##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002


OR

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

OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE TRANSITION PERIOD FROM

TO


Commission File Number: 814-00127

BRANTLEY CAPITAL CORPORATION




(Exact name of registrant as specified in its
charter)


|                                |  |                                            
|------------------------------- |  | -------------------------------------------
|Maryland                        |  | 34-1838462                                 
|                                |  |                                            
|(State or other Jurisdiction of |  | (I.R.S. Employer Identification
    Number)
|Incorporation or Organization)  |  |                                            

3201 Enterprise Parkway, Suite 350,
Cleveland, Ohio 44122

(Address of principal executive offices
including zip code)


(216) 464-8400

(Registrants telephone number including
area code)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [     ].

The number of shares of common stock, $.01 par
value, outstanding as of March 31, 2002 was 3,810,535.



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TABLE OF CONTENTS



|                              |                                                                                               |                                    |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | BALANCE SHEETS                    
|                              |                                                                                               | STATEMENTS OF OPERATIONS          
|                              |                                                                                               | STATEMENTS OF STOCKHOLDERS EQUITY
|                              |                                                                                               | STATEMENTS OF CASH FLOWS          
|                              |                                                                                               | 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                           
|PART II. OTHER INFORMATION   
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT INDEX                



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##### Table of Contents



TABLE OF CONTENTS

|                              |  |                                                                                           |    |  |    | 
|----------------------------- |  | ----------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I. FINANCIAL INFORMATION |  |                                                                                           |    | 
|Item 1.                       |  | Financial Statements                                                                      |    |  | 2  | 
|                              |  | Balance Sheets                                                                            |    |  | 2  | 
|                              |  | Statements of Operations                                                                  |    |  | 3  | 
|                              |  | Statements of Stockholders Equity                                                        |    |  | 4  | 
|                              |  | Statements of Cash Flows                                                                  |    |  | 5  | 
|                              |  | Notes to the Financial Statements                                                         |    |  | 6  | 
|Item 2.                       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |    |  | 9  | 
|Item 3.                       |  | Quantitative and Qualitative Disclosures about
    Market Risk                            |    |  | 17 | 
|PART II. OTHER INFORMATION    |  |                                                                                           |    | 
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                          |    |  | 18 | 
|Signatures                    |  |                                                                                           | 19 | 
|Exhibit Index                 |  |                                                                                           | 20 | 



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##### Table of Contents






PART I.      FINANCIAL
INFORMATION




Item 1. Financial
Statements

BRANTLEY CAPITAL CORPORATION






BALANCE SHEETS


|                                                                                                                                                                      |                                                |             |            |              |  |   |            |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ----------- | ---------- | ------------ |  | - | ---------- | ---------- | 
|                                                                                                                                                                      |                                                | March 31,   |            | December 31,
|                                                                                                                                                                      |                                                | 2002        |            | 2001        
|                                                                                                                                                                      |                                                | (Unaudited) |            | (Audited)   
|                                                                                                                                                                      |                                                |             |            |             
|ASSETS                                                                                                                                                                |                                                |             |            |              |  |   |            |           
|Investments, at market                                                                                                                                                |                                                | $           | 64,733,175 |              |  | $ | 60,311,107 |           
|Cash and cash equivalents                                                                                                                                             |                                                |             |           |              |  |   | 5,369,345  |           
|Restricted cash                                                                                                                                                       |                                                |             | 6,000,000  |              |  |   | 6,000,000  |           
|Dividends and interest receivable                                                                                                                                     |                                                |             | 3,949,633  |              |  |   | 3,493,059  |           
|Other assets                                                                                                                                                          |                                                |             | 357,969    |              |  |   | 360,158    |           
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|                                                                                                                                                                      | Total Assets                                   |             | $          | 75,040,777   |  |   | $          | 75,533,669 | 
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|                                                                                                                                                                      | LIABILITIES AND STOCKHOLDERS
    EQUITY       |             |            |              |  |   |            |            | 
|Note payable                                                                                                                                                          |                                                | $           | 6,000,000  |              |  | $ | 6,000,000  |           
|Payable for investments purchased                                                                                                                                     |                                                |             |           |              |  |   | 200,000    |           
|Advisory fee payable                                                                                                                                                  |                                                |             | 591,124    |              |  |   | 487,931    |           
|Accrued professional fees                                                                                                                                             |                                                |             | 121,819    |              |  |   | 53,163     |           
|Distributions payable                                                                                                                                                 |                                                |             |           |              |  |   | 736,455    |           
|Other liabilities                                                                                                                                                     |                                                |             | 307,512    |              |  |   | 49,806     |           
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|                                                                                                                                                                      | Total Liabilities                              |             |            | 7,020,455    |  |   |            | 7,527,355  | 
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|Stockholders Equity:                                                                                                                                                 |                                                |             |            |              |  |   |            |           
|Common Stock, $0.01 par value; 25,000,000 shares
    authorized and 3,810,535 shares issued and outstanding at
    March 31, 2002 and December 31, 2001, respectively |                                                |             | 38,105     |              |  |   | 38,105     |           
|Additional paid in capital                                                                                                                                            |                                                |             | 37,484,895 |              |  |   | 37,484,895 |           
|Retained earnings                                                                                                                                                     |                                                |             | 30,497,322 |              |  |   | 30,483,314 |           
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|                                                                                                                                                                      | Total Stockholders Equity                     |             |            | 68,020,322   |  |   |            | 68,006,314 | 
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|                                                                                                                                                                      | Total Liabilities and
    Stockholders Equity |             | $          | 75,040,777   |  |   | $          | 75,533,669 | 
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           
|Net Asset Value Per Share                                                                                                                                             |                                                | $           | 17.85      |              |  | $ | 17.85      |           
|                                                                                                                                                                      |                                                |             |            |              |  |   |            |           

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

2



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##### Table of Contents



BRANTLEY CAPITAL CORPORATION






STATEMENTS OF OPERATIONS


(Unaudited)

|                                                                                    |                                            |                 |           |                 |   |   |           |         | 
|----------------------------------------------------------------------------------- | ------------------------------------------ | --------------- | --------- | --------------- | - | - | --------- | ------- | 
|                                                                                    |                                            | For the quarter |           | For the quarter
|                                                                                    |                                            | ended           |           | ended          
|                                                                                    |                                            | March 31,       |           | March 31,      
|                                                                                    |                                            | 2002            |           | 2001           
|                                                                                    |                                            |                 |           |                
|Investment Income:                                                                  |                                            |                 |           |                 |   |   |           |        
|                                                                                    | Interest                                   |                 | $         | 182,639         |   |   | $         | 168,505 | 
|                                                                                    | Dividends                                  |                 |           | 295,301         |   |   |           | 271,458 | 
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|                                                                                    | Total investment income                    |                 |           | 477,940         |   |   |           | 439,963 | 
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|Operating Expenses:                                                                 |                                            |                 |           |                 |   |   |           |        
|                                                                                    | Advisory fees                              |                 |           | 488,124         |   |   |           | 351,571 | 
|                                                                                    | Administration fees                        |                 |           | 18,493          |   |   |           | 18,288  | 
|                                                                                    | Professional fees                          |                 |           | 45,616          |   |   |           | 99,110  | 
|                                                                                    | Interest expense                           |                 |           | 154,076         |   |   |           | 135,081 | 
|                                                                                    | Other                                      |                 |           | 49,927          |   |   |           | 147,668 | 
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|                                                                                    | Total operating expenses                   |                 |           | 756,236         |   |   |           | 751,718 | 
|Investment Income (Loss), net                                                       |                                            |                 | (278,296  | )               |   |   | (311,755  | )      
|Net Realized and Unrealized Gains (Losses) on
    Investments:                      |                                            |                 |           |                 |   |   |           |        
|                                                                                    | Net realized gains (losses) on investments |                 |           | (441,234        | ) |   |           | 407,096 | 
|                                                                                    | Net unrealized gains on investments        |                 |           | 733,538         |   |   |           | 68,518  | 
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|Net realized and unrealized gains on
    investment transactions                    |                                            |                 | 292,304   |                 |   |   | 475,614   |        
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|Net increase in net assets resulting
    from operations                            |                                            | $               | 14,008    |                 |   | $ | 163,859   |        
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|Net increase in net assets from operations per
    share, primary and fully diluted |                                            | $               | 0.00      |                 |   | $ | 0.04      |        
|                                                                                    |                                            |                 |           |                 |   |   |           |        
|Weighted average number of shares outstanding,
    primary and fully diluted        |                                            |                 | 3,810,535 |                 |   |   | 3,810,535 |        
|                                                                                    |                                            |                 |           |                 |   |   |           |        

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

3



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BRANTLEY CAPITAL CORPORATION






STATEMENTS OF STOCKHOLDERS
EQUITY


(Unaudited)

|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|------------------------------------------ |  | ------ | ------ | ---------- |  | -------- | ---------- | ------------ |  | - | ---------- | - |  | - | ---------- | -
|                                           |  |        |        | Additional |  |          |            | Total       
|                                           |  | Common |        | Paid in    |  | Retained |            | Stockholders
|                                           |  | Stock  |        | Capital    |  | Earnings |            | Equity      
|                                           |  |        |        |            |  |          |            |             
|Balance at
    December 31, 1999           |  | $      | 38,105 |            |  | $        | 37,505,433 |              |  | $ | 14,896,797 |   |  | $ | 52,440,335 |  
|Net increase in net assets from operations |  |        |       |            |  |          |           |              |  |   | 1,879,315  |   |  |   | 1,879,315  |  
|Distributions from:                        |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Net investment income                      |  |        |       |            |  |          | (20,538    | )            |  |   | (112,831   | ) |  |   | (133,369   | )
|Net realized gains                         |  |        |       |            |  |          |           |              |  |   | (2,243,262 | ) |  |   | (2,243,262 | )
|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Balance at
    December 31, 2000           |  | $      | 38,105 |            |  | $        | 37,484,895 |              |  | $ | 14,420,019 |   |  | $ | 51,943,019 |  
|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Net increase in net assets from operations |  |        |       |            |  |          |           |              |  |   | 16,799,750 |   |  |   | 16,799,750 |  
|Distributions from:                        |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Net investment income                      |  |        |       |            |  |          |           |              |  |   |           |   |  |   |           |  
|Net realized gains                         |  |        |       |            |  |          |           |              |  |   | (736,455   | ) |  |   | (736,455   | )
|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Balance at
    December 31, 2001           |  | $      | 38,105 |            |  | $        | 37,484,895 |              |  | $ | 30,483,314 |   |  | $ | 68,006,314 |  
|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Net increase in net assets from operations |  |        |       |            |  |          |           |              |  |   | 14,008     |   |  |   | 14,008     |  
|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  
|Balance at March 31, 2002                  |  | $      | 38,105 |            |  | $        | 37,484,895 |              |  | $ | 30,497,322 |   |  | $ | 68,020,322 |  
|                                           |  |        |        |            |  |          |            |              |  |   |            |   |  |   |            |  

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

4



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BRANTLEY CAPITAL CORPORATION






STATEMENTS OF CASH FLOWS


(Unaudited)

|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |          |              |          |  
|------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------------- | --------------- | ---------- | -------- | ---------- | -------- | ------------ | -------- | -
|                                                                    |                                                                                                                  | For the quarter                              |                                  | For the quarter
|                                                                    |                                                                                                                  | ended March 31,                              |                                  | ended March 31,
|                                                                    |                                                                                                                  | 2002                                         |                                  | 2001           
|                                                                    |                                                                                                                  |                                              |                                  |                
|Cash Flows from Operating
    Activities:                           |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|                                                                    | Net change in net assets resulting from
    operations:                                                          |                                              | $                                | 14,008          |            |          | $          | 163,859  |             
|                                                                    | Adjustments to reconcile net change in net assets
    resulting from operations to net cash used for operations: |                                              |                                  |                 |            |          |            |          |             
|                                                                    |                                                                                                                  | Net realized (gains) losses from investments |                                  |                 | 441,234    |          |            |          | (407,096     | )       
|                                                                    |                                                                                                                  | Net unrealized gains on investments          |                                  |                 | (733,538   | )        |            |          | (68,518      | )       
|                                                                    |                                                                                                                  | Changes in assets and liabilities:           |                                  |                 |            |          |            |          |              |         
|                                                                    |                                                                                                                  |                                              | Dividend and interest receivable |                 |            | (456,574 | )          |          |              | (297,710 | )
|                                                                    |                                                                                                                  |                                              | Other assets                     |                 |            | 2,189    |            |          |              | 2,189    |  
|                                                                    |                                                                                                                  |                                              | Advisory fee payable             |                 |            | 103,193  |            |          |              | (19,812  | )
|                                                                    |                                                                                                                  |                                              | Accrued professional fees        |                 |            | 68,656   |            |          |              | (49,758  | )
|                                                                    |                                                                                                                  |                                              | Dividends payable                |                 |            | (736,455 | )          |          |              |         |  
|                                                                    |                                                                                                                  |                                              | Other liabilities                |                 |            | 57,706   |            |          |              | 192,546  |  
|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|                                                                    | Net cash used for
    operating activities                                                                       |                                              |                                  | (1,239,581      | )          |          |            | (484,300 | )           
|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|Cash Flows from Investing
    Activities:                           |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|                                                                    |                                                                                                                  | Purchases of investment securities           |                                  |                 | (5,945,482 | )        |            |          | (722,225     | )       
|                                                                    |                                                                                                                  | Sales/Maturities of investment securities    |                                  |                 | 1,815,718  |          |            |          | 1,123,297    |         
|                                                                    |                                                                                                                  | Purchases of short-term investments          |                                  |                 |           |          |            |          | (514,416,928 | )       
|                                                                    |                                                                                                                  | Sales/Maturities of short-term investments   |                                  |                 |           |          |            |          | 514,416,321  |         
|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|                                                                    | Net cash used for
    investing activities                                                                       |                                              |                                  | (4,129,764      | )          |          |            | 400,465  |             
|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|Net change in cash and cash equivalents for
    the period          |                                                                                                                  |                                              | (5,369,345                       | )               |            |          | (83,835    | )       
|Cash, cash equivalents and restricted cash,
    beginning of period |                                                                                                                  |                                              | 11,369,345                       |                 |            |          | 14,882,432 |         
|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |         
|Cash, cash equivalents and restricted cash,
    end of the period   |                                                                                                                  | $                                            | 6,000,000                        |                 |            | $        | 14,798,597 |         
|                                                                    |                                                                                                                  |                                              |                                  |                 |            |          |            |         

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

5



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##### Table of Contents



BRANTLEY CAPITAL CORPORATION










|   |                                
|-- | -------------------------------
|1. | Significant Accounting Policies



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The interim financial statements have been
    prepared by Brantley Capital Corporation (the
    Company) pursuant to the rules and regulations of the
    Securities and Exchange Commission applicable to quarterly
    reports on Form 10-Q. Certain information and footnote
    disclosures normally included in financial statements prepared
    in accordance with generally accepted accounting principles have
    been condensed or omitted pursuant to such rules and
    regulations, although management believes that the disclosures
    are adequate to make the information presented not misleading.
    These financial statements should be read in conjunction with
    the audited financial statements and related notes and schedules
    included in the Companys 2001 Annual Report filed on
    Form 10-K dated December 31, 2001.
|
| | The unaudited financial statements reflect, in
    the opinion of management, all adjustments, all of which are of
    a normal recurring nature, necessary to present fairly the
    financial position of the Company as of March 31, 2002, the
    results of its operations for the quarter ended March 31,
    2002, and its cash flows for the quarter ended March 31,
    2002. Interim results are not necessarily indicative of results
    to be expected for a full fiscal year.                                                                                                                                                                                                                                                                                                                                                                      
|
| | Privately placed securities are carried at fair
    value as determined in good faith by or under the direction of
    the Board of Directors. Generally, the fair value of each
    security will initially be based primarily upon its original
    cost to the Company. Cost will be the primary factor used to
    determine fair value on an ongoing basis until significant
    developments or other factors affecting the investment (such as
    results of the portfolio companys operations, changes in
    the general market conditions, subsequent financings or the
    availability of market quotations) provide a basis for value
    other than cost valuation.                                                                                                                                                                              
|
| | Portfolio investments listed on an exchange or
    traded on NASDAQ National Market are valued at the closing price
    listed on their respective exchange or system on the date of
    valuation. Securities traded in the over-the-counter market will
    be valued on the average of the closing bid and asked prices on
    the day of valuation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Debt securities with 60 days or less
    remaining to maturity will be valued at amortized cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|   |                                           
|-- | ------------------------------------------
|2. | Investments, Cash and Cash
    Equivalents



| |                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of March 31, 2002 and December 31,
    2001, the identified costs of investments, cash, cash
    equivalents and restricted cash were $38,591,708 and
    $40,292,851, respectively.                                           
|
| | Cash equivalents consist of highly liquid
    investments with insignificant interest rate risk and original
    maturities of three months or less at acquisition date. Cash and
    cash equivalents consisted of the following:

|                    |  |             |           |              |  |   |           | 
|------------------- |  | ----------- | --------- | ------------ |  | - | --------- | 
|                    |  | March 31,   |           | December 31,
|                    |  | 2002        |           | 2001        
|                    |  | (Unaudited) |           | (Audited)   
|                    |  |             |           |             
|Cash                |  | $           |          |              |  | $ | 5,369,345 | 
|                    |  |             |           |              |  |   |           | 
|Non-restricted Cash |  | $           |          |              |  | $ | 5,369,345 | 
|                    |  |             |           |              |  |   |           | 
|Restricted Cash     |  | $           | 6,000,000 |              |  | $ | 6,000,000 | 
|                    |  |             |           |              |  |   |           | 



|   |                              
|-- | -----------------------------
|3. | Investment Advisory Agreement



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has entered into an investment
    advisory agreement (the Investment Advisory
    Agreement) with Brantley Capital Management, L.L.C. (the
    Investment Adviser) under which the Investment
    Adviser is entitled to an annual management fee of 2.85% of the
    Companys net assets, determined at the end of each
    calendar quarter, and payable quarterly in arrears throughout
    the term of the Investment Advisory Agreement. For the quarter
    ended March 31, 2002, the Investment Adviser earned
    $488,124 under the Investment Advisory Agreement. Certain
    officers of the Company are also officers of the Investment
    Adviser.

6



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##### Table of Contents



BRANTLEY CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)



| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | No officer of the Investment Adviser receives any
    compensation from the Company for serving as officer of the
    Company.



|   |                     
|-- | --------------------
|4. | Financial Highlights

|                                         |                                                     |                                  |       |                 |       |       |       |       |       |      
|---------------------------------------- | --------------------------------------------------- | -------------------------------- | ----- | --------------- | ----- | ----- | ----- | ----- | ----- | -----
|                                         |                                                     | For the quarter                  |       | For the quarter
|                                         |                                                     | ended                            |       | ended          
|                                         |                                                     | March 31, 2002                   |       | March 31, 2001 
|                                         |                                                     |                                  |       |                
|Net Asset Value, Beginning of the Period |                                                     | $                                | 17.85 |                 |       | $     | 13.63 |      
|                                         |                                                     |                                  |       |                 |       |       |       |      
|Income from investment operations:       |                                                     |                                  |       |                 |       |       |       |      
|                                         | Net investment income/(loss)                        |                                  |       | (0.07           | )     |       |       | (0.08 | )    
|                                         | Net realized and unrealized gain
    on investments |                                  |       | 0.07            |       |       |       | 0.12  |      
|                                         |                                                     |                                  |       |                 |       |       |       |      
|                                         |                                                     | Total from investment operations |       |                 | 0.00  |       |       |       | 0.04  |      
|                                         |                                                     |                                  |       |                 |       |       |       |      
|Net Asset Value, End of Period           |                                                     | $                                | 17.85 |                 |       | $     | 13.67 |      
|                                         |                                                     |                                  |       |                 |       |       |       |      
|Market Value, End of Period              |                                                     | $                                | 10.34 |                 |       | $     | 8.00  |      
|                                         |                                                     |                                  |       |                 |       |       |       |      
|                                         |                                                     | Total return, at Market Value    |       |                 | (5.05 | )%(1) |       |       | (7.25 | )%(1)
|                                         |                                                     |                                  |       |                 |       |       |       |      
|                                         |                                                     | Total return, at Net Asset Value |       |                 | 0.00  | %(1)  |       |       | 0.29  | %(1) 
|                                         |                                                     |                                  |       |                 |       |       |       |      
|Total Expenses/Average net assets        |                                                     |                                  | 1.11  | %(1)            |       |       | 1.28  | %(1) 
|                                         |                                                     |                                  |       |                 |       |       |       |      
|Net Investment Income/Average net assets |                                                     |                                  | (0.41 | )%(1)           |       |       | (0.53 | )%(1)
|                                         |                                                     |                                  |       |                 |       |       |       |      



---



|    |               
|--- | --------------
|(1) | Not annualized

5. Schedule of Investments

|                                  |                                                                      |                |  |           |  |  |           |            | 
|--------------------------------- | -------------------------------------------------------------------- | -------------- |  | --------- |  |  | --------- | ---------- | 
|                                  |                                                                      |               
|                                  |                                                                      | March 31, 2002
|                                  |                                                                      |               
|Name of Issuer and Title of Issue |                                                                      | Shares/Par     |  | Value    
|                                  |                                                                      |                |  |          
|Avionics                          |                                                                      |                |  |           |  |  |           |           
|                                  | Flight Options International, Inc. Preferred
    Stock *#            |                |  | 3,342,060 |  |  | $         | 32,500,000 | 
|                                  |                                                                      |                |  |           |  |  |           |           
|Business Services                 |                                                                      |                |  |           |  |  |           |           
|                                  | Disposable Products Company, LLC Subordinated
    Debt #             |                |  | 1,779,667 |  |  |           | 1,773,000  | 
|                                  | The Holland Group, Inc. Preferred Stock #                            |                |  | 282,530   |  |  |           | 2,125,000  | 
|                                  | The Holland Group, Inc. Subordinated Note #                          |                |  | 50,000    |  |  |           | 50,000     | 
|                                  | International Total Services, Inc. Common Stock                      |                |  | 104,250   |  |  |           | 5,213      | 
|                                  | NCO Group, Inc. Common Stock                                         |                |  | 11,750    |  |  |           | 326,180    | 
|                                  | Prime Office Products, Inc. Preferred Stock #                        |                |  | 710,000   |  |  |           | 1,420,000  | 
|                                  | Rent-A-Center, Inc. Common Stock                                     |                |  | 9,300     |  |  |           | 475,137    | 
|                                  |                                                                      |                |  |           |  |  |           |           
|                                  |                                                                      |                |  |           |  |  | 6,174,530 |           
|                                  |                                                                      |                |  |           |  |  |           |           
|Drugs & Health Care               |                                                                      |                |  |           |  |  |           |           
|                                  | Health Care Solutions, Inc. Subordinated Debt
    with Warrants *#   |                |  | 3,549,000 |  |  |           | 3,578,401  | 
|                                  | ICU Medical Industries Common Stock                                  |                |  | 11,250    |  |  |           | 409,500    | 
|                                  | KV Pharmaceutical, Inc. Common Stock                                 |                |  | 13,000    |  |  |           | 378,300    | 
|                                  | National Rehabilitation Partners, Inc. Preferred
    Stock #         |                |  | 2,218,375 |  |  |           | 1,455,387  | 
|                                  | National Rehab Partners, Inc. Subordinated Note #                    |                |  | 26,126    |  |  |           | 26,126     | 
|                                  | Pediatric Physicians Alliance, Inc. Preferred
    Stock #            |                |  | 793,000   |  |  |           | 3,172,000  | 
|                                  | Pediatric Physicians Alliance, Inc. Subordinated
    Debt/Warrants # |                |  | 297,448   |  |  |           | 292,348    | 
|                                  | Regeneration Technology, Inc. Common Stock                           |                |  | 18,300    |  |  |           | 132,675    | 
|                                  |                                                                      |                |  |           |  |  |           |           
|                                  |                                                                      |                |  |           |  |  | 9,444,737 |           
|                                  |                                                                      |                |  |           |  |  |           |           

7



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##### Table of Contents



BRANTLEY CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)

|                                         |                                                                 |                |  |           |  |   |            |           | 
|---------------------------------------- | --------------------------------------------------------------- | -------------- |  | --------- |  | - | ---------- | --------- | 
|                                         |                                                                 |               
|                                         |                                                                 | March 31, 2002
|                                         |                                                                 |               
|Name of Issuer and Title of Issue        |                                                                 | Shares/Par     |  | Value    
|                                         |                                                                 |                |  |          
|Miscellaneous                            |                                                                 |                |  |           |  |   |            |          
|                                         | Buca, Inc. Common Stock                                         |                |  | 23,000    |  |   | $          | 417,910   | 
|                                         | Renaissance Learning, Inc.                                      |                |  | 13,000    |  |   |            | 425,100   | 
|                                         | Streamline Foods, Inc. Preferred Stock #                        |                |  | 898,568   |  |   |            | 700,000   | 
|                                         | Streamline Foods, Inc. Subordinated Debt
    Warrants #         |                |  | 95,000    |  |   |            | 95,000    | 
|                                         | Trend West Resorts, Inc. Common Stock                           |                |  | 15,000    |  |   |            | 375,667   | 
|                                         | Triad Guaranty, Inc. Common Stock                               |                |  | 9,000     |  |   |            | 391,230   | 
|                                         | Value Creation Partners, Inc. Preferred
    Stock #             |                |  | 304,989   |  |   |            | 2,225,960 | 
|                                         | Waterlink, Inc. (Warrants)                                      |                |  | 53,550    |  |   |            |          | 
|                                         |                                                                 |                |  |           |  |   |            |          
|                                         |                                                                 |                |  |           |  |   | 4,630,867  |          
|                                         |                                                                 |                |  |           |  |   |            |          
|Oil                                      |                                                                 |                |  |           |  |   |            |          
|                                         | Petroleum Partners, Inc. Preferred Stock #                      |                |  | 850,000   |  |   |            | 1,450,000 | 
|                                         | Petroleum Partners, Inc., Subordinated Debt with
    Warrants # |                |  | 1,875,000 |  |   |            | 1,875,000 | 
|                                         |                                                                 |                |  |           |  |   |            |          
|                                         |                                                                 |                |  |           |  |   | 3,325,000  |          
|                                         |                                                                 |                |  |           |  |   |            |          
|Retail Trade                             |                                                                 |                |  |           |  |   |            |          
|                                         | Fitness Quest, Inc. Preferred Stock *#                          |                |  | 1,468,602 |  |   |            | 7,408,892 | 
|                                         | Fitness Quest, Inc., Subordinated Debt with
    Warrants #      |                |  | 181,172   |  |   |            | 1,249,149 | 
|                                         |                                                                 |                |  |           |  |   |            |          
|                                         |                                                                 |                |  |           |  |   | 8,658,041  |          
|                                         |                                                                 |                |  |           |  |   |            |          
|Total Investments(Cost
    $32,591,708) |                                                                 |                |  |           |  | $ | 64,733,175 |          
|                                         |                                                                 |                |  |           |  |   |            |          



---

All investments are U.S. companies



|  |                                                        
|- | -------------------------------------------------------
|* | Represents 5% or more of total stockholders
    equity
| 
|# | Represents privately held securities                   

8



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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. In addition,
we invest a portion of our assets in small-capitalization public
companies. 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.

In the past year we have explored various
strategic alternatives to enhance our growth and
stockholders value. We determined that operating at our
current size or attempting to realize premature liquidity events
within our portfolio would not enhance the market value of our
common stock and would limit our ability to generate recurring
income sought by the investment community and our stockholders.
Specifically, we have been exploring the possibility of
expanding our origination of mezzanine investments. Shares of
business development companies that invest primarily in
mezzanine investments tend to trade at a premium to net asset
value per share due to the expectation of current income
produced by such investments. We believe that current market
conditions, influenced by more stringent credit standards of
commercial banks and more conservative capital structures sought
by entrepreneurs and equity sponsors, have created an increased
demand for mezzanine investments.

Mezzanine investments would be expected to
provide a current cash return to us in the form of interest and
origination fees. We typically participate in any increase in
the equity value of the companies to whom we provide mezzanine
financing through warrants or other equity rights. We anticipate
that mezzanine investments would provide less potential for
appreciation in our net asset value than private equity
investments, but would instead provide higher current income
that may be distributed to our stockholders. In the future, we
may also seek to further leverage our portfolio by utilizing
additional borrowings to fund our investments.

In order to fund the origination of mezzanine
investments, we are exploring various capital-raising
alternatives. We intend to use the proceeds of such an event to
make mezzanine investments. We can make no assurances that a
capital raising effort will be undertaken or that any of our
portfolio companies would experience a liquidity event. We can
also make no assurances that our plan to expand our origination
of mezzanine investments will be consummated or be successful.

Certain
Accounting Policies

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.

Origination fees are recognized as income during
the period in which they are received. 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.

9



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##### Table of Contents



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

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

Results of Operations

Dividend
and Interest Income

Dividend and interest income on investments for
the three months ended March 31, 2002 and 2001 was $477,940
and $439,963, respectively. The increase in interest and
dividend income during the three months ended March 31,
2002 was primarily due to the ongoing increase in the private
equity and mezzanine portfolio which generates dividend and
interest income.

Operating
Expenses

Total operating expenses during the three months
ended March 31, 2002 and 2001 were $756,236 and $751,718,
respectively. The significant component of total operating
expenses was advisory fees of $488,124 and $351,571 earned by
our investment adviser during the three months ended
March 31, 2002 and 2001, respectively.



| |                                                                 
| | ----------------------------------------------------------------
| | Net Realized and Unrealized Gains on
    Investment Transactions

During the three months ended March 31, 2002
and 2001, valuation of our equity and mezzanine investments
resulted in net realized and unrealized gains on investments of
$292,304 and $475,614, respectively. At March 31, 2002, and
2001, we had investments in twelve and ten privately-held
companies, respectively, as well as in various
small-capitalization public stocks which are subject to general
stock market and business conditions. The unrealized gains
during such periods were significantly influenced by general
stock market and business conditions.

Financial Condition, Liquidity and Capital
Resources

At March 31, 2002 and December 31,
2001, we had $0 and $5,369,345, respectively, in cash and cash
equivalents which were primarily invested in United States
Treasury securities. Restricted cash is held under direction of
our lender and is not readily available to fund investments or
pay operating expenses. Our management believes that proceeds
from our investments will provide us with the liquidity
necessary to pay our operating expenses and make follow-on
investments. However, in order to execute our mezzanine
investment plan, we will continue to seek opportunities to raise
additional capital.

At March 31, 2002 and December 31,
2001, we had stockholders equity of $68,020,322 and
$68,006,314, respectively, resulting in a net asset value per
share of $17.85. At March 31, 2002, we had $6,000,000 of

10



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##### Table of Contents



outstanding indebtedness. For the three months
ended March 31, 2002, the weighted average interest rate on
this indebtedness was 4.75%.


Brantley Venture Partners II, L.P., Brantley
Venture Partners III, L.P. and Brantley Partners IV, L.P. hold,
in the aggregate, approximately $211 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.

Consistent with our current long-term objectives,
our board of directors has recently asked our investment adviser
to consider ways to maximize stockholder value in the event that
our net asset value has not appreciated by a minimum of 15% per
annum for the seven-year period ending December 31, 2003.
Such actions could include, but are not limited to, a possible
recommendation to consider the sale of some or all of our
investments. Our management has been pleased with the
performance of our portfolio companies since inception and
believes that liquidity opportunities that generally start
presenting themselves several years into a portfolio of this
nature may create gains for us over the next few years. Our
portfolio is just beginning to enter a period of possible
liquidity events. However, in light of the market price of our
common stock relative to its net asset value, our management has
reiterated our planned goals and objectives and has reassured
our stockholders that our management intends to take action if
those goals and objectives are not met. Nevertheless, our
management expects to meet our net asset value appreciation
target.

At March 31, 2002 and December 31,
2001, the aggregate cost of the investments we made to date was
$32.6 million and $28.9 million, respectively, and
their aggregate market value was $64.7 million and
$60.3 million, respectively, for an aggregate fair value
appreciation of 99% and 109%, respectively. Our management
believes that our portfolio companies have significant potential
for long-term growth in sales and earnings.

Since the completion of our initial public
offering, our management has focused its investment activities
on securing new investments for our portfolio. However, given
the nature of our current portfolio and the fact that this
portfolio as a whole is maturing, our management is seeking to
position the more mature portfolio companies for appropriate
liquidity events. We are continuously monitoring portfolio
company results and evaluating opportunities to maximize the
value 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. 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. Any such
transaction could have an impact on the valuation of our
investments. However, these revised valuations would generally
not be adjusted until the transaction is publicly announced or
completed.

11



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##### Table of Contents



Private
Portfolio Company Investments

The following is a list of the private companies
in which we had an investment and the cost and fair value of
such securities at March 31, 2002.

|                                    |  |                                               |  |      |            |            |  |   |            | 
|----------------------------------- |  | --------------------------------------------- |  | ---- | ---------- | ---------- |  | - | ---------- | 
|Name of Company                     |  | Nature of its Principal Business              |  | Cost |            | Fair Value
|                                    |  |                                               |  |      |            |           
|Disposable Products Company, LLC    |  | Non-Woven Paper Products Manufacturer         |  |      | 1,779,667  |            |  |   | 1,773,000  | 
|Fitness Quest, Inc.                 |  | Fitness Products Direct Marketer              |  |      | 3,846,358  |            |  |   | 8,658,041  | 
|Flight Options International, Inc.  |  | Private Air Travel Services                   |  |      | 5,562,500  |            |  |   | 32,500,000 | 
|Health Care Solutions, Inc.         |  | Home Health Care Provider                     |  |      | 3,549,000  |            |  |   | 3,578,401  | 
|The Holland Group, Inc.             |  | Temporary Staffing                            |  |      | 2,175,000  |            |  |   | 2,175,000  | 
|National Rehab Partners, Inc.       |  | Rehabilitation Services                       |  |      | 1,481,513  |            |  |   | 1,481,513  | 
|Pediatric Physicians Alliance, Inc. |  | Pediatric Physician Practice Management Group |  |      | 3,439,448  |            |  |   | 3,464,348  | 
|Petroleum Partners, Inc.            |  | Petroleum Distribution Maintenance Services   |  |      | 3,325,000  |            |  |   | 3,325,000  | 
|Streamline Foods, Inc.              |  | Food Processing and Distribution Services     |  |      | 795,000    |            |  |   | 795,000    | 
|Prime Office Products, Inc.         |  | Office Products Distributor                   |  |      | 1,420,000  |            |  |   | 1,420,000  | 
|Value Creation Partners, Inc.       |  | Food Products Manufacturer and Distributor    |  |      | 2,145,460  |            |  |   | 2,225,960  | 
|Waterlink, Inc.(1)                  |  | Water and Waste-Water Management              |  |      |           |            |  |   |           | 
|                                    |  |                                               |  |      |            |            |  |   |            | 
|                                    |  | Total                                         |  | $    | 29,518,946 |            |  | $ | 61,396,263 | 
|                                    |  |                                               |  |      |            |            |  |   |            | 



---



|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We hold a warrant to purchase common stock with
    an exercise price in excess of the market price of the common
    stock at March 31, 2002.

Our individually significant equity and mezzanine
investments at March 31, 2002 are described below:

Disposable
Products Company, LLC

On August 10, 1998, we entered into an
investment led by Banc One Capital to provide $1.0 million
of a $3.0 million subordinated debt facility with warrants
for Disposable Products Company, LLC. Disposable Products is an
acquisition strategy company in the business of manufacturing
and converting paper and non-woven materials into wiping
products for sale to commercial, institutional, industrial and
government markets. In addition, Disposable Products is a
converter and reseller of other safety and industrial/janitorial
products. Proceeds of the transaction were used to complete
Disposable Products first acquisition. The terms of the
debt facility call for a 12% interest rate per annum with a
final maturity in 2003. We also received a detachable capital
stock purchase warrant exercisable for 5% of the fully-diluted
capital stock of Disposable Products at the time of exercise at
a nominal exercise price. On January 26, 2001, we funded a
$169,667 12% promissory note from Disposable Products. In
addition, through March 31, 2002 we funded additional 12%
promissory notes of $610,000 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

12



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##### Table of Contents



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.



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

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

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

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

On July 11, 2000, we guaranteed a portion of
Flight Options third-party borrowings. As a result, we
were issued a warrant to purchase 36,000 shares of Flight
Options common stock at a price of $0.01 per share. Our
management believes, based on the current facts and
circumstances and Flight Options financial position, that
the likelihood of a payment pursuant to such guarantee is remote.

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

13



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##### Table of Contents



fractional aircraft ownership program to be known
as Flight Options. Under the terms of the transaction, Flight
Options, Inc. will hold 50.1% ownership of the new business with
Raytheon holding 49.9%. The transaction was completed during the
quarter ended March 31, 2002.


As a result of the transaction described above,
our board of directors met to review the terms of the
transaction including, among other things, a valuation review
prepared by an investment banking firm working on the
transaction. See Determination of Net Asset Value.
Consistent with our valuation guidelines, the board used a
private market method to value our investment in Flight Options,
Inc. and approved an increase in the value of our investment in
Flight Options, Inc. to $32,500,000 from its September 30,
2001 valuation of $17,779,379, resulting in a $14,720,621 or
$3.86 per share unrealized gain reported in the fourth quarter
of 2001. At March 31, 2002, the financial statement value
of our investment in Flight Options represents an increase of
more than 484% from its original purchase price. The commentary
above reflects a four-for-one stock split executed in 2000. All
share and per share amounts have been adjusted to reflect such
stock split.

Health
Care Solutions, Inc.

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

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

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

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.

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 will be 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.

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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.

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 Pediatric Physicians Alliance, Inc. Pursuant to our
commitment, we purchased 793,000 shares of Class A-2 10%
Convertible Preferred Stock. Pediatric Physicians Alliance is a
physician practice management company that develops integrated
pediatric networks of care. Their objective is to develop the
leading physician-based integrated pediatric organization in the
United States. Pediatric Physicians Alliance is dependent on the
management talent and effort of key personnel for its success in
this highly competitive industry. We do not believe it is
dependent on a single or small number of customers, possesses
significant intellectual property or that it is subject to
significant regulations. The proceeds of the transaction were
used to complete the acquisition of a number of physician
practices.

In addition to the above Class A-2 10%
Convertible Preferred Stock, in 2000 we funded $267,448 to
invest with Brantley Venture Partners III, L.P. in $668,619 of
promissory notes, with detachable warrants, in Pediatric
Physicians Alliance. The detachable warrants are for the
purchase of 30,000 shares of Pediatric Physicians Alliance
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
$625,000 of 10% Convertible Subordinated Notes during the three
months ended March 31, 2002. The proceeds of the notes were
used for operating purposes.



| |                                                                     
| | --------------------------------------------------------------------
| | 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 will
be 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.

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. 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.



| |                                                   
| | --------------------------------------------------
| | Small-Capitalization Public Equity
    Investments

The following is a list of the
small-capitalization public companies in which we had an
investment at March 31, 2002 and the cost and market value
of such securities at March 31, 2002.

|                                   |  |      |           |        |  |   |           | 
|---------------------------------- |  | ---- | --------- | ------ |  | - | --------- | 
|                                   |  |      |           | Market
|Name of Company                    |  | Cost |           | Value 
|                                   |  |      |           |       
|Buca, Inc.                         |  | $    | 347,236   |        |  | $ | 417,910   | 
|ICU Medical Industries             |  |      | 363,245   |        |  |   | 409,500   | 
|International Total Services, Inc. |  |      | 68,409    |        |  |   | 5,213     | 
|KV Pharmaceutical, Inc.            |  |      | 348,487   |        |  |   | 378,300   | 
|NCO Group, Inc.                    |  |      | 397,150   |        |  |   | 326,180   | 
|Rent-A-Center, Inc.                |  |      | 256,671   |        |  |   | 475,137   | 
|Renaissance Learning, Inc.         |  |      | 354,250   |        |  |   | 425,100   | 
|Regeneration Technologies, Inc.    |  |      | 214,450   |        |  |   | 132,675   | 
|Triad Guaranty, Inc.               |  |      | 352,648   |        |  |   | 391,230   | 
|Trendwest Resorts, Inc.            |  |      | 370,216   |        |  |   | 375,667   | 
|                                   |  |      |           |        |  |   |           | 
|Totals                             |  | $    | 3,072,762 |        |  | $ | 3,336,912 | 
|                                   |  |      |           |        |  |   |           | 

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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.

Recent Developments

On June 4, 2000 the Company announced that
it had received board approval to pursue a preliminary plan to
raise capital for the purpose of expanding its origination of
mezzanine investments. As part of the plan, we intend to
initiate a rights offering to stockholders where each
stockholder will receive a right to purchase one new share of
the Companys common stock for every three shares of common
stock that a stockholder owns. The right would entitle the
holder to purchase the share of common stock at a discount to
the market price. Based on the current number of shares
outstanding, the plan would increase the outstanding shares by
up to 1.27 million shares. The subscription price and the
record date for the distribution of the rights have not been
determined. We anticipate that the rights will be transferable
and will be admitted for trading on the Nasdaq National Market.
There can be no assurance that a market for the rights will
develop.

In addition to the rights offering, we intend to
apply for inclusion in the Small Business Investment Company
program of the Small Business Administration (the
SBA). If granted, we would be eligible for debt
financing from the SBA at an amount up to two times the equity
financing expected from the rights offering. We intend to file a
registration statement with the Securities and Exchange
Commission and an application with the SBA, which will be
subject to review. There can be no assurance that we will be
able to obtain a license to operate an SBIC or that we will be
able to obtain leverage from the SBA.

On June 11, 2002, the Company announced that
it had selected KPMG LLP to replace Arthur Andersen LLP as the
Companys independent accountants. We will no longer engage
Arthur Andersen LLP as its independent accountants effective
upon completion of the December 31, 2001 audit and the
March 31, 2002 quarterly review. The decision to change
accountants was approved by our Audit Committee and Board of
Directors and will be submitted for ratification by our
stockholders.

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. A portion of 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. A
portion of our investment portfolio also consists of shares of
common stock of small-capitalization public companies. These
investments are directly exposed to market price risk.

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PART II.      OTHER
INFORMATION




Item 6. Exhibits and Reports on
Form 8-K

a. Exhibits

Reference is made to the Exhibit Index that
is found on page 19 of this Form 10-Q.

b. Reports on Form 8-K

On June 11, 2002, the Company filed a
current report on Form 8-K disclosing a change in the
Companys independent accountants.

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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: July 29, 2002 |  | By: /s/ ROBERT P. PINKASRobert P. Pinkas
    Chairman of the Board and
    Chief Executive Officer
|                   
|Date: July 29, 2002 |  | By: /s/ TAB A. KEPLINGERTab A. Keplinger
    Vice President and
    Chief Financial Officer       

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EXHIBIT INDEX

The following exhibits are filed with this report
or are incorporated herein by reference to a prior filing, in
accordance with Rule 12b-32 under the Securities Exchange
Act of 1934. (Asterisk denotes exhibits filed with this report.)

|           |  |                                                                                                                                                                                                                                              
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          
|Exhibit 3  |  | Articles of Incorporation and By-laws                                                                                                                                                                                                        
|(1)        |  | Articles of Amendment and Restatement of the
    Charter of the Company (Exhibit 3.1 to the Annual Report on Form
    10-K filed on March 31, 1999, which exhibit is incorporated
    herein by reference)                                   
|(2)        |  | Amended and Restated Bylaws of the Company
    (Exhibit 3.2 to the Annual Report on Form 10-K filed on March
    31, 1999, which exhibit is incorporated herein by reference)                                                                
|(3)        |  | Amendment to the Charter of the Company (Exhibit
    3.3 to the Registration Statement filed on October 26, 2001,
    which exhibit is incorporated herein by reference)                                                                     
|Exhibit 4  |  | Form of Share Certificate (Exhibit 2.d to
    amendment No. 1 to the Registration Statement filed on October
    31, 1996, which exhibit is incorporated herein by reference)                                                                
|Exhibit 10 |  | Material Contracts                                                                                                                                                                                                                           
|(1)        |  | Dividend Reinvestment and Cash Purchase Plan
    (Exhibit 2.e to Amendment No. 3 to the Registration Statement
    filed on November 26, 1996, which exhibit is incorporated herein
    by reference)                                        
|(2)        |  | Form of Investment Advisory Agreement between the
    Company and the Investment Adviser (Exhibit 2.g to Amendment No.
    3 to the Registration Statement filed on November 26, 1996,
    which exhibit is incorporated herein by reference)
|(3)        |  | Stock Option Plan and Form of Option Grants
    (Exhibit 2.i.1 to Amendment No. 2 to the Registration Statement
    filed on November 22, 1996, which exhibit is incorporated herein
    by reference)                                       
|(4)        |  | Disinterested Director Option Plan and Form of
    Option Grants (Exhibit 2.i.2 to Amendment No. 2 to the
    Registration Statement filed on November 22, 1996, which exhibit
    is incorporated herein by reference)                      
|(5)        |  | Form of Custodian Contract (Exhibit 2.j to
    Amendment No. 2 to the Registration Statement filed on November
    22, 1996, which exhibit is incorporated herein by reference)                                                              
|(6)        |  | Form of Registrar, Transfer Agency and Service
    Agreement (Exhibit 2.k.1 to Amendment No. 2 to the Registration
    Statement filed on November 22, 1996, which exhibit is
    incorporated herein by reference)                          
|(7)        |  | Form of Administration Agreement (Exhibit 2.k.2
    to Amendment No. 2 to the Registration Statement filed on
    November 22, 1996, which exhibit is incorporated herein by
    reference)                                                  
|(8)        |  | Form of Indemnification Agreement for Directors
    and Officers (Exhibit 2.s to Amendment No. 2 to the Registration
    Statement filed on November 22, 1996, which exhibit is
    incorporated herein by reference)                        

20