UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2008
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 0-51459
 PATRIOT CAPITAL FUNDING, INC.
  Delaware
    
    74-3068511(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)274 Riverside AvenueWestport, CT
    
    06880(Address of principal executive office)
    
    (Zip Code)
 (203) 429-2700
 þ o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o þ




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##### 



PATRIOT CAPITAL FUNDING, INC.
 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2008
 TABLE OF CONTENTS
 PART I FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Financial Statements (Unaudited)
    
    
    1Consolidated Balance Sheets at March 31, 2008 and December 31, 2007
    
    
    1Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007
    
    
    2Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2008 and 2007
    
    
    3Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007
    
    
    4Consolidated Schedule of Investments as of March 31, 2008
    
    
    5Consolidated Schedule of Investments as of December 31, 2007
    
    
    11Notes to Consolidated Financial Statements
    
    
    17Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4.
    
    Controls and Procedures
    
    
    36PART II OTHER INFORMATION
    
    
    37Item 1.
    
    Legal Proceedings
    
    
    37Item 1A.
    
    Risk Factors
    
    
    37Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3.
    
    Defaults upon Senior Securities
    
    
    37Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    37Item 5.
    
    Other Information
    
    
    37Item 6.
    
    Exhibits
    
    
    37Signatures
    
    
    
    
    38




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##### 



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Patriot Capital Funding, Inc.
 
 Consolidated Balance Sheets
 (unaudited)
 March 31,
    
    December 31,2008
    
    2007ASSETSInvestments at fair value:Non-control/non-affiliate
investments (cost of $270,937,995 - 2008,
$294,686,727 - 2007)
    
    $
    260,051,446
    
    
    $
    290,225,759Affiliate investments
(cost of $87,363,276 - 2008,
$86,577,905 - 2007)
    
    
    83,364,986
    
    
    
    85,171,605Control investments (cost of $7,029,968 - 2008, $6,980,389 - 2007,)
    
    
    8,529,968
    
    
    
    9,328,389Total investments
    
    
    351,946,400
    
    
    
    384,725,753Cash and cash equivalents
    
    
    1,311,750
    
    
    
    789,451Restricted cash
    
    
    9,062,021
    
    
    
    10,487,202Interest receivable
    
    
    1,377,674
    
    
    
    1,758,954Other assets
    
    
    1,325,457
    
    
    
    617,448TOTAL ASSETS
    
    $
    365,023,302
    
    
    $
    398,378,808LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESBorrowings
    
    $
    143,000,000
    
    
    $
    164,900,000Interest payable
    
    
    517,602
    
    
    
    821,124Dividends payable
    
    
    6,814,650
    
    
    
    6,814,650Accounts payable, accrued expenses and other
    
    
    3,633,728
    
    
    
    4,245,350TOTAL LIABILITIES
    
    
    153,965,980
    
    
    
    176,781,124COMMITMENTS
(Note 7)STOCKHOLDERS EQUITYPreferred stock, $.01 par value, 1,000,000 shares authorized;
no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 49,000,000 shares authorized;
20,650,455 shares issued and outstanding at March 31, 2008,
and December 31, 2007
    
    
    206,504
    
    
    
    206,504Paid-in capital
    
    
    233,904,656
    
    
    
    233,722,593Accumulated net investment loss
    
    
    (1,912,061
    )
    
    
    (1,912,061
    )Distributions in excess of net investment income
    
    
    (2,853,401
    )
    
    
    (2,824,651
    )Net realized loss on investments
    
    
    (3,260,915
    )
    
    
    (3,171,365
    )Net unrealized depreciation on interest rate swaps
    
    
    (1,515,216
    )
    
    
    (762,365
    )Net unrealized depreciation on investments
    
    
    (13,512,245
    )
    
    
    (3,660,971
    )TOTAL STOCKHOLDERS EQUITY
    
    
    211,057,322
    
    
    
    221,597,684TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    365,023,302
    
    
    $
    398,378,808NET ASSET VALUE PER COMMON SHARE
    
    $
    10.22
    
    
    $
    10.73
  1




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##### 



Patriot Capital Funding, Inc.
 
 Consolidated Statements of Operations
 (unaudited)
 Three Months EndedMarch 31,2008
    
    2007INVESTMENT INCOMEInterest and dividends:Non-control/non-affiliate investments
    
    $
    8,298,333
    
    
    $
    7,578,948Affiliate investments
    
    
    2,514,423
    
    
    
    619,233Control investments
    
    
    178,466
    
    
    
    Total interest and dividend income
    
    
    10,991,222
    
    
    
    8,198,181Fees:Non-control/non-affiliate investments
    
    
    168,697
    
    
    
    381,626Affiliate investments
    
    
    38,661
    
    
    
    13,229Control investments
    
    
    6,250
    
    
    
    Total fee income
    
    
    213,608
    
    
    
    394,855Other investment income  non-control/non-affiliate investments
    
    
    39,855
    
    
    
    384,287Total Investment Income
    
    
    11,244,685
    
    
    
    8,977,323EXPENSESCompensation expense
    
    
    1,498,175
    
    
    
    1,219,533Interest expense
    
    
    2,059,523
    
    
    
    1,506,212Professional fees
    
    
    262,527
    
    
    
    307,627General and administrative expense
    
    
    638,560
    
    
    
    598,673Total Expenses
    
    
    4,458,785
    
    
    
    3,632,045Net Investment Income
    
    
    6,785,900
    
    
    
    5,345,278NET REALIZED GAIN (LOSS) AND NET UNREALIZED
APPRECIATION (DEPRECIATION)Net realized gain (loss) on investments  non-control/non-affiliate
    
    
    (89,550
    )
    
    
    6,167Net unrealized depreciation on investments  non-control/non-affiliate
    
    
    (6,411,284
    )
    
    
    (68,100
    )Net unrealized appreciation (depreciation) on investments  affiliate
    
    
    (2,591,990
    )
    
    
    153,200Net unrealized depreciation on investments  control
    
    
    (848,000
    )
    
    
    Net unrealized depreciation on interest rate swaps
    
    
    (752,851
    )
    
    
    (63,328
    )Net Realized Gain (Loss) and Net Unrealized Appreciation
(Depreciation)
    
    
    (10,693,675
    )
    
    
    27,939NET INCOME (LOSS)
    
    $
    (3,907,775
    )
    
    $
    5,373,217Earnings (loss) per share, basic
    
    $
    (0.19
    )
    
    $
    0.31Earnings (loss) per share, diluted
    
    $
    (0.19
    )
    
    $
    0.30Weighted average shares outstanding, basic
    
    
    20,650,455
    
    
    
    17,532,896Weighted average shares outstanding, diluted
    
    
    20,650,455
    
    
    
    17,724,026
  2




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##### 



Patriot Capital Funding, Inc.
 
 Consolidated Statements of Changes in Net Assets
 (unaudited)
 Three Months EndedMarch 31,2008
    
    2007Operations:Net investment income
    
    $
    6,785,900
    
    
    $
    5,345,278Net realized gain (loss) on investments
    
    
    (89,550
    )
    
    
    6,167Net unrealized appreciation (depreciation) on investments
    
    
    (9,851,274
    )
    
    
    85,100Net unrealized depreciation on interest rate swaps
    
    
    (752,851
    )
    
    
    (63,328
    )Net increase (decrease) in net assets from operations
    
    
    (3,907,775
    )
    
    
    5,373,217Stockholder transactions:Distributions to stockholders from net investment income
    
    
    (6,785,900
    )
    
    
    (5,345,278
    )Distributions in excess of net investment income
    
    
    (28,750
    )
    
    
    (486,247
    )Net decrease in net assets from stockholder distributions
    
    
    (6,814,650
    )
    
    
    (5,831,525
    )Capital share transactions:Issuance of common stock
    
    
    
    
    
    
    31,718,816Issuance of common stock under dividend reinvestment plan
    
    
    
    
    
    
    450,766Stock option compensation
    
    
    182,063
    
    
    
    158,782Net increase in net assets from capital share transactions
    
    
    182,063
    
    
    
    32,328,364Total increase (decrease) in net assets
    
    
    (10,540,362
    )
    
    
    31,870,056Net assets at beginning of period
    
    
    221,597,684
    
    
    
    164,108,629Net assets at end of period
    
    $
    211,057,322
    
    
    $
    195,978,685Net asset value per common share
    
    $
    10.22
    
    
    $
    10.75Common shares outstanding at end of period
    
    
    20,650,455
    
    
    
    18,223,517
  3




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##### 



Patriot Capital Funding, Inc.
 
 Consolidated Statements of Cash Flows
 (unaudited)
 Three Months EndedMarch 31,2008
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (3,907,775
    )
    
    $
    5,373,217Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:Depreciation and amortization
    
    
    98,111
    
    
    
    107,010Change in interest receivable
    
    
    381,280
    
    
    
    67,059Realized (gain) loss on sale of investments
    
    
    89,550
    
    
    
    (6,167
    )Change in unrealized (appreciation) depreciation on
investments
    
    
    9,851,274
    
    
    
    (85,100
    )Unrealized depreciation on interest rate swaps
    
    
    752,851
    
    
    
    63,328Payment-in-kind interest and dividends
    
    
    (1,453,912
    )
    
    
    (840,698
    )Stock-based compensation expense
    
    
    182,063
    
    
    
    158,782Change in unearned income
    
    
    (356,002
    )
    
    
    263,790Change in interest payable
    
    
    (303,522
    )
    
    
    (47,091
    )Change in other assets
    
    
    (16,195
    )
    
    
    202,031Change in accounts payable, accrued expenses and other
    
    
    (2,126,838
    )
    
    
    (1,307,841
    )Net cash provided by operating activities
    
    
    3,190,885
    
    
    
    3,948,320CASH FLOWS FROM INVESTING ACTIVITIES:Funded investments
    
    
    (5,141,406
    )
    
    
    (57,286,250
    )Principal repayments on investments
    
    
    19,441,899
    
    
    
    38,154,654Proceeds from sale of investments
    
    
    10,347,950
    
    
    
    5,349,917Purchases of furniture and equipment
    
    
    (3,927
    )
    
    
    Net cash provided by (used for) investing activities
    
    
    24,644,516
    
    
    
    (13,781,679
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings
    
    
    6,052,500
    
    
    
    55,550,000Repayments on borrowings
    
    
    (27,952,500
    )
    
    
    (73,557,000
    )Net proceeds from sale of common stock
    
    
    
    
    
    
    31,718,816Dividends paid
    
    
    (6,814,650
    )
    
    
    (4,454,053
    )Deferred offering costs
    
    
    (23,633
    )
    
    
    Decrease in restricted cash
    
    
    1,425,181
    
    
    
    1,142,982Net cash provided by (used for) financing activities
    
    
    (27,313,102
    )
    
    
    10,400,745NET INCREASE IN CASH AND CASH
EQUIVALENTS
    
    
    522,299
    
    
    
    567,386CASH AND CASH EQUIVALENTS AT:Beginning of Period
    
    
    789,451
    
    
    
    4,211,643End of Period
    
    $
    1,311,750
    
    
    $
    4,779,029Supplemental information:Interest paid
    
    $
    2,363,045
    
    
    $
    1,553,303Non-cash financing activities:Dividends reinvested in common stock
    
    $
    
    
    
    $
    450,766Dividends declared but not paid
    
    
    6,814,650
    
    
    
    5,831,525
  4




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##### 



Patriot Capital Funding, Inc.
 
 Consolidated Schedule of Investments
March 31, 2008
(unaudited)
 Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueControl investments:Fischbein, LLC
  (Machinery)
    
    Designer and manufacturer of
packaging equipment
    
    Senior Subordinated Debt
(16.5%, Due 5/13) (2) (3)
    
    $
    4,260,082
    
    
    $
    4,229,968
    
    
    $
    4,357,968Membership Interest  Class A (4)
    
    
    
    
    
    
    2,800,000
    
    
    
    4,172,000Total Control investments
(represents 2.4% of total
investments at fair value)
    
    
    
    
    
    $
    7,029,968
    
    
    $
    8,529,968Affiliate investments:Aylward Enterprises, LLC (5)  
(Machinery)
    
    Manufacturer of packaging equipment
    
    Revolving Line of Credit
(7.5%, Due 2/12) (3)
    
    $
    3,700,000
    
    
    $
    3,634,298
    
    
    $
    3,634,298Senior Secured Term Loan A
(8.8%, Due 2/12) (3)
    
    
    8,199,063
    
    
    
    8,080,949
    
    
    
    8,080,949Senior Subordinated Debt
(22.0%, Due 8/12) (2)
    
    
    6,525,623
    
    
    
    6,441,259
    
    
    
    4,558,259Subordinated Member Note
(8.0%, Due 2/13) (2)
    
    
    142,632
    
    
    
    142,632
    
    
    Membership Interest (4)
    
    
    
    
    
    
    1,250,000
    
    
    KTPS Holdings, LLC  
(Textiles & Leather)
    
    Manufacturer and distributor of
specialty pet products
    
    Revolving Line of Credit
(7.0%, Due 1/12) (3)
    
    
    500,000
    
    
    
    483,631
    
    
    
    483,631Senior Secured Term Loan A
(6.3%, Due 1/12) (3)
    
    
    5,850,000
    
    
    
    5,785,770
    
    
    
    5,785,770Senior Secured Term Loan B
(12.0%, Due 1/12) (3)
    
    
    1,980,000
    
    
    
    1,957,137
    
    
    
    1,957,137Junior Secured Term Loan
(15.0%, Due 3/12) (2) (3)
    
    
    4,112,832
    
    
    
    4,068,832
    
    
    
    4,068,832Membership Interest  Class A
(4)
    
    
    
    
    
    
    730,020
    
    
    
    778,700Membership Interest  Common (4)
    
    
    
    
    
    
    
    
    
    
    250,500Nupla Corporation  
(Home & Office Furnishings,  
Housewares & Durable  
Consumer Products)
    
    Manufacturer and marketer of
professional high-grade
fiberglass-handled striking and
digging tools
    
    Revolving Line of Credit
(6.7%, Due 9/12) (3)
    
    
    1,050,000
    
    
    
    1,033,650
    
    
    
    1,033,650Senior Secured Term Loan A
(6.6%, Due 9/12) (3)
    
    
    5,606,250
    
    
    
    5,559,194
    
    
    
    5,467,194Senior Subordinated Debt
(14.0%, Due 3/13) (2)
    
    
    3,034,956
    
    
    
    3,010,144
    
    
    
    2,926,144Preferred Stock (2)
    
    
    
    
    
    
    507,638
    
    
    
    210,100Common Stock (4)
    
    
    
    
    
    
    25,000
    
    
    
 5




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##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueSmart, LLC (5)  
(Diversified/Conglomerate  
Service)
    
    Provider of tuition management
services
    
    Revolving Line of Credit
(7.8%, Due 8/11) (3)
    
    
    870,000
    
    
    
    826,025
    
    
    
    826,025Senior Secured Term Loan A
(8.1%, Due 6/11) (3)
    
    
    3,693,750
    
    
    
    3,653,999
    
    
    
    3,653,999Senior Secured Term Loan B
(16.5%, Due 2/12) (2) (3)
    
    
    3,736,431
    
    
    
    3,696,341
    
    
    
    3,696,341Convertible Subordinated Note
(22.0%, Due 8/12)
    
    
    500,000
    
    
    
    500,000
    
    
    
    500,000Membership Interest - Class B
(4)
    
    
    
    
    
    
    1,000,000
    
    
    
    616,800Sport Helmets Holdings, LLC
(5)  
(Personal & Nondurable  
Consumer Products)
    
    Manufacturer of protective headgear
    
    Senior Secured Term Loan A
(6.8%, Due 12/13)
    
    
    4,500,000
    
    
    
    4,434,846
    
    
    
    4,434,846Senior Secured Term Loan B
(7.3%, Due 12/13)
    
    
    7,500,000
    
    
    
    7,388,891
    
    
    
    7,388,891Senior Subordinated Debt
(15.0%, Due 6/14) (2)
    
    
    8,072,086
    
    
    
    7,954,740
    
    
    
    7,954,740Common Stock (4)
    
    
    
    
    
    
    2,000,000
    
    
    
    1,907,200Vince & Associates Clinic  
Research, Inc.  
(Healthcare, Education &  
Childcare)
    
    Provider of clinical testing services
    
    Senior Secured Term Loan
(6.6%, Due 11/12) (2) (3)
    
    
    7,312,500
    
    
    
    7,211,084
    
    
    
    7,211,084Senior Subordinated Debt
(15.0%, Due 5/13) (2)
    
    
    5,563,538
    
    
    
    5,487,196
    
    
    
    5,487,196Convertible Preferred Stock (4)
    
    
    
    
    
    
    500,000
    
    
    
    452,700Total Affiliate investments
(represents 23.7% of total
investments at fair value)
    
    
    
    
    
    $
    87,363,276
    
    
    $
    83,364,986Non-control/non-affiliate investments:ADAPCO, Inc.  
(Ecological)
    
    Distributor of specialty chemicals
and contract application services
    
    Revolving Line of Credit
(9.5%, Due 7/11) (3)
    
    $
    3,000,000
    
    
    $
    2,979,269
    
    
    $
    2,979,269Senior Secured Term Loan A
(12.8%, Due 6/11) (3)
    
    
    8,849,375
    
    
    
    8,785,284
    
    
    
    8,085,334Common Stock (4)
    
    
    
    
    
    
    500,000
    
    
    Aircraft Fasteners  
International, LLC  
(Machinery)
    
    Distributor of fasteners and related
hardware for use in aerospace,
electronics and defense industries
    
    Senior Secured Term Loan
(6.8%, Due 11/12) (3)
    
    
    6,732,000
    
    
    
    6,634,895
    
    
    
    6,488,895Junior Secured Term Loan
(14.0%, Due 5/13) (2) (3)
    
    
    5,226,289
    
    
    
    5,151,778
    
    
    
    5,015,778Convertible Preferred Stock (2)
    
    
    
    
    
    
    258,329
    
    
    
    399,287Allied Defense Group, Inc.  
(Aerospace & Defense)
    
    Diversified defense company
    
    Common Stock (4)
    
    
    
    
    
    
    463,168
    
    
    
    165,200
 6




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##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueArrowhead General Insurance  
Agency, Inc. (6)  
(Insurance)
    
    Insurance agency and program
specialist
    
    Junior Secured Term Loan
(10.0%, Due 2/13) (3)
    
    
    5,000,000
    
    
    
    5,000,000
    
    
    
    3,750,000Borga, Inc.  
(Mining, Steel, Iron &  
Nonprecious Metals)
    
    Manufacturer of pre-fabricated metal
building systems
    
    Senior Secured Term Loan A
(6.7%, Due 3/09) (3)
    
    
    1,054,000
    
    
    
    1,045,276
    
    
    
    1,045,276Senior Secured Term Loan B
(9.5%, Due 5/10) (3)
    
    
    1,721,000
    
    
    
    1,694,153
    
    
    
    1,694,153Senior Secured Term Loan C
(16.0%, Due 5/10) (2) (3)
    
    
    7,873,398
    
    
    
    7,807,371
    
    
    
    7,807,371Common Stock Warrants (4)
    
    
    
    
    
    
    11,761
    
    
    Caleel + Hayden, LLC (5)  
(Personal & Nondurable  
Consumer Products)
    
    Provider of proprietary branded
professional skincare and cosmetic
products to physicians and spa
communities
    
    Junior Secured Term Loan B
(6.9%, Due 11/11) (3)
    
    
    10,852,187
    
    
    
    10,725,908
    
    
    
    10,725,908Senior Subordinated Debt
(14.5%, Due 11/12) (2) (3)
    
    
    6,250,000
    
    
    
    6,178,321
    
    
    
    6,178,321Common Stock (4)
    
    
    
    
    
    
    750,000
    
    
    
    1,137,000Cheeseworks, Inc.  
(Grocery)
    
    Distributor of specialty cheese and
food products
    
    Revolving Line of Credit
(5.6%, Due 6/11) (3)
    
    
    5,080,219
    
    
    
    4,991,252
    
    
    
    4,991,252Senior Secured Term Loan
(8.7%, Due 6/11) (3)
    
    
    10,264,966
    
    
    
    10,141,173
    
    
    
    10,141,173CS Operating, LLC (5)  
(Buildings & Real Estate)
    
    Provider of maintenance, repair and
replacement of HVAC, electrical,
plumbing, and foundation repair
    
    Revolving Line of Credit
(7.4%, Due 1/13) (3)
    
    
    200,000
    
    
    
    193,234
    
    
    
    193,234Senior Secured Term Loan A
(7.9%, Due 7/12) (3)
    
    
    2,237,500
    
    
    
    2,206,004
    
    
    
    2,206,004Senior Subordinated Debt
(14.5%, Due 1/13) (2) (3)
    
    
    2,543,300
    
    
    
    2,507,956
    
    
    
    2,507,956Copperhead Chemical  
Company, Inc.  
(Chemicals, Plastics &  
Rubber)
    
    Manufacturer of bulk pharmaceuticals
    
    Senior Subordinated Debt
(15.3%, Due 1/13) (2) (3)
    
    
    3,570,112
    
    
    
    3,536,303
    
    
    
    3,536,303Custom Direct, Inc. (6)  
(Printing & Publishing)
    
    Direct marketer of checks and other
financial products and services
    
    Junior Secured Term Loan
(8.7%, Due 12/14) (3)
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    1,550,000Dover Saddlery, Inc.  
(Retail Stores)
    
    Equestrian products catalog retailer
    
    Common Stock (4)
    
    
    
    
    
    
    148,200
    
    
    
    160,800Employbridge Holding  
Company (5) (6)  
(Personal, Food &  
Miscellaneous Services)
    
    A provider of specialized staffing
services
    
    Junior Secured Term Loan
(9.7%, Due 10/13) (3)
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    2,730,000
 7




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueEncore Legal Solutions, Inc.  
(Printing & Publishing)
    
    Legal document management services
    
    Junior Secured Term Loan A
(8.3%, Due 6/10) (2) (3)
    
    
    3,987,873
    
    
    
    3,966,964
    
    
    
    3,966,964Junior Secured Term Loan B
(10.4%, Due 6/10) (2) (3)
    
    
    7,267,900
    
    
    
    7,217,806
    
    
    
    6,295,806Senior Subordinated Debt
(15.0%, Due 6/10) (2) (3)
    
    
    6,154,438
    
    
    
    6,120,537
    
    
    
    3,720,577Common Stock Warrants (4)
    
    
    
    
    
    
    232,833
    
    
    
    EXL Acquisition Corp.  
(Electronics)
    
    Manufacturer of lab testing supplies
    
    Senior Secured Term Loan A
(5.9%, Due 3/11) (3)
    
    
    4,406,659
    
    
    
    4,373,473
    
    
    
    4,305,473Senior Secured Term Loan B
(6.3%, Due 3/12) (3)
    
    
    4,765,771
    
    
    
    4,709,231
    
    
    
    4,635,630Senior Secured Term Loan C
(6.8%, Due 3/12) (3)
    
    
    2,939,415
    
    
    
    2,894,241
    
    
    
    2,848,841Senior Secured Term Loan D
(15.0%, Due 3/12) (3)
    
    
    6,893,099
    
    
    
    6,822,796
    
    
    
    6,822,796Common Stock  Class A (4)
    
    
    
    
    
    
    2,475
    
    
    
    139,500Common Stock  Class B (2)
    
    
    
    
    
    
    260,314
    
    
    
    261,681Fairchild
Industrial Products, Co. (Electronics)
    
    Manufacturer of industrial controls
and power transmission products
    
    Senior Secured Term Loan A
(6.5%, Due 7/10) (3)
    
    
    2,252,500
    
    
    
    2,231,651
    
    
    
    2,231,651Senior Secured Term Loan B
(8.2%, Due 7/11) (3)
    
    
    4,621,875
    
    
    
    4,582,766
    
    
    
    4,582,766Senior Subordinated Debt
(14.8%, Due 7/11) (2)
    
    
    5,460,000
    
    
    
    5,405,807
    
    
    
    5,405,807Preferred Stock  Class A (2)
    
    
    
    
    
    
    334,259
    
    
    
    334,259Common Stock  Class B (4)
    
    
    
    
    
    
    121,598
    
    
    
    327,900Impact Products, LLC  
(Machinery)
    
    Distributor of janitorial supplies
    
    Junior Secured Term Loan
(7.4%, Due 9/12) (3)
    
    
    8,950,000
    
    
    
    8,887,181
    
    
    
    7,949,181Senior Subordinated Debt
(13.5%, Due 9/12) (2) (3)
    
    
    5,547,993
    
    
    
    5,511,641
    
    
    
    5,246,648Innovative Concepts in  
Entertainment, Inc.  
(Personal & Nondurable  
Consumer Products)
    
    Manufacturer of coin operated games
    
    Junior Secured Term Loan A
(7.2%, Due 2/11) (3)
    
    
    4,050,000
    
    
    
    4,032,875
    
    
    
    4,032,875Junior Secured Term Loan B
(7.6%, Due 2/11) (3)
    
    
    3,528,000
    
    
    
    3,512,065
    
    
    
    3,512,065Junior Secured Term Loan C
(13.0%, Due 8/11) (3)
    
    
    3,900,000
    
    
    
    3,883,181
    
    
    
    3,883,181Keltner Enterprises, LLC (5)  
(Oil & Gas)
    
    Distributor of automotive oils,
chemicals and parts
    
    Senior Subordinated Debt
(14.0%, Due 12/11) (3)
    
    
    3,850,000
    
    
    
    3,838,335
    
    
    
    3,838,335
 8




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueL.A. Spas, Inc.
    
    Manufacturer of above ground spas
    
    Senior Subordinated Debt(Chemicals, Plastics &
    
    
    
    (17.5%, Due 1/10) (2) (3)
    
    
    7,680,391
    
    
    
    7,640,089
    
    
    
    7,640,089Rubber)Common Stock Warrants (4)
    
    
    
    
    
    
    3,248
    
    
    
    LHC Holdings Corp.
    
    Provider of home healthcare services
    
    Senior Secured Term Loan A(Healthcare, Education & Childcare)
    
    
    
    (8.8%, Due 11/12) (3)
    
    
    4,978,875
    
    
    
    4,918,951
    
    
    
    4,918,951Senior Subordinated Debt(14.5%, Due 5/13)
    
    
    4,565,000
    
    
    
    4,509,922
    
    
    
    4,509,922Membership Interest (4)
    
    
    
    
    
    
    125,000
    
    
    
    109,100Mac & Massey Holdings, LLC
    
    Broker and distributor of ingredients to
    
    Senior Subordinated Debt(Grocery)
    
    manufacturers of food products
    
    (16.5%, Due 2/13) (2)
    
    
    7,560,495
    
    
    
    7,526,464
    
    
    
    7,526,464Common Stock (4)
    
    
    
    
    
    
    247,284
    
    
    
    259,700Metrologic Instruments, Inc. (6)
    
    Manufacturer of imaging and scanning
    
    Senior Secured Term Loan(Electronics)
    
    equipment
    
    (5.7%, Due 4/14) (3)
    
    
    990,000
    
    
    
    990,000
    
    
    
    900,900Junior Secured Term Loan(9.0%, Due 12/15)
    
    
    1,000,000
    
    
    
    1,000,000
    
    
    
    875,000Northwestern Management Services, LLC
    
    Provider of dental services
    
    Senior Secured Term Loan A(7.1%, Due 12/12) (3)
    
    
    5,895,000
    
    
    
    5,835,379
    
    
    
    5,835,379(Healthcare, Education & Childcare)Senior Secured Term Loan B(7.6%, Due 12/12) (3)
    
    
    1,246,875
    
    
    
    1,234,149
    
    
    
    1,234,149Junior Secured Term Loan(15.0%, Due 6/13) (2)
    
    
    2,775,063
    
    
    
    2,747,272
    
    
    
    2,747,272Common Stock (4)
    
    
    
    
    
    
    500,000
    
    
    
    397,500Prince
Mineral Company, Inc.
    
    Manufacturer of pigments
    
    Junior Secured Term Loan(Metals
& Minerals)
    
    
    
    (8.3%, Due 12/12) (3)
    
    
    11,350,000
    
    
    
    11,185,465
    
    
    
    10,153,465Senior Subordinated Debt(14.0%, Due 7/13) (2) (3)
    
    
    11,943,272
    
    
    
    11,805,660
    
    
    
    11,484,660Quartermaster, Inc.
    
    Retailer of uniforms and tactical
    
    Revolving Line of Credit(Retail Stores)
    
    equipment to law enforcement and
    
    (7.5%, Due 12/10) (3)
    
    
    1,000,000
    
    
    
    974,234
    
    
    
    974,234security professionalsSenior Secured Term Loan A(9.3%, Due 12/10) (3)
    
    
    4,057,500
    
    
    
    4,014,646
    
    
    
    4,014,646Senior Secured Term Loan B(10.6%, Due 12/10) (3)
    
    
    2,562,500
    
    
    
    2,538,642
    
    
    
    2,538,642Senior Secured Term Loan C(15.0%, Due 12/11) (2) (3)
    
    
    3,323,081
    
    
    
    3,292,912
    
    
    
    3,292,912
 9




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueR-O-M Corporation
    
    Manufacturer of doors, ramps and bulk
    
    Senior Secured Term Loan A(Automobile)
    
    heads for fire trucks and food
    
    (5.6%, Due 2/13) (3)
    
    
    7,240,000
    
    
    
    7,165,017
    
    
    
    7,028,017transportationSenior Secured Term Loan B(6.8%, Due 5/13) (3)
    
    
    8,443,125
    
    
    
    8,342,067
    
    
    
    8,182,067Senior Subordinated Debt(15.0%, Due 8/13) (2)
    
    
    9,100,000
    
    
    
    8,996,588
    
    
    
    8,996,588Sidumpr Trailer Company, Inc.
    
    Manufacturer of side dump trailers
    
    Revolving Line of Credit(Automobile)
    
    
    
    (7.8%, Due 1/11) (3)
    
    
    2,000,000
    
    
    
    1,978,657
    
    
    
    1,978,657Senior Secured Term Loan A(6.3%, Due 1/11) (3)
    
    
    2,047,500
    
    
    
    2,030,387
    
    
    
    2,030,387Senior Secured Term Loan B(9.3%, Due 1/11) (3)
    
    
    2,320,625
    
    
    
    2,296,151
    
    
    
    2,296,151Senior Secured Term Loan C(15.0%, Due 7/11) (2) (3)
    
    
    3,254,631
    
    
    
    3,224,144
    
    
    
    2,296,144Senior Subordinated Debt(12.0%, Due 1/12) (3)
    
    
    75,000
    
    
    
    75,000
    
    
    
    Preferred Stock (2)
    
    
    
    
    
    
    88,978
    
    
    
    Common Stock (4)
    
    
    
    
    
    
    25
    
    
    
    Total Non-control/non-affiliate investments (represents 73.9% of total investments at fair value)
    
    
    
    
    
    $
    270,937,995
    
    
    $
    260,051,446Total Investments
    
    
    
    
    
    
    
    
    
    $
    365,331,239
    
    
    $
    351,946,400
 
 (1)
    
    Affiliate investments are generally defined under the Investment Company Act of 1940, as amended (the 1940 Act) as companies in which the Company owns at least 5% but not more than 25% of the voting securities of the
company. Control investments are generally defined under the 1940 Act as companies in which the Company owns more than 25% of the voting securities of the company or has greater than 50% representation on its board.(2)
    
    Amount includes payment-in-kind (PIK) interest or dividends.(3)
    
    Pledged as collateral under the Companys Securitization Facility. See Note 4 to Consolidated Financial Statements.(4)
    
    Non-income producing.(5)
    
    Some of the investments listed are issued by an affiliate of the listed portfolio company.(6)
    
    Syndicated investment which has been originated by another financial institution and broadly distributed.  10




---



##### 



PATRIOT CAPITAL FUNDING, INC.
 
 Consolidated Schedule of Investments
December 31, 2007
 Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueControl investments:Fischbein, LLC
    
    Designer and manufacturer of packaging
    
    Senior Subordinated Debt(Machinery)
    
    equipment
    
    (16.5%, Due 5/13) (2) (3)
    
    $
    4,211,988
    
    
    $
    4,180,389
    
    
    $
    4,180,389Membership Interest  Class A (4)
    
    
    
    
    
    
    2,800,000
    
    
    
    5,148,000Total Control investments (represents 2.4% of total investments at fair value)
    
    
    
    
    
    $
    6,980,389
    
    
    $
    9,328,389Affiliate investments:Aylward Enterprises, LLC (5)
    
    Manufacturer of packaging equipment
    
    Revolving Line of Credit(Machinery)
    
    
    
    (8.7%, Due 2/12) (3)
    
    $
    3,700,000
    
    
    $
    3,630,012
    
    
    $
    3,630,012Senior Secured Term Loan A(9.5%, Due 2/12) (3)
    
    
    8,292,188
    
    
    
    8,162,724
    
    
    
    8,162,724Senior Subordinated Debt(14.5%, Due 8/12) (2)
    
    
    6,424,702
    
    
    
    6,335,464
    
    
    
    6,335,464Membership Interest (4)
    
    
    
    
    
    
    1,250,000
    
    
    
    KTPS Holdings, LLC
    
    Manufacturer and distributor of
    
    Revolving Line of Credit(Textiles & Leather)
    
    specialty pet products
    
    (8.2%, Due 1/12) (3)
    
    
    300,000
    
    
    
    282,562
    
    
    
    282,562Senior Secured Term Loan A(8.4%, Due 1/12) (3)
    
    
    6,012,500
    
    
    
    5,941,886
    
    
    
    5,941,886Senior Secured Term Loan B(12.0%, Due 1/12) (3)
    
    
    1,985,000
    
    
    
    1,960,952
    
    
    
    1,960,952Junior Secured Term Loan(15.0%, Due 3/12) (2) (3)
    
    
    4,081,878
    
    
    
    4,035,122
    
    
    
    4,035,122Membership Interest  Class A (4)
    
    
    
    
    
    
    730,020
    
    
    
    769,000Membership Interest  Common (4)
    
    
    
    
    
    
    19,980
    
    
    
    87,900Nupla Corporation
    
    Manufacturer and marketer of professional high-grade fiberglass-handled striking and digging tools
    
    Revolving Line of Credit(Home & Office Furnishings, Housewares & Durable
    

    
    (9.5%, Due 9/12) (3)
    
    
    550,000
    
    
    
    532,725
    
    
    
    532,725Consumer Products)Senior Secured Term Loan A(8.8%, Due 9/12) (3)
    
    
    5,678,125
    
    
    
    5,628,411
    
    
    
    5,628,411Senior Subordinated Debt(14.0%, Due 3/13) (2)
    
    
    3,019,688
    
    
    
    2,993,614
    
    
    
    2,993,614Preferred Stock (2)
    
    
    
    
    
    
    493,427
    
    
    
    493,427Common Stock (4)
    
    
    
    
    
    
    25,000
    
    
    
    38,300
 11




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueSmart, LLC (5)
    
    Provider of tuition management services
    
    Revolving Line of Credit(Diversified/Conglomerate Service)
    
    
    
    (12.3%, Due 8/11) (3)
    
    
    870,000
    
    
    
    822,799
    
    
    
    822,799Senior Secured Term Loan A(12.3%, Due 8/11) (3)
    
    
    3,862,500
    
    
    
    3,817,733
    
    
    
    3,817,733Senior Secured Term Loan B(19.0%, Due 2/12) (2) (3)
    
    
    3,668,965
    
    
    
    3,626,308
    
    
    
    3,626,308Convertible Subordinated Note(22.0%, Due 8/12)
    
    
    250,000
    
    
    
    250,000
    
    
    
    250,000Membership Interest   Class B
(4)
    
    
    
    
    
    
    1,000,000
    
    
    
    729,100Sport Helmets Holdings, LLC (5)
    
    Manufacturer of protective headgear
    
    Senior Secured Term Loan A(Personal & Nondurable Consumer Products)
    
    
    
    (9.0%, Due 12/13)
    
    
    4,500,000
    
    
    
    4,431,440
    
    
    
    4,431,440Senior Secured Term Loan B(9.5%, Due 12/13)
    
    
    7,500,000
    
    
    
    7,385,336
    
    
    
    7,385,336Senior Subordinated Debt(15.0%, Due 6/14) (2)
    
    
    8,011,333
    
    
    
    7,889,250
    
    
    
    7,889,250Common Stock (4)
    
    
    
    
    
    
    2,000,000
    
    
    
    1,901,500Vince & Associates Clinic
    
    Provider of clinical testing services
    
    Senior Secured Term LoanResearch, Inc.
    
    
    
    (10.0%, Due 11/12) (2) (3)
    
    
    7,500,000
    
    
    
    7,391,657
    
    
    
    7,391,657(Healthcare, Education &Childcare)Senior Subordinated Debt(15.0%, Due 5/13) (2)
    
    
    5,521,561
    
    
    
    5,441,483
    
    
    
    5,441,483Convertible Preferred Stock (4)
    
    
    
    
    
    
    500,000
    
    
    
    592,900Total Affiliate investments (represents 22.1% of total investments at fair value)
    
    
    
    
    
    $
    86,577,905
    
    
    $
    85,171,605Non-control/non-affiliate investments:ADAPCO, Inc.
    
    Distributor of specialty chemicals and
    
    Revolving Line of Credit(Ecological)
    
    contract application services
    
    (9.0%, Due 7/11) (3)
    
    $
    2,200,000
    
    
    $
    2,177,697
    
    
    $
    2,177,697Senior Secured Term Loan A(10.5%, Due 6/11) (3)
    
    
    13,016,250
    
    
    
    12,916,093
    
    
    
    12,216,143Common Stock (4)
    
    
    
    
    
    
    500,000
    
    
    
    Aircraft Fasteners
    
    Distributor of fasteners and related
    
    Senior Secured Term LoanInternational, LLC
    
    hardware for use in aerospace,
    
    (8.3%, Due 11/12) (3)
    
    
    6,800,000
    
    
    
    6,697,869
    
    
    
    6,697,869(Machinery)
    
    electronics and defense industriesJunior Secured Term Loan(14.0%, Due 5/13) (2) (3)
    
    
    5,200,000
    
    
    
    5,121,815
    
    
    
    5,121,815Convertible Preferred Stock (2)
    
    
    
    
    
    
    253,342
    
    
    
    341,800Allied Defense Group, Inc.
    
    Diversified defense company
    
    Common Stock (4)
    
    
    
    
    
    
    463,168
    
    
    
    161,600(Aerospace & Defense)
 12




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueArrowhead General Insurance
Agency, Inc. (6)
(Insurance)
    
    Insurance agency and program specialist
    
    Junior Secured Term Loan
(12.1%, Due 2/13) (3)
    
    
    5,000,000
    
    
    
    5,000,000
    
    
    
    4,500,000Borga, Inc.
(Mining, Steel, Iron &
Nonprecious Metals)
    
    Manufacturer of pre-fabricated metal building
systems
    
    Senior Secured Term Loan A
(8.8%, Due 3/09) (3)
    
    
    1,321,000
    
    
    
    1,309,581
    
    
    
    1,309,581Senior Secured Term Loan B
(11.8%, Due 5/10) (3)
    
    
    1,785,250
    
    
    
    1,755,679
    
    
    
    1,755,679Senior Secured Term Loan C
(16.0%, Due 5/10) (2) (3)
    
    
    7,794,323
    
    
    
    7,720,404
    
    
    
    7,720,404Common Stock Warrants (4)
    
    
    
    
    
    
    10,746
    
    
    Caleel + Hayden, LLC (5)(Personal & Nondurable Consumer 
Products)
    
    Provider of proprietary branded professional
skincare and cosmetic products to physicians and
spa communities
    
    Junior Secured Term Loan B
(9.6%, Due 11/11) (3)
    
    
    10,879,062
    
    
    
    10,745,564
    
    
    
    10,745,564Senior Subordinated Debt
(14.5%, Due 11/12) (2) (3)
    
    
    6,250,000
    
    
    
    6,174,425
    
    
    
    6,174,425Common Stock (4)
    
    
    
    
    
    
    750,000
    
    
    
    1,058,600Cheeseworks, Inc.
(Grocery)
    
    Distributor of specialty cheese and food products
    
    Revolving Line of Credit
(7.6%, Due 6/11) (3)
    
    
    5,080,219
    
    
    
    4,984,386
    
    
    
    4,984,386Senior Secured Term Loan
(10.7%, Due 6/11) (3)
    
    
    10,648,560
    
    
    
    10,512,576
    
    
    
    10,512,576CS Operating, LLC (5)(Buildings & Real Estate)
    
    Provider of maintenance, repair and replacement
of HVAC, electrical, plumbing, and foundation
repair
    
    Senior Secured Term Loan A
(9.1%, Due 7/12) (3)
    
    
    2,325,000
    
    
    
    2,290,500
    
    
    
    2,290,500Senior Subordinated Debt
(14.5%, Due 1/13) (2) (3)
    
    
    2,527,328
    
    
    
    2,490,326
    
    
    
    2,490,326Copperhead Chemical Company,
Inc.
(Chemicals, Plastics & Rubber)
    
    Manufacturer of bulk pharmaceuticals
    
    Senior Subordinated Debt
(15.3%, Due 1/13) (2) (3)
    
    
    3,540,943
    
    
    
    3,505,378
    
    
    
    3,505,378Custom Direct, Inc. (6)(Printing & Publishing)
    
    Direct marketer of checks and other financial
products and services
    
    Junior Secured Term Loan
(10.8%, Due 12/14) (3)
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    1,750,000Dover Saddlery, Inc. (Retail Stores)
    
    Equestrian products catalog retailer
    
    Common Stock (4)
    
    
    
    
    
    
    148,200
    
    
    
    129,200Eight OClock Coffee Company (6)(Beverage, Food & Tobacco)
    
    Manufacturer, distributor, and marketer of coffee
    
    Junior Secured Term Loan
(11.4%, Due 7/13) (3)
    
    
    9,000,000
    
    
    
    9,000,000
    
    
    
    9,000,000Employbridge Holding Company(5)(6)(Personal, Food & Miscellaneous 
Services)
    
    A provider of specialized staffing services
    
    Junior Secured Term Loan
(11.8%, Due 10/13) (3)
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    2,910,000
 13




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueEncore Legal Solutions, Inc.
(Printing & Publishing)
    
    Legal document management services
    
    Junior Secured Term Loan A
(10.7%, Due 6/10) (2) (3)
    
    
    3,949,437
    
    
    
    3,925,802
    
    
    
    3,925,802Junior Secured Term Loan B
(10.8%, Due 6/10) (2) (3)
    
    
    7,193,143
    
    
    
    7,138,192
    
    
    
    7,138,192Senior Subordinated Debt
(15.0%, Due 6/10) (2) (3)
    
    
    5,926,861
    
    
    
    5,889,187
    
    
    
    3,489,226Common Stock Warrants (4)
    
    
    
    
    
    
    219,791
    
    
    
    EXL Acquisition Corp.
(Electronics)
    
    Manufacturer of lab testing supplies
    
    Senior Secured Term Loan A
(8.4%, Due 3/11) (3)
    
    
    4,800,000
    
    
    
    4,761,933
    
    
    
    4,761,933Senior Secured Term Loan B
(8.9%, Due 3/12) (3)
    
    
    4,851,840
    
    
    
    4,792,326
    
    
    
    4,792,326Senior Secured Term Loan C
(9.4%, Due 3/12) (3)
    
    
    2,992,500
    
    
    
    2,944,981
    
    
    
    2,944,981Senior Secured Term Loan D
(15.0%, Due 3/12) (3)
    
    
    7,000,000
    
    
    
    6,925,241
    
    
    
    6,925,241Common Stock  Class A (4)
    
    
    
    
    
    
    2,475
    
    
    
    123,900Common Stock  Class B (2)
    
    
    
    
    
    
    254,057
    
    
    
    255,325Fairchild Industrial Products, Co.
(Electronics)
    
    Manufacturer of industrial controls and power
transmission products
    
    Senior Secured Term Loan A
(8.3%, Due 7/10) (3)
    
    
    5,580,000
    
    
    
    5,531,331
    
    
    
    5,531,331Senior Secured Term Loan B
(10.0%, Due 7/11) (3)
    
    
    9,325,000
    
    
    
    9,239,973
    
    
    
    9,239,973Senior Subordinated Debt
(14.8%, Due 7/11) (2)
    
    
    5,460,000
    
    
    
    5,401,721
    
    
    
    5,401,721Preferred Stock  Class A (2)
    
    
    
    
    
    
    327,879
    
    
    
    327,879Common Stock  Class B (4)
    
    
    
    
    
    
    121,598
    
    
    
    293,200Impact Products, LLC(Machinery)
    
    Distributor of janitorial supplies
    
    Junior Secured Term Loan
(9.5%, Due 9/12) (3)
    
    
    8,968,750
    
    
    
    8,903,106
    
    
    
    8,903,106Senior Subordinated Debt
(13.5%, Due 9/12) (2) (3)
    
    
    5,547,996
    
    
    
    5,509,594
    
    
    
    5,509,594Innovative Concepts in
Entertainment, Inc.
(Personal & Nondurable Consumer
Products)
    
    Manufacturer of coin operated games
    
    Junior Secured Term Loan A
(9.0%, Due 2/11) (3)
    
    
    4,312,500
    
    
    
    4,292,854
    
    
    
    4,292,854Junior Secured Term Loan B
(9.5%, Due 2/11) (3)
    
    
    3,537,000
    
    
    
    3,519,896
    
    
    
    3,519,896Junior Secured Term Loan C
(13.0%, Due 8/11) (3)
    
    
    3,900,000
    
    
    
    3,881,940
    
    
    
    3,881,940Keltner Enterprises, LLC (5)(Oil & Gas)
    
    Distributor of automotive oils, chemicals and parts
    
    Senior Subordinated Debt
(14.0%, Due 12/11) (3)
    
    
    3,850,000
    
    
    
    3,837,555
    
    
    
    3,837,555
 14




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueL.A. Spas, Inc.
(Chemicals, Plastics & Rubber)
    
    Manufacturer of above ground spas
    
    Senior Subordinated Debt
(15.5%, Due 1/10) (2) (3)
    
    
    7,271,249
    
    
    
    7,225,464
    
    
    
    7,225,464Common Stock Warrants (4)
    
    
    
    
    
    
    3,009
    
    
    
    LHC Holdings Corp.
(Healthcare, Education & Childcare)
    
    Provider of home healthcare services
    
    Revolving Line of Credit
(8.8%, Due 11/12) (3)
    
    
    300,000
    
    
    
    287,369
    
    
    
    287,369Senior Secured Term Loan A
(8.8%, Due 11/12) (3)
    
    
    5,100,000
    
    
    
    5,035,888
    
    
    
    5,035,888Senior Subordinated Debt
(14.5%, Due 5/13)
    
    
    4,565,000
    
    
    
    4,507,250
    
    
    
    4,507,250Membership Interest (4)
    
    
    
    
    
    
    125,000
    
    
    
    120,500Mac & Massey Holdings, LLC(Grocery)
    
    Broker and distributor of ingredients to
manufacturers of food products
    
    Senior Subordinated Debt
(16.5%, Due 2/13) (2)
    
    
    7,438,280
    
    
    
    7,402,496
    
    
    
    7,402,496Common Stock (4)
    
    
    
    
    
    
    250,000
    
    
    
    388,200Metrologic Instruments, Inc. (6)
(Electronics)
    
    Manufacturer of imaging and scanning equipment
    
    Senior Secured Term Loan
(7.8%, Due 4/14) (3)
    
    
    992,500
    
    
    
    992,500
    
    
    
    942,900Junior Secured Term Loan
(11.1%, Due 12/15)
    
    
    1,000,000
    
    
    
    1,000,000
    
    
    
    930,000Nice-Pak Products, Inc. (6)
(Containers, Packaging & Glass)
    
    Manufacturer of pre-moistened wipes
    
    Senior Secured Term Loan
(8.5%, Due 6/14) (3)
    
    
    2,985,000
    
    
    
    2,985,000
    
    
    
    2,895,500Northwestern Management Services, LLC(Healthcare, Education & Childcare)
    
    Provider of dental services
    
    Senior Secured Term Loan A
(8.9%, Due 12/12) (3)
    
    
    6,000,000
    
    
    
    5,936,612
    
    
    
    5,936,612Senior Secured Term Loan B
(9.4%, Due 12/12) (3)
    
    
    1,250,000
    
    
    
    1,236,744
    
    
    
    1,236,744Junior Secured Term Loan
(15.0%, Due 6/13) (2)
    
    
    2,754,125
    
    
    
    2,724,995
    
    
    
    2,724,995Common Stock (4)
    
    
    
    
    
    
    500,000
    
    
    
    504,400Prince Mineral Company, Inc.
(Metals & Minerals)
    
    Manufacturer of pigments
    
    Junior Secured Term Loan
(9.9%, Due 12/12) (3)
    
    
    11,375,000
    
    
    
    11,203,941
    
    
    
    11,203,941Senior Subordinated Debt
(14.0%, Due 7/13) (2) (3)
    
    
    11,913,159
    
    
    
    11,768,249
    
    
    
    11,768,249Quartermaster, Inc.
(Retail Stores)
    
    Retailer of uniforms and tactical equipment
to law enforcement and security professionals
    
    Revolving Line of Credit
(9.5%, Due 12/10) (3)
    
    
    500,000
    
    
    
    471,887
    
    
    
    471,887Senior Secured Term Loan A
(9.4%, Due 12/10) (3)
    
    
    4,276,250
    
    
    
    4,228,116
    
    
    
    4,228,116Senior Secured Term Loan B
(10.6%, Due 12/10) (3)
    
    
    2,568,750
    
    
    
    2,542,846
    
    
    
    2,542,846Senior Secured Term Loan C
(15.0%, Due 12/11) (2) (3)
    
    
    3,298,069
    
    
    
    3,265,862
    
    
    
    3,265,862
 15




---



##### 



Company(1)(Industry)
    
    Company Description
    
    Investment
    
    Principal
    
    Cost
    
    ValueR-O-M Corporation(Automobile)
    
    Manufacturer of doors, ramps and
bulk heads for fire trucks and
food transportation
    
    Senior Secured Term Loan A
(8.0%, Due 2/13) (3)
    
    
    7,440,000
    
    
    
    7,359,023
    
    
    
    7,359,023Senior Secured Term Loan B
(9.3%, Due 5/13) (3)
    
    
    8,464,500
    
    
    
    8,359,596
    
    
    
    8,359,596Senior Subordinated Debt
(15.0%, Due 8/13) (2)
    
    
    9,100,000
    
    
    
    8,991,761
    
    
    
    8,991,761Sidumpr Trailer Company, Inc.
(Automobile)
    
    Manufacturer of side dump trailers
    
    Revolving Line of Credit
(9.8%, Due 1/11) (3)
    
    
    1,675,000
    
    
    
    1,651,732
    
    
    
    1,651,732Senior Secured Term Loan A
(8.5%, Due 1/11) (3)
    
    
    2,047,500
    
    
    
    2,028,320
    
    
    
    2,028,320Senior Secured Term Loan B
(11.5%, Due 1/11) (3)
    
    
    2,320,625
    
    
    
    2,294,336
    
    
    
    2,294,336Senior Secured Term Loan C
(15.0%, Due 7/11) (2) (3)
    
    
    3,230,074
    
    
    
    3,197,254
    
    
    
    3,197,254Senior Subordinated Debt
(12.0%, Due 1/12) (3)
    
    
    75,000
    
    
    
    75,000
    
    
    
    75,000Preferred Stock (2)
    
    
    
    
    
    
    87,271
    
    
    Common Stock (4)
    
    
    
    
    
    
    25
    
    
    Total Non-control/non-affiliate investments (represents 75.5% of total investments at fair value)
    
    
    
    
    
    $
    294,686,727
    
    
    $
    290,225,759Total Investments
    
    
    
    
    
    
    
    
    
    $
    388,245,021
    
    
    $
    384,725,753
 
 (1)
    
    Affiliate investments are generally defined under the Investment Company Act of 1940, as amended (the 1940 Act)
as companies in which the Company owns at least 5% but not more than 25% of the voting securities of the company.
Control investments are generally defined under the 1940 Act as companies in which the Company owns more than 25% of the
voting securities of the company or has greater than 50% representation on its board.(2)
    
    Amount includes payment-in-kind (PIK) interest or dividends.(3)
    
    Pledged as collateral under the Companys Securitization Facility. See Note 4 to Consolidated Financial Statements.(4)
    
    Non-income producing.(5)
    
    Some of the investments listed are issued by an affiliate of the listed portfolio company.(6)
    
    Syndicated investment which has been originated by another financial institution and broadly distributed.  16




---



##### 



Patriot Capital Funding, Inc.
 
 Notes to Consolidated Financial Statements
 (unaudited)
  Description of Business
   Basis of Presentation
   Recent Accounting Pronouncements
  Interest, Dividends, Fees, and Other Investment Income
  17




---



##### 



Federal Income Taxes
  Dividends Paid
   Reclassifications
   Statement of Financial
Standards No. 157Fair Value Measurements
  March 31, 2008
    
    
    December 31, 2007Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueInvestments in debt securities
    
    $
    352,471,109
    
    
    $
    339,866,473
    
    
    $
    375,410,033
    
    
    $
    371,261,022Investments in equity securities
    
    
    12,860,130
    
    
    
    12,079,927
    
    
    
    12,834,988
    
    
    
    13,464,731Total
    
    $
    365,331,239
    
    
    $
    351,946,400
    
    
    $
    388,245,021
    
    
    $
    384,725,753
    18




---



##### 



March 31, 2008
    
    
    December 31, 2007Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)
    
    
    Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)Senior Secured Debt
    
    $
    174,673,220
    
    
    
    47.8
    %
    
    $
    172,234,169
    
    
    
    48.9
    %
    
    $
    190,048,200
    
    
    
    49.0
    %
    
    $
    189,209,150
    
    
    
    49.2
    %Junior Secured Debt
    
    
    76,379,327
    
    
    
    20.9
    
    
    
    71,256,327
    
    
    
    20.3
    
    
    
    85,493,227
    
    
    
    22.0
    
    
    
    84,583,227
    
    
    
    22.0Subordinated Debt
    
    
    101,418,562
    
    
    
    27.8
    
    
    
    96,375,977
    
    
    
    27.4
    
    
    
    99,868,606
    
    
    
    25.7
    
    
    
    97,468,645
    
    
    
    25.3Warrants / Equity
    
    
    12,860,130
    
    
    
    3.5
    
    
    
    12,079,927
    
    
    
    3.4
    
    
    
    12,834,988
    
    
    
    3.3
    
    
    
    13,464,731
    
    
    
    3.5Total
    
    $
    365,331,239
    
    
    
    100.0
    %
    
    $
    351,946,400
    
    
    
    100.0
    %
    
    $
    388,245,021
    
    
    
    100.0
    %
    
    $
    384,725,753
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of total portfolio.  March 31, 2008
    
    
    December 31, 2007Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)
    
    
    Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)Machinery
    
    $
    53,022,930
    
    
    
    14.5
    %
    
    $
    49,903,263
    
    
    
    14.2
    %
    
    $
    52,844,315
    
    
    
    13.6
    %
    
    $
    54,030,773
    
    
    
    14.0
    %Personal & Nondurable Consumer
Products
    
    
    50,860,827
    
    
    
    13.9
    
    
    
    51,155,027
    
    
    
    14.5
    
    
    
    51,070,705
    
    
    
    13.2
    
    
    
    51,280,805
    
    
    
    13.3Automobile
    
    
    34,197,014
    
    
    
    9.4
    
    
    
    32,808,011
    
    
    
    9.3
    
    
    
    34,044,318
    
    
    
    8.8
    
    
    
    33,957,022
    
    
    
    8.8Electronics
    
    
    33,728,611
    
    
    
    9.2
    
    
    
    33,672,204
    
    
    
    9.6
    
    
    
    42,296,015
    
    
    
    10.9
    
    
    
    42,470,710
    
    
    
    11.0Health Care, Education &
Childcare
    
    
    33,068,953
    
    
    
    9.1
    
    
    
    32,903,253
    
    
    
    9.3
    
    
    
    33,686,998
    
    
    
    8.7
    
    
    
    33,779,798
    
    
    
    8.8Metals & Minerals
    
    
    22,991,125
    
    
    
    6.3
    
    
    
    21,638,125
    
    
    
    6.2
    
    
    
    22,972,190
    
    
    
    5.9
    
    
    
    22,972,190
    
    
    
    6.0Grocery
    
    
    22,906,173
    
    
    
    6.3
    
    
    
    22,918,589
    
    
    
    6.5
    
    
    
    23,149,458
    
    
    
    6.0
    
    
    
    23,287,658
    
    
    
    6.1Printing & Publishing
    
    
    19,538,140
    
    
    
    5.3
    
    
    
    15,533,347
    
    
    
    4.4
    
    
    
    19,172,972
    
    
    
    4.9
    
    
    
    16,303,220
    
    
    
    4.2Textiles & Leather
    
    
    13,025,390
    
    
    
    3.6
    
    
    
    13,324,570
    
    
    
    3.8
    
    
    
    12,970,522
    
    
    
    3.3
    
    
    
    13,077,422
    
    
    
    3.4Ecological
    
    
    12,264,553
    
    
    
    3.4
    
    
    
    11,064,603
    
    
    
    3.1
    
    
    
    15,593,790
    
    
    
    4.0
    
    
    
    14,393,840
    
    
    
    3.7Chemicals, Plastic & Rubber
    
    
    11,179,640
    
    
    
    3.1
    
    
    
    11,176,392
    
    
    
    3.2
    
    
    
    10,733,851
    
    
    
    2.8
    
    
    
    10,730,842
    
    
    
    2.8Retail Stores
    
    
    10,968,634
    
    
    
    3.0
    
    
    
    10,981,234
    
    
    
    3.1
    
    
    
    10,656,911
    
    
    
    2.7
    
    
    
    10,637,911
    
    
    
    2.8Mining, Steel, Iron &
Nonprecious Metals
    
    
    10,558,561
    
    
    
    2.9
    
    
    
    10,546,800
    
    
    
    3.0
    
    
    
    10,796,410
    
    
    
    2.8
    
    
    
    10,785,664
    
    
    
    2.8Housewares & Durable Consumer
Products
    
    
    10,135,626
    
    
    
    2.8
    
    
    
    9,637,088
    
    
    
    2.7
    
    
    
    9,673,177
    
    
    
    2.5
    
    
    
    9,686,477
    
    
    
    2.5Diversified/Conglomerate Service
    
    
    9,676,365
    
    
    
    2.6
    
    
    
    9,293,165
    
    
    
    2.6
    
    
    
    9,516,840
    
    
    
    2.4
    
    
    
    9,245,940
    
    
    
    2.4Insurance
    
    
    5,000,000
    
    
    
    1.4
    
    
    
    3,750,000
    
    
    
    1.1
    
    
    
    5,000,000
    
    
    
    1.3
    
    
    
    4,500,000
    
    
    
    1.2Buildings & Real Estate
    
    
    4,907,194
    
    
    
    1.3
    
    
    
    4,907,194
    
    
    
    1.4
    
    
    
    4,780,826
    
    
    
    1.2
    
    
    
    4,780,826
    
    
    
    1.2Oil & Gas
    
    
    3,838,335
    
    
    
    1.0
    
    
    
    3,838,335
    
    
    
    1.1
    
    
    
    3,837,555
    
    
    
    1.0
    
    
    
    3,837,555
    
    
    
    1.0Personal, Food & Miscellaneous
Services
    
    
    3,000,000
    
    
    
    0.8
    
    
    
    2,730,000
    
    
    
    0.8
    
    
    
    3,000,000
    
    
    
    0.8
    
    
    
    2,910,000
    
    
    
    0.8Aerospace & Defense
    
    
    463,168
    
    
    
    0.1
    
    
    
    165,200
    
    
    
    0.1
    
    
    
    463,168
    
    
    
    0.1
    
    
    
    161,600
    
    
    
    0.1Beverage, Food & Tobacco
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000,000
    
    
    
    2.3
    
    
    
    9,000,000
    
    
    
    2.3Containers, Packaging & Glass
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,985,000
    
    
    
    0.8
    
    
    
    2,895,500
    
    
    
    0.8Total
    
    $
    365,331,239
    
    
    
    100.0
    %
    
    $
    351,946,400
    
    
    
    100.0
    %
    
    $
    388,245,021
    
    
    
    100.0
    %
    
    $
    384,725,753
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of total portfolio.   Statement of Financial Standards
No. 157Fair Value Measurements
 19




---



##### 



As of March 31, 2008Internal Models with
    
    
    Internal Models with
    
    
    Total Fair ValueQuoted Market Prices
    
    
    Significant Observable
    
    
    Significant Unobservable
    
    
    Reported inin Active Markets
    
    
    Market Parameters
    
    
    Market Parameters
    
    
    Consolidated(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Balance SheetNon-affiliate investments
    
    $
    326,000
    
    
    $
    9,805,900
    
    
    $
    249,919,546
    
    
    $
    260,051,446Affiliate investments
    
    
    
    
    
    
    
    
    
    
    83,364,986
    
    
    
    83,364,986Control investments
    
    
    
    
    
    
    
    
    
    
    8,529,968
    
    
    
    8,529,968Total investments at fair value
    
    $
    326,000
    
    
    $
    9,805,900
    
    
    $
    341,814,500
    
    
    $
    351,946,400
  Fair value measurements using unobservable inputs (Level 3)Non-affiliate
    
    
    Affiliate
    
    
    ControlInvestments
    
    
    Investments
    
    
    Investments
    
    
    TotalFair Value December 31, 2007
    
    $
    267,006,559
    
    
    $
    85,171,605
    
    
    $
    9,328,389
    
    
    $
    361,506,553Total realized gains (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in unrealized depreciation
    
    
    (5,311,484
    )
    
    
    (2,591,990
    )
    
    
    (848,000
    )
    
    
    (8,751,474
    )Purchases, issuances and settlements, net
    
    
    (11,775,529
    )
    
    
    785,371
    
    
    
    49,579
    
    
    
    (10,940,579
    )Transfers in (out) of Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair Value as of March 31, 2008
    
    $
    249,919,546
    
    
    $
    83,364,986
    
    
    $
    8,529,968
    
    
    $
    341,814,500
    20




---



##### 



Three Months Ended March 31,2008
    
    
    2007Interest charges
    
    $
    1,986,376
    
    
    $
    1,401,562Amortization of debt issuance costs
    
    
    58,904
    
    
    
    70,059Unused facility fees
    
    
    14,243
    
    
    
    34,591Total
    
    $
    2,059,523
    
    
    $
    1,506,212
   21




---



##### 



Three Months Ended March 31,2008
    
    
    2007Weighted average common shares outstanding, basic
    
    
    20,650,455
    
    
    
    17,532,896Effect of dilutive stock options
    
    
    
    
    
    
    191,130Weighted average common shares outstanding,
diluted
    
    
    20,650,455
    
    
    
    17,724,026
 22




---



##### 



Date Declared
    
    Record Date
    
    Payment Date
    
    AmountFebruary 27, 2008
    
    March 14, 2008
    
    April 16, 2008
    
    $0.33November 1, 2007
    
    December 14, 2007
    
    January 16, 2008
    
    $0.33August 2, 2007
    
    September 14, 2007
    
    October 17, 2007
    
    $0.32April 30, 2007
    
    June 15, 2007
    
    July 17, 2007
    
    $0.32February 23, 2007
    
    March 15, 2007
    
    April 18, 2007
    
    $0.32
          23




---



##### 



January 1, 2008toMarch 31, 2008GAAP net investment income
    
    $
    6,786,000Tax timing differences of:Origination fees, net
    
    
    (245,000
    )Stock compensation expense, bonus accruals, original
issue discount and depreciation and amortization
    
    
    (1,428,000
    )Tax distributable income
    
    $
    5,113,000
      For the Three Months EndedMarch 31,2008
    
    
    2007Per Share Data:Net asset value at beginning of period
    
    $
    10.73
    
    
    $
    10.37Net investment income
    
    
    .33
    
    
    
    .31Net change in unrealized appreciation (depreciation)
on investments
    
    
    (.48
    )
    
    
    .01Effect of issuance of common stock
    
    
    
    
    
    
    .39Distributions from net investment income
    
    
    (.33
    )
    
    
    (.31
    )Distributions in excess of net investment income
    
    
    
    
    
    
    (.03
    )Net change in unrealized swap depreciation
    
    
    (.04
    )
    
    
    Stock based compensation expense
    
    
    .01
    
    
    
    .01Net asset value at end of period
    
    $
    10.22
    
    
    $
    10.75Total net asset value return (1)
    
    
    (1.7
    )%
    
    
    6.9
    %Per share market value, beginning of period
    
    $
    10.09
    
    
    $
    14.49Per share market value, end of period
    
    $
    10.47
    
    
    $
    14.20Total market value return (2)
    
    
    7.0
    %
    
    
    0.3
    %Shares outstanding at end of period
    
    
    20,650,455
    
    
    
    18,223,517Ratios and Supplemental Data:Net assets at end of period
    
    $
    211,057,000
    
    
    $
    195,979,000Average net assets
    
    
    218,247,000
    
    
    
    195,963,000Ratio of operating expenses to average
net assets (annualized)
    
    
    8.2
    %
    
    
    7.4
    %Ratio of net investment income (loss) to
average net assets (annualized)
    
    
    12.4
    %
    
    
    10.9
    %Average borrowings outstanding
    
    $
    152,702,000
    
    
    $
    84,855,000Average amount of borrowings per
share
    
    $
    7.39
    
    
    $
    4.66
 
 (1)
    
    The total net asset value return (not annualized) reflects the change in net asset
value of a share of stock, plus dividends.(2)
    
    The total market value return (not annualized) reflects the change in the ending market
value per share plus dividends, divided by the beginning market value per share. 24




---



##### 



25




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   
    
    Our future operating results;
    
    Our business prospects and the prospects of our portfolio companies;
    
    The impact of the investments that we expect to make;
    
    The ability of our portfolio companies to achieve their objectives;
    
    Our expected financings and investments;
    
    The adequacy of our cash resources and working capital; and
    
    The timing of cash flows, if any, from the operations of our portfolio companies.
  
    
    changes in the economy;
    
    risks associated with possible disruption in our operations or the economy, and
    
    future changes in laws or regulations and conditions in our operating areas.
  Overview
  Current Market Conditions
  26




---



##### 



Portfolio Composition
   March 31, 2008
    
    
    December 31, 2007Beginning portfolio at fair value
    
    $
    384,725,753
    
    
    $
    257,812,235Investments in debt securities
    
    
    5,141,406
    
    
    
    191,391,250Investments in equity securities
    
    
    
    
    
    
    8,925,000Investment repayments
    
    
    (19,441,899
    )
    
    
    (67,332,023
    )Increase in payment-in-kind interest/dividends
    
    
    1,453,912
    
    
    
    3,928,159Sale of investments
    
    
    (10,437,500
    )
    
    
    (5,374,749
    )Change in unearned revenue
    
    
    356,002
    
    
    
    (986,413
    )Decrease in fair value of investments
    
    
    (9,851,274
    )
    
    
    (3,637,706
    )Ending portfolio at fair value
    
    $
    351,946,400
    
    
    $
    384,725,753
  March 31, 2008
    
    
    December 31, 2007Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofFair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total PortfolioSenior secured revolving lines of credit
    
    $
    17,094,250
    
    
    
    4.9
    %
    
    $
    14,841,169
    
    
    
    3.9
    %Senior secured term loans
    
    
    155,139,919
    
    
    
    44.1
    
    
    
    174,367,981
    
    
    
    45.3Junior secured term loans
    
    
    71,256,327
    
    
    
    20.2
    
    
    
    84,583,227
    
    
    
    22.0Senior subordinated debt
    
    
    96,375,977
    
    
    
    27.4
    
    
    
    97,468,645
    
    
    
    25.3Investments in equity securities
    
    
    12,079,927
    
    
    
    3.4
    
    
    
    13,464,731
    
    
    
    3.5Totals
    
    $
    351,946,400
    
    
    
    100.0
    %
    
    $
    384,725,753
    
    
    
    100.0
    %
  27




---



##### 



March 31, 2008
    
    
    December 31, 2007Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)
    
    
    Cost
    
    
    % (1)
    
    
    Fair Value
    
    
    % (1)Machinery
    
    $
    53,022,930
    
    
    
    14.5
    %
    
    $
    49,903,263
    
    
    
    14.2
    %
    
    $
    52,844,315
    
    
    
    13.6
    %
    
    $
    54,030,773
    
    
    
    14.0
    %Personal & Nondurable Consumer Products
    
    
    50,860,827
    
    
    
    13.9
    
    
    
    51,155,027
    
    
    
    14.5
    
    
    
    51,070,705
    
    
    
    13.2
    
    
    
    51,280,805
    
    
    
    13.3Automobile
    
    
    34,197,014
    
    
    
    9.4
    
    
    
    32,808,011
    
    
    
    9.3
    
    
    
    34,044,318
    
    
    
    8.8
    
    
    
    33,957,022
    
    
    
    8.8Electronics
    
    
    33,728,611
    
    
    
    9.2
    
    
    
    33,672,204
    
    
    
    9.6
    
    
    
    42,296,015
    
    
    
    10.9
    
    
    
    42,470,710
    
    
    
    11.0Health Care, Education & Childcare
    
    
    33,068,953
    
    
    
    9.1
    
    
    
    32,903,253
    
    
    
    9.3
    
    
    
    33,686,998
    
    
    
    8.7
    
    
    
    33,779,798
    
    
    
    8.8Metals & Minerals
    
    
    22,991,125
    
    
    
    6.3
    
    
    
    21,638,125
    
    
    
    6.2
    
    
    
    22,972,190
    
    
    
    5.9
    
    
    
    22,972,190
    
    
    
    6.0Grocery
    
    
    22,906,173
    
    
    
    6.3
    
    
    
    22,918,589
    
    
    
    6.5
    
    
    
    23,149,458
    
    
    
    6.0
    
    
    
    23,287,658
    
    
    
    6.1Printing & Publishing
    
    
    19,538,140
    
    
    
    5.3
    
    
    
    15,533,347
    
    
    
    4.4
    
    
    
    19,172,972
    
    
    
    4.9
    
    
    
    16,303,220
    
    
    
    4.2Textiles & Leather
    
    
    13,025,390
    
    
    
    3.6
    
    
    
    13,324,570
    
    
    
    3.8
    
    
    
    12,970,522
    
    
    
    3.3
    
    
    
    13,077,422
    
    
    
    3.4Ecological
    
    
    12,264,553
    
    
    
    3.4
    
    
    
    11,064,603
    
    
    
    3.1
    
    
    
    15,593,790
    
    
    
    4.0
    
    
    
    14,393,840
    
    
    
    3.7Chemicals, Plastic & Rubber
    
    
    11,179,640
    
    
    
    3.1
    
    
    
    11,176,392
    
    
    
    3.2
    
    
    
    10,733,851
    
    
    
    2.8
    
    
    
    10,730,842
    
    
    
    2.8Retail Stores
    
    
    10,968,634
    
    
    
    3.0
    
    
    
    10,981,234
    
    
    
    3.1
    
    
    
    10,656,911
    
    
    
    2.7
    
    
    
    10,637,911
    
    
    
    2.8Mining, Steel, Iron & Nonprecious Metals
    
    
    10,558,561
    
    
    
    2.9
    
    
    
    10,546,800
    
    
    
    3.0
    
    
    
    10,796,410
    
    
    
    2.8
    
    
    
    10,785,664
    
    
    
    2.8Housewares & Durable Consumer Products
    
    
    10,135,626
    
    
    
    2.8
    
    
    
    9,637,088
    
    
    
    2.7
    
    
    
    9,673,177
    
    
    
    2.5
    
    
    
    9,686,477
    
    
    
    2.5Diversified/Conglomerate Service
    
    
    9,676,365
    
    
    
    2.6
    
    
    
    9,293,165
    
    
    
    2.6
    
    
    
    9,516,840
    
    
    
    2.4
    
    
    
    9,245,940
    
    
    
    2.4Insurance
    
    
    5,000,000
    
    
    
    1.4
    
    
    
    3,750,000
    
    
    
    1.1
    
    
    
    5,000,000
    
    
    
    1.3
    
    
    
    4,500,000
    
    
    
    1.2Buildings & Real Estate
    
    
    4,907,194
    
    
    
    1.3
    
    
    
    4,907,194
    
    
    
    1.4
    
    
    
    4,780,826
    
    
    
    1.2
    
    
    
    4,780,826
    
    
    
    1.2Oil & Gas
    
    
    3,838,335
    
    
    
    1.0
    
    
    
    3,838,335
    
    
    
    1.1
    
    
    
    3,837,555
    
    
    
    1.0
    
    
    
    3,837,555
    
    
    
    1.0Personal, Food & Miscellaneous Services
    
    
    3,000,000
    
    
    
    0.8
    
    
    
    2,730,000
    
    
    
    0.8
    
    
    
    3,000,000
    
    
    
    0.8
    
    
    
    2,910,000
    
    
    
    0.8Aerospace & Defense
    
    
    463,168
    
    
    
    0.1
    
    
    
    165,200
    
    
    
    0.1
    
    
    
    463,168
    
    
    
    0.1
    
    
    
    161,600
    
    
    
    0.1Beverage, Food & Tobacco
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000,000
    
    
    
    2.3
    
    
    
    9,000,000
    
    
    
    2.3Containers, Packaging & Glass
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,985,000
    
    
    
    0.8
    
    
    
    2,895,500
    
    
    
    0.8Total
    
    $
    365,331,239
    
    
    
    100.0
    %
    
    $
    351,946,400
    
    
    
    100.0
    %
    
    $
    388,245,021
    
    
    
    100.0
    %
    
    $
    384,725,753
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of total portfolio.  Portfolio Asset Quality
  28




---



##### 



March 31, 2008
    
    
    December 31, 2007Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofInvestment Rating
    
    Fair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total Portfolio1
    
    $
    54,495,792
    
    
    
    16.0
    %
    
    $
    46,466,323
    
    
    
    12.5
    %2
    
    
    219,131,432
    
    
    
    64.5
    
    
    
    252,730,493
    
    
    
    68.13
    
    
    37,316,165
    
    
    
    11.0
    
    
    
    57,510,986
    
    
    
    15.54
    
    
    28,923,084
    
    
    
    8.5
    
    
    
    14,553,220
    
    
    
    3.95
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    $
    339,866,473
    
    
    
    100.0
    %
    
    $
    371,261,022
    
    
    
    100.0
    %
  Loans and Debt Securities on Non-Accrual Status
  Results of Operations
  Comparison for the three months ended March 31, 2008 and 2007
 Total Investment Income
    29




---



##### 



Expenses
    Realized Gain (Loss) on Sale of Investments
  Net Change in Unrealized Appreciation or Depreciation on Investments
     30




---



##### 



Net Unrealized Depreciation on Interest Rate Swaps
  Net Income (Loss)
  Financial Condition, Liquidity and Capital Resources
 Cash, Cash Equivalents and Restricted Cash
   Liquidity and Capital Resources
     31




---



##### 



Borrowings
 Securitization Revolving Credit Facility.
   Regulated Investment Company Status and Dividends
    32




---



##### 



Critical Accounting Policies
  Valuation of Portfolio Investments
     Fee Income Recognition
  33




---



##### 



Payment-in-Kind or PIK Interest and Dividends
   Three Months EndedMarch 31, 2008Beginning PIK balance
    
    $
    4,714,356PIK interest and dividends earned during the period
    
    
    1,453,912PIK receipts during the period
    
    
    (255,463
    )Ending PIK balance
    
    $
    5,912,805
 Interest and Dividend Income Recognition
   Off-Balance Sheet Arrangements
   34




---



##### 



Contractual Obligations
  Recent Developments
    35




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 (a)
    
    As of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934). Based on that evaluation, our Chief Executive Officer and
our Chief Financial Officer have concluded that our current disclosure controls and procedures
are effective in facilitating timely decisions regarding required disclosure of any material
information relating to us that is required to be disclosed by us in the reports we file or
submit under the Securities Exchange Act of 1934.(b)
    
    There have been no changes in our internal control over financial reporting that occurred
during the quarter ended March 31, 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
 36




---



##### 



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
  Period
    
    Total Number
of Shares
Purchased
    
    
    Average Price
Paid Per
Share
    
    
    Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
    
    
    Maximum (or
Approximate Dollar 
Value) 
of Shares that May Yet 
Be
Purchased Under the 
Plans
or ProgramsJanuary 1, 2008 through January 31, 2008
    
    
    55,134 (1)
    
    
    $
    10.39
    
    
    
    
    
    
    
    February 1, 2008
through February 29, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1, 2008 through
March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Pursuant to
our dividend reinvestment plan, we directed our plan administrator to purchase 55,134 shares
in the open market in order to satisfy our obligations to deliver shares of common
stock to our stockholders with respect to our dividend for
the fourth quarter of 2007.
 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  ExhibitNumber
    
    Description of Document31.1*
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2*
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.32.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S.
C. 1350).32.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U. S.
C. 1350).
 
 *
    
    Submitted herewith. 37




---



##### 



SIGNATURES
  PATRIOT CAPITAL FUNDING, INC.By:
    /s/    Richard P. BuckanavageRichard P. BuckanavageChief Executive Officer and PresidentBy:
    /s/     William E. Alvarez, Jr.William E. Alvarez, Jr.Executive Vice President, Chief
Financial Officer and Secretary 38