the previous Memorandum of
Understanding. There can be no assurances that this relief would be granted or
that it would not be subject to unfavorable terms and conditions that would
cause us to abandon the application and the new proposed Memorandum of
Understanding.

Proceeds we receive from liquidity events are intended to be distributed
to shareholders after retaining sufficient cash for operations including any
follow-on investments in accordance with the proposed memorandum of
understanding. The proceeds from the liquidity events will be held in short
term investments until such time as they may be distributed to shareholders.
Such distributions may not be made in accordance with such memorandum until we
receive both regulatory and shareholder approvals. There can be no assurance
when or in what amount any potential distributions will be made or when such
approvals may be received.

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.





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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.

On November 6, 2003, IVS Associates, Inc. filed a complaint in the Superior Court of Delaware seeking approximately $86,000 in connection with their services
as Inspector of Elections at the 2002 Annual Meeting. The Company is in the process of responding to the complaint.




Items 2.-5.

Not Applicable





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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, 996, 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.l 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 8-K
filed March 20, 2003.                                                                                                                                                                                                                                                                                                                        
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|Exhibit 31             |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|(1)                    |  | Certification of Chief Executive Officer Pursuant to Rules
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934,
as amended.                                                                                                                                                                                                                                                                                   
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2)                    |  | Certification of Chief Financial Officer Pursuant to Rules
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934,
as amended.                                                                                                                                                                                                                                                                                   
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|Exhibit 32             |  | Other                                                                                                                                                                                                                                                                                                                                                                                                                   
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|(1)                    |  | Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. Submitted
herewith.                                                                                                                                                                                                                                                                                     
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2)                    |  | Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. Submitted
herewith.                                                                                                                                                                                                                                                                                     
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|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).





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##### Table of Contents






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: November 14, 2003 |                              | By: /s/ ROBERT P. PINKAS 
|                        |                              |                          
|                        |                              | Robert P. Pinkas         
|                        |                              | Chairman of the Board and
|                        |                              | Chief Executive Officer  
|                        |                              |                          
|Date: November 14, 2003 |                              | By: /s/ TAB A. KEPLINGER 
|                        |                              |                          
|                        |                              | Tab A. Keplinger         
|                        |                              | Vice President and       
|                        |                              | Chief Financial Officer